Washington Fines Insurers More Than $490K

Washington Insurance Commissioner Mike Kreidler has issued more than $490,000 in fines over the last three months to insurance companies that reportedly don’t play by the rules.

Mega Life and Health Insurance Company was fined $150,000 for issuing coverage to three groups using policy forms that did not comply with Washington state law. One form had been disapproved by the Insurance Commissioner and one form had never been filed. These policies also were issued as blanket coverage to groups that did not qualify for such coverage.

Delaware-based AMT Service Corporation also received a hefty fine of $100,000, with half of that suspended, for not registering with the state before it began selling service contracts in Washington state.

The following companies also were fined by the Insurance Commissioner:

• On April 1, Safeco and four of its affiliates were fined $27,000, with half suspended subject to the successful completion of a compliance plan, for several late and inaccurate special liability reports, and one inaccurate annual statement.
• On April 2, Fred Hutchison Cancer Research Center was fined $22,650 for inaccurately issuing gift annuities in the name of its foundation.
• On April 4, Great Republic Life Insurance Company was fined $5,000, with $4,500 suspended, for failing to file its audited financial statement for 2006.
• On May 1, WELS Foundation was fined $20,000 with $11,000 suspended, for filing its 2005 annual statement almost a year after the deadline, and failing to maintain a reserve fund specific to Washington annuities.
• On May 16, United Healthcare was fined $50,000 for denying Medicare supplemental coverage.
• On May 20, Farmers New World Life Insurance Company was fined $10,000 for paying an “extraordinary shareholder dividend” without prior approval.
• On June 3, American International and its affiliates were fined $50,000, with $20,000 suspended, for several violations including not clearly identifying its legal name, not filing with the Insurance Commissioner’s Office, and for issues related to its agents.
• On June 3, AIG and its affiliates were fined $50,000, with $15,000 suspended, for a variety of issues including not clearly identifying its legal name and sending insufficient information to consumers.
• Saddleback Memorial Foundation, Linfield College and Virginia Mason each received a fine of $1,000 to $2,000 for not maintaining a sufficient surplus for their gift annuity programs.
• The Omaha Home for Boys and the Christian Children’s Fund each were fined $1,000 for not meeting reporting requirements.
• International Planned Parenthood Federation was fined $425 for issuing one annuity before it received its certificate of exemption.

In addition to levying fines, the Insurance Commissioner has the authority to revoke licenses to sell insurance in Washington state. The following companies and independent agents and brokers have had their licenses suspended since March:

• Bnai Brith Foundation of the U.S. in Washington, D.C. for failing to maintain the required surplus.
• Olympic Memorial Hospital Foundation in Port Angeles for not providing information about its financial situation.
• Lutheran Bible Institute of Seattle, based in Issaquah, for not meeting financial requirements.
• Spokane United Methodist Homes for not meeting financial requirements.
• Jonathan E. Kruse of Oak Harbor misrepresented policy information and forged customers’ signatures on applications. He has voluntarily surrendered his license.
• Shelby M. King of Puyallup had her license revoked because she was convicted of an unrelated felony.

Fines collected by the Insurance Commissioner go into the state’s general fund and are used to fund a variety of programs that other state agencies provide for Washington residents. The agency already has collected more than $375,000 in enforcement fines in 2008.