August 1998 -- #4

Insurance company privilege taxes
by John O'Brien, Tax & Fiscal Services Section

On October 23, 1997, the Illinois Supreme Court (Milwaukee Safeguard Insurance Company vs. Selcke, et al. No. 93L50663) declared the Illinois privilege tax unconstitutional. To replace this lost revenue, the Illinois General Assembly passed Senate Bill 659, signed into law on May 29, 1998. The new legislation corrects the constitutional issues identified in the Supreme Court ruling and provides for insurers to be taxed at a level which sustains past income to the state.

Senate Bill 659 implements a privilege tax of one-half (.5) percent for all lines of insurance except health and annuity, payable by all licensed insurance companies. All companies which write health insurance premiums, including health maintenance organizations, will pay a privilege tax of four-tenths (.4) percent. There is no privilege tax on premiums from annuities.

The replacement privilege tax has staggered effective dates of January 1, 1998, on all premiums except health; July 1, 1998, on all health insurance premiums except HMOs; and January 1, 1999, on premiums for HMOs.

The Department of Insurance is in the process of drafting rules to clarify the statutory language found in Sections 408, 409, 444 and 444.1 of the Insurance Code. The rules will describe applicability, purpose, definitions, calculation guidelines, form of payment, due dates, allowable deductions, unitary allocation for offsets, hearings, etc. We anticipate the rules to be adopted by the end of December.

During the early part of August, all companies subject to the replacement privilege tax and retaliatory tax will receive an installment blank for the tax due September 15, 1998, and December 15, 1998. This form replaces Installment Form PRT-1 which was used for the June 15 filing and the Retaliatory Tax Quarterly form used for the April 15 filing.

Companies whose privilege tax did not exceed $5,000 in the preceding year are only required to file an annual privilege tax return and need not submit the installment filing. Likewise, companies whose retaliatory tax did not exceed $5,000 in the preceding year are only required to file an annual retaliatory tax return and need not submit the installment filing.

Per the statute, the September and December payment for privilege tax will be one-third (1/3) of 80% of a company's calendar year 1998 estimated privilege tax. Foreign and alien companies must also pay one-fourth (1/4) of their calendar year 1998 estimated retaliatory tax. Once the amount due is determined, companies that had a prior year privilege or retaliatory tax overpayment may reduce their September payment accordingly.

Finally, the privilege and retaliatory annual tax filing date has been changed to March 15 rather than the old date of March 1.

All questions about the September and December calculation and payment should be addressed to the Department's Tax Unit at (217) 785-8156. Questions concerning the rule should be referred to Chuck Feinen, Legal Division, at (217) 557-1396.

The privilege tax rules, minus the illustrations, are available on our web site under "Industry Information." Correction - Privilege tax rules are no longer available from our Website as of March 2002. Contact the Department of Insurance for further information.


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One way to retain important homeowners business

"Nothing is more expensive than a missed opportunity." We've all heard that it's cheaper to retain a current customer than it is to gain a new one, and with today's competitive insurance market, it's more true than ever.

Have you ever had to cancel or nonrenew a long-time policyholder because you found an unacceptable condition in the dwelling? Illinois law requires that you give the policyholder a chance to repair the dwelling, but sometimes it just isn't possible, especially if the insured doesn't have the money to make repairs.

Some insurers have started steering these policyholders to their local Neighborhood Housing Services (NHS) office. NHS has offices in many U.S. cities. One NHS function is to work with homeowners to repair their dwellings, often being able to provide low-interest loans to make repairs possible.

The next time one of your policyholders calls you to say they'd gladly make needed repairs if they only had the money, don't say "Sorry, there's nothing we can do." Instead, give them the phone number of the local NHS office. With very little effort, you can retain the business, help a family make worthwhile home repairs, and win customer loyalty. It's hard to think of an easier opportunity that will provide such an abundant return.

In Illinois, NHS offices are located in:

Aurora NHS of Aurora 630-820-7400
Chicago NHS of Chicago 312-738-2227
Elgin NHS of Elgin 847-695-0399
Freeport NHS of Freeport 815-232-4422
Kankakee Kankakee NHS 815-939-9700
Peoria East Bluff NHS 309-685-3066


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Consumer insurance complaints up from 1996
Consumers filed 14,081 complaints about insurance in 1997 according to the Illinois Insurance Department's annual statistical summary. Of that number, 12,971 were complaints against insurance companies and 1,110 were against health maintenance organizations. In 1996, the Department investigated 12,362 complaints against insurers and 719 against HMOs.

