August 1999 - #4

In this issue:

Dick Rogers retires
Fewer insurance complaints in '98; auto and health insurance top list
Department rules review
Illinois Insurance Company liquidated
Company action
Exam reports filed
Producer regulatory action
Hearings

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Dick Rogers retires

Richard D. Rogers, Deputy Director of our Consumer Market Division, retired from state service on June 30. A 28 year veteran of the Illinois Department of Insurance, Dick has been instrumental in developing and securing Illinois' national reputation for leadership, professionalism, and innovation. Under his stewardship, Illinois consumers benefited from a thriving insurance market where coverages are widely available at some of the most competitive prices in the country.

While it would be difficult to list all of Dick's many contributions to state insurance regulation, there are some that come readily to mind. Dick has a knack for looking at the big picture, for examining a problem from several perspectives, and for challenging the insurance industry to make positive changes that will benefit consumers.

Prime examples are the significant improvements Dick helped bring about in the Illinois urban insurance market. At a time when other states were taking a piecemeal approach to allegations of industry redlining, Dick formed an Urban Insurance Issues Task Force to identify specific market problems and find practical solutions. As a result, Illinois boasts the most progressive FAIR Plan in the nation, as well as a topnotch homeowners insurance education program aimed at first-time home buyers. That program has been adopted nationally by the Neighborhood Reinvestment Corporation.

Dick's vision has resulted in numerous innovations inside the Department as well, including: publication of consumer complaint ratios; computerization of producer licensing; development of a policy forms database; introduction of market conduct annual statements; and formation of an HMO Unit within the Consumer Market Division.

His leadership abilities have been further manifested through his chairmanship and membership on countless committees of the National Association of Insurance Commissioners and as a founding member and officer of the CPCU Legislation and Regulation section and the Insurance Regulatory Examiners Society.

When asked what he regards as his greatest legacy to the Illinois Department, Dick's unhesitating response is, "my staff. Any accomplishments that I might be credited with, would never have come about without the incredibly dedicated and talented people I've been privileged to work with over the years."

Dick has entered the private sector as a consultant, but hopes to find more time for his family and his golf game, as well.

As he begins this new chapter in his professional career, Dick takes our sincere wishes for his continued success and our appreciation for nearly three decades of outstanding service to the people of Illinois and his colleagues in the Department of Insurance. Perhaps our greatest tribute to Dick will, in fact, be the ability of a knowledgeable and professional staff to carry out and build upon the solid regulatory foundation he provided us.

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Fewer insurance complaints in '98; auto & health insurance top list

Consumer insurance complaints decreased from 14,081 in 1997 to 13,812 in 1998, with auto and health insurance problems leading the list. Written grievances against auto insurers totaled 4,401, while health insurers and HMOs combined for 4,458 of all complaints filed in the past year. Disputes arising from claim handling accounted for the majority of complaints filed with the Department.

The most dramatic decrease occurred in homeowners insurance complaints which plunged 22 percent. Reductions in complaints for other lines included: group credit accident & health insurance, 17 percent; individual life insurance, 16 percent; individual annuity, 13 percent; and auto insurance, 11 percent. Health insurance complaints increased by 5 percent overall, including a 1 percent increase in complaints against HMOs.

The Department of Insurance calculates complaint ratios for all licensed HMOs regardless of the number of complaints and for auto, homeowners, life and accident and health insurance companies that receive ten or more complaints in a calendar year. Ratios measure the number of written grievances in relation to Illinois premium volume, policies in force or membership. A rank of 1 is the lowest ratio of all companies listed for a line of coverage. Complaints reflected on the ratio lists account for slightly more than half of all written grievances received by the Department of Insurance.

Illinois began releasing consumer complaint ratios in 1976 and is one of only eight states that recently received an "A" grade from the Consumer Federation of America for the complaint information made available to the public.

"Technology has made it much easier for consumers to comparison shop for a wide variety of products, including insurance," Director Nat Shapo noted, "and customer satisfaction is often an important consideration in their buying decisions. The Illinois Department of Insurance is committed to consumer education initiatives that make those decisions as informed as possible. In addition to complaint data, our web site (www.ins.state.il.us) contains interactive premium comparison programs (No Longer Available as of Feb 2003) and a wide variety of information on insurance topics."

1998 Composite of Insurance Complaints
Total Complaints Investigated

Complaints by Line of Coverage

Major Reasons for Complaints

Distribution of Complaints by Zip Code

Comparison of Complaints by Coverage & Reason 1997-1998

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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 926 (Insurance Department Consumer Complaints) was amended May 3, 1999, to prohibit the release of consumer complaint files under subpoena pursuant to Section 404(1)(a) of the Illinois Insurance Code. Language is being added to Section 926.40 to also prohibit the release to third parties of consumer complaints files and all documents submitted with the consumer complaint or in response to the consumer complaint. (Vol. 23, #20; Denise Hamilton)

Rule 5421 (Health Maintenance Organization) was amended May 3, 1999, to provide consistency both with NAIC codification of statutory accounting principles and other state practices. With the advent of risk-based capital, language in Section 5421.70 allowing an artificial floor for repayment of subordinated indebtedness is no longer needed and has been deleted (Vol. 23, #20; Jim Hanson)

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Illinois Insurance Company liquidated

Illinois Insurance Company, of Oakbrook, Illinois, was declared insolvent and placed under an Agreed Order of Liquidation on July 9, 1999. The Cook Count Circuit Court granted Director Nathaniel S. Shapo's petition based on the Department of Insurance's finding that the company's policyholder surplus was impaired by over $2.5 million.

