1 995-1 996 Biennial Report
N.C. Department of Insurance
rs
Jim Long
Insurance Commissioner
Table of Contents
Department of Insurance Mission Statement 3
Ensuring Safety and Equity for North Carolinians 5
Company Services Group 7
Financial Evaluation Division 7
Actuarial Services Division 12
Information Systems Division 13
Administrative Supervision Division 14
Estate Operations Division 15
Technical Services Group 17
Property and Casualty Division 18
Life and Health Division 23
Seniors' Health Insurance Information Program 25
Market Examinations Division 26
Managed Care and Health Benefits Division 26
Public Services Group 29
Consumer Services Division 29
Agent Services Division 30
Investigations Division 32
Special Services Division 34
Office of the General Counsel 39
Safety Services Group 43
Engineering Division 44
Manufactured Building Division 46
State Property Fire Insurance Fund 47
Fire and Rescue Services Division 48
North Carolina Code Officials Qualifications Board 51
North Carolina Building Code Council 52
North Carolina Fire and Rescue Commission 53
North Carolina Home Inspectors Licensure Board 54
North Carolina Manufactured Housing Board 55
Public Officers and Employees Liability Insurance Commission 56
NC Department ofInsurance
Department of Insurance
Mission Statement
The North Carolina Department of Insurance serves the citizens of North Carolina through con-sumer
protection and education, safety training and promotion, and regulation of specified activities
and industries.
This is accomplished by:
• Assuring an optimum marketplace in which consumers can readily purchase fairly-priced
insurance products from sound, responsive entities;
• Educating the public in loss prevention, safety awareness and developing life safety standards;
• Maintaining a well-managed, fiscally-responsible organization staffed by knowledgeable, cour-teous,
professional employees.
At all times, the affairs of the department are conducted in an open, ethical manner and in the best
interests of the public.
3 1995-96 Biennial Report
NC Department ofInsurance
Ensuring Safety and Equity
for North Carolinians
The Department of Insurance continued to be a strong advocate for North
Carolina consumers during the 1995-96 biennium on issues ranging from
auto rates to fire safety.
Department staff worked long and hard to keep auto insurance rates reason-able.
North Carolinians currently pay the lowest auto insurance rates of any
state east of the Mississippi River, and yet still enjoy a thriving market of
financially-sound insurance companies eager to do business in our state.
In December 1996, the North Carolina Court ofAppeals issued its decision
on the 1994 auto insurance rate filing—a decision which unanimously
confirmed the commissioner's authority to set rates and supported his
ratemaking approach. By the close of 1996, it was unknown whether the
industry would pursue further appeals. If the Court of Appeals' decision
becomes final, the commissioner will order consumer refunds totaling millions of dollars.
The department continued to work to lower insurance rates through traffic safety and injury-prevention
programs. The department and Commissioner Long played a pivotal role in the success
of the Click It or Ticket and Booze It &Lose It programs.
Over the past two years, the Click It or Ticket program has reduced fatalities and serious injuries by
12 percent, resulting in a savings of $164 million in health care costs. Also, in two recent rate filings
from the auto insurance industry, savings of more than $33 million in auto insurance premiums
were attributed to Click It or Ticket.
The Booze It &Lose It program is having similar success. Numbers gathered at North Carolina
checkpoints indicate that we've cut late night drunk driving in half and reduced DWI-related fatali-ties
by 20 percent. Together, these programs are saving lives, preventing injuries, and helping
reduce the high medical costs of auto crashes.
Insurance Commissioner
Jim Long
5 1995-96 Biennial Report
The department's in-house safety programs also have been very busy during the biennium. The
Buckle Up Kids program is active in 57 counties and has distributed more than 2,100 child safety
seats through local fire/rescue agencies. The Learn Not to Burn program provides fire safety
education to more than 90,000 fourth graders annually. A new program was added in 1996—the
NC SAFE KIDS coalition is one of 250 local and state groups dedicated to childhood injury pre-vention.
The department has been a leader in anti-fraud efforts since establishing the first investigations
bureau within an insurance department in 1945. In 1996, the Investigations Division helped to
obtain a $187 million settlement in the largest criminal health care fraud case in North Carolina
history. The case against this medical laboratory was investigated jointiy by state and federal law
enforcement agencies and was the third-largest criminal health care fraud case in the nation.
Investigators from the Special Services Division also concluded two record-breaking cases this
biennium. A $250,000 fine levied against one collection agency is the largest ever assessed by the
division. The owner of another collection agency pled guilty to 45 counts of embezzlement total-ing
nearly $400,000. He is currently serving a 21 -year active sentence—the longest sentence ever
ordered by the courts as a result of a criminal investigation conducted by the division. One of the
division's investigators received the Governor's Award for Excellence in 1995, in part for his work
on this case.
The 1995-96 biennium marked a period of great change in the health insurance industry. New
federal legislation and the growth of managed care pose challenges for regulators and consumers.
The Life and Health Division has prepared legislation which brings North Carolina law into com-pliance
with the federal Health Insurance Portability and Accountability Act of 1996, sponsored by
Senators Kassebaum and Kennedy. The act requires states to conform their statutes to the new law
or risk federal management of health insurance. The legislation prepared by the division is expected
to be introduced during the 1997 session of the General Assembly.
The Managed Care and Health Benefits Division has developed a status report on health mainte-nance
organizations in North Carolina. The report provides a snapshot of the current HMO indus-try
in the state and a detailed analysis ofHMO activity in 1995. The report is intended to give
legislators, regulators and citizens a better understanding of the health care environment in North
Carolina.
The following report explains in detail how each group, division, and unit within the department
contributes to the overall mission of the NC Department of Insurance.
NC Department ofInsurance 6
Digitized by the Internet Archive
in 2013
http://archive.org/details/biennialreport1995nort
Company Services Group
The Company Services Group consists of five divisions: Financial Evaluation, Actuarial Services,
Information Systems, Administrative Supervision, and Estate Operations.
The Financial Evaluation Division monitors the solvency of insurance companies; reviews admis-sion
of out-of-state, domestic, and surplus lines companies seeking to do business in the state; and
audits domestic and foreign insurance organizations.
The Actuarial Services Division assists in the review of rate, form, and statistical filings. The divi-sion
also conducts actuarial studies for financial evaluation work and is involved in special projects
and studies.
The Information Systems Division manages the department's information technological resources,
which include data processing, word processing, office automation, data communications and voice
communications
.
The Administrative Supervision Division monitors the financial condition and operations of do-mestic
insurance companies to determine whether a troubled entity can be prevented from going
into formal delinquency proceedings by returning the insurer to sound financial condition and
good business practices.
The Estate Operations Division works closely with the Administrative Supervision Division to
evaluate the necessity of instituting formal delinquency proceedings and to provide guidance to
troubled insurers after leaving administrative supervision.
Financial Evaluation Division
The Financial Evaluation Division is comprised of the Company Admissions Section, Financial
Compliance Section, Field Audit Section, Self-Insured Workers Compensation Section, and the
Continuing Care Retirement Communities Section. The division regulates managing general
agents and accredited reinsurers, and ensures compliance with many new solvency-related laws.
7 1995-96 Biennial Report
The division is currently working toward accomplishing the following goals and objectives:
Continue to respond to the National Association of Insurance Commissioners Interim Annual
Review in order to enable the department to maintain its accreditation, which was just re-awarded
for five years, by this national regulatory oversight board.
• Finalize additional financial solvency laws necessary to maintain the department's accreditation
with the National Association of Insurance Commissioners for introduction in the 1997 Legis-lative
Session
• Evaluate the adequacy and appropriateness of other insurance laws administered by the division
prior to the 1997 Legislative Session.
• Re-engineer the Field Audit Section.
Company Admissions Section
The primary responsibility of this section is the review and evaluation of the financial condition of
insurance companies applying for initial licensing, eligibility or registration to transact insurance
business in North Carolina.
It is important that insurance entities meeting or exceeding the minimum requirements be licensed
or authorized so that adequate markets and competition are available to North Carolina insurance
consumers. It is equally important that each entity not meeting the minimum requirements be
denied a license or certificate of authority in order to protect North Carolina insurance consumers
from potential insurance problems.
In 1995-1996 insurance companies continued to demonstrate considerable interest in companies
seeking authority to transact business in North Carolina. During the last two years, 95 new applica-tions
were received.
A total of 76 insurance entities were qualified and received initial certificates of authority during the
biennium, including the formation of one new North Carolina domestic insurance company.
This section has been responsible since 1985 for the initial review of insurance companies applying
for eligibility for the placement of surplus lines business. A list of eligible companies is produced
and distributed to North Carolina surplus lines brokers monthly. The surplus lines market repre-sents
insurance products that are not readily available to consumers through licensed companies.
The statutory requirements for surplus lines eligibility were strengthened during 1991, 1992, and
1993.
During 1995-1996, this section received and reviewed 17 filings for surplus lines eligibility. Thir-teen
new companies were found to qualify and were added to the list. There were 23 companies
deleted or withdrawn from the list during this period. The Financial Compliance Section is respon-sible
for the financial surveillance of surplus lines companies after they initially qualify for eligibility.
Since early 1993, this section has been responsible for reviewing applications for accredited
reinsurer status in North Carolina. During 1995-1996, 14 such filings were received. Ten compa-nies
were found to satisfy the requirements and were listed as accredited reinsurers in this jurisdic-tion.
The Financial Compliance Section is responsible for the continued financial surveillance of
accredited reinsurers.
NC Department ofInsurance 8
Since late 1986, this section has been responsible for conducting the financial review of risk reten-tion
groups filing for initial registration. It has also been responsible for making the initial determi-nation
that purchasing groups satisfy the requirements for registration. These entities operate under
the authority of the Federal Risk Retention Act and North Carolina Insurance Statutes governing
liability risk retention. The federal act permits risk retention groups and purchasing groups to
provide certain types of liability insurance coverages to their members if the group is properly
licensed in at least one state and files certain minimal financial information with each state in which it
desires to do business.
The department has required as much information as allowed under the federal act in order to
evaluate the merits of risk retention group filings and to protect North Carolina citizens to the
maximum extent possible. North Carolina statutes require a purchasing group to purchase its
coverages from an insurance company that is either licensed or eligible for surplus lines business in
this state.
During the biennium, a total of seven filings for initial registration were received from risk retention
groups and 62 initial filings were received from purchasing groups. Fourteen risk retention groups
and 5 1 purchasing groups received initial registration during the period. The Financial Compliance
Section is responsible for the continued surveillance of these entities after registration.
Financial Compliance Section
The primary responsibility of this section is to monitor the solvency of all insurance organizations
licensed and/or authorized by the department. The section has the following responsibilities
:
Process and review company licenses, corporate changes and corporate filings: Includes the
review of renewal license applications of insurance organizations and the review, processing and
approval of corporate changes of insurance organizations. Corporate changes include: acquisitions,
mergers, dissolutions, reinsurance arrangements, charter changes, bylaw changes, holding company
filings, and requests for sale of securities.
Monitor financial condition of insurance organizations: Accomplished by reviewing the
operations and financial condition of each organization through the financial analysis of annual and
interim financial statements and other financial data. The primary responsibility of the section is to
determine the financial health of each insurance organization and take necessary and appropriate
steps to safeguard the interests of the citizens of North Carolina. This financial analysis process
utilizes the database and programs of the National Association of Insurance Commissioners.
