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Chubb Appeals WA State's Order to Stop Writing Commercial Lines Insurance

Source: National Underwriter

Posted on 11 Nov 2010

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Chubb & Son announced that its attorneys have appealed an order from Washington State Insurance Commissioner Mike Kreidler, who is looking to stop six Chubb subsidiaries from writing new commercial insurance in the state for nine months because the companies’ use of rates allegedly did not adhere to their rate filings.

Chubb faces a $534,000 fine—an amount based on 534 alleged violations of state law at $1,000 a piece said Commissioner Kreidler.
Chubb spokesman Mark Schussel said the company was “extremely surprised and disappointed” with the order and fine. Attorneys for the company have filed an appeal, which immediately stays the ordered suspension and fine and allows the Chubb companies to continue to write new business pending a hearing, Mr. Schussel said.

“Chubb takes seriously its compliance obligations and remains committed to the insurance market in the state of Washington,” he said.

The insurance commissioner said his office has “repeatedly tried to work with Chubb and its subsidiaries to fix a number of ongoing violations of state law.”

Some of the violations have been happening for more than a decade, he said, including the companies’ alleged failure to document reasons for charging the rates they do on certain policies, Commissioner Kreidler said.

The suspension order includes Chubb’s Federal Insurance Company, Pacific Indemnity Company, Great Northern Insurance Company, Executive Risk Indemnity, Inc., Vigilant Insurance Company, and Northwestern Pacific Indemnity Company and is effective Nov. 18. The order does not affect existing policies or renewals.

“Insurance relies on a level playing field and fair competition,” said Commissioner Kreidler in a statement. “Rate decisions must be based on a sound rationale and documented. Repeated exams showed that Chubb wasn’t playing by those rules.”

He said Chubb has been repeatedly fined since 2000. Insurance department examinations and company self-audits Commissioner Kreidler said he ordered allegedly found hundreds of violations. According to the order, the Office of the Insurance Commissioner (OIC) conducted market conduct exams in 1998 and again over a period covering 2002 and 2003. Each exam found that the companies “failed to document the application of commercial rating schedules and to provide the reasons for applying schedule rating debits or credits.”

According to Highline Data, Chubb & Son is the 10th largest provider of commercial multiperil insurance in Washington with 4 percent of the market in 2009. Highline Data is a part of Summit Business Media, which also owns National Underwriter.

Last month Chubb reported a slight drop in third-quarter net income while recording higher pre-tax catastrophe losses and lower net realized investment gains. Chubb earned $572 million during the 2010 third quarter compared to $596 million in the 2009 third quarter.