PRIVATE PASSENGER AUTOMOBILE INSURANCE
Q. What coverages are mandatory?
A. Every automobile owner must have liability coverage. Liability coverage pays for any claims when you are at fault in an accident. The minimum liability you are required to carry by law is $25,000 per person for bodily injury, $50,000 per accident and $25,000 to cover property damage to other’s property. Almost all insurers offer higher limits. When you apply for liability coverage, you must be offered an opportunity to purchase coverage for uninsured motorist bodily and property damage, underinsured motorist coverage for bodily injury and personal injury protection coverage.
Uninsured motorist coverages cover you and your automobile if the other driver is at fault and does not have liability insurance.
Underinsured motorist coverage gives you additional protection if the other driver is at fault and doesn’t have enough coverage to cover your injuries.
Personal Injury Protection provides you with wage loss, death benefits and medical coverage regardless of fault.
Q. What other coverages are available?
A. You may also purchase comprehensive and collision coverages. Comprehensive coverage protects against damage to your automobile from acts of nature or other events not associated with operating the automobile. Collision coverage protects against damage to your automobile when it is involved in an accident.
Q. Are there any discounts that must be offered?
A. Yes, the College Graduate Discount and Defensive Driver Discount for those insureds 55 and over who have successfully completed a course approved by the Office of Driver Services. Check with your agent for any other discounts your insurer may offer.
Q. Why have my rates gone up when I haven’t had an accident and/or claim?
A. Probably because the insurer increased its overall rates because it has paid out more losses than expected. You may personally receive a lower or higher rate based upon various factors.
Q. Why haven’t my physical damages premiums decreased as my vehicle ages?
A. The price of repairing vehicles does not go down as a vehicles ages.
Q. Will my policy cover me if I rent an automobile?
A. This can vary by company. You should ask your agent if your policy covers you, those you might injure if at fault, and the rental agency’s automobile.
Q. What coverages are mandatory?
A. You are not required to have homeowners coverage by any Arkansas law. However, if you have a mortgage on your home, you may be required by your mortgage agreement or loan agreement to carry full coverage or be in breach of your agreement. Your lending institution may have more information on what levels of coverage it requires you to maintain.
Q. What different types of homeowners coverages are available?
A. There are several different types, but most homeowners carry full coverage for all perils including losses associated with any sudden and accidental event. In the case your home is totally destroyed, you may wish to consider having replacement cost coverage so that you can rebuild your home. The all perils coverage usually includes coverage for your liability to your guests.
Other types of homeowners insurance cover only fire and weather events. Some are designed specifically for renters.
Q. Can insurance companies use my credit information to deny me insurance or to increase the premium I pay?
A. An insurance company may use credit AS PART of the process of determining whether coverage will be provided and what it costs. A Consumer Brochure on use of credit in homeowners and personal automobile insurance is now available. This brochure, “Understanding How Insurers Use Credit Information,” contains information about Act 1452 of 2003 and its affect on the use of credit information in homeowners and personal automobile insurance underwriting and rating.
Q. What is a public protection classification?
A. A rating determined by the equipment, manpower, water source and other factors of a fire district. Classifications range from 1 to 10, with 10 being a very rural area with very little fire protection.
Q. Who determines a public protection classification?
A. The Insurance Services Office, or ISO, inspects local fire departments and sets the classification.
Q. How does it effect my homeowners premium?
A. Generally, the lower the protection class rating the lower the base premium. You can contact your local fire department and ask them for their “ISO public protection class rating”.
Q. What is the difference in replacement cost (RC) and actual cash value (ACV)?
A. ACV allows for depreciation in determining how much to pay you on your claim while replacement cost does not.
Q. How do I know what type of policy I have (RC or ACV)?
A. You may wish to contact your agent. You can also read the loss settlement provision of your policy.
Q. Why have my rates gone up when I haven’t filed any claims?
A. Probably because the insurer increased its overall rates because it has paid out more losses than expected. You may personally receive a lower or higher rate based upon various factors.
Q. Does the Insurance Department set insurance rates?
A. No, that is a common misconception regarding the Department’s oversight of rates. Proposed rate changes by insurers must be filed with the Arkansas Insurance Department at least twenty (20) days prior to the effective date. We have broad authority to review how the rate is distributed among insureds according to factors that might predict future losses, but we cannot disapprove an overall rate unless it is actuarially “excessive, inadequate or unfairly discriminatory.”
“Excessive.” A rate becomes excessive when the loss ratio (losses divided by premiums paid) drops to a point which results in the insurance company earning an excessive amount of profit.