Maintain security deposits from insurance organizations: Includes the collection of and main-tenance
of all security deposits made by insurance organizations for the protection of North Caro-lina
policyholders. The actual funds are maintained by United Carolina Bank under a safekeeping
arrangement and total approximately $400 million at present. Most of the functions of the collateral
securities program are computerized which allows quicker response on transactions and better
monitoring of the quality of securities on deposit.
9 1995-96 Biennial Report
Performance Indicators
1995-96
Insurance organizations regulated 1,738
Financial statements analyzed 11,897
Reports on examination reviewed 1,008
Insurer licenses suspended 2
Insurer licenses revoked 6
Administrative actions 33
Deposits obtained as a result of financial inquiries $10,000,000
Securities on deposit for policyholder protection $400,000,000
Requests for authority to sell securities 357
Certificates of good standing, deposit, etc. processed 2,500
Field Audit Section
The primary responsibility of the Field Audit Section is to protect the interests of policyholders by
ascertaining the financial strength of regulated insurance entities through on-site verification of
financial data reported to the department. This function is conducted principally at the home office
of insurance companies. Practices and procedures developed by this section, the Financial Evalua-tion
Division, and the National Association of Insurance Commissioners (NAIC) provide the
framework for the examinations conducted. This department was instrumental in directing the
NAIC to incorporate North Carolina's in-house procedures into the NAIC Financial Examiners'
Handbook. These procedures were adopted by the NAIC in 1994 and became required procedures
in all states in 1996.
From January 1995 through December 1996, the Field Audit staff examined 61 domestic compa-nies.
Beginning in 1996, the section assumed responsibility for the field examinations of self-insured
workers compensation groups.
EDP audit software sub-licensed from the NAIC is used to supplement other examination proce-dures.
Both mainframe and personal computer versions of this software are utilized. Beginning in
1997, the section will explore implementation and training with new audit software that is currentiy
under review by the NAIC.
Other automation includes the use of personal computers and various software packages. The
previous objective to provide each examiner with a computer for use in the examination process has
been met. However, with technological advances and the development of more sophisticated
NC Department ofInsurance 10
software applications, much of the hardware had to be updated during 1996. The section believes
upgrading of hardware will continue to be a challenge in the coming years as technology changes.
Electronic communication with the office and the NAIC is an important part of the examination
process. The field examiners' personal computers are equipped with modems so they may connect
to the department's and the NAIC's LAN file server. Field examiners can now gain access to finan-cial
information of insurance entities and provide information gained through the examination
process.
Self-Insured Workers Compensation Section
This section reviews and evaluates applications of all entities that self-insure for liability under the
Workers Compensation Act for initial licensing and ongoing solvency analysis. These entities are
composed of "individuals" (single employers that retain their liability) and "groups" (two or more
employers that pool their liabilities)
.
In the fall of 1995, the legislature passed significant legislation affecting groups. This legislation
provided the department with additional authority to evaluate the financial condition of groups
through additional filing requirements, examination by the Field Audit Section, and other oversight
responsibilities.
Currently, there are 380 individuals and 29 groups. These entities generated $18.3 million in
premium tax revenue in 1996.
Continuing Care Retirement Communities Section
The Continuing Care Retirement Communities Section is charged with the responsibility of regis-tration,
disclosure, contract, and financial monitoring requirements for continuing care facilities in
North Carolina. This section serves to provide for the financial oversight and licensing of continu-ing
care facilities as well as providing additional safeguards for facility residents and prospective
residents.
This authority, which became effective on January 1, 1990, applies only to facilities that furnish
lodging or independent living combined with health-related services under a contract for the life of
the individual, or for a period in excess of one year. Current laws provide for: disclosure of all
material facts and financial data, departmental authority to intervene in the event of insolvency or
the imminent danger of financial impairment, departmental authority to audit the financial records
of facilities, and the establishment of a nine-member Advisory Committee to advise the Commis-sioner
of Insurance on matters related to these facilities.
Facility filings sent to this section include a disclosure statement, certified financial statements,
forecast projections, listings of services and fees, and residency agreements or contracts. Facility
filings are evaluated for statutory compliance, financial stability, operating trends, and consistency
between disclosure statements and residency agreements.
The first filing was received on January 29, 1990. As of December 31, 1996, 43 continuing care
facilities have been issued permanent licenses. These 44 facilities are serving some 13,000 North
Carolina residents.
11 1 995-96 Biennial Report
Actuarial Services Division
Life and Health Section
This division's review of rate change requests has saved consumers covered under individual acci-dent
and health insurance policies approximately $1.6 million in 1994, approximately $3.5 million
in 1995, and approximately $1.2 million in 1996. An additional $285,537 in savings will result
from rate compromises that become effective in 1997. Since the division's review of the rates
began, consumers have realized savings of approximately $29.7 million as of December 1996.
During the biennium, Actuarial Services collected data and evaluated the impact of mandated
reductions in the credit life insurance prima facie rates. The results of lowering the credit life insur-ance
prima facie rates show a modest increase in the incurred loss ratio as of the end of 1995. It is
expected that the incurred loss ratio will continue to increase with further reductions in prima facie
rates.
Actuarial Services annually reviews the Medicare supplement insurance refund calculations submit-ted
by insurance carriers. All carriers were correctly performing the calculations and no refunds
were made for calendar year 1995. Actuarial Services also continues to review Small Employer
Group actuarial rate certifications to assure compliance with the Small Employer Group Health
Reform Act.
Actuarial Services continues to assist other divisions in regard to all aspects of actuarial science. As
an example, Actuarial Services has assisted the Consumer Services Division with consumer com-plaints
on rate increases (small employer group rate increases) and with questions concerning the
recently adopted policy illustration regulation; the Financial Evaluation Division with shepherding
Actuarial Guideline XXX through the rules adoption procedure; the Field Audit Division with
various reserve and proper accounting of reserve items; the Managed Care Division in regard to the
licensing of new HMOs and investigating HMO rate violations which resulted in several HMOs
being fined; the Life & Health Division with reviewing unusual life, annuity and health insurance
products as well as the review of all individual accident and health insurance and HMO rate revi-sions;
and the State Health Plan with respect to the review of all rates submitted by HMOs.
Actuarial Services also provided the South Carolina Department of Insurance with its evaluation
techniques and procedures for reviewing individual accident and health insurance rate revisions,
HMO applications for certificate of authority, HMO rate revisions, and MEWA applications and
regulations.
Property and Casualty Work
Actuarial Services works closely with the Property and Casualty Division in reviewing rate filings,
loss cost filings, form filings and statistical filings. Actuarial Services has been heavily involved in
private passenger automobile rate filings, workers compensation filings, self-insured compensations
funds, and discussions with the North Carolina Rate Bureau on hurricane models for possible use in
homeowners filings. The Actuarial Services Division strives to maintain rates that are not excessive
and are not unfairly discriminatory to policyholders, yet adequate so as to provide a reasonable
profit to companies and to protect their solvency. From the 1989 private passenger automobile
filing, the companies were ordered to refund almost $140 million, including interest, to North
NC Department ofInsurance 12
Carolina drivers. In addition, the Actuarial Services Division helped save drivers in North Carolina
approximately $400 million from the 1994 filing and about $13 million from the 1995-1996 filing
with potential refunds of approximately $900 million from those two filings.
The 1995 workers compensation filings were changed to produce loss costs rather than final rates.
The Actuarial Services Division reviewed requests for loss cost decreases of 15.4% in 1995 and
13.7% in 1996. Additionally, as a result of loss costs legislation, the Actuarial Services Division has
reviewed more than 100 loss cost filings for individual companies.
Another change in legislation dealt with workers compensation groups. This change strengthened
the department's oversight of self-insured workers compensation groups. The Actuarial Services
Division has reviewed the rate structure for every one of the self insured groups domiciled in North
Carolina. This division has also assisted the Financial Evaluation Division in the financial review of
these groups.
As a result of the protracted litigation involved with the 1993 homeowners rate filing the Actuarial
Services Division has met several times with the North Carolina Rate Bureau to discuss the feasibil-ity
of using hurricane models in rate filings. Much information has been exchanged and much
progress has resulted. In addition to these activities, this division has reviewed hundreds of rate
filings, loss-cost and loss-cost adoption filings for commercial lines of insurance.
Financial Evaluation Work
Actuarial Services assists various sections of the Financial Evaluation Division. Actuarial analyses are
performed on financial projections and proposed rates of companies applying for admission or
registration in North Carolina. Loss and loss adjustment expense reserve reviews are also per-formed
to aid in the financial evaluation of domestic insurance companies.
Information Systems Division
The Information Systems Division deals with high-technology issues and equipment, with a goal of
using technology effectively to support the department's regulatory function. This activity, known
within state government as "information resources management" (IRM), includes voice, image and
data processing equipment and software, as well as telecommunications systems such as two-way
radios, telephones and facsimile equipment.
Day-to-day responsibilities include programming, operating, planning, and managing five local area
network (LAN) servers connected via the state's area network; and providing support for the
department's microcomputers. An electronic mail system connects our staff with all other state
departments of insurance; NAIC staff in Kansas City, Washington, and New York; other state
government agencies; numerous private insurance companies; and Internet addresses worldwide.
The division also provides office automation training to department staff.
The Information Systems Division is directly responsible for maintaining four major application
systems on the network: consumer complaint tracking and analysis, company licensing, property
and casualty rate and forms filings, and life and health rate and form filings. Staff of the division
also work with computer programmers at State Information Processing Services (SIPS) to maintain
and develop major software systems for our Agent Services and Self-Insured Workers Compensa-
13 1995-96 Biennial Report
tion units. Other smaller applications include fire incident reporting and an inventory of state prop-erty,
which is self-insured by the department.
The Information Systems Division also consults with the department's line divisions regarding
technology planning. Information Systems is the department's representative on the SIPS Advisory
Board, and represents Commissioner Long on the Information Resources Management Commis-sion
as required. Similarly, the division exercises approval authority over all acquisitions of informa-tion
and technology resources such as telephones, radios, computers, software, services, and mainte-nance
contracts.
Under the state's revised IRM management structure as implemented by the 1992 General Assem-bly,
the division will continue to perform the lead role within the department for integrated infor-mation
technology planning and management. Similarly, within the department, the division
provides staff support to a committee of managers of line divisions setting hardware and software
standards, and IRM operational policy.
Administrative Supervision Division
The Administrative Supervision Division was formed in early 1992 to increase regulatory scrutiny
over potentially-troubled insurance entities domiciled in North Carolina. The primary responsibility
of this division is to closely monitor the financial condition and operations of domestic insurance
entities deemed to be in a potentially hazardous financial condition. The ultimate goal of this
division is to determine whether a troubled insurance entity can be prevented from going into
formal delinquency proceedings and returned to sound financial condition and good business
practices.
Examples of close monitoring procedures performed by this division include:
• financial analyses of annual and interim financial statements and other financial data, including
holding company and affiliated company data;
• initiating, monitoring and enforcing workout plans designed to correct deficiencies causing the
hazardous financial condition;
• performance of targeted financial and operational examinations;
• institution of formal administrative supervision proceedings designed to protect insurance
company assets through a workout period.
Potentially-troubled insurance companies are transferred to the Administrative Supervision Division
via interaction with the Financial Evaluation Division and other divisions of the Department of
Insurance.
NC Department ofInsurance 14
Estate Operations Division
The Estate Operations Division works closely with the Administrative Supervision Division to
evaluate the necessity of instituting formal delinquency proceedings and to provide guidance to
troubled insurers after leaving administrative supervision. The unit's ultimate goal is to rehabilitate
and/or liquidate troubled and insolvent insurers in order to protect and preserve, to the maximum
extent possible, the remaining assets of the insurer for the benefit of the company's policyholders,
creditors and the public.
