WSR 20-05-027

PROPOSED RULES

OFFICE OF THE

INSURANCE COMMISSIONER

[Insurance Commissioner Matter No. R 2016-23—Filed February 10, 2020, 11:46 a.m.]

Supplemental Notice to WSR 19-21-174.

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 March 24, 2020, at 10:00 a.m., at the Office of Insurance Commissioner (OIC) Conference Room, 302 Sid Snyder Avenue S.W., Olympia, WA 98504.

Date of Intended Adoption: March 26, 2020.

Submit Written Comments to: Bode Makinde, P.O. Box 40258, Olympia, WA 98504, email rulescoordinator@oic.wa.gov, fax 360-725-7038, by March 24, 2020.

Assistance for Persons with Disabilities: Contact Melanie Watness, phone 360-725-7013, fax 360-586-2023, TTY 360-586-0241 or 360-725-7087, email MelanieW@oic.wa.gov, by March 23, 2020.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This supplemental filling [filing] will consider clarifying language to ensure consistency with statutory requirement. 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providers, forms of a parental guarantee, the filings these entities submit to the commissioner, and the correction of outdated statutory citations.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 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 the OIC.

Statutory Authority for Adoption: RCW 48.02.060 and 48.110.150.

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: Bode Makinde, P.O. Box 40260, Olympia, WA 98504-0260, 360-725-7038; Implementation: Ron Pastuch, P.O. Box 40255, Olympia, WA 98504-0255, 360-725-7211; and Enforcement: Melanie Anderson, 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 Bode Makinde, P.O. Box 40260, Olympia, WA 98504-0260, phone 360-725-7038, 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 small business economic impact statement requirements under RCW 19.85.025(3), which exempts such rules as defined in RCW 34.05.310(4).

February 10, 2020

Mike Kreidler

Insurance Commissioner

Chapter 284-110 WAC

SERVICE CONTRACTS AND PROTECTION PRODUCT GUARANTEES

NEW SECTION

WAC 284-110-010Definitions.

The definitions in this section apply throughout this chapter.

(1) "Most recent financial statements" means a partial fiscal year financial statement to include year-end totals, if available. For start-up applicants, formed less than one fiscal year, partial fiscal year financial statements shall include the months from formation to current.

(2) "Statutory accounting principles" means the current year accounting practices and procedures manual as adopted by the national association of insurance commissioners. Service contract providers and protection product guarantee providers must follow all statement of statutory accounting principles with a type of issue of "common area" and "property and casualty." Any permitted accounting practices from a domiciliary state regulator shall not be used in determining minimum net worth. Only service contract providers relying on RCW 48.110.050 (2)(a) or 48.110.075 (2)(a) may elect to use statutory accounting principles.

NEW SECTION

WAC 284-110-020Certified financial statement.

(1) 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 protection product guarantee provider in lieu of audited financial statements in certain circumstances. Certified financial statements must include all the financial statements, notes, and information that accurately present the financial position of the provider at the report date. Management is responsible for the preparation and fair presentation of these financial statements in conformity with the accounting practices prescribed or permitted under chapter 48.110 RCW and this chapter.

(2) Only service contract providers and protection product guarantee providers filing certified financial statements must use the prescribed certification of financial statements form that is available on the commissioner's website.

NEW SECTION

WAC 284-110-030Parental guarantee.

Service contract providers relying on RCW 48.110.050 (2)(c) to demonstrate financial responsibility or assure faithful performance must use the prescribed parental guarantee form that is available on the commissioner's website.

NEW SECTION

WAC 284-110-040Reporting of material change.

RCW 48.110.030(6) (service contract providers) and RCW 48.110.055(7) (protection product guarantee providers) require that these entities registered by the commissioner must keep their 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 minimum net worth required by chapter 48.110 RCW and this chapter;

(2) A service contract provider relying on RCW 48.110.050 (2)(c) fails to maintain, or its parent company fails to maintain, a net worth of at least one hundred million dollars;

(3) A change in the designation to whom the commissioner must forward the legal process so served upon him or her; and

(4) A change in type of service contract coverages offered. Service contract providers must file with the commissioner the prescribed change request form that is available on the commissioner's website.

AMENDATORY SECTION(Amending WSR 13-12-038, filed 5/30/13, effective 7/1/13)

WAC 284-20C-005Definitions 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

(b) "Service contract" means the same as in RCW 48.110.020(((17)))(18).

(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

(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)))(20).

(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.