“Inadequate.” A rate is inadequate if it will lead to solvency problems immediately or has the potential for long-term solvency implications in that it may not provide sufficient fund to pay future claims, the costs of adjusting those claims and operating the business.
“Unfairly Discriminatory.” All insurance discriminates among various risks. There is “fair,” i.e., “legal” discrimination, and “unfair,” i.e., illegal discrimination. Cross-subsidies encourage risky behavior in some risk categories. Therefore, allocating the premiums among risks tends to discourage risky behavior. “Unfair” discrimination basically means not treating similar risks the same in rates and coverages.
Q. What rates are reviewed?
A. We review life, health, private passenger auto, homeowners, workers’ compensation and professional liability insurance rates.
Q. What part does the Arkansas Insurance Department play in workers’ compensation issues and claims?
A. The Arkansas Insurance Department is only involved in approving what rates and forms insurance companies use to insure the employer. We have no part in the determination of whether a claim is covered under workers’ compensation. That responsibility rests with the Arkansas Workers’ Compensation Commission.
Q. What is a “pre-existing condition”?
A. It is a health condition you had before you purchased your health insurance coverage, such as cancer, regardless of whether you received a diagnosis or treatment before the purchase. Health carriers can sometimes refuse to cover your pre-existing conditions.
Q. When can my health insurance carrier exclude coverage for my pre-existing conditions?
A. There are several circumstances in which your health carrier can refuse to cover your pre-existing conditions. Pre-existing conditions can always be excluded if you buy an individual health insurance policy. For group health policies, pre-existing conditions can only be excluded under the following circumstances:
- The pre-existing condition exclusion relates to a mental or physical condition for which medical advice, care, etc. was recommended or received within the 6 month period ending on the enrollment date (date of hire);
- The exclusion can’t last more than 12 months (or 18 months for a late enrollee) after the enrollment date; and
- The exclusion period must be reduced by creditable coverage. Creditable coverage is virtually any kind of coverage the person had before enrolling in the present coverage, but not workers compensation, liability insurance, or any of the excepted benefits listed in Ark Code Ann. §23-86-310. However, if a person has coverage, followed by break of 63 days, that prior coverage does not count as creditable coverage! To illustrate, suppose an individual had coverage for 2 years followed by a break in coverage of 70 days and then resumed coverage for 8 months. That individual would only receive credit for 8 months of coverage; no credit would be given for the 2 years of coverage prior to the break in coverage of 70 days.
Q. Can my pregnancy be excluded as a pre-existing condition?
A. In a group health plan, No; under an individual policy, Yes. If you are going to buy an individual policy, always buy a maternity rider if you may become pregnant!
Q. I have been offered a health insurance policy by a company I have never heard of. The rate is very low, and this looks too good to be true! Should I buy it?
A. Unauthorized health insurance has been a big problem in Arkansas in recent years. Hundreds of Arkansas consumers have purchased insurance from companies they thought were legitimate, only to be left with thousands of dollars in unpaid medical claims.
Keep in mind that if something looks too good to be true, it probably is! Always call the Arkansas Insurance Department if you are unsure about an insurance product you are offered. We can check to make sure that both the insurance carrier and producer offering it are properly licensed. Here are some other danger signs:
- Beware if a licensed insurance agent attempts to sell you health coverage that claims to be an ERISA plan.
- Be skeptical if the plan offers coverage without pre-existing condition exclusions.
- Investigate offers that avoid the word “insurance” or the use of insurance terminology.
- Watch out for terms like “consultant fees” (instead of commissions) and those that refer to payments as “contributions.”
- Be skeptical if companies fail to disclose name of carrier for products they claim to be “fully insured” or “fully funded.”
- Investigate a company if enrollees are required to join and pay dues to an “association” to obtain health coverage.
Health discount cards are regulated by the Arkansas Attorney General. If you have questions about health discount cards, please contact the Attorney General’s office at 1-800-482-8982.
Q. What is Arkansas's Any Willing Provider Law?
A. Arkansas's “Any Willing Provider Law” provides that persons in group or individual health plans or HMOs will be able to go to the doctors or hospitals of their choice, if the doctor or hospital agrees to the terms and conditions of that person's health insurer or HMO.
Q. How long does a health insurance company have to pay a health insurance claim?
A. Health insurance companies, including HMOs, have 30 days to pay a claim to either you or your medical provider, if the claim is electronically filed with the health insurance company. If the claim is mailed to the health insurance company, the health insurance company has forty-five days to pay the claim. All of these time deadlines assume that the claim is considered a "clean claim," or a claim falling squarely under coverage under the health plan, in which no further information is needed by the health insurer to process the claim. If the claim is however not "clean" or the health insurer needs more information to process the claim, the health insurer is allowed 30 days to collect the information, and after all of the required information is received by the health insurer, the 30 (electronic) and 45 (non-electronic) day payment rules then apply.
