WSR 17-23-191 PROPOSED RULES OFFICE OF THE INSURANCE COMMISSIONER [Insurance Commissioner Matter No. R 2016-23—Filed November 22, 2017, 10:22 a.m.] Original Notice. Preproposal statement of inquiry was filed as WSR 16-18-065. Title of Rule and Other Identifying Information: Service contract providers and protection product guarantee providers. Hearing Location(s): On January 4, 2018, at 10:30 a.m., at the Office of Insurance Commissioner (OIC) Conference Room, 302 Sid Snyder Avenue S.W., Olympia, WA 98504. Date of Intended Adoption: January 5, 2018. Submit Written Comments to: Jim Tompkins, P.O. Box 40260, Olympia, WA 98504, email rulescoordinator@oic.wa.gov, fax 360-586-3109, by January 3, 2018. Assistance for Persons with Disabilities: Contact Lorie Villaflores, phone 360-725-7000, fax 360-582-3109, TTY 360-586-0241 or 360-725-7087, email loriev@oic.wa.gov, by January 3, 2018. Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rules will consider clarifying solvency and financial requirements of service contract providers and protection product guarantee providers, forms of a parental guarantee, the filings these entities submit to the commissioner, and the correction of outdated statutory citations. Reasons Supporting Proposal: Since the original enactment of chapter 48.110 RCW there have been several amendments to that chapter, including some in the 2016 legislative session. In addition, over the years there have been issues that have arisen regarding the requirements for solvency and filings required to be made by service contract providers and protection product guarantee providers to OIC. Statute Being Implemented: Chapter 48.110 RCW. Rule is not necessitated by federal law, federal or state court decision. Name of Proponent: Mike Kreidler, insurance commissioner, governmental. Name of Agency Personnel Responsible for Drafting: Jim Tompkins, P.O. Box 40260, Olympia, WA 98504-0260, 360-725-7036; Implementation: Ron Pastuch, P.O. Box 40255, Olympia, WA 98504-0255, 360-725-7211; and Enforcement: Doug Hartz, P.O. Box 40255, Olympia, WA 98504-0255, 360-725-7214. A school district fiscal impact statement is not required under RCW 28A.305.135.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Jim Tompkins, P.O. Box 40260, Olympia, WA 98504-0260, phone 360-725-7036, fax 360-586-3109, TTY 360-586-0241 or 360-725-7087, email rulescoordinator@oic.wa.gov. This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal: Is exempt under RCW 19.85.025(3) as the rule content is explicitly and specifically dictated by statute; and rules adopt, amend, or repeal a procedure, practice, or requirement relating to agency hearings; or a filing or related process requirement for applying to an agency for a license or permit. Explanation of exemptions: Much of this proposed rule simply cites requirements already existent in the RCW.
The new inclusions:
(A) Required minimum net worth;
(B) Definitions of how liabilities and assets should be considered for reaching the minimum net worth;
(C) The requirement to use GAAP principles and include in the application filing the normal financial documents OIC would get along with an audited financial statement; and
(D) The requirement to use an OIC generated guarantee form for parent company guarantees all apply to the process of filing for license application or permits to issue products. As such, these are exempted from the small business economic impact statement requirements under RCW 19.85.025(3), which exempts such rules as defined in RCW 34.05.310(4). November 22, 2017 Mike Kreidler Insurance Commissioner
AMENDATORY SECTION (Amending WSR 13-12-038, filed 5/30/13, effective 7/1/13)
WAC 284-20C-005 Definitions that apply to this chapter.
The definitions in this section apply throughout this chapter:
(1) "Complete filing" means a package of information containing motor vehicle service contracts, supporting information, documents and exhibits.
(2) "Contract" means a service contract covering motor vehicles, as described in chapter 48.110 RCW. Under this definition:
(a) "Motor vehicle" means the same as in RCW 48.110.020(7), and only includes vehicles that are self-propelled by a motor; and
(3) "Date filed" means the date a complete motor vehicle service contract filing has been received and accepted by the commissioner.
(4) "Filer" means a person, organization or other entity that files motor vehicle service contracts with the commissioner.
(5) "Objection letter" means correspondence sent by the commissioner to the filer that:
(a) Requests clarification, documentation or other information;
(b) Explains errors or omissions in the filing; or
(c) Disapproves a motor vehicle service contract under RCW 48.110.073.
(6) "SERFF" means the System for Electronic Rate and Form Filing. SERFF is a proprietary National Association of Insurance Commissioners (NAIC) computer-based application that allows filers to create and submit rate, rule and form filings electronically to the commissioner.
(7) "Service contract provider" or "provider" means the same as in RCW 48.110.020(19).
(8) "Type of insurance" means a specific type of insurance listed in the Uniform Property and Casualty Product Coding Matrix published by the NAIC and available at www.naic.org.
Chapter 284-110 WAC
SERVICE CONTRACTS AND
PROTECTION PRODUCT GUARANTEES
NEW SECTION
WAC 284-110-010 Solvency defined.
(1) RCW 48.110.030 (service contract providers) and RCW 48.110.055 (protection product guarantee providers) require that a service contract provider and protection product guarantee provider be solvent on a stand-alone basis in order to be registered and continue to issue contracts in this state.
(2) For the purposes of chapter 48.110 RCW and this chapter "solvent" means:
(a) Having a minimum net worth of two hundred thousand dollars, with assets exceeding liabilities by this amount. In determining its net worth, the service contract provider or protection product guarantee provider:
(i) May only include those unencumbered assets which it owns directly in its own name;
(ii) Must include as a liability:
(A) An amount equal in the aggregate to provide for all unearned service contract or protection product guarantee fees;
(B) An amount for payment of all expected claims and claims which have been incurred, whether reported or unreported, which are unpaid and for which the service contract provider or protection product guarantee provider is or may be liable; and
(b) The service contract provider or protection product guarantee provider is able to pay its debts as the debts become due.
NEW SECTION
WAC 284-110-020 Certified financial statement.
RCW 48.110.030 and 48.110.055 permit service contract providers and protection product guarantee providers to submit financial statements certified as accurate by two or more officers of the service contract provider or product guarantee provider in lieu of audited financial statements in certain circumstances. These certified financial statements must be prepared in accordance with generally accepted accounting principles (GAAP) and include all the financial statements, information and documents that audited financial statements would include with the only difference being that rather than being prepared and signed by an independent auditor, the statements are signed by the two officers.
NEW SECTION
WAC 284-110-030 Parental guarantee.
Service contract providers must utilize the prescribed parental guarantee forms that are available on the commissioner's web site.
NEW SECTION
WAC 284-110-040 Reporting of material change.
RCW 48.110.030(6) requires that a service contract provider registered by the commissioner must keep its information submitted to the commissioner current by reporting all material changes to the information within thirty days after the end of the month in which the change occurs. RCW 48.110.055(7) requires that a protection product guarantee provider registered by the commissioner must keep its information submitted to the commissioner current by reporting all material changes to the information within thirty days after the end of the month in which the change occurs. In addition to material changes to its financial statement, the following are deemed material changes that must be reported:
(1) The service contract provider or protection product guarantee provider does not meet the solvency requirement required by chapter 48.110 RCW and this chapter; or
(2) If service contract provider is using parental guarantee to meet its financial obligations and the parent net's worth goes under one hundred million dollars.
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