The Estate Operations Division manages the financial and operational affairs of domestic insurance
entities placed into receivership. Examples of specific duties performed include:
• marshaling assets, pursuing asset recoveries and liquidating assets of companies in receivership
to the maximum benefit of policyholders and other creditors;
• managing the operations of the various departments of the insurer through a runoff period
including claims, underwriting, policyholder service, data processing, accounting, and person-nel.
• coordinating relationships and issues involving the various state guaranty associations called
upon to pay policyholder claims.
• providing litigation support services and coordinating relationships and issues involving federal
and state investigative agencies outside of the Department of Insurance.
15 1995-96 Biennial Report
NC Department ofInsurance
Technical Services Group
Created in September 1988, the Technical Services Group is comprised of the Property and Casu-alty
Division, Market Examinations Division, Life and Health Division, Seniors' Health Insurance
Information Program and the Managed Care Division.
The Property and Casualty Division's primary responsibility is the review of rate, rule and policy
form filings relating to property and casualty coverages. These filings are made by insurance com-panies,
statutory bureaus and licensed rating organizations.
The Life and Health Division is responsible for the review and approval of rate, rule and policy
form filings submitted by life and health insurance companies. Beginning in late 1996, this division
began regulating the activities of third party administrators and multiple employer welfare arrange-ments.
The Market Examinations Division conducts field examinations of the market practices of domestic
and foreign insurers and their representatives. Market Examinations has been reorganized and has
standardized its review, summary, expense and examination procedures in order to develop mean-ingful
trends.
The primary function of the Seniors' Health Insurance Information Program (SHIIP) is to train
adult volunteers to help older adults through the maze ofMedicare regulations, Medicare supple-ment
insurance, long-term care insurance and claims procedures. In September 1992, SHIIP
completed a six-year drive to expand the program to all 100 counties of North Carolina.
The Managed Care Division was established in 1992 to monitor and regulate the activities of man-aged
care entities including: health maintenance organizations (HMOs), preferred provider organi-zations
(PPOs), utilization review organizations (UROs), managed care indemnity health insurers,
multiple employer welfare arrangements (MEWA), and third part administrators (TPAs). The
division's emphasis is on how company activities affect consumers in North Carolina. The division
accomplishes its work through several types of activities: market practice examinations of compa-nies,
review of document filings required of companies, and data collection and analysis.
17 1995-96 Biennial Report
While each of these functions has existed within the department for a variable number ofyears, the
Technical Services Group was formed to increase their effectiveness, improve communication and
enhance coordination, primarily with the actuarial staff and financial analysis examiners, as well as
with other divisions within the department.
Property and Casualty Division
This division licenses rating organizations, advisory organizations and joint underwriting associa-tions,
and reviews rate, rule and policy form filings made by these entities. The division also collects
filing fees for rate and form filings. In addition, this division reviews the rates, rules and forms for
the North Carolina Rate Bureau , North Carolina Reinsurance Facility, Beach Plan, Fair Plan and
licensed property and casualty insurance companies.
State law permits insurance coverages to be placed with surplus lines companies — those unlicensed
in North Carolina — as long as there is compliance with applicable statutes and rules. Surplus lines
taxes are the responsibility of specially-licensed agents; this division receives and reviews the tax
forms submitted by these agents. In 1995-96, surplus lines premium taxes generated $6,417,124
for the state.
Premium Taxes
No. of Policies Premium Tax Generated
1995 27,659 $83,649,691 $4,182,483
1996* 22,135 $44,692,812 $2,234,642
"Through 9/96
Rate Deviations
State law allows companies to file rate deviations (discounts) on coverages such as private passenger
automobile, homeowners, and dwelling fire under the jurisdiction of the North Carolina Rate
Bureau. A typical deviation would be lower auto insurance premiums for autos with anti-locking
brakes.
New Rate Deviations
HO Dwelling/Fire Auto WC Combined Auto/HO
1995 197 74 139 88
1996* 202 71 150 90 1
"Through 9/96
NC Department ofInsurance 18
Consent To Rate
Because some risks cannot be written at standard rates, state law permits companies to charge
higher-than-standard rates on individual policies with the written consent of the policyholder. Prior
to October 1, 1996, insurance companies were required to submit consent information to the
Commissioner of Insurance for approval. However, due to a statute change, this division no longer
reviews such information. Each insurance company must now maintain the required information
for review during market conduct examinations or specific inquires from this department.
Consent To Rate Requests
Private Auto All Others
1995 791,775 3,314
1996* 754,411 2,785
*Through 10/96
Filings Review
Because this division's primary responsibility is the review of forms, rules and rates, filings must be
carefully analyzed. During 1995-1996, a total of 17,923 filings were reviewed.
Forms, Rules and Rates Reviewed
Companies and Organizations
1995 8,395
1996* 9,528
*Through 12/16/96
Workers Compensation
Effective September 1, 1995, the method in which workers compensation insurance rates were
established changed. The new system provided that the North Carolina Rate Bureau would deter-mine
the "loss cost," then each insurance company would determine its "multiplier." Loss Costs are
based on historical aggregate losses and loss adjustment expenses adjusted through development to
their ultimate value and projected through trending to a future point in time. Kmultiplier is an
individual company's determination of expenses, other than loss expense and loss adjustment ex-pense,
associated with writing workers compensation and employers liability insurance.
19 1995-96 Biennial Report
Workers Compensation Loss Costs Filings
NC Rate Bureau Residual Market Individual Company
1995* 1 1
1996** 1 1 177
*Effective 9/1/95
** Through 11/96
Workers Compensation Rates
1985-1996
Filina Year Rate
Requested
Rate
Implemented
Statewide
Premium
Employer
Savings
1985 12.90% 7.50% $289,077,233 $15,610,171
1986 12.80% 5.80% $363,134,574 $25,419,420
1987 16.80% 15.90% $419,796,824 $3,778,171
1988 (no filing)
1989 16.80% 9.00% $509,210,148 $39,718,392
1990 29.30% 18.90% $541,485,184 $56,314,459
1991 41.80% 15.80% $575,129,570 $149,533,688
1992 40.30% 33.00% $650,405,437 $47,479,597
1993 15.50% 9.30% $865,000,000* $53,630,000
1994 (no filing)
NC Rate Bureau Loss Costs Base Rates
1995 -15.00% -15.00% $603,000,000 $92,259,000
1996 -14.00% -14.00% $511,000,000 $70,000,000
Total Savings $541,280,898
Significant Issues
Building Code Effectiveness Grading: North Carolina is one of three states that have approved
this rating system for Commercial Property. The Building Code Effectiveness Grading Schedule
developed a grade of 1 to 10 for a community based on the adequacy of its building code and the
effectiveness of its enforcement of that code. The credits for the grades range from -1% to -15%.
The Commissioner of Insurance approved the rate filing effective March 1, 1995.
NC Department ofInsurance 20
Auto Rate Filings: The 1995 Auto Rate Filing was withdrawn as a result of problems with the
data. Instead of a 1996 filing, the 1995 Filing was amended. Data problems still existed in the
1996 data but most were corrected. At the conclusion of the hearing, the Commissioner of Insur-ance
ordered an overall rate decrease of 8.3%. The North Carolina Rate Bureau implemented a rate
increase of 5.5% over the commissioner's order. The matter is now in litigation.
In December 1996, the North Carolina Court of Appeals issued its decision on the 1994 auto
insurance rate filing—a decision which unanimously confirmed the commissioner's authority to set
rates and supported his ratemaking approach. By the close of 1996, it was unknown whether the
industry would pursue further appeals. If the Court of Appeals' decision becomes final, the commis-sioner
will order consumer refunds totaling millions of dollars.
Private Passenger Auto Rates
1984-1996
Filing Year
Rate
Rpni lAQtArl
Rate Implemented Consumer Savings*
1984 3.90% -0.20% (too roc cn~7
1985 20.80% 10.40% $69,767,852
1986 12.20% 1.00% $98,010,197
1987 4.10% 1.0% $36,525,296
1988 6.40% 4.30% $23,917,914
1989 4.10% -6.10% $127,768,278
1990 9.60% 4.00% $77,400,316
1991 9.60% 4.00% $83,191,330
1992 -4.20% -6.10% $28,537,119
1993 (No filing)
1994 17.70% 4.40% $418,072,648
1995/96 6.10% 5.50% $12,771,921
Totals $999,044,625
*Differencein totalmanualpremiumdoUars betweenfiledandimplementedrates
21 1995-96 Biennial Report
Medical Malpractice: Many companies have been revising physician and surgeon rates this year.
The companies have made changes ranging from reclassifications to small overall rate increases.
Two new companies have submitted filings for physicians and surgeons professional liability and
are pending approval. This market appears to remain very competitive. It also appears that major
changes may occur in the hospital professional liability market in 1997. The industry has indicated
that a change in the rating basis will probably be filed in the next year. There has also been some
interest from the industry in writing capitated stop-loss coverage. Approval is now pending for one
company's program. Division staff anticipate more of these filings in 1997.
HO-91 Program: The new homeowners program was approved by the Commissioner of Insur-ance
on April 1, 1996 with an effective date ofNovember 1, 1996. The new program contains the
following new coverages and enhancements:
New Coverages
• Other Structures away from the Residence Premises (HO 04 92)
Refrigerated Property Coverage (HO 04 98)
$500 limit of coverage
$100 deductible
Special Personal Property Coverage for Unit-Owners (HO 17 31)
CoveragesEnhancements
• $1,000 Special Limit on grave markers removed
$ 1 ,000 Special Limit for electronic apparatus added
• $2,500 Additional coverage for landlord's furnishings added
• Exclusion for damage resulting from "constant or repeated seepage or leakage over period of
weeks, months, or years" removed
• Threshold for actual replacement to receive replacement cost settlement raised from $1,000 to
$2,500
• Up to 10% of Coverage A for Ordinance or Law Coverage
Beach Plan: There were three important changes made during the 1996 legislative session.
• The development of a proposal for a Reserve Fund to pay catastrophic losses as recommended
by the Legislative Research Committee.
• Passage of an act to revise the Beach Plan participation formula. The revision to the formula is
to encourage companies to write voluntary policies in the Beach area and enable them to write
themselves out of the losses of the Beach Plan.
• The addition of business income coverage to the coverages available from the Beach Plan.
NC Department ofInsurance 22
North Carolina Insurance Underwriting Association
(Beach Plan)
Beach Policies Only
Premiums % of Change Policies Issued % of Change
1995 $14,844,286 9% 18,135 7%
1996 $16,237,766 9% 19,113 5%
Wind and Hail Policies Only
1995 $6,911,128 52% 7,154 31%
1996 $8,134,454 18% 8,368 17%
Total Beach Plan
1995 $21,755,414 19% 25,289 13%
1996 $24,372,220 12% 27,481 9%
Life and Health Division
The 1995-1996 biennium has been a period of explosive activity for this division. Activities relating
to federal and state health insurance reform, increases in the volume of life and health form and rate
filings, and changes to life insurance rules have significantly impacted the workload of the division.
Health Insurance Issues
Most of the division's efforts have concentrated on health insurance issues. Many of these activities
were a result of the public's interest in making health insurance more accessible, and the continued
growth of uninsured persons in North Carolina.
Division staff served as a consultant to the NC Health Planning Commission and its successor, the
NC Health Care Reform Commission. Staffmembers assisted the regional health insurance Pur-chasing
Alliances in their efforts to make health insurance available to North Carolina's small busi-nesses.
