DISB Approves Decreases in Workers’ Compensation Rates
DISB recently approved the 2008 workers’ compensation rate filings by the National Council on Compensation Insurance (NCCI), which includes a decrease of 7.6 percent for the industrial classes in the voluntary market, and a decrease of 10.6 percent for the industrial classes in the residual market (those in the assigned risk category). In the District of Columbia, workers’ compensation insurance is mandatory for employers on all employees. According to DISB Commissioner Thomas E. Hampton, the rate decreases were a result of an overall decline in claim frequency, and less severity in the claims amount.

These decreases are in addition to the voluntary decrease of 7.9 percent and assigned risk decrease of 5.6 percent for 2007. The 2006 decrease in claim frequency extended a trend that started in the 1990s, according to the NCCI, a statistical company that compiles information from insurance companies, analyzes trends, prepares workers’ compensation rate recommendations, and provides a variety of services and tools to maintain a healthy workers’ compensation system. The decline seems to have become just as prominent among the medium and large claims, as it is for the small claims. Commissioner Hampton noted that while most of the insurance companies will use the NCCI-recommended rates, additional expenses might add to the rates that each company sets. 

Commissioner Hampton Promotes Small Business Resources at DC Retail Summit
Commissioner Thomas E. Hampton introduced two key resources for small businesses at the Retail Summit organized by the Washington, DC Economic Partnership on Sept. 18. He discussed Insure U for Small Business, a comprehensive public education program to help small businesses with information about business risks and insurance options; and the DC Certified Capital Companies program, better known as CAPCO, an economic development tool administered by DISB to provide growth funds to promising local small businesses. The retail summit is an annual event that promotes the retail opportunities in the District’s neighborhoods and offers a range of resources to help retailers start or expand their businesses. 

Viatical Settlements Licensing Act of 2007 Introduced
The Council of the District of Columbia introduced the Viatical Settlements Licensing Act of 2007 on behalf of Mayor Adrian M. Fenty. While there are many opportunities to defraud people with viaticals, there is no comprehensive program to regulate these products. Therefore, this is an area of concern for DISB as viatical settlements have been identified as one of the top 10 investment scams.

A viatical is a life insurance policy of a terminally ill person brought by an investor for an amount that is below the face value of the policy; the ill person gets needed money and the purchaser receives the full face value of the policy when the person dies. There is also a product being sold, which is a spin-off of viatical settlements known as life settlements. In these sales, an individual who no longer needs the benefits of his or her life insurance policy can sell this policy to a life settlement company. The life settlement company packages several of these policies in a securitized pool and sell interest in this pool to investors. Further, the amount of consideration received by the owner of the life insurance policy is far greater than the amount received from surrendering the policy to the life insurance company. However, several situations may arise: life settlement companies have been accused of making contractual arrangements with life insurance policy owners to buy their policies before they acquire the policies from the insurance company. In some cases, the life settlement companies pay the premiums on these policies for the insured during the contestability period. (The contestability period is usually two years.) These policies, called Stranger Owned Life Insurance or STOLI, has caused life insurance companies concern because they focus the ownership of life insurance policies away from the asset and estate protection benefit it was intended to make it more of an investment vehicle. The American Council of Life Insurers and other life insurance associations believe that continued growth of the life settlements marketplace could jeopardize the tax exemption status life insurance proceeds currently enjoy. DISB will be introducing a Viatical Settlements bill that will provide consumer protections but permit life insurance policy owners to sell their property in a secondary market.

(L-R) DISB Associate Commissioner for Banking Howard Amer, Industrial Bank’s president and CEO Doyle Mitchell Jr., Deputy Mayor Neil Albert and DISB Commissioner Thomas E. Hampton.

Industrial Bank Becomes District-Chartered Bank
Industrial Bank, the sixth largest African-American-owned commercial bank in the United States and the largest minority-owned commercial bank in the Washington metropolitan region, recently received its District bank charter at the beginning of September. This allowed the 73-year old bank to convert from a national banking association, and authorized it to begin operations as a District-chartered bank with headquarters at 4812 Georgia Ave., NW. Industrial Bank is a full-service commercial bank that offers a wide variety of banking services including checking, savings and investment accounts for retail and commercial customers. The bank also offers cash management, corporate on-line banking, electronic banking services, debit cards, credit cards and consumer, real estate, and commercial loans and lines of credit. It was founded by real estate investor, real estate broker and attorney Jesse H. Mitchell, grandfather of its current chief executive officer, B. Doyle Mitchell Jr., and operates five branches in the District and two branches in Maryland. Under a District charter, DISB will supervise Industrial Bank, which is now the third bank chartered and regulated under District law since 2004.

