Kentucky Market Gallops Along Under Acting Executive Director

With agents witnessing increasing competition in Kentucky’s property/casualty market, Kentucky Office of Insurance Acting Executive Director Glenn Jennings recently talked with Insurance Journal Southeast.

Jennings was appointed deputy commissioner in January 2002. In December 2003, Jennings was appointed acting commissioner. As a result of a reorganization of the executive branch of state government, Jennings is now acting executive director.

Jennings has led the efforts to automate many agent licensing and other tracking functions, as well as working with regulatory e-commerce issues and overseeing the agency’s health insurance programs.

Insurance Journal: How would you describe the current property/casualty market for independent agents in Kentucky?

Jennings: Agents are seeing increasing competition in the P/C market. In addition, in some areas and markets, companies are not signing up new agents. We are seeing market changes that require agents to rapidly learn about new products and issues in order to educate their consumers. We look to them as the front line educators—particularly in the area of product changes such as the addition of a separate wind/hail deductible. Agents are best able to handle specific questions about the use of credit and the impact that may have on a premium.

In addition, since Kentucky led the nation in weather catastrophe-related losses in 2002, we have seen increases in premiums for personal lines over the past couple of years. We are beginning to see those increases stabilize somewhat but we are sure agents are getting a lot of questions about the cost of auto and homeowners insurance.

We are seeing a hardening of the agent E&O market, as well as a large increase in the placement of business in surplus lines, and are monitoring both developments.

KOI has a good relationship with Kentucky agents and encourages a two-way flow of information.

IJ: In the last year, have we seen more insurers coming into the state or more
leaving?

Jennings: We have seen a fairly stable, competitive P/C market during the past few years. In 2003, we admitted 25 new P/C insurers with 11 leaving the market, either voluntarily or through revocation. So far in 2004, we have seen four new P/C insurers enter the market with two leaving.

IJ: What has the department done to fight fraud in the state?

Jennings: Since its establishment in 1994, our fraud division has taken an active role in the law enforcement community. We have 10 officers with law enforcement authority stationed throughout the state. They investigate a variety of fraud cases including fraudulent claims and applications and premium theft (particularly related to agents). A number of the premium theft cases have resulted in felony convictions and license revocations. An ongoing problem in the state has been the use of fraudulent proof of insurance cards and certificates. The Division was an active member of the federal task force in the recent fraud case involving Kelco, a viatical settlement company. Our officers serve as a resource for state and local law enforcement and conduct public presentations upon request.

IJ: How does the department help residents when catastrophes hit the state?

Jennings: The Office of Insurance has a disaster response team, housed in our Consumer Protection and Education division. Working closely with Emergency Management and elected officials throughout the state, these employees travel to a disaster site. Depending on the extent of the storm, they either set up in a nearby building or go door-to-door. When at all possible, our people are actually out in the neighborhoods. Our “After the Storm Has Passed” brochure is left with residents and contains information on what to expect during the claims process, as well as how to file a complaint with the Office. On several occasions, this process has allowed us to identify the need for more adjusters and we have worked with those companies to ensure adequate response.

In addition to our people on-site, investigators back in Frankfort are available to answer questions and assist consumers with complaints and concerns.

IJ: What is the status of medical malpractice in the state and is Kentucky viewed as a crisis state, or one that could be there before too long?

Jennings: We continue to grapple with this issue. We recognize that the marketplace can be its own regulator in most circumstances. However, the medical malpractice line continues to have difficulties. Kentucky was designated a “crisis” state by the American Medical Association in 2003. KOI completed an extensive study of the market, held a hearing and designated the line in January 2003. Companies are now required to file rates with us with any change of more than 25 percent for any class triggering a prior approval process. KOI has held several public hearings on rate filings in the past year.

The main issue in Kentucky is not availability but affordability. This is especially an issue for providers with claims experience and in certain high-risk specialty areas such as obstetrics, neurosurgery and emergency medicine. We have responded to a number of provider complaints and are closely monitoring underwriting practices to be certain the companies are complying with state law.

Legislation has been proposed in the last several sessions related to this issue, ranging from a constitutional amendment capping damages to a pre-litigation screening panel. At this writing, none have been enacted.

IJ: What are the goals of the department for the remainder of 2004?

Jennings: We continue to move toward offering more electronic services for agents, companies and the general public. KOI recently unveiled its eServices for agents allowing them to complete many processes online. This has streamlined our efforts and has been well received by agents. We hope to expand these offerings throughout 2004 and have begun efforts to offer online services to insurers and business entities.

Along with that, we are seeing a significant increase in electronic filings in both the P/C and health areas. We continue to welcome this. The office is working on more automation in regard to how we handle an electronic filing once it is received. Automation in the surplus line market is another goal the Office hopes to achieve during 2004. Over 27,000 paper applications come to us annually because of placement of coverage in surplus lines. We hope to receive these electronically by the end of the year.

For more information on Acting Executive Director Jennings and the department, visit www.doi.state.ky.us/.