Assistance was provided to the Small Group Carrier Committee as it revised the "standard"
and "basic" plans to make them more marketable, and thus increase access to health insurance for
small businesses. In response to Senate Bill 652 (enacted by the 1995 legislative session), which
analyzed the impact of adjusted community rating on North Carolina and other states, the division
researched and drafted a report submitted to the General Assembly.
The division prepared legislation which brings NC law into compliance with the requirements of
the recently enacted federal Health Insurance Portability and Accountability Act of 1996, sponsored
by Senators Kassebaum and Kennedy. The law makes all group health insurance plans "guaranteed
issue," and increases the "portability" of all health insurance plans. The federal legislation requires
23 1995-96 Biennial Report
states to conform their statutes to the new law or risk federal management of health insurance. The
legislation prepared by the division is expected to be introduced during the 1997 session of the
General Assembly.
The division has worked closely with the Managed Care and Health Benefits Division in its over-sight
of managed care in North Carolina. Issues in which the division has been involved include
"pharmacy of choice," freedom of access to obstetricians/gynecologists, length of maternity stays,
confidentiality of data and trade secrets and the advertising of insurance products.
Much effort was spent in 1996 on issues relating to violations of rate laws by HMOs in North
Carolina. It came to the attention of the division that several managed care organizations were
using rates which had not been approved by the Commissioner of Insurance, or were offering rate
guarantees or rate caps in violation of state statutes. These violations are apparently due to the
intense competition for business within the HMO industry. Two cases have been closed. In both,
the commissioner imposed monetary penalties on the managed care organizations. Research on
other cases is continuing, and they are expected to be resolved in 1997.
Life Insurance Issues
The department adopted a rule governing life insurance illustrations in 1996. The rule, based on the
model regulation for life insurance illustrations developed by the National Association of Insurance
Commissioners, was effective January 1, 1997. As used in the rule, "illustrations" are presentations
or depictions that include non-guaranteed elements of a policy over a period of years. The rule
establishes how the various elements of a life insurance policy shall be described, how illustrations of
future policy values shall be explained to consumers and how calculations of future policy values
shall be projected.
Form and Rate Filings
The 1995-1996 biennium witnessed a steady increase in both the volume and complexity of health
insurance form filings. New products, many of which contain innovative and complex provisions,
were submitted to the Life and Health Analysts for review as the health insurance industry re-sponded
to increasing concern about costs, increasing marketplace competitiveness, the growth of
the managed care industry and increasing pressure to provide insurance for the uninsured.
Life and Health Form/Rate Filings
Forms Filed Fees Received
1995 6,881 $307,560
1996 7,414 $328,342
NC Department ofInsurance 24
Seniors' Health Insurance Information Program
The Seniors' Health Insurance Information Program, known as SHIIP, was established in 1986 by
North Carolina Insurance Commissioner Jim Long in response to an increased number of calls,
letters and complaints from older North Carolinians confused by their health insurance options.
The activities and duties performed by SHIIP provide a valuable service to the State's senior popu-lation.
SHIIP's primary objective is to educate the public on seniors' health insurance concentrating
on Medicare, Medicare supplements and long-term care insurance. SHIIP educates the public
using a three tier approach:
• by training volunteer counselors in all 100 counties of NC to educate and counsel their peers
on seniors' health insurance
• by operating a toll-free hotline from the Raleigh SHIIP office, and
• by developing educational materials for use by consumers.
Since its creation SHIIP has trained more than 8,000 senior volunteers who undergo an extensive
24-hour training course to serve as SHIIP counselors. Currently there are almost 1,500 active SHIIP
volunteers covering all 100 counties in the state. SHIIP Education Specialists conducted 41 training
programs in 1995 and 25 in 1996, training a total of 427 volunteers. As a result of these trainings,
SHIIP volunteers documented cash savings to clients of $339,204.51 in 1995, and $110,981.00 in
1996. In addition to individual counseling SHIIP received 31,353 calls on the hodine during
1995-96. SHIIP creates a number of consumer publications on a yearly basis including iheMedi-care
Supplement Comparison Guide and the Guide to Long-Term Care Insurance in North Carolina and
serves as a clearinghouse for many Health Care Financing Administration publications.
SHIIP is coordinated in each county through an existing human service agency such as a Council
on Aging office, a Senior Center, or a Cooperative Extension office. These agencies serve as spon-sors
and provide important continuity, an available point of access and are models for interagency
cooperation. Currently there are 124 SHIIP sponsors in our state.
SHIIP Achievements:
• receipt of national recognition from the Council of State Governments
• receipt ofMedicare Beneficiary ServicesAward from HCFA in 1990
• training and informational workshops for NC Cooperative Extension Service agents on health
insurance
• development and distribution of multimedia program called Medicare Myths which targets the
pre-retirement audience and details five common misconceptions about Medicare and how
these misconceptions can be hazardous to pre-retirement planning
development and statewide distribution of an informational video on long-term care insurance
• development of Employer Group Health Plans and Related Issues Module
• development of direct mailer project targeting all North Carolinians turning age 65 in 1996
25 1995-96 Biennial Report
Market Examinations Division
The Market Examinations Division was created to monitor insurance company market practices,
especially as they affect consumers. The examination methods employed by the division are based
on a program developed by the National Association of Insurance Commissioners (NAIC) . By
agreeing to pilot the NAIC program, North Carolina became the first state in the nation to conduct
market examinations along the lines promulgated by the NAIC.
The division is staffed by a deputy commissioner, a management support person, 13 field examiners
and two clerical support persons. The division monitors the activities of foreign and domestic
insurance carriers operating in North Carolina.
The division is divided into four regular examination teams, each capable of responding to special
problems or concerns related to company practices.
Examinations are conducted on a regular rotation so that all companies domiciled in North Caro-lina
will be examined on a four-year cycle and dominant foreign companies on a five-year cycle. A
company's size usually dictates the number of analysts required for an examination. Most compa-nies
require no fewer than three analysts to conduct a thorough, effective examination.
Upon completion of the examination, and after a report has been submitted to the Commissioner of
Insurance, the company is required to take action on all areas of concern referenced in the report.
Examinations are divided into three categories: general, focus and market segment. The three types
of examinations require distinct protocols to ensure that companies are treated fairly and without
prejudice or unfair discrimination.
Market Conduct Examinations
Year General Focus Market Segment
1994 6 36 14
1995 16 13 5
Managed Care and Health Benefits Division
The Managed Care and Health Benefits Division was established in 1992 to monitor and regulate
the activities of managed care entities including: health maintenance organizations (HMOs); pre-ferred
provider organizations (PPOs); utilization review organizations (UROs); managed care
indemnity health insurers; multiple employer welfare arrangements (MEWA); and third party
administrators (TPAs). The division's emphasis is on how company activities affect consumers in
North Carolina.
In contrast to traditional indemnity health insurance, through which insureds obtain covered ser-vices
from health care providers of their choice and with little consideration of plan requirements,
managed care plans determine many of the specifics of the delivery of care, such as the types of
NC Department ofInsurance 26
providers available, selection of individual providers, and programs and policies that insureds and
their treating physician must follow as a condition of receiving coverage.
As a result of the additional company and enrollee obligations present in the contractual relationship
under a managed care plan, special regulatory concerns, in addition to traditional concerns relating
to fair marketing practices, fair policyholder treatment, and financial capability, are warranted.
These concerns relate primarily to the provider networks utilized by managed care plans, and their
programs and policies designed to promote effective care and eliminate unnecessary care. Misappli-cation
of these tools and techniques could result in insureds not getting coverage for the services
promised under their policy, either through outright denial of coverage or through systematic
barriers to care.
The division accomplishes its work through several types of activities: market practice examinations
of companies, review of document filings required of companies, and data collection and analysis.
These activities are discussed below.
The division's examination program has focused entirely on HMOs, with a few exceptions in earlier
years. This focus is due to the fact that HMOs employ the highest level of policies and techniques
to "manage care," thus having the greatest potential impact on consumers, as well as due to the
need to utilize staff to perform statutorily prescribed examination duties. The examination program
provides for examination of each HMO on at least a triennial basis, as required by law, and includes
review of operational areas of a company, including management and control, provider network
development, utilization management programs, quality assurance activities, third-party contracting
arrangements, marketing, member services, claims payment, and underwriting practices. Examina-tions
last between two and nine weeks, depending on their type and areas covered. General exami-nations
entail comprehensive review of policies, procedures and practices in major operational areas
of the company. Compliance examinations are designed to ascertain whether the company has
taken corrective action to address problems found during the previous general examination.
The division is also responsible for reviewing filings for an HMO certificate of authority. These
reviews are conducted in consultation with other divisions in the department, including actuarial
and financial staff, and include review of applicant companies' planned operations, as well as an on-site
pre-licensure examination. When resources permit, a licensure follow-up examination is con-ducted
approximately 12 months after a new HMO has been licensed. The purpose of follow-up
examinations is to ensure that actual operations are in accordance with that proposed in the
licensure application, as well as to review company policies and procedures relating to areas ad-dressed
in law or regulations.
HMO Examinations and Licensure Summary
Year Licensed General Compliance Pre-Licensur Follow-Up Total
HMOs Exams Exams Exams Exams Exams
1994 18 1 1 6 8
1995 22 5 4 10 7 26
1996 27 6 4 2 1 13
27 1995-96 Biennial Report
In-house review is performed on form health care provider contracts used by HMOs and managed
care indemnity health insurers and annual registration filings from PPOs and UROs. Review of
these filings permits evaluation of company practices and compliance as indicated by their written
policies and procedures, data reporting, and assertions made by company officers. For form pro-vider
contracts and PPO registrations, review is performed to establish compliance with regulations
pertaining to carriers' responsibilities for arranging the provider networks to which insureds are
directed. For URO registrations, review is performed to determine procedural compliance with
regulations governing the utilization review process, as well as the member appeal process when
care is denied.
Managed Care Filings
Year Provider Form
Contracts
PPO
Registrations
URO
Registrations
1994 not available 41 110
1995 250 (estimated) 84 140
1996 429 111 146
Commencing in the latter half of 1996, staffing resources have been dedicated to data collection and
analysis of the managed care industry. Better data is expected to be of use to the department, in
both its policy-making and enforcement efforts, as well as to legislators, other policy-makers, and
researchers. Depending upon future directions, analyses useful to employers and/or consumers
could be developed. Examples of possible data usage as a result of efforts currently underway
include:
• the establishment of industry trends and norms relating to areas such as accessibility of provider
networks (e.g. the types and numbers of health care providers included insurers' networks),
utilization management practices (e.g. rate of denials of care, the timing and results of member
appeals of such denials), member complaints about service and quality of care (e.g. reasons for
member complaints and companies' policies for resolving complaints);
assessment of managed care penetration, enrollment trends, and demographic and geographic
enrollment information that may provide information about industry practices; and
• compilation of summary company information that provides interested parties with an over-view
of managed care industry presence and performance in North Carolina.
The number of licensed TPAs has grown from 118 as of December 31, 1994, to 149 as of Decem-ber
31, 1996. An additional 48 TPAs which serve only self-funded single employer plans were
registered with the Department as ofDecember 31, 1996. Effective December 1996, TPA licens-ing
was moved from the Managed Care and Health Benefits Division to the department's Life and
Health Division.
Since laws were enacted to license multiple employer welfare arrangements, six licenses have been
issued, three in 1993, two in 1994, and one in 1996.
NC Department ofInsurance 28
Public Services Group
The Public Services Group is comprised of the Agent Services, Consumer Services, Special Services
and Investigations Divisions.