National Insurance Act of 2007 Pending
There are two pending bills for the federal regulation of the insurance industry. Both bills—one in the Senate and one in the House of Representatives—would authorize the establishment of a comprehensive system of federal chartering, licensing, regulation and supervision of insurers and insurance producers that is independent of the state system of insurance licensing, regulation and supervision. It will require federally chartered and licensed insurers and producers to comply with certain state laws, including state tax laws; and to provide for the creation of an Office of National Insurance within the Department of Treasury that is funded by assessments imposed upon federally chartered and licensed insurers and insurance producers. If the proposals become law, insurers will be allowed to choose whether to be governed by a state or federal regulator, which is similar to the banking industry.

District Plays Host to NAIC Fall Meeting
More than 1,600 people attended the 2007 Fall National Meeting of the National Association of Insurance Commissioners (NAIC), which officially started Sept. 29 as NAIC president and Alabama Insurance Commissioner Walter Bell addressed attendees during the opening session at the Marriott Wardman Park Hotel in northwest Washington, DC. Bell highlighted his focus as NAIC president on streamlining NAIC’s operations. He also commented on the importance of ensuring the availability and affordability of insurance.

Representing the hosting city and Mayor Adrian M. Fenty, DISB Commissioner Thomas E. Hampton welcomed attendees to the nation’s capital, saying he applauded the NAIC for its responsiveness to the ever-changing market needs and its continued efforts to modernize and strengthen state-based insurance regulation. “I want to challenge my colleagues in the insurance regulatory community to continue to make insurance a relevant topic of national debate and a more vital part of every American’s life,” he added. During the Fall Meeting, Commissioner Hampton was interviewed by Bill Bailey, host of the “Bill Bailey Show: It’s Your Money” on public radio. DISB staff hosted a hospitality table providing information on local amenities and restaurant recommendations. 

DISB Hires a Consumer Advocate
DISB recently hired a new consumer advocate in the Office of the Deputy Commissioner for Administration. Idriys J. Abdullah will be responsible for overseeing the consumer protection activities and strategies to ensure that all areas of the agency are working in concert to identify and address consumer concerns and issues. Abdullah will provide proposals for improving consumer protection efforts on an ongoing basis. He joined DISB’s staff with more than 25 years’ experience in housing and community development and outreach, working in organizations in the private, governmental and nonprofit sectors.  In his previous position, he was vice president of Community Affairs for SunTrust Bank in Washington, DC Committed to professional development, he has earned certificates in mortgage banking, real estate finance, insurance and securities, real estate appraisals, financial literacy training and housing counseling. A native Washingtonian, Abdullah currently lives in the District of Columbia.

DISB Commissions Study on the Impact of Subprime Mortgages in the District
As the housing market continues its downward spiral, DC officials have grown increasingly concerned about the impact of the crumbling subprime market nationwide. With foreclosures rising, especially among subprime borrowers, DISB recently contracted the DC-based Center for Responsible Lending, a nonprofit research group, to study the impact of subprime mortgage lending in the city. The study, which is expected to be completed by January, will also include work by The Urban Institute, The Reinvestment Fund, the National Community Reinvestment Coalition and the Capital Area Asset Builders. The group will then explore ways to help homeowners who now find themselves with balloon payments and interest rates resetting to unreachable levels.

September Was Life Insurance Awareness Month
For the second year in a row, DISB marked September as Life Insurance Awareness Month to keep consumers informed with tips about life insurance throughout September. This month was designed to help increase public awareness about the importance of life insurance in providing protection for unforeseen events and the benefits of advice from financial-service professionals. While many people do not like to consider the unthinkable, they must, especially with the high cost of living in the District of Columbia. Having a Life Insurance Awareness Month gives District residents an opportunity to examine their priorities and needs based on changes in their financial situations and life stages. “One of the biggest mistakes we make is not changing our policies to match our changing needs,” said DISB Commissioner Thomas E. Hampton. “As regulators, we want to help District consumers make wiser choices about the types of insurance that best fit their lifestyles and personal needs.” 

During the month, DISB sent out weekly life insurance tips in the hope that they forced residents to think about making insurance changes based on life stages—marriage, divorce, new baby, new job, retirement or death. Studies have shown that 70 million Americans say they lack the life insurance coverage they need to ensure the financial security of their loved ones. Further, US life insurance sales activity for individually underwritten life insurance was down 5.5 percent in July in comparison to June, one of the largest changes in the last five consecutive years of June declines, according to the MIB Life Index, the life insurance industry’s timeliest measure of application activity across North America. Declines were consistent across all age groups except the 60-plus group, which showed a four-month growth trend increasing 5.2 percent this year.