Illinois Insurance Company's most recent financial statements reflect approximately $28 million in direct and assumed reinsurance premium as of December 31, 1998, although the company has not written any new business since July 1998. The company wrote private passenger automobile insurance in Illinois, and assumed reinsurance business covering automobile warranty coverages in several states.

Policyholders are being notified that all policies protected by the Illinois Insurance Guaranty Fund will be canceled as of 12:01 a.m. August 9, 1999, unless they expire or are terminated at an earlier date. The fund will be responsible for the covered claims of Illinois policyholders.

Illinois Insurance Company was incorporated in March 1876, and is currently owned by North American Holdings, Inc.

The liquidation proceedings are being handled by the Office of the Special Deputy Receiver, 222 Merchandise Mart Plaza, Suite 1450, Chicago, IL 60654; (312) 836-9500.

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Company Action

New Admissions

Commercial Compensation Casualty Company, CA, 6/21/99
Direct Choice Insurance Company, IL, 6/9/99

Fines

The following entities were issued Stipulation and Consent Orders and fined for Insurance Code violations and/or improper claims practices cited in their Illinois market conduct examinations:

Humana Health Plan, Inc., KY, 5/28/99, $50,000
Principal Life Insurance Company, IA, 6/10/99, $50,000
US Life/Credit Life Insurance Company, IL, 7/6/99, $7,500

Terminations

Illinois Insurance Company, IL, was placed under an Agreed Order of Liquidation with a finding of insolvency on 7/9/99.

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Exam reports filed

Financial

Baker Insurance Company -- 5/19/99
Constitutional Casualty Company -- 6/1099
Country Casualty Insurance Company -- 7/08/99
Country Mutual Insurance Company -- 7/08/99
Country Preferred Insurance Company -- 7/08/99
Hartford Insurance Company of Illinois -- 6/10/99
Health Alliance - Midwest, Inc. -- 5/26/99
Health Alliance Medical Plans, Inc. -- 5/26/99
Horace Mann Insurance Company -- 6/03/99
Interstate Bankers Casualty Company -- 5/06/99
Legion Indemnity Company -- 5/19/99
Midway Insurance Company of Illinois -- 6/21/99
National Surety Corporation -- 6/21/99
Potomac Insurance Company of Illinois -- 6/18/99
Teachers Insurance Company -- 6/03/99
Veterans Life Insurance Company -- 5/25/99
Warner Insurance Company -- 6/21/99
Western Specialty Insurance Company -- 7/08/99

Market Conduct

Humana Health Plan, Inc. -- 5/28/99
Health Alliance Medical Plans -- 5/28/99
Statewide Insurance Company -- 6/04/99
Western Southern Life Insurance -- 6/04/99
Central Mutual Insurance Company -- 6/04/99
Prudential Insurance Company of America -- 6/08/99
Principal Life Insurance Company -- 6/10/99
US Life/Credit Life Insurance Company -- 7/07/99

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Producer regulatory action

(Copies of regulatory orders are available upon written request to the Producer Regulatory Unit, for $1/page. The number of pages are indicated in parentheses following the effective date.)

Revocation of Licensing Authority

William E. Dyson
14651 Chicago Road
Dolton, IL 60419
Effective 5/10/99 (3)

Dennis L. Jeffers
511 Bradley Road
Bay Village, OH 44140
Effective 6/11/99 (4)

Dominick R. Kohout
635 Chicago Ave., Apt. 126
PO Box 281
Evanston, IL 60202
Effective 6/17/99 (2)

TJAW Group
801 N. Cass #300
Westmont, IL 60559
Effective 6/11/99 (4)

Voluntary Revocation

Frank O. Tartaglia
115 Broadway
Rockford, IL 61104
Effective 6/23/99 (1)

Order of Suspension

Michael J. Pavlick
10825 Carolyn Court
Orland Park, IL 60462
Effective 5/26/99 (12)
Civil forfeiture $2000

Other Action

Gary Ryherd
8 Golf Road
Springfield, IL 62704
Suspension lifted 6/14/99

Mark Yoder
3536 Oscar
Alton, IL 62002
Suspension lifted 6/14/99

Stipulation and Consent Order - Civil Forfeiture Paid

ABI Polish Services, Inc.
3380 N. Milwaukee Ave.
Chicago, IL 60641
Effective 5/11/99 (5)

William H. Brown, Jr.
2219 N. Kilbourn
Chicago, IL 60639
Effective 6/11/99 (3)

Busy Bee Construction, Inc.
2435 North Carlson
Chicago, IL 60639
Effective 6/11/99 (3)