The Agent Services Division regulates and issues licenses for insurance agents, adjusters, brokers
and appraisers. The division reviews license applications, licensing examinations, and maintains a file
on every licensed insurance professional doing business in the state of North Carolina.
The Consumer Services Division helps North Carolina consumers get answers to their insurance
questions and resolve their insurance problems. A highly-trained staff of consumer specialists
advise and acquaint consumers with courses of action they may pursue to solve their particular
problems.
The Special Services Division is responsible for licensing and investigating complaints related to
insurance premium finance companies, professional bail bondsmen and runners, collection agencies
and motor clubs.
The Investigations Division is responsible for investigating criminal violations ofNorth Carolina's
insurance laws. Requests for investigations come from within the department, consumers, law
enforcement agencies, local, state and federal agencies and insurance companies.
Consumer Services Division
The technical and complex nature of insurance generates a multitude of questions from the con-suming
public and from many segments of the insurance industry itself. Questions touching upon
all types of insurance products are handled by our Consumer Services Division. Each year the
division (a staff of 29 consumer service specialists and support personnel) provides valuable assis-tance
to a broad array of our citizens.
During the 1995-96 biennium, division staff handled an average of more than 100,000 telephone
calls and processed almost 10,000 written consumer complaints each year. A computerized data
format allows for continuous updates and changes on each complaint file.
29 1995-96 Biennial Report
Such computerized complaint handling and the accumulation of related information offers impor-tant
indications of how well departmental regulatory measures are affecting insurance market
practices.
During the 1995-96 biennium, the consumer services staff was involved and active in a number of
areas:
• The staff spoke to numerous community groups and educational gatherings on a variety of
insurance topics, including automobile, health, workers compensation, and specialty coverage.
• The division helped to identify financially-troubled insurance agencies and assisted consumers
in the resolution of resulting problems.
• The division, through its Market Assistance Plan, continued a remarkable record of helping
prospective commercial policyholders locate and procure hard-to-find coverage that reduced
their risks and allowed them to stay in business.
• The division provided direction and information to the department's Market Examinations
Division relating to complaint experience regarding insurance companies' conduct in the
marketplace.
• Staff provided front line participation at disaster recovery centers in the aftermath of natural
calamities such as hurricanes, tornadoes and flooding.
In 1995-96, Consumer Services proceeded with the development of a new PC client/server data
base. In early 1997, this new state of the art technology system will replace the division's first ever
computer data base which was installed in 1985. The data collected and stored will be more readily
accessible, and will enhance significandy the division's ability to monitor statutory and regulatory
compliance of the insurance industry.
The Consumer Services Division serves as a significant front line service organization. Division staff
continues to improve the quality of their service to consumers through professional training and
continuing education.
Agent Services Division
The Agent Services Division protects the general public of North Carolina by ensuring that indi-viduals
representing the insurance industry have an adequate knowledge of the industry and possess
the moral and ethical characteristics necessary to operate in a fiduciary capacity. The division's main
function is to regulate all licensed agents, brokers, limited representatives, appraisers and adjusters
authorized to do business in North Carolina. This regulation includes all activities concerning
licensing, appointing and educating agents, brokers, adjusters and limited representatives (both
resident and non-resident) selling insurance and adjusting claims of insurance in North Carolina.
The division operates in three separate and distinct sections. The Licensing/Pre-Licensing Educa-tion
(PLE) Section establishes and administers minimum standards for licensure of agents, adjust-ers,
brokers and limited representatives as well as recommending regulatory action. Division staff
works closely with the Consumer Services Division, the Investigations Division, and the Attorney
General regarding regulatory matters.
NC Department ofInsurance 30
The Financial Section handles the billing and collection of all fees payable to the division. This
section is responsible for adhering to the state's Daily Deposit Act and other state government
accounting procedures. All reports are audited by the State Auditor.
The Continuing Education Section establishes and administers minimum education standards to
maintain licensure through the Continuing Education program. This section also performs insur-ance
agency examinations to determine compliance with the North Carolina statutes and regula-tions,
and recommends regulatory action.
The division regulates the operation of 79 pre-licensing insurance schools conducted through
private vendors, trade associations, universities, community colleges, and technical institutes. In
addition, there are 4,661 approved continuing education courses being offered by 560 providers.
An additional 235 seminars were approved for continuing education credits during 1996.
Agent Licensing Activity
1995* 1996**
Examinations 13,852 13,506
Licenses Issued 21,155 23,109
Agent Appointments 128,770 150,685
Certification Letters 18,052 16,423
Renewals/Appointments 317,864 388,782
* Reflects dates 1/1/95 through 12/31/95
** Reflects dates 1/1/96 through 12/19/96
In August 1996, the Licensing Voice Response Unit (VRU) was activated, (919) 981-5244. This
number provides access to license status and general licensing information. The division is cur-rently
developing a computer program for the electronic download of insurance companies' ap-pointments
and terminations
The Continuing Education Voice Response Unit (VRU) is a toll-free number, 1-800-931-7111.
Licensees may call this number from 7:30 a.m. - 11:30 p. m. Monday through Saturday to access
their continuing education records and information on continuing education courses currently
being offered.
The division continues to conduct routine examinations of insurance agencies. These examinations
are conducted daily across the state by field examiners. The examination process gives the division
an opportunity to review the records and operations ofNC agencies. The purpose of the examina-tion
is to ensure that agency staff is appropriately licensed, review financial information, determine
if files are accurately underwritten and to recommend continuing education courses. There has
been a noticeable decrease in the number of agencies that have gone out of business since the
implementation of routine examinations. The rules governing the continuing education program
have been revised to give the division more control over the quality of instruction.
31 1995-96 Biennial Report
Investigations Division
Established in 1945 as the nation's first investigations bureau within an insurance department, the
Investigations Division enjoys a long history in criminal investigation of insurance related crimes.
The division conducts criminal investigations and supports prosecution of individuals, companies,
and entities violating insurance and other criminal statutes.
During the biennium the Investigations Division initiated and concluded investigations of complex
financial crimes in the area of health care fraud, while continuing the traditional vigilance over
dishonest insurance agents and policyholders. Previous changes in management, investigative
emphasis, and law enforcement personnel have produced positive results.
The recent criminal conviction and pre-trial diversion settlement of a medical laboratory fraud case
is an example of the positive effect of these changes. The case was investigated jointly by state and
federal law enforcement agencies, including the Investigations Division, and resulted in a criminal
conviction with a $5 million fine, plus an additional $182 million in restitution to the federal, state,
and local governments. These monetary penalties made this the largest criminal health care fraud
case in North Carolina history, and the third largest in the nation. Individual settlements by insur-ance
companies across the nation are now being pursued due to the investigative efforts and guid-ance
of the Department of Insurance.
Other significant developments in the past two years include a less lenient stance by our court
system for insurance agents convicted of embezzling premiums. Recently, four insurance agents or
former agents have received active prison terms for stealing premium dollars from insurance com-panies.
These sentences have ranged from a high of 20 years to three years incarceration. In
previous years, active sentences were rarely imposed against insurance agents. Aggressive investiga-tion
and support of prosecution of insurance agents that divert and misapply funds from policy-holders
and insurers remains a major investigative initiative by the Investigations Division.
As evidenced by the statistical data below, the numbers of complaints and case referrals continue to
increase. While the success of the Investigations Division cannot be measured only in numbers of
convictions or amounts of money recovered, this data is an important measure of the success of our
mission of combating insurance fraud.
Investigations Activities Report
1995 1996
Complaints and case referrals received 441 532
Investigations Initiated 88 72
Criminal Convictions 29 32
Restitution/monetary recoveries $804,346.58 $187,447,246.08
Pending criminal cases 115 100
NC Department ofInsurance 32
Restitution Report
Countv 1995 1996 CWoXXu%An1tI Vvw 1995 1996
aAnl1 val ImIIaVIn1 cWeX* $0.00 $187,000,200.00 Madison $0.00 $1,069.02
Brunswick $0.00 $13,317.88 McDowell 1 W XX XX W W X* $5,189.13 $0.00
Buncombe $76 245 76 $0.00 MWeX*cVklX IeX^nbm&uMraM $229,066.98 $17,641.53
CXXaVIl1dVIwIeI xl*l1 $0.00 $19,762.00 Moore $4,944.84 $0.00
CVXaVItVVaI WwWbIXaVI $71,839.00 $32,133.55 Nash $0.00 $6,509.99
CXXh1 owWWaVIn $0.00 $117,025.98 OVXnIsXXl1 XoX WwW $9,046.00 $0.00
CXXlXe^1veland W X^ VI VI $955.14 $0.00 Oranae Xi^ I VI IM $0.00 $8,162.73
CX^oX^lumbu%MsX* $25,814.00 $0.00 PaX*sX^a%|uX*oX^tXXa*nkX $0.00 $0.00
Cumberland $0.00 $3,501.75 PeX^nI der MX* $2,994.57 $15,610.71
Davidson $2,932.00 $0.00 Pitt $0.00 $0.00
Duplin $0.00 $20,485.00 RmaVindVIoVloh I l«X I $642.83 $0.00
DuVIrIIhI VaI ImII $49,134.72 $11,566.07 Richmond B X 1 X# I 1 1 I I XX 1 1 VI $36,241.89 $3,015.18
EdVIaSJew Xc* XoX ImIbIXeX^ $0.00 $16 361 37 Rockinaham 1 \WXX IX III mm I 1 VI III $0.00 $14,004.48
Forsvth I XXI VmVJ VI I $33,025.67 $0.00 Stanlev $0.00 $0.00
GWMaWsbtVoInI $0.00 $22 067 32 Union $659 00 $3 862 00 XJ^ X* J X^ mmm
GX^XuViIlIIfI XoXrI VdI $13 114 00 $82 702 45 Wake $0.00 $29 653 23
HeX#ndMeX*rsX#oX^n $1,850.00 $0.00 Wayne $32 864 40 $0.00
Hoke $2,630.00 $0.00 WWWiIlI Ik1eVsW $4,911.78 $0.00
Johnston $5,168.00 $6,000.00 Wilson $4,410.49 $0.00
Lenoir $5,592.71 $0.00 Other states $146,056.61 $0.00
Lincoln $0.00 $2,593.84 Totals $804,346.58 $187,447,246.08
Prospectus
Case referrals related to the approximately 425,000 Hurricane Fran claims were beginning to be
reported at the end of 1996. These storm related claims will likely dominate the complaints re-ceived
by the division in 1997. The Investigations Division has participated with insurance compa-nies
in a catastrophe task force that analyzes and investigates suspicious storm related claims. The
division also has assigned investigators to work with investigators from the Federal Emergency
Management Agency's Office of the Inspector General to pursue criminal investigations of fraud
perpetrated by contractors, adjusters, and policyholders. In addition to significant health care fraud
cases and catastrophe related crimes, the Investigations Division will continue the customary investi-gative
role involving fraud committed by licensed insurance agents, insurance companies, workers
compensation fraud, and staged automobile accidents.
33 1995-96 Biennial Report
Special Services Division
The Special Services Division is responsible for licensing, auditing, and monitoring insurance
premium finance companies, motor clubs, collection agencies, professional bail bondsmen, bail
bond runners and surety bondsmen. The division protects the public by investigating allegations of
criminal as well as statutory violation by these licensed entities and seeking prosecution, restitution
and/or disciplinary action.
