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Publié par	Vaef
Nombre de lectures	81
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Rulemaking Hearing Rules
Of the
Department of Commerce and Insurance
Division of Insurance

Chapter 0780-1-54
Self-Insured Workers’ Compensation Pools

Public Comments and Responses
By the Commissioner of Commerce and Insurance

Compiled Pursuant to Tenn. Code Ann. § 4-5-222

On December 17, 2004, a rulemaking hearing was held by Larry C. Knight, Jr.,
Assistant Commissioner for Insurance and John F. Morris, Chief Counsel for Insurance,
by designation of Paula A. Flowers, Commissioner, at the offices of the Department of
Commerce and Insurance. This hearing, conducted pursuant to the requirements of the
Uniform Administrative Procedures Act, Tenn. Code Ann. § 4-5-101 et. seq., allowed
the Commissioner of Commerce and Insurance and her designees to hear public
comments and responses to the proposed rule. The rule is being promulgated pursuant
to Tenn. Code Ann. § 50-6-405(c).

The Commissioner solicited comments from the public by causing notice of the hearing
to be published in accordance with the requirements of Tenn. Code Ann. § 4-5-203.
The Commissioner received oral and written comments at the rulemaking hearing.

Comment 1

Rule 0780-1-54-.01 Purpose and Scope

It was commented that the proposed rules treat the pools as insurance carriers and
negates the original purpose and scope of the existing rules.

Agency Response to Comment 1

The purpose of these proposed rules is to provide a comprehensive regulatory
framework for self-insured workers’ compensation pools. These rules attempt to
recognize the structural and practical differences between self-insuring pools and
commercial insurance companies. However, the Department does recognize that such
pools and insurance companies are nearly identical often times in their function and
purpose. These proposed rules attempt to strike the balance between applying
traditional insurance regulatory requirements on the pools and recognizing the peculiar
structure of the pools. The Department believes it is important to emphasize its belief
that the joint and several nature of the pools warrant the imposition of certain regulatory
requirements not imposed on commercial insurance companies. Comment 2

Rule 0780-1-54-.02 (6) Definitions

It was commented that the definition of “Pool Year” should be clarified to mean the
twelve (12) months within a pool’s fiscal year, as some pools are not on a calendar year
basis.

Agency Response to Comment 2

The Department agrees with this comment and will amend the definition of “Pool Year”
to recognize that all pools are not on a calendar year basis.

Comment 3

Rule 0780-1-54-.02(9) Definitions

It was commented that the Department should specifically state which statutes and
regulations are applicable to pools rather than the reference to “Insurance Law” that is
found in the current definition. It was suggested that the Department affirmatively state
that only those provisions in Title 56 specifically referenced in this Rule would apply to
the pools.

Agency Response to Comment 3

Paragraph (9) of this Rule only seeks to define the meaning of the term “Insurance Law”
as used in this Chapter.

Comment 4

Rule 0780-1-54.02 (11) Definitions

The definition of “Loss Reserves” is funds of the pool immediately available to pay:

(a) known or open claims and expenses associated therewith;
(b) IBNR and expenses associated therewith;
(c) unearned premiums;
(d) bad or uncollectible debts; and
(e) expenses associated with run-off or termination of a pool.

It was commented that unearned premium reserves are established separately and
should not be included in loss reserves.

Agency Response to Comment 4

The Department concurs with this comment and the proposed rules have been
amended in order to incorporate the changes sought by this comment.

Comment 5

Rule 0780-1-54.02 (11) Definitions

It was commented that bad debts or uncollectible reserves should be established in
accordance with insurance company guidelines for uncollectible debt as being those
which reach ninety (90) days past due, and should not be included in loss reserves.

Agency Response to Comment 5

The Department concurs with this comment and the proposed rules have been
amended in order to incorporate the changes sought by this comment. However, the
Department believes that each pool should establish reserves for bad debt that is
separate from its loss reserves.

Comment 6

Rule 0780-1-54.02 (11) Definitions

It was commented that the bulk of expenses associated with termination of the pool are
losses and allocated loss adjustment expenses (ALAE). It was commented that any
other amounts are indeterminable and until such time as the company enters run-off,
and should not be included in loss reserves.

Agency Response to Comment 6

The Department does not concur with this comment.

Comment 7

Rule 0780-1-54-.02(18) Definition

It was commented that the definition of “sponsoring association” be amended to include
the specific association requirements contained in Tenn. Code Ann. § 50-6-405(c).

Agency Response to Comment 7

The Department concurs with this comment and the proposed rules have been
amended in order to incorporate the changes sought by this comment.

Comment 8

Rule 0780-1-54-.04 Application for a Certificate of Authority

Subsection (2)(c)(2) of this Rule requires submission of documentation establishing the
rate at which insurance producers will be commissioned to solicit membership into the
pool. It was commented that since the Department has not attempted to regulate the
commissions of insurance producers in the voluntary market, this language should be
clarified that the proposed authority still remains with the pool’s Board of Trustees.

Agency Response to Comment 8

The authority to set the rate for commissions to insurance producers continues to
remain with the pools’ Board of Trustees. However, this information must still be filed
with the Department as part of a pool’s application for a certificate of authority. The
Department has a legitimate government interest in ensuring that commissions paid to
insurance producers are not excessive given the joint and several nature of the pools.

Comment 9

Rule 0780-1-54-.04 Application for a Certificate of Authority

It was commented that Subsection (2)(d)(1) of this Rule should be clarified to state what
is considered acceptable evidence to the Commissioner evidencing the pool’s ability to
pay their obligations.

Agency Response to Comment 9

The purpose of this requirement is to give the Commissioner and the pool the flexibility
of evaluating each pool on a case by case basis since each pool has a slightly different
operational structure. If the Department were to provide an exhaustive list of factors,
the flexibility would be removed and, for that reason, the Department does not concur
with this comment.

Comment 10

Rule 0780-1-54-.04 Application for a Certificate of Authority

It was commented that the Department should state what is to be considered proof of
payment to the pool by each member as required by Subsection (2)(d)(2) of this Rule. It
was commented that the current rules require payment of twenty-five percent (25%) of
the member’s first quarter premium. It was requested that the Department provide
guidance on whether this will continue to be acceptable proof of payment.

Agency Response to Comment 10

The Department believes that each member should be required to pay at least twenty-
five percent (25%) of the first year’s premium. The Department has amended the Rule
to reflect this position.

Comment 11

Rule 0780-1-54-.04 Application for a Certificate of Authority

It was commented that Subsection (2)(e)(3) of this Rule requiring each member’s
experience modification to be submitted should be amended to acknowledge that some
members may not be large enough to be experience rated by the National Council on
Compensation Insurance (“NCCI”) and would not have an experience modification
factor.

Agency Response to Comment 11

The Department concurs with this comment and the proposed rules have been
amended in order to incorporate the changes sought by this comment.

Comment 12

Rule 0780-1-54-.04 Application for a Certificate of Authority

It was commented that Subsection (2)(e)(4) of this Rule requiring documentation
evidencing a member’s loss runs for the past four (4) year should be amended to
acknowledge the fact that some companies may not have been in existence for fo