Cliff W. Carlson
205 S. Madison
LaGrange, IL 60525
Effective 6/11/99 (3)

Joseph Crapanzano
9098 Terrance Dr.
Niles, IL 60714
Effective 5/28/99 (2)

First Community Insurance Group
265 Stebbings Court #3
Bradley, IL 60915
Effective 5/5/99 (6)

John T. Keane
2631 West 103rd Place
Chicago, IL 60655
Effective 5/25/99 (3)

Adam Kuhiwczak
2561 N. Hessing
River Grove, IL 60171
Effective 5/11/99 (5)

H. Thomas Lane, Jr.
8001 S. W. 30 Ave.
Gainesville, Florida 32607
Effective 6/21/99 (3)

Lightning Construction Co.
5639 W. 63rd St.
Chicago, IL 60638
Effective 5/25/99 (3)

Magnum Insurance Agency Co., Inc.
4259 North Western
Chicago, IL 60618
Effective 4/26/99 (6)

Ana Pivaral
7752 W. Davis
Morton Grove, IL 60053
Effective 4/26/99 (6)

Magnum Insurance Agency Co., Inc.
The Premium Finance Co.
4259 North Western
Chicago, IL 60618
Effective 4/26/99 (3)

Ana Pivaral
7752 W. Davis
Morton Grove, IL 60053
Effective 4/26/99 (3)

Joseph E. Martin
505 N. Lake Shore Drive, Unit 6109
Chicago, IL 60611
Effective 5/14/99 (6)

Northwest Insurance Network, Inc.
330 South Wells St., 16th Floor
Chicago, IL 60606
Effective 5/14/99 (6)

Northwest Premium Services, Inc.
330 South Wells St., 16th Floor
Chicago, IL 60606
Effective 5/14/99 (3)

Mark Stutsman
204 Maple Dr.
Catlin, IL 61817
Effective 5/10/99 (3)

Byron Turner
19 West Mill St.
Millstadt, IL 62260
Effective 5/18/99 (5)

Turner Risk Management, Inc.
8802 Summer Road
Columbia, IL 62236
Effective 5/18/99 (5)

Gloria R. Waters
543 Beacon Pointe
Wildwood, MO 63040
Effective 3/12/99 (4)

Douglas A. Wheeler
323 South Dearborn
Bradley, IL 60915
Effective 5/5/99 (6)

Robert W. Williams
2028 Cornelia Court
Galesburg, IL 61401
Effective 5/26/99 (3)

Stipulation & Consent Order - No Civil Forfeiture

Ayala Premium Finance, Inc.
Lou Ayala
3056 S. Millard Ave.
Chicago, IL 60623
Effective 5/11/99 (3)

Denial of Request for License

Michael D. Adkins
16423 Centerpointe Court
Grover, MO 63040
Effective 5/24/99 (2)

Robert J. Bradshaw
3909 Cass St., Apt. #3
Omaha, NE 68131
Effective 5/24/99 (1)

Mark F. Guenzberger
10280 State Rt. 127
Carlyle, IL 62231-3328
Effective 7/1/99 (2)

Robert D. Larson
143 Birch Street Court
Park Forest, IL 60466
Effective 5/12/99 (2)

Reginald Mitchell
2421 North Missouri Ave.
Peoria, IL 61603
Effective 6/23/99 (2)

Dennis O. Walrath
4545 E. Sunland Ave.
Phoenix, AZ 85040
Effective 6/10/99 (2)

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Hearings

Scheduled Hearings:

Bruce A. Hankey
7/15/99 Hearing No. 3724
Revocation of licensing authority

Grzegorz N. Grabczyrski
7/21/99 Hearing No. 3726
Denial of limited license

James S. Hayles
7/22/99 Hearing No. 3725
Suspension of licensing authority

Thomas W. La Francis
8/4/99 Hearing No. 3728
Revocation of licensing authority

Mutual Trust Life Insurance Co.
8/9/99 Hearing No. 3731
Demutualization

Lansing Police Pension Fund
8/12/99 Hearing No. 3730
Noncompliance

Lansing Firefighters' Pension Fund
8/12/99 Hearing No. 3729
Noncompliance

Trustmark Insurance Company
8/25/99 Hearing No. 3732
Demutualization

Matters Settled without Hearing:

Susan Caimi
Illinois Farmers Insurance Co.
Hearing No. 3723
Hearing Dismissed 6/14/99

Clare Hayes
Hearing No. 3727
Hearing dismissed 7/799

H. Thomas Lane, Jr.
Hearing No. 3711
Stipulation and Consent Order 6/21/99

Completed Hearings:

Buckeye Mutual Insurance Co.
Hearing No. 3695
Requested investment in Mutual Claims
Solutions Inc. stock denied 6/3/99

Kevin & Dawn Buckner
State Farm Fire & Casualty Insurance Co.
Hearing No. 3720
Cancellation effective 7/2/99

Maynard Cannon
Hearing No. 3717
Licensing authority granted 7/6/99

Michael J. Pavlick
Hearing No. 3699A
License suspended for 1 year 5/26/99