In 1995-96, the division licensed the following entities to operate in North Carolina:
1995-96 Licensees
Name of Industry No. of Licensees
1995 1996
Insurance Premium Finance Companies
Insurance Premium Finance Companies (Branch Office)
213
122
192
119
Collection Agencies
In State (128) Out of State (181)
In State (133) Out of State (166)
309 299
Professional Bail Bondsmen 230 219
Bail Bond Runners 354 311
Surety Bondsmen Not Recorded 646
Motor Clubs
Motor Clubs (Branch Office)
32
401
32
421
Totals 1,661 2239
During this biennium, the division completed a total of 1,073 routine and criminal investigative
assignments. As a result of these assignments, criminal and regulatory actions were taken against
the violators. Fifty-two criminal charges by investigators of the division resulted in 29 arrests. Civil
penalties totaling $305,600.00 were levied and $439,526.92 in restitution was ordered paid. The
division monitored and administered $333,785.38 in consumer funds to North Carolina consum-ers.
(See following tables detailing criminal/regulatory actions and refunds effected.)
NC Department ofInsurance 34
Consumer Refunds
Bail Bondsmen Collection Agencies Premium Finance Co.
County 1995 1996 1995 1996 1995 1996
Alamance $8,002.32
Bladen $605.00
Cleveland $500.00
Columbus $1,786.00 $165.00
Durham $510.00 $237.53 $382.55
Edgecomb $655.00
Forsyth $1,543.00 $156.95
Gaston $4,155.00 $5,500.00 $14,469.92
Guilford $4,000.00 $1,478.00
Harnett $327.17 $263.94
Haywood $30.00
Iredell $3,150.00
Mecklenburg* $2,370.00 $4,085.00 $1,428.47
Nash $1,600.00 $275.00
New Hanover $650.00
Onslow $1,075.00
Pasquotank $75.00
Pitt $700.00 $50.00 $22.00
Robeson $3300.00
Surry $425.00
Vance $11,000.00
Wake $11,890.00 $7,456.75 $375.00 $290.00
Watauga $226,870.78
Wilkes $290.00 $450.00
Totals $27350.00 $34,106.75 $17,368.47 $249,949.97 $4,163.70 $811.49
*A Motor Club in Mecklenburg County refunded $35.00 in 1995.
35 1995-96 Biennial Report
Summary of Civil Penalties, Criminal Convictions,
Restitution, and License Action
VslVII
Penalties
Number/Penalty Amount
uriminai
Convictions
Number/Restitution
License
Action
Denial, Revocation or Suspension
Bail Bondsmen 14/$34,250.00 8/$2,832.00 5
Collection Agencies 0/0 2/$41 7,975.00* 2
Premium Finance Co. 1/$3,100.00 0/0
1996 Civil
Penalties
Number/Penalty Amount
Criminal
Convictions
Number/Restitution
License
Action
Denial/Revocation, or Suspension
Bail Bondsmen 8/$1 0,250.00 6/4,250.00 15
Collection Agencies 3/$254,500.00** 1/$14,469.92 1
Premium Finance Co. 1/$3,500.00 0/0
*The owner of the collection agency charged and convicted in Pitt County is currently serving the
longest sentence ever ordered by the courts as a result of a criminal investigation conducted by the
division.
**The $250,000 civil penalty against the collection agency located in Watauga County is the largest
fine ever accessed by the division. Pursuant to Article IX, Section 7 of the North Carolina Constitu-tion,
this fine was remitted to the Watauga County School Board.
During this biennium the division processed findings of facts and request for payments from North
Carolina county officials to satisfy bail bond judgements from security deposits held in trust by the
department. The process resulted in payments to various clerks of courts (local school boards)
totaling $761,344.18. The payments are detailed in the attached chart.
NC Department ofInsurance 36
Bail Bond Judgements
County 1995 1996 County 1995 1996
Alamance $529.00 Johnston $3,075.00 $285.00
Alexander $1,000.00 $6,235.23 Lenoir $1,870.00 $6,330.00
Alleghany $1,595.00 Martin $95.39
Beaufort $1,725.00 $3,903.47 Mecklenburg $59,705.00 $35,650.00
Brunswick $18,450.00 Nash $7,457.10 $2,934.00
Buncombe $7,820.00 New
Hanover
$33,609.89 $41,880.00
Cabarrus $10,247.63 $435.60 Northampton $1,115.00
Caldwell $2,410.00 $2,150.00 Onslow $5,487.00 $101,485.66
Catawba $5,735.00 $335.00 Orange $2,375.00
Cleveland $510.00 Pender $620.00 $1,010.00
Columbus $12,541.00 Pitt $40,976.00 $26,644.86
Craven $11,040.00 Polk $500.00
Cumberland $3,808.00 Robeson $21,300.00
Durham $10,040.00 $15,599.12 Rowan $555.75 $31.52
Edgecomb $2,601.75 $8,007.12 Sampson $33,105.00
Forsyth $71,835.04 $138.28 Surry $7,436.54
Franklin $1,175.00 $150.00 Vance $7,550.00 $1,160.00
Gaston $917.75 Wake $37,827.09 $30,999.24
Granville $2,435.00 $1,356.75 Warren $1,150.00
Greene $5,010.00 $1,715.00 Watauga $600.00
Guilford $27,237.40 $3,560.00 Wayne $835.00
Harnett $1,810.00 $275.00 Wilson $85.00 $20,840.00
Haywood $250.00 Yadkin $1,000.00
Henderson $700.00
Iredell $185.00 Totals $403,389.65 $357,344.18
37 1995-96 Biennial Report
Legislative Action
The 1995 session of the General Assembly ratified Senate Bill 534, which regulates surety bonds-men,
bail bondsmen, and runners. In summary, this act redefined the term "surety bondsmen" and
changed the licensing procedures whereby all bail bondsmen (professional bail bondsmen and
surety bondsmen) and bail bond runners would be licensed and regulated by the Special Services
Division pursuant to North Carolina General Statute 58, Article 71.
Personnel
In 1995 one of the criminal investigators of the division was recognized for his devotion to duty
and received the Governor's Award for Excellence. This was the first employee of the Department
of Insurance to ever receive this award. In 1996, the Governmental Accounts Auditor of the divi-sion
was nominated and elected as the candidate to represent the Department of Insurance for the
Governor's Award for Excellence within the category of Devotion to Duty.
The Deputy Commissioner of the division has been instrumental in organizing and establishing the
North American Collection Agency Regulatory Association (NACARA) . The purpose of the
NACARA is to enhance the administration and enforcement of collection license laws by providing
members with opportunities for communication on license law matters, to conduct research and
obtain information on license matters for professional improvement, and to encourage and develop
cooperation with other organizations whose major objective is of a similar nature. In 1996, the
Deputy Commissioner of the division was elected President of the NACARA.
NC Department ofInsurance 38
Office of the General Counsel
This organizational unit provides internal legal advice to all divisions of the department. The divi-sion
includes two Attorney IVs who litigate all rate cases for the department through final appellate
adjudication. The department's General Counsel also acts as liaison with the Attorney General. The
office coordinates hearings on a wide variety of administrative matters and prepares complex orders
and memoranda for the Commissioner. The General Counsel serves as one of the Department's
hearing officers having final agency decision authority, and reviews all department contracts with
suppliers and consultants.
General Counsel
The General Counsel must give legal direction and counsel to the Commissioner, all members of
the department, and the Attorney General in areas relating to insurance law, general civil practice,
statutory and common law, criminal law and procedure. Further, the General Counsel serves as the
hearing officer for a wide variety of administrative hearings. The General Counsel also provides
legal direction and counsel concerning the laws relating specifically to the activities of the related
non-insurance entities regulated by the divisions in the department. The General Counsel direcdy
supervises the activities of two Attorney IVs and two administrative secretaries and evaluates the
effectiveness of the work of the Attorney General in the context of providing advisory opinions and
handling administrative proceedings and other litigation. The General Counsel also litigates cases at
the instruction of the Commissioner of Insurance when the Department of Justice conflicts with
representing the Department of Insurance.
39 1995-96 Biennial Report
Activities of the General Counsel
1995 1 www 1996 1 %/ w w
Hearinos on Aoent Summarv SusDension/License Revocations 21 15
Hearinos on Aaent/Bailbondsmen Denial of License Aoolications o 15
Hearinos on ADDeals from Decision of Joint Underwritina Authoritv i iwui 1 1 iyo ' 1 i npuwuiw ii >-/ 1 i i L/ vvioiui i wi i i l 1 iu v i wi ilii i v_j / % w*i li i V—* i 1 1 y ,
Beach Plan, FAIR Plan, and Guaranty Associations
3 5
Licpnsurp Matters Relatina to Insurance ComDanies 5
Other Administrative Hearings 8 3
Informal/Formal Opinions Produced In-House by General Counsel 106
Other Matters Handled by the General Counsel
(Excluding Administrative Hearings)
34
Matters Referred to Attorney General's Office for
Review/Informal Opinion
6 114
Market Conduct Hearings 2
Ratemaking Litigation
During the 1995-96 biennium the Office of the General Counsel continued to be closely involved in
several pieces of significant litigation involving ratemaking for lines of insurance under the jurisdic-tion
of the North Carolina Rate Bureau. Until early 1996, these cases were handled primarily by
outside counsel and outside witnesses under the direction of the General Counsel. Beginning in early
1996, however, two Attorney IV positions and one staff position were created by the 1995 General
Assembly. These positions assumed the ratemaking functions in the General Counsel's Office,
thereby eliminating the necessity for contracting outside counsel in complex rate cases.
In September 1994, the Commissioner disapproved an auto insurance filing submitted by the Rate
Bureau on February 1, 1994. The Commissioner stated that it was "excessive and unfairly discrimi-natory"
in part because it added million of dollars to the bills of many of the state's drivers so others
could be given "deviations," or premium discounts. The industry insisted that such cost shifting is
authorized by state law, but after a five-week administrative hearing, the Commissioner found
otherwise. The Commissioner's 1994 order was subsequendy appealed to the North Carolina Court
of Appeals,
In December 1996, the Court of Appeals issued its decision affirming in part, yet remanding the
case to the Commissioner for further clarification. Notwithstanding the partial remand, the court's
decision unanimously confirmed the Commissioner's authority to set rates and supported the
Commissioner's ratemaking approach. By the close of 1996, it was unknown whether the industry
would pursue further appeals.
NC Department ofInsurance 40
If the Court of Appeal's decision becomes final, the Commissioner will order consumer refunds
totaling millions of dollars. Until such time, the escrow funds will continue to accrue interest.
The Rate Bureau's 1995 filing was continued prior to its hearing. The delay was due to substantial
data errors discovered by the industry in the ratemaking database underlying the filing. In April
1996 the Rate Bureau submitted a filing which satisfied the 1995 and 1996 filing requirements.
The Department held a six-week hearing. The Commissioner issued his final "order" in October
1996 disapproving the filing. The Rate Bureau appealed the Commissioner's order to the Court of
Appeals.
The 1994 and 1996 automobile rates cases are the only cases on appeal at this time. In past years,
as many as five rates cases have been simultaneously on appeal by the Rate Bureau.
In its 1995 and 1996 filings, the Rate Bureau filed for significant decreases in Workers Compensa-tion
rates which were approved by the Commissioner without formal hearing. Department staff
join the industry and businesses in hoping that the significant reforms enacted by the legislature in
1995 will continue to reduce workers compensation costs and, hence, the premiums paid by North
Carolina businesses.
While these lengthy rate cases involve public expense in staff and consultant time, taxpayers have
enjoyed an enormous rate of return on funds disbursed from the Consumer Protection Fund
created by N.C.G.S. 58-2-215. The Fund has fulfilled its promise of "leveling the playing field" for
state regulators facing the substantial resources of the insurance industry. The table below details
this favorable cost-to-benefit ratio.