"Although total HMO complaints jumped by 54 percent from the previous year, HMOs generated only 8 percent of all complaints in 1997," said Acting Insurance Director Arnold Dutcher. "Such an increase is not surprising in light of heightened public interest in the HMO industry and managed care issues and the growing number of people covered by HMOs. Still, less than 1/2 percent of HMO enrollees filed complaints with the Department of Insurance."

Equally unsurprising is that claims handling continues to account for the majority of complaints in most lines. Claims handling complaints range from payment delays to dissatisfaction with the company's settlement offer to denial of a claim. "Consumers tend to get a closer look at their coverage when they have a claim," Dutcher said. "If they didn't review their policy or ask questions at the time of sale, they are more likely to encounter problems during the settlement process."

For HMOs and some health insurers, recent women's health care initiatives such as minimum maternity stays, post-mastectomy hospitalization and designation of an ob/gyn as a woman's principal health care provider, generated numerous inquiries and written complaints.

Many of those problems stemmed from confusion over the effective date. Although legislative mandates carry an effective date, they are usually not added to group contracts or individual policies until the renewal date which could be up to eleven months later.

In addition to the composite complaint analysis, the Department of Insurance calculates a complaint ratio for all licensed HMOs regardless of the number of complaints and for auto, homeowners, life and accident and health insurance companies that received ten or more complaints. Ratios measure the number of written grievances in relation to Illinois premium volume, policies in force or membership.

A rank of 1 reflects the lowest complaint ratio of all companies listed for the line of coverage.

Unauthorized address changes
by Dale Emerson, Consumer Services Section

The Illinois Department has become aware that private vendors are offering off-the-shelf Address Corrections and Change of Address software programs approved by the United States Post Office. Those software programs can be downloaded to either individual PCs or the main frames at insurance companies to provide the latest address changes.

While the Department of Insurance has no objection to insurance companies or HMOs utilizing those software packages to verify the addresses of their policyholders, certificate holders, or enrollees, the arbitrary changing of addresses without some form of independent verification by the party affected may be an inappropriate business practice.

The Department will monitor consumer complaints where complainants raise objections that address were changed without prior permission and take regulatory action where warranted.


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Chicago area flood insurance seminars for agents

Two years ago, widespread and unexpected flooding hit major portions of the Chicago area. Many property owners were without flood insurance and too few agents were equipped to deal with the peril and the National Flood Insurance Program's flood insurance products.

How many of your clients were protected by flood insurance? How many of them suffered uninsured flood losses? Are you uncertain of the rules and regulations for flood insurance? Are you unsure of exactly how to write a policy? Are you aware of your E&O exposure if you don't? Do you know where to go for all the flood insurance information you need?

The National Flood Insurance Program will be presenting educational seminars for agents and agency personnel in the Chicago area. You will receive:

• practical and simplified technical and marketing know-how;
• explanation of NFIP terms, rules, and forms;
• instructions for ordering maps, policy supplies, and brochures;
• tips to maximize your customer's flood protection;
• four credit hours for producer licensing continuing education requirements.

Exam reports filed

Financial

American Slovenian Catholic Union (K.S.K.J.) -- 5/7/98
Federal Kemper Life Assurance Company -- 5/7/98
Kemper Investors Life Insurance Company -- 5/7/98
Fidelity Life Association, A Mutual Legal Reserve Company -- 5/13/98
American Family Society -- 5/19/98
Columbian Life Insurance Company -- 5/19/98
Contemporary American Insurance Company -- 5/27/98
American Live Stock Insurance Company -- 6/4/98
Martingale National Insurance Company -- 6/4/98
Montgomery Ward Life Insurance Company -- 6/4/98
Paco Assurance Company -- 6/4/98
Ullin Mutual County Fire Insurance Company -- 6/4/98
Central Investors Life Insurance Company -- 6/9/98
Lincoln Heritage Life Insurance Company -- 6/15/98
Harco National Insurance Company -- 6/18/98
Country Investors Life Assurance Company -- 7/24/98
Country Life Insurance Company -- 7/24/98
Country Medical Plans, Inc. -- 7/24/98
Illinois Mutual Life Insurance Company -- 7/24/98

Market Conduct

American Republic Insurance Company -- 6/3/98
Compass Health Care Plans (Oxford) -- 6/3/98
Sentry Life Insurance Company -- 6/3/98
Fidelity & Casualty Company of NY -- 6/8/98
Apollo Casualty Company -- 6/15/98
Paul Revere Life Insurance Company (Provident) -- 7/6/98
Maryland Casualty Company -- 7/9/98
United HealthCare of Illinois, Inc. -- 7/9/98


