Washington state insurance regulators issued an order that would prohibit six commercial property-casualty companies of Chubb & Sons from selling new insurance policies in the state for nine months, an extreme step in response to the carriers’ repeated failure for more than a decade to properly document rate decisions.
Washington State Insurance Commissioner Mike Kreidler wants to impose the suspension, effective Nov. 18, on Federal Insurance Co., Pacific Indemnity Co., Great Northern Insurance Co., Executive Risk Indemnity, Vigilant Insurance Co. and Northwestern Pacific Indemnity Co.
Kreidler’s order, which does not affect existing policies or renewals, also wants to impose a $534,000 fine against Warren, N.J.-based Chubb & Son. The fine is based on 534 alleged violations of state law, costing the insurer $1,000 each, if Kreidler carries out his action.
Mike Kreidler
State officials say that since 1998, the Chubb companies have repeated failed to properly document the reasons for charging higher or lower rates on certain policies. Exams and audits dating back to 1998 find the same problem cropping up repeatedly, according to a statement from Kreidler.
Since 2000, the company has been repeatedly fined and urged to fix the problems. Repeated examinations and a series of company self-audits ordered by Kreidler since 2007 found hundreds of violations of state law, including numerous recent ones.
In some cases, more than half the sample files checked had violations.
“It’s highly unusual for us to suspend a company’s certificate to sell insurance,” Kreidler said in a statement. “But we’ve repeatedly tried to work with Chubb and its subsidiaries to fix a number of ongoing violations of state law. Some of the problems that triggered this decision have been recurring for a decade.”
The penalties, Kreidler said, will ensure that all insurers have “a level playing field and fair competition.”
He added, “Rate decisions must be based on a sound rationale and documented. Repeated exams showed that Chubb wasn’t playing by those rules.”
Chubb can appeal the suspension.
State official said the suspension order does not affect the companies’ obligation to honor policies issued prior to the effective date of the suspension. Nor does it affect their authority to renew existing policies. But it would prohibit them from selling new policies during the nine-month period of the suspension.
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