Departmental Rate Regulation
Rate Filing Total Savings Total Cost Savings/Consumers
1994 Auto $1,029,700,277 $911,210 $1,130
1995/1996 Auto $320,675,852 $619,107 $518
41 1995-96 Biennial Report
NC Department ofInsurance
Safety Services Group
Comprised of the Engineering, Manufactured Building, State Property Fire Insurance Fund, and
the Fire and Rescue Services Divisions, the Safety Services Group administers and enforces life
safety standards throughout the state, promotes risk management practices throughout govern-ment,
and maintains a sound insurance program for state agencies.
The Engineering Division administers the state building code. Providing staff to the NC Building
Code Council, the NC Code Official Qualifications Board and the Home Inspectors Licensing
Board, the division is comprised of seven sections: code consultant, electrical, mechanical, modular,
inspector certification, building code council and handicapped accessibility.
The Manufactured Building Division works to assure that construction standards for manufactured
homes are maintained and that warranty obligations under state law are met. The division monitors
handling of consumer complaints, licenses the makers of manufactured homes, dealers, sales repre-sentatives
and set-up contractors, and acts as staff for the NC Manufactured Housing Board.
The State Property Fire Insurance Fund administers the self-insurance fund for state-owned prop-erty
and vehicles, and assists local governments with property and casualty insurance programs.
This program also makes available professional liability coverages for law enforcement officers,
public officials and employees of any political subdivision in the state. This section also provides
staff, administration, and research services to the Public Officers and Employees Liability Insurance
Commission (POELIC).
The Fire and Rescue Services Division administers the Firemen's Relief Fund, trains fire depart-ments
and rescue squads and works to improve fire and rescue protection. The division also admin-isters
matching dollar-for-dollar grants to volunteer fire departments and rescue squads and offers
fire prevention education in the public schools. And the division provides staff, administration, and
research services to the Fire and Rescue Commission.
43 1995-96 Biennial Report
Engineering Division
North Carolina's General Statutes give the Commissioner of Insurance the responsibility of general
supervision of the administration of the North Carolina State Building Codes. The codes contain
regulations relating to plumbing, electrical, heating, air conditioning and fire protection systems
and the construction of buildings in general. The division meets these responsibilities by providing
interpretations of code requirements and assisting local government authorities with the application
of the codes.
The division also inspects electrical systems in state-owned buildings, reviews plans and specifica-tions
of new buildings for code compliance, assists with code-related educational programs, and
administers state examinations required for certification of city, county and state code enforcement
officials.
Division staff also administer the state's accreditation program of independent inspection agencies
who safety test and label electrical and mechanical equipment or monitor the performance of manu-facturers
who sell factory-fabricated modular buildings.
In addition to serving as an informal state code appeals agency, the division also serves as staff to the
North Carolina State Building Code Council, the North Carolina Code Officials Qualification
Board, and the North Carolina Home Inspectors Licensure Board.
Engineering Division Activities
1995-1996
Plans reviewed 4,207
Field inspections 2,953
Office conferences 6,888
Telephone information requests 126,365
Schools, seminars and conference participation 444
Building Code Council meetings 88
Qualification Board meetings/hearings 56
Qualification Board complaint investigations 36
Inspection certification schools coordinated 1,932
Inspector certification exams administered 2,562
Inspector certification applications reviewed 8,165
Inspector certificates renewed and issued 9,537
Code publication sales $1,844,357
Electrical certificates of compliance issued 642
NC Department ofInsurance 4-4
Code Administration and Enforcement
The division provides interpretations of the intent of the state building code to city and county
inspection officials, architects, engineers, contractors, material suppliers, manufacturers, other state
agencies, attorneys and the general public.
The division is responsible for reviewing plans and specifications for large buildings. Before a
permit can be secured for these buildings, a letter of compliance must be issued by this division to
the inspection department having jurisdiction.
State law requires that handicapped and disabled persons receive treatment equal to that afforded
other persons. The division has an Accessibility Section which provides information to handi-capped
organizations, design and construction professionals and building owners in the application
of these state laws and the building code requirements relating to accessibility. This assistance helps
provide our disabled citizens with the full and free use of all buildings in the state. Accessibility
regulations are currently being revised to make N.C. Code equivalent to federal Americans with
Disabilities Act regulations
.
This division inspects the electrical systems of all state-owned buildings during construction. When
code violations are detected, the contractor or designer is advised of corrections required. Contrac-tors
cannot receive payment for their work until this division issues a certificate stating that the
installation complies with safety regulations. In addition to these required inspections, this division
assists local officials with the inspection of other construction aspects of buildings when requested.
Because some buildings require special construction, technical assistance is necessary from the
division to ensure that the building is safe. Inspection assistance is also provided for structures
when deterioration, fire or storms create conditions which appear to be hazardous to life.
Our staff also serves as the State Damage Assessment Team and assists the State Office of Emer-gency
Management during disasters.
State Building Code Council Support
The building code council consists of 15 members appointed by the governor. The council is
empowered to adopt and amend the state building code, hear appeals on the interpretation of the
code and approve local building regulations which are different from the state code. The council
holds regularly scheduled public hearings on the second Tuesday in March, June, September, and
December. Additional meetings are held by council code committees.
State law permits the building code council to provide, in circumstances deemed appropriate,
programs to certify independent testing laboratories as state-accredited third-party agencies to
evaluate, inspect and label factory-built manufactured buildings, and electrical and mechanical
building components. This program is administered by division staff.
Code Officials Qualification Board Support
This board develops standards for the training and certification of code enforcement officials. The
division provides clerical and staff services in support of this effort. The board is also responsible
for developing training schools and state examinations for inspector certification. Some division
staff members serve as instructors; all state certification exams are administered by division staff.
45 1995-96 Biennial Report
Persons certified by the board are issued a certificate for each level and area of inspection for which
they have met qualification requirements. The division also investigates written, substantiated
complaints against inspectors made to the board, which may then schedule a hearing.
The division is divided into eight sections: code consultant, electrical, mechanical, modular, inspec-tor
certification, accessibility, code council, and fire prevention.
On July 1, 1991, North Carolina's first State Fire Prevention Code became effective. This required
the hiring of an individual with fire prevention experience. This staff member has provided code
interpretations to more than 1,500 city and county fire inspectors throughout the state and has
assisted in the development of three levels of fire prevention courses.
Home Inspectors Licensure Board Support
This board was created by the legislature in 1994 to provide for the licensure and regulation of
those who perform home inspections for compensation. This board is composed of seven mem-bers
and a designee of the Commissioner of Insurance. This board provides for the development
and maintenance of standards of practice, code of ethics, examinations, licensure, renewal, and
disciplinary procedures for home inspectors in North Carolina. The division provides clerical and
staff services in support of this effort. The staff provides all administrative functions for the board
including administering the examinations, issuing licenses, and renewal of licenses.
Manufactured Building Division
This division acts both as a state administrative agency under the federal Manufactured Housing
Constructions and Safety Standards Act and as staff to the North Carolina Manufactured Housing
Board.
The role of a state administrative agency is to monitor manufacturers' handling of consumer com-plaints
to assure compliance with federal standards. Staff support of the Manufactured Housing
Board includes licensing all manufacturers, dealers, set-up contractors, and salespersons that do
business in this state to ensure compliance with warranty requirements set forth in the General
Statutes.
This division is also responsible for developing set-up and anchoring standards for manufactured
homes and assisting local inspection departments in the inspection of homes for proper set-up and
anchoring requirements. Division staff has rewritten the state set-up and anchoring standards
which became effective July 1, 1995. Seminars have been held throughout the state to familiarize
the local inspection departments, manufacturers, dealers, set-up contractors and other interested
parties with the 1996 revisions to the code.
This division is entirely receipt supported. A portion of these receipts come from fees received from
HUD for manufactured homes placed in our state for retail sale. The balance of the division's
funding comes from license fees charged to manufacturers, dealers, set-up contractors, and salesper-sons.
In July 1992 the division began requiring salespeople to pass a formal test before issuing a sales
license. These tests are offered in various locations across the state to facilitate the program.
NC Department ofInsurance 46
The division is responsible for filing claims against surety bonds in the event dealers or manufactur-ers
go out of business or cannot otherwise fulfill their warranty obligations. In 1995, the division
collected approximately $10,400 and collected in 1996 about $19,700 on behalf of North Carolina
consumers.
The division also supplements its receipts by participating in a contract with the National Confer-ence
of States on Building Codes Standards. During 1995-96, division staff spent approximately
1,000 hours on interstate monitoring inspections.
Manufactured Building Division Activities
1995 1996
Complaints Received 806 1,121
Inspections Completed 503 657
Manufacturers Licensed 81 90
Dealers Licensed 735 862
Set-up Contractors Licensed 536 633
Salespersons Licensed 2,075 2,200
Salespersons Temp. Licensed 628 922
Board Hearings Scheduled 4 11
Pre-Hearing Conferences Scheduled 113 243
State Property Fire Insurance Fund
This division is responsible for the operation and maintenance of the State Property Fire Insurance
Fund, the self-insurance plan for state property. The division currendy has jurisdiction over 13,000
state-owned buildings with a combined value of $9.6 billion. With the approval of the Council of
State, the division investigates and adjusts claims and pays losses.
The fund provides basic fire and lightning insurance coverage for state-owned property and offers
insurance for wind, hail, riot, explosion, smoke, theft, sprinkler leakage, vandalism, flood, and
business interruption. The division procures from private insurance carriers other needed insurance
such as auto liability and physical damage, inland marine, ocean marine, aircraft liability and physi-cal
damage, boiler and machinery, workers compensation, accident and health, general liability,
crime, professional liability, and bonds.
Another vital function of the division is plan approval for construction and renovation of all state
buildings. Plans are reviewed to assure state construction is safe for building occupants and desir-able
for insurance purposes. Emphasis is placed on proper exits, building fire resistance, and fire
protection systems.
47 1995-96 Biennial Report
The division also develops specifications for fire detection and alarm systems, sprinkler systems, and
other life safety equipment used by designers of state buildings.
By statute, the division reviews and approves all building plans, insures finished buildings, and
inspects them annually. Between plan approval and completion of construction, there is at present
no statutory inspection for code compliance. One of our objectives for the coming biennium is to
develop statutory requirements for such inspections.
Loss control through annual inspection of all state-owned buildings is accomplished by inspectors
who are certified in the interpretation of codes and standards for fire protection and construction.
Reports are made to agency management for correction of deficiencies. The staff also provides
advice on corrective measures.
Updating fire protection systems in existing buildings is a continuous process. Emphasis is placed
on improving the protection of major computer installations, libraries, high-risk buildings, places of
assembly, and other areas with a high concentration of people or expensive property.
Because of the rapid increase in the use of computers and other electronic equipment, lightning
damage has become the state's most frequent loss. Efforts to reduce lightning losses include com-municating
information to agencies on proper protective measures, and inspecting sites with recur-ring
claims.
The risk management section serves as the resource for state agencies in resolving risk issues. The
section administers the state's automobile insurance program covering 31,000 vehicles, and helps
local governments review their insurance needs and implement risk management programs. Since
1985, 145 North Carolina communities and counties have received complete insurance surveys and
risk management services.
The section also provides staff, administration, and research services to the Public Officers and
Employees Liability Insurance Commission (POELIC). The commission is charged with making
available a plan of professional liability coverages for all law enforcement officers, public officials,
and employees of any political subdivision of the state.