Q. Is Maternity a mandated benefit?
A. No, it is not mandated by the Arkansas Insurance Department. Complication of Pregnancy is a covered benefit. In employer groups of more than 15 employees, Title VII of the Civil Rights Act of 1964 states that any health insurance provided must cover expenses for pregnancy-related conditions on the same basis as expenses for other medical conditions.
Q. Is In-Vitro Fertilization a mandated benefit?
A. Yes, refer to ACA §23-85-137, ACA 23-86-118 and Rule and Regulation 1. It is a benefit on a policy which provides normal pregnancy-related benefits. It does not apply to HMO’s or to self-insured plans.
Q. In what situation is a newborn automatically covered under an insurance policy?
A. Under ACA §23-79-129 – If an insured has a policy (individual or group), that covers the insured and at least one family member (spouse or child), then a newborn must be covered from birth for at least 90 days. If an insured has an individual policy or certificate with no dependents, in most situations, the newborn will have to go through underwriting unless otherwise stated by contract language.
Q. Is there a state continuation law for health insurance?
A. Yes, state continuation is for 120 days as outlined under ACA 23-86-114.
Q. Can a medical provider file a complaint with the Department for slow payment issues against a health insurer or HMO?
A. Yes. The Department, however, requires that the medical provider provide evidence in the complaint showing a "pattern of slow payment" practices by the health insurer or HMO.
Q. Are there statutes or Rules concerning the use of age and gender as underwriting criteria in Arkansas?
A. Yes. An insurer should consider the relevant provisions of the Arkansas Trade Practices Act, Ark. Code Ann. § 23-66-206. However, if age and gender are proven to be a substantial factor as an underwriting criteria by the alleged discriminator, then an insurer is not prohibited from using it as a criterion to charge different rates to different customers.
Q. What is external review?
A. An independent review of claims for benefits (treatment or services) to see if they are medically necessary or experimental/investigational. The requested benefit must be at least $500 for external review to apply.
Q. What if I need the requested treatment as soon as possible?
A. You may qualify for expedited external review, where a decision is rendered as soon as necessary, but no later than 72 hours after the IRO receives the request for external review.
Q. What type of plans does external review apply to?
A. All health insurance plans, except specified disease, limited supplement benefit, long-term care insurance, self-insured plans, CHIP pool, Medicare, WC, or automobile med pay. (For more specifics, see Section 1 E)
Q. What if I, or my health insurance carrier, don’t like the IRO’s decision?
A. Then you can file a lawsuit. Both the health carrier and the covered person have the right to go to court.
Q. Who can request external review?
A. The person covered under the health insurance policy and/or that person’s authorized representative. An “authorized representative” is:
- A person to whom a covered person has given express written consent to represent the covered person in an external review;
- A person authorized by law to provide substituted consent for a covered person; or
- When the covered person is unable to provide consent, a family member of the covered person or the covered person’s treating health care professional if a family member is unavailable.
Q. Who performs external reviews?
A. An independent review organization (“IRO”) certified by the Department. It is independent of both the insurance company and the covered person.
Q. When can I request an external review?
A. After your claim for treatment or services, which have to be at least $500, has been denied as being not medically necessary or as being experimental/ investigational. Generally, you have to exhaust your heath carrier’s internal appeal process before requesting external review.
Q. When do I have to request an external review?
A. You have sixty days after you receive an initial denial or a final denial (after the carrier’s internal appeals process is completed).
Q. Where can I find out about external review?
A. Your health insurance carrier should provide this information in your policy. Also, your health carrier is required to give you information about your right to an external review after it initially denies payment for your claim as not being medically necessary or as being experimental/investigational. Most carriers have an internal appeals procedure, and if your claim is still denied after the internal appeals process, your carrier must again tell you about your right to external review.
Q. Where can I find out more about external review?
A. You can call your health carrier or the Arkansas Insurance Department.
Q. How do I request an external review?
A. Your health carrier will give you this information in your policy and after your claim is denied.
Q. How long does it take the IRO to complete an external review?
A. Within 45 calendar days of the IRO’s receipt of the request for the external review. For an expedited review, the review is completed as soon as necessary, but no later than 72 hours after the IRO receives the request for expedited review.
Q. Why does external review only apply to claims that are denied as not being medically necessary or as being experimental/investigational?
