You asked several insurance-related questions. Specifically, you asked (1) if there are any regulations regarding the dollar amount or percentage that can be charged for commissions on insurance premiums; (2) if there were any notable workers’ compensation rate increases by classification in recent years; (3) if there are any regulations regarding how an insurer is required to manage reserves for open claims; and (4) for background information on captives and self-insured trusts.

SUMMARY

Insurance Commissions and Fees

According to the insurance department, there are no regulations that limit commissions paid to producers. The statute concerning commissions does not impose a cap, but allows commissions to be paid to a producer as long as he is properly licensed (CGS § 38a-702l).

Also, producers are permitted to charge the policyholder service fees that are in addition to the commission received, so long as the fees are set out in a written contract signed by the party to be charged. The insurance commissioner is granted the authority to regulate such service fees (CGS § 38a-707). The scheduled fees are outlined in Table 1.

Workers’ Compensation Rates

According to the insurance department there has been an overall decrease in workers’ compensation rates recently. The department considers rate level changes proposed by the National Council on Compensation Insurance, Inc. (NCCI), which is the primary industry loss cost reference filing for workers’ compensation insurance. The department approved a 2. 2% overall increase in loss costs for 2003 and a 3. 5% overall decrease for 2004. Details are provided in Tables 2 and 3.

Claim Reserves

There is a statute and a regulation concerning claim reserves. CGS § 38a-76 requires that each insurer maintain reserves equal in amount to its liability under all its policies. The Regulations of Connecticut State Agencies § 38a-78 establishes rules for minimum reserve standards for individual and group health insurance contracts. Insurers must maintain adequate reserves, including claim, premium, and contract reserves. The adequacy of the reserves is to be determined on the basis of all three categories (Regs. Conn. § 38a-78-11).

Claim reserves are required for all incurred but unpaid claims. All reserves are to be tested for adequacy and reasonableness. Any generally accepted or reasonable actuarial method may be used to estimate claim liabilities, but adequacy of the claim reserves must be determined in the aggregate (Regs. Conn. § 38a-78-13).

Captives and Self-insured Trusts

We continue to gather background information on captives and self-insured trusts. A separate report will be issued shortly to address this question.

INSURANCE SERVICE FEES

The Regulations of Connecticut State Agencies § 38a-707 sets out the service fees that properly licensed producers may charge. In addition to the scheduled fees, the producer may request reimbursement for any money spent by him for inspection reports, motor vehicle department reports, policy reports, telegrams, or telephone calls necessary for the placement of the risk under consideration. Table 1 shows the maximum service fees permissible.

Table 1: Service Fees to be Charged by Producers

WORKERS’ COMPENSATION RATES

Based on information from NCCI, every workers’ compensation classification belongs to one of five industry groups: manufacturing, contracting, office and clerical, goods and services, and miscellaneous. Tables 2 and 3 below show the 2003 and 2004 average change proposed for each industry group and the largest increase and decrease possible for classifications within each group.

Table 2: 2003 Change in Loss Costs

Table 3: 2004 Change in Loss Costs

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