The plan provides $11,000,000 in liability coverage on all 102,000 state employees for losses
resulting in bodily injury or property damage, and for errors and omissions in the performance of
their jobs. About 500 such claims are filed against state employees each year.
Fire and Rescue Services Division
Inspections
This section serves as the certifying agency for qualifying fire departments and their members for
several benefit programs.
Since 1985, fire departments must be inspected by the Fire and Rescue Division in order to qualify
for the In-Line-of-Duty Death Benefit, the Firemen's Pension Fund, and the Firemen's Relief
Fund.
The Commissioner of Insurance sets the standards and qualifications for the initial certification of all
fire departments. North Carolina has experienced an annual growth rate of approximately ten fire
departments in each of the last ten years.
NC Department ofInsurance 48
In October 1987, this section was given the duty of inspecting more than 1,000 fire departments in
North Carolina. The first phase of this project has been completed. The results of these inspections
have been reported to the North Carolina Fire Rate Bureau and are to be used by them in filing
future rates for fire insurance costs. The fire departments are reinspected on a two-to-three year
cycle in order to maintain a current picture of the quality of fire protection in North Carolina and to
assist the departments in making improvements.
In August 1995, the third phase of the inspections program was completed with approximately
90% of the fire departments meeting state requirements. The information collected during the
inspections is also used in the qualification process for the rural fire department and rescue grant
programs. The inspections program has been instrumental in helping to upgrade fire protection in
the state.
This section continues to assist local governments with fire district mapping, setting up tax districts,
preparing fire departments for ISO surveys and by providing information on benefit programs.
The section also serves as an information resource on rural fire protection for local government
officials.
Safety Programs
Fighting the causes of unintentional injuries, fatalities and property loss is the focus of the Safety
Programs Section. The section's primary goal is to raise awareness about the causes of injury
through behavioral, environmental and legislative interventions. Support is also given to local fire
and rescue providers in forming information networks such as the Fire and Life Safety Educators
Network and developing resources for local safety projects.
Research is an important part of the Safety Programs Section. Items researched by this section
include the impact study of legalizing fireworks, product-specific studies, educational methods
research, and general trend analysis. Data collected through the North Carolina Fire Incident
Reporting System and Casualty Reporting System provides the basis for fire/burn prevention
programs to this section.
Specific programs managed by the Safety Programs Section include North Carolina Safe Kids,
Learn Not To Burn, and the Buckle Up Kids Programs. North Carolina has eight Safe Kids coali-tions
and is growing. Buckle Up Kids has been implemented in 57 counties with 7 counties pend-ing
and has distributed more than 2,100 child passenger safety seats through fire/rescue agencies.
The Learn Not To Burn Program educates more than 90,000 fourth graders annually.
Funds
Working closely with the NC Fireman's Association, division staff continues to improve collection
and disbursement of the Firemen's Relief Fund. Significant effort has been made to reduce the
number of fire departments disqualified due to ineligibility. The Rescue ReliefFund was created in
1987 to assist rescue personnel in need.
The Volunteer Fire Department Fund and Volunteer Rescue/EMS Fund were created in 1987 to
financially aid local fire and rescue departments with equipment purchases and capital expenditures
.
49 1995-96 Biennial Report
Volunteer Fire Department and Rescue/EMS Grants*
1995 1996
Volunteer Fire Department Fund $1,800,089.81 $1,839,244.18
Volunteer Rescue/EMS Fund $952,085.64 $995,998.41
* Total approved monies for both matching and non-matching state grants.
North Carolina Fire and Rescue Commission
The Fire and Rescue Commission is an advisory board consisting of representatives from various
fire and rescue organizations as well as state agencies. The Commission is responsible for develop-ing
voluntary certification programs and professional standards for all levels of fire and rescue
personnel.
Presently, eight certification programs and 20 levels of certification are active, including:
Firefighter, Instructor, Rescue Technician, Fire and Life Safety Educator, Fire Apparatus Driver/
Operator, Emergency Vehicle Driver, Hazardous Materials Responder, and Fire/Arson Investiga-tor.
The Firefighter, Instructor, Hazardous Materials and the Driver/Operator programs are currently
accredited by the International Fire Service Accreditation Congress, ofwhich the Commission is an
active member.
The most recent undertaking of the commission is the development and dissemination of the
Occupational Safety and Health Standard for Fire Departments and Rescue Squads. This is a
compilation of the applicable NFPA Standards and OSHA General Industry Standards.
Future programs from the Commission will include a Fire Officer Certification program. A com-mittee
is currently working on the development of this standard and should be ready for pilot
testing in early 1997.
The goal of such programs is to provide additional professional recognition, as well as enhance the
safety of emergency services personnel in North Carolina.
NC Department ofInsurance 50
North Carolina Code Officials Qualifications Board
The board is organized under the provisions of Chapter 143, Article 9C of the North Carolina
General Statutes. A list of members follows, along with the individual or organization by whom
they were appointed.
Mr. Charles England, Chair Speaker of the House
Mr. Charles R. Home, Vice-Chair Governor
Mr. Richard D. Ducker Institute of Government
Ms. Renee Cahoon Governor
Mr. KenardM. Knust Lieutenant Governor
Mr. D. Edwin Rose Speaker of the House
Mr. David Carelock Governor
Mr. Nathaniel Cannadv Speaker of the House
Mr. Mike Pittman Department of Communitv Colleges
1 JO
Mr. Joseph D. Wheliss Governor
Mr. Tames D. Kennedv Lieutenant Governor
Mr. Hubert Jefferson Governor
Mr. Rick Lee Lieutenant Governor 1 Jl L4. 1 \~ L Kit 1 L \JV/ V WL X IV-/ 1.
Mr. C. Neil Styers Speaker of the House
Mr. J. Lee Hauser, P.E. Commissioner of Insurance
Mr. Jasper Ormond Governor
Mr. Paul P. McCain, P.E. N.C. State University
Mr. C.W.Williams Governor
Ms. Barbara H. Mulkey, P.E. Lieutenant Governor
Mr. Ronnie Bailey N.C. A&T University
51 1995-96 Biennial Report
North Carolina Building Code Council
NC General Statutes 143-138 authorize the N.C. Building Code Council to prepare, adopt and
amend the State Building Code. The council consists of 15 members appointed by the governor
for six-year terms. Statutes require that members have expertise in areas relating to construction
safety. The council meets quarterly in March, June, September and December.
Members
Mr. John R. Andrew, Chair
Mr. Sam T. Snowdon Jr., Vice-Chair
Mr. Clifton N. Bishop
Mr. Barry W. Gardner
Mr. James W. Smith II
Mr. Edward L. Woods
Mr. J. Harmon Byrd
Mr. Mark B. Trollinger
Mr. Stephen B. Peay
Mr. Brian Runnells
Mr. Ronald Decker
Mr. Robert C. Pierce
Mr. JackF. Neel
Mr. Larry C. Hayes
NC Department ofInsurance 52
North Carolina Fire and Rescue Commission
The NC Fire and Rescue Commission is charged with developing certification standards for all
levels of fire service and rescue personnel and coordinating the state's involvement with the Federal
Emergency Management Agency and the US Fire Administration.
The commission is also responsible for developing a master plan for fire prevention and control,
increasing professional skills of fire protection and fire fighting personnel, serving as a central
clearinghouse of information relating to the state's fire service activities, and handling federal and
state grants.
Member Organization
Mr. Richard Trexler, Chair NC Association of Fire Chiefs
Mr. Dean Wall, Vice-Chair NC Association of Rescue and EMS, Inc.
Mr. Zelodis Jay NC Association of County Commissioners
Mr. Jerry Lewis NC County Fire Marshal's Association
Mr. Bobby Joyner NC Association ofFire Chiefs
Mr. Alan Nobles NC Fire Marshal's Association
Mr. Jimmy Sanders NC League ofMunicipalities
Mr. Fred O'Neal, Jr. Governor's Appointee
Mr. Hiram Brinson Lt. Governor's Appointee
Mr. John Home Nc Fireman's Association
Mr. Cloyce Anders Public-at-large
Mr. Benny Scarbro Speaker of the House Nominee
Mr. Buddy White NC Association of Rescue and EMS, Inc.
Mr. C. Harley Cook NC Society of Fire Service Instructors
53 1995-96 Biennial Report
North Carolina Home Inspectors Licensure Board
NC General Statutes 143-151.43 Article 9F created the North Carolina Home Inspectors Licensure
Board to license those who perform home inspections for compensation. A list of the eight mem-bers
follows, along with the individual by whom they were appointed.
Representing
Senator Marc Basnight
Representative Dan Blue
Governor James B. Hunt
Governor James B. Hunt
Senator Marc Basnight
Representative Dan Blue
Commissioner Jim Long
Governor James B. Hunt
Members
Mr. Roger R. Pierce, Chairman
Mr. John J. Woodmansee, Vice-Chairman
Mr. T. Larry Summer, Secretary-Treasurer
Mr. John W. Hamrick
Mr. Jimmy A. Hughes
Mr. Ralph L. McSwain
Mr. Grover L. Sawyer, Jr., P.E.
Mr. Stephen C. Smallman
NC Department ofInsurance 54
North Carolina Manufactured Housing Board
The Board is empowered to issue and revoke licenses, require bonds, resolve complaints and pro-mulgate
rules as necessary to carry out these goals. The following is a list of members and the
individual or industry they represent as of January 1997.
Members Representing
Mr. Dascheil Propes, Chair Commissioner of Insurance
Ms. Mickey Hanula Commissioner of Insurance
Ms. Linda Willey Commissioner of Insurance
Mr. Jim Johnson Governor
Mr. J.T. Williams Governor
Ms. Judy Ward Finance
Mr. Larry Gilmore Insurance
Mr. Bill Glover Set-up Contractor
Mr. Durwood Batchelor Supplies
55 1995-96 Biennial Report
Public Officers and Employees Liability Insurance Commission
The Commission is given authority under North Carolina General Statutes 58-31-25 and 58-32-1
through 58-32-30 to make available a plan of professional liability insurance coverage for all law
enforcement officers, public officials, and employees of any political subdivision of the State.
POELIC is empowered to negotiate with insurance companies for the most favorable rates and
coverage.
The commission also serves as liaison between the companies and those insured, to resolve any
issues which may arise. The commission consists of 11 members representing city, county, and
state governments, sheriffs and police departments, and the insurance industry. It meets at least
four times each year, on or about the 15th of January, April, July, and October. Following is a list
of the members
:
Member
Mr. Joe R. Kluttz, Chairman
SheriffDane Mastin, Vice Chairman
Mr. James L. Bichsel
Mr. Pat Marshall
Mr. Bob G. Haynes
Mr. Hugh C. Talton, Jr.
Lt Col. Kent Fletcher
Mr. J. Dal Snipes
Representing
Independent Insurance Agents of North Carolina
NC Sheriffs Association
Speaker of the House
NC Association of County Commissioners
NC League ofMunicipalities
Lt. Governor
NC Police Chiefs, Police Executives Associations
Carolinas Assn. of Professional Insurance Agents
Ex-Officio Members:
Mr. William A. Dudley
Mr. Ralph B. Strickland, Jr.
Mr. J. Thomas Sutton, III
Secretary of Crime Control and Public Safety
Attorney General
Commissioner of Insurance
NC Department ofInsurance 56
1995-96 Biennial Report
North Carolina Department of Insurance
430 North Salisbury Street
Raleigh, North Carolina 2761
1
919-733-7343
500 copies of this document were printed at a cost of $1 128 90 or $2.26 per copy