Assurant 2013 Annual Report Download - page 39

ASSURANT, INC. – 2013 Form 10-K 27
PART I
ITEM 1A Risk Factors
• more stringent standards of review for claims denials or
coverage determinations;
• additional guaranteed-issue requirements restricting our
ability to limit or deny coverage;
•new benefi t mandates;
•increased regulation relating to lender-placed insurance;
• limitations on our ability to build appropriate provider
networks and, as a result, manage health care and utilization
due to “any willing provider” legislation, which requires us
to take any provider willing to accept our reimbursement;
• limitations on the ability to manage health care and
utilization due to direct access laws that allow insureds
to seek services directly from specialty medical providers
without referral by a primary care provider;
• new or enhanced regulatory requirements that require
insurers to pay claims on terms other than those mandated
by underlying policy contracts; and
• restriction of solicitation of insurance consumers by funeral
board laws for prefunded funeral insurance coverage.
In recent years, signifi cant attention has been focused on the
procedures that life insurers follow to identify unreported death
claims. In November 2011, the National Conference of Insurance
Legislators (“NCOIL”) proposed a model rule that would govern
unclaimed property policies for insurers and mandate the use
of the U.S. Social Security Administration’s Death Master File
(the “Death Master File”) to identify deceased policyholders
and benefi ciaries. Certain state insurance regulators have also
focused on this issue. For example, the NYDFS issued a letter
requiring life insurers doing business in New York to use data
from the Death Master File to search proactively for deceased
policyholders and to pay claims without the receipt of a valid
claim by or on behalf of a benefi ciary. The Company evaluated
the impact of the NCOIL model rule and established reserves
for additional claim liabilities in certain of its businesses. For
example, in 2011, the Company increased reserves in its preneed
business by $7,500 for unreported claims. It is possible that
existing reserves may be inadequate and need to be increased
and/or that the Company may be required to establish reserves
for businesses the Company does not currently believe are
subject to the NCOIL model rule or any similar regulatory
requirement. In addition, it is possible that these regulators or
regulators in other states may adopt regulations similar to the
NCOIL model rule or to the requirements imposed by the NYDFS.
In addition, regulators in certain states have hired third
party auditors to audit the unclaimed property records of
insurance companies operating in those states. Among other
companies, the Company is currently subject to these audits
in a number of states and has been responding to information
requests from these auditors.
Several proposals are currently pending to amend state
insurance holding company laws to increase the scope of
insurance holding company regulation. These include model
laws proposed by the International Association of Insurance
Supervisors and the NAIC that provide for uniform standards
of insurer corporate governance, group-wide supervision of
insurance holding companies, adjustments to risk-based capital
ratios, and additional regulatory disclosure requirements
for insurance holding companies. In addition, the NAIC has
proposed a “Solvency Modernization Initiative” that focuses
on capital requirements, corporate governance and risk
management, statutory accounting and fi nancial reporting,
and reinsurance. Similarly, the Solvency II Directive, which
was adopted in the European Union on November 25, 2009
and is expected to become effective in the coming years,
reforms the insurance industry’s solvency framework, including
minimum capital and solvency requirements, governance
requirements, risk management and public reporting standards.
Various state and federal regulatory authorities have taken
actions with respect to our lender-placed insurance business.
As previously disclosed, the Company has been involved in
discussions and has reached agreements with certain state
regulators regarding its lender-placed insurance business. At
the federal level, in early 2013, the CFPB published mortgage
servicing guidelines that incorporate certain requirements
mandated by the Dodd-Frank Act. In addition, the FHFA issued
new mortgage servicer guidelines, which will be effective
in June 2014, that will eliminate lender-placed insurance-
related commissions and client quota-share arrangements on
properties securing GSE loans. At the directive of the FHFA,
the Federal National Mortgage Association (“Fannie Mae”)
and the Federal Home Loan Mortgage Corporation (“Freddie
Mac”) each issued bulletins in December 2013 implementing
these mortgage servicer guidelines.
We cannot predict the full effect of these or any other
regulatory initiatives on the Company at this time, but it is
possible that they could have a material adverse effect on
the Company’s results of operations and fi nancial condition.
Reform of the health insurance industry could
materially reduce the profi tability of certain
of our businesses or render them unprofi table.
In March 2010, President Obama signed the Affordable Care
Act into law. Provisions of the Affordable Care Act and related
reforms have and will continue to become effective at various
dates over the next several years and make sweeping and
fundamental changes to the U.S. health care system. For
more information on the Affordable Care Act and its impact
on our Assurant Health and Assurant Employee Benefi ts
segments, please see Item 1, “Business—Regulation—Federal
Regulation—Patient Protection and Affordable Care Act.”
Among other requirements, the Affordable Care Act requires
Assurant Health, for some products, to increase benefi ts, to limit
rescission to cases of intentional fraud and to insure pre-existing
conditions in all lines of insurance, among other things. If, for
those products, Assurant Health’s actual loss ratios fall short
of required minimum medical loss ratios (by state and legal
entity), we are required to rebate the difference to consumers.
Please see “Item 7—Management’s Discussion & Analysis—Critical
Accounting Estimates—Health Insurance Premium Rebate
Liability” for more information about the minimum medical
loss ratio and the Company’s rebate estimate calculations. In
addition, the Affordable Care Act imposes limitations on the
deductibility of compensation and certain other payments.