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Hearings

Scheduled Hearings:

Edwin N. Millan
8/3/98 Hearing No. 3675
Denial of Licensing Authority

Richard L. Moore
Nationwide Mutual Insurance Co.
8/4/98 Hearing No. 3676
Nonrenewal

James Trombino
State Farm Mutual Automobile Ins. Co.
8/18/98 Hearing No. 3677
Nonrenewal

Matters Settled without Hearing:

Clifford Hardy
Allstate Insurance Co.
Hearing No. 3668
Dismissed 7/1/98

Anne P. Josetti
American Family Mutual Ins. Co.
Hearing No. 3669
Dismissed
Nonrenewal effective 5/26/98

Completed Hearings:

Ben Kiddy
Hearing No. 3573
Order of revocation rescinded;
civil forfeiture ordered 6/13/98

Giuliani Frank Guzi
Hearing No. 3571
License authority reinstated 7/10/98

Charles L. Shulkin
Hearing No. 3580
Licensing authority revoked 7/7/98

David Francis Droege
Hearing No. 3649
Licensing authority suspended;
civil forfeiture ordered 6/17/98

Andy King
Hearing No. 3608
Request for license denied 6/10/98

Carl Bergstrom
Economy Preferred Insurance Co.
Hearing No. 3658
Nonrenewal effective 5/28/98

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Department rules review

The full text of Department rules is printed in the Illinois Register published weekly by the Illinois Secretary of State's Index Department, 111 E. Monroe St., Springfield, IL 62756. Subscriptions are available from that source for an annual fee of $290. Issue numbers and a Department contact person are listed below after each rule summary.

Copies of rules are also available upon written request to the Department of Insurance at a $1 per page charge. Adopted rules are codified in Title 50 of the Illinois Administrative Code.

Rule 4435 (Noncompliance Notification and Penalties) was adopted June 1, 1998, to address new legislation which assesses penalties on pension funds for noncompliance with the Illinois Pension Code and the Department's regulations. The rule sets forth the process for the assessment of penalties as prescribed by Section 1A-113 of the Illinois Pension Code which includes a hearing. The rule also provides criteria for the Director's determination of whether a pension fund has demonstrated good and sufficient cause for its noncompliance with the Illinois Pension Code and the Department's regulations. (Vol. 22, #24; Tom Jones)

Rule 961 (Rulemaking) was adopted on August 7, 1998, to set forth procedures that will allow any interested or affected party to petition the Department of Insurance to initiate rulemaking action. (Vol. 22, #32;David VanLieshout)

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Producer regulatory action

Revocation of Licensing Authority

James A. Bahl
1120 52nd Street
Moline, IL
Effective 5/7/98

Mary V. Clemons
1911 West Monterey Avenue
Chicago, IL
Effective 5/5/98

William C. Fields
11143 South Lowe Avenue
Chicago, IL
Effective 5/28/98

Irwin L. Harris
15800 Halsted, PO Box 2389
Harvey, IL
Effective 5/28/98

Charles T. King
710 South Water Street, PO Box 44251
Chicago, IL
Effective 5/15/98

Martin A. Robinson
6820 South Oglesby, Apt. 304
Chicago, IL
Effective 5/7/98

Charles L. Shulkin
331 Rivershire Court
Lincolnshire, IL
Effective 7/7/98

Brian Winters
5800 Old Missouri Avenue
Centreville, IL
Effective 5/28/98

Voluntary Revocation

Nick J. Caruso, Jr.
10672 West Wakefield Street
Westchester, IL
Effective 7/7/98

Theodore Delgado
2734 West Francis Place, 2nd Floor
Chicago, IL
Effective 7/7/98

Jimmie Hodges
12843 South Wallace
Chicago, IL
Effective 6/30/98

Laramie Insurance Center Pacific Services
2443 South Laramie
Cicero, IL
Effective 7/7/98

Stephen E. Larson
1640 Woodside Circle
Freeport, IL
Effective 6/18/98

North Star Brokerage, Inc.
One East Erie, Suite 232
Chicago, IL
Effective 7/7/98

Northstar Insurance Agency, Inc.
6924 West Cermak Road
Berwyn, IL
Effective 7/7/98

