The 10 biggest market misconduct issues to avoid

6. Improper documentation of underwriting and claim files.

This is a case of insurers simply not doing their homework, Donovan says. When examiners come in and conduct an examination, if they don't find compliance resolution letters and adverse underwriting decision notices in their policyholders' individual files, then it raises a red flag. As far as the examiner is concerned, there is a question of whether those documents were ever actually provided. "Document, document, document," Donovan says. "Can you prove everything you were supposed to do?" 

5. Failure to adhere to required claims appeal processes including timeframes and disclosures.

The origins of this problem are a little unclear, Donovan says. It comes down to claims appeal processes not being followed, usually in conjunction with there being a lack of detailed policies and procedures within the insurer itself. Donovan notes that a significant number of complaints in this area involve companies that for some reason do not initiate the grievance process immediately upon receiving a filed grievance.

This issue is most commonly associated with health insurance, and in particular the very specific and highly regulated health insurance claims process. States really define this process closely so that when policyholders have exhausted their appeals with an insurer over a claim, they can exercise their right to request an independent review with the department of insurance. It is all tied into consumer protection, and for the insurer, the trick is effectively implementing the state's mandated framework for handling claims appeals into the organization's own framework. Sometimes the two just are not that compatible, and with a lot of moving parts, there is a risk of something going wrong. The upside here, Donovan says, is that the sheer number of grievances filed are a relatively small subset of the total claims volume. Most claims are handled swiftly and without incident. 

4. Failure to pay claims properly in accordance with policy provisions.

This has a lot to do with certain state-mandated health insurance benefits with exams that predate the Patient Protection and Affordable Care Act. Usually the state receives a complaint that something is not being covered by a health insurer, such as a policy holder on the autism spectrum, or certain kinds of preventative care. What tends to happen is that the policy provision has those coverages, but the claims are denied anyway due to some disconnect within the insurer itself over what the policy does and does not cover. This kind of problem can also arise when there is confusion internally at the insurer over whether or not a cost is within network. This is a series of compliance challenges that can go unmet, Donovan says, and they evidence themselves in unmet payments.

3. Failure to use compliant policy forms and/or maintain compliant plans.

This is a health insurance issue, for the most part, in which policy forms have to be up to date to reflect any all state-mandated benefits. Massachusetts and Missouri in particular require a laundry list of coverages, and insurers that have not updated their forms for use in those states could find themselves walking into a regulatory pickle. 

What can carriers do? Donovan says that insurers have to recognize the importance of internal compliance audits. Poll internal paperwork to ensure it is abiding by all applicable rules. Check to see if there have been any regulatory updates done within the last year or two in the jurisdictions in which business is being placed, but also double check to make sure that forms being uses are in compliance. This is the area in which many insurers might think they are in compliance, but are, in fact, not, Donovan says. It requires an assembly lines of requirements for proper filing, testing and issuance to get it right.

2. Noncompliant claim denial notices.

This typically involves non-mandated forms, and insurers that fail to use the proper wording when issuing a claim denial. Most commonly, it involves failure to note that the policyholder has the right to appeal the denial to their department of insurance. This one oversight can generate plenty of headache with state authorities, as it will run counter to consumer protection laws. 

If a person is receiving a claims denial, Donovan says, they need to understand why they are being denied so they can take advantage of the grievance and appeals process. If that information is not on the claim denial notice, then the entire process goes back to Square One as far as the state is concerned. The insurer must get it right the first time when issuing a denial, Donovan says. The burden is on the insurer.

1. Failure to issue correct explanation of benefits.

EOB forms are a way of life, Donovan explains, especially in health insurance. This is the step in the claims process where the insurer tells the policyholder what has been paid, what the provider has accepted, whether the services are in network, and what the policyholder might owe. Disclosures of this kind vary state by state, and the states definitely look for what they expect to be in that language, such as a prominent display of notice of appeal rights, or the right time limit for subscribers to file an appeal.