Joseph R. Schwinger
8234 Westview Lane
Woodridge, IL
Effective 6/11/98

Noel C. Valenti
4857 East 85th
Garfield Heights, IL
Effective 7/7/98

Order of Suspension

David Francis Droege
RR #2, Box 147
Rochester, IL
Effective 6/29/98

Timothy W. Elafros
705 Juniper Drive
O'Fallon, IL
Effective 5/28/98

Giuliani Frank Guzi
306 Waldman Avenue, PO Box 408
Matteson, IL
Effective 5/15/98

Ronald L. Meardy
6404 South Hollis Road, PO Box 4036
Peoria, IL
Effective 5/7/98

Stipulation and Consent Order - Civil Forfeiture Paid

Leon Adams
3220 Sandy Lane
Glenview, IL
Effective 4/6/98

AHI Insurance Services, Inc.
724 East Schaumburg Road
Schaumburg, IL
Effective 5/28/98

All Insurance Services, Inc.
3713 West 216th Street
Matteson, IL
Effective 4/6/98

James Stephen Bares
1155 West Empire
Freeport, IL
Effective 4/15/98

Essex Insurance Agency
5616 West Irving Park Road
Chicago, IL
Effective 5/13/98

General Insurance Services, Inc.
651 West Terra Cotta Avenue, Suite 221
Crystal Lake, IL
Effective 5/19/98

George C. LeFlore
4 North Wedgewood
Matteson, IL
Effective 4/3/98

David G. Logan
601 North Ridgemoor
Mundelein, IL
Effective 5/7/98

James L. Massey
12151 Juniper Street NW
Coon Rapids, MN
Effective 5/12/98

Thomas Mastros
631 Leamington
Wilmette, IL
Effective 5/13/98

Wanda Mastros
631 Leamington
Wilmette, IL
Effective 5/13/98

James Sam Papas
916 West Old Mill Road
Lake Forest, IL
Effective 5/19/98

Ira K. Purvis
1178 22nd Street
Moline, IL
Effective 4/15/98

David M. Ramos
21303 Main Street
Matteson, IL
Effective 4/6/98

Joann A. Rossi
7533 Ute Lane
Palos Heights, IL
Effective 5/4/98

Robert Rossi
7533 Ute Lane
Palos Heights, IL
Effective 5/13/98

William James Schaper
2N 537 Pleasant
Glen Ellyn, IL
Effective 5/4/98

Harold T. Seligman
1027 South Rowen
Mesa, AZ
Effective 7/8/98

Talro Insurance Agency, Inc.
25 West Hubbard, 3rd Floor
Chicago, IL
Effective 4/6/98

Raymond Charles Veselik
3807 North Washington
Oak Brook, IL
Effective 4/28/98

Arthur Wirth
725 Apple Tree Lane
Glencoe, IL
Effective 4/6/98

Stipulation and Consent Order - Civil Forfeiture Not Paid

Ernest Cecil Mahon
637 East 88th Place
Chicago, IL
Effective 4/3/98

Denial of Request for License

Traci K. Baker
307 East Louis
Sullivan, IL
Effective 5/7/98

Dennis S. Gregor
813 Sherman Avenue
Evanston, IL
Effective 5/14/98

Lieutenant Jackson, Jr.
14 Augusta National Drive
Glastonbury, CT
Effective 5/1/98

Andy King
613 North Wells Street
Chicago, IL
Effective 6/10/98

Tilmon M. Sharpp
7521 South St. Lawrence Street
Chicago, IL
Effective 5/4/98

Markell Thrash
3224 West 184th Street
Homewood, IL
Effective 6/1/98

Frank Wright
298 Conestoga Street
Windsor, CT
Effective 5/28/98

Director's Order

Jerry D. Fromm
2031 College Drive
Mt. Carmel, IL
Effective 4/27/98
P & C authority revoked
6 month suspension of LAH license

James K. Perlstein
395 Brandon Avenue
Glen Ellyn, IL
Effective 5/15/98
Civil forfeiture paid

James Prince
8836 South Ridgeland
Chicago, IL
Effective 4/27/98
Civil forfeiture paid

William M. Shaver
726 Bruce
Flossmoor, IL
Effective 4/27/98
Civil forfeiture paid

Gordon P. Sowers
701 East Front Street
Bloomington, IL
Effective 4/27/98
Civil forfeiture paid

Other Action

Giuliani Frank Guzi
306 Waldman Avenue, PO Box 408
Matteson, IL
Suspension lifted 6/17/98

Melvin K. Johnson
7349 South Kenwood
Chicago, IL
Order of Revocation stayed

Michael Thomas Mourek
2 S. 601 Danbury Drive
Glen Ellyn, IL
Suspension lifted 5/19/98