A. Because other terms in your insurance policy are agreed upon by you or your employer when you sign up for the coverage. Doctors can differ, though, on what is experimental/investigational or medically necessary.
Q. Are Professional Employer Organization services (PEO) licensed in Arkansas?
A. Yes. By using our Company Search database you can find out if someone offering PEO services holds a valid license to sell those services. You can also get a complete listing of every licensed PEO doing business in Arkansas.
Q. What is the difference between a PEO and an Employee Leasing Firm?
A. None. In 2003, the name of the license was changed from an Employee Leasing license to a Professional Employer Organization license. The definition of what constituted these business was not changed.
Q. Is there insurance available for damage caused by earthquakes?
A. Yes. A Market Assistance Program (MAP) has been developed as a result of the Arkansas Earthquake Authority Act of 1999. The MAP is designed to assist consumers who are unable to find residential earthquake insurance through traditional sources. Additional information is available by calling 1-800-852-5494.
On homeowners coverages, your company must tell you if it does not offer earthquake coverage and provide you with information on how to obtain coverage through the MAP.
Q. High-risk insurance pools, what are they and how do I find them?
A. High risk pools are designed to provide coverage for consumers who are unable to secure insurance in the voluntary market. The Property and Casualty Division of the Arkansas Insurance Department manages the residual or assigned risk plans for workers' compensation and automobile insurance. Additionally, fire insurance is available through a Rural Risk Underwriting Association, which provides coverage for structures located in rural areas--where coverage is not available in the voluntary market. Contact your insurance agent for specifics.
Here is a listing of the administrators of the various pools:
National Council on Compensation Insurance (NCCI)
Little Rock, AR-501-834-9123 or 1-800-622-4271
Arkansas Rural Risk Underwriting Association (ARRUA)
1-800-272-6588 (Arkansas only)
1-800-233-2398 (out of state)
Arkansas Automobile Insurance Plan
(Agents only...Consumers must access this plan through their insurance agent.)
Earthquake Market Assistance Program
Q. What is “Surplus Lines” and when can I buy insurance from a surplus lines company?
A. When licensed insurers are unwilling or unable to provide needed coverage, you may secure coverage with an approved surplus line insurer through a licensed surplus line broker. Individuals or corporations may secure insurance coverage directly from a non-admitted insurer. This coverage is considered "self-procured." Your agent can help you if surplus lines coverage is required.
Surplus lines insurance is regulated by Rule 24.
Q. Does the Arkansas Insurance Department license or regulate premium finance companies?
A. We do not. Federal and State Bank regulators do that, along with U.S. Attorney and the Arkansas Attorney General. Contact the Arkansas Attorney General on-line via links from the State website at www.ag.arkansas.gov.
Q. May producers charge insureds fees over and above gross premiums charged by carriers on the policies delivered to the insureds?
A. In general, Ark. Code Ann. § 23-66-310 allows a producer to charge a fee in excess of the premiums as long as:
a. The fee is separately disclosed on the insured’s bill; and
b. The fee does not exceed 20% of the premium.
Q. May I buy an insurance policy on other people or property?
A. It depends. If you are related to a person in ways approved under the law, you may. You may if you have title to real property or personal property, such as a car or boat. If your company considers you to be a key officer or director or manager, it may take out a life policy on your life to benefit the business.
Anyone seeking to buy insurance on other people or property must have an "insurable interest" at the time the insurance contract is made and sometimes when the loss occurs, too. The law is found at Ark. Code Ann. §§ 23-79-103 (for insurance interests in people) and 23-79-104 (for insurance interests in property).
Q. What is the "Valued Policy" law on total fire losses of buildings and real property?
A. The valued policy law, Ark. Code Ann. §23-88-101, covers losses on real property, such as a house, from fire and natural disasters. Basically the valued policy law says that, absent an insurer defense such as arson or other insurance fraud, the insurer for a total loss on real property owes the full face amount (total policy price in $ dollars) of the policy without depreciation or contesting the value. Insurance companies in rural areas must pay rural volunteer fire fighter claims out of the insurance proceeds first before paying the homeowner if the homeowner has not paid its rural district fire association dues timely, under Ark. Code Ann. § 23-88-102. The valued policy law does not apply to:
- flood or earthquake losses; or
- detached or appurtenant structures. Contact your insurance producer or your carrier about a rider or endorsement to cover these other structures.
Q. How can I tell if my insurance binder is any good?
A. Insurance binders are temporary policies of insurance that are generally issued by insurance producers, though sometimes they come direct from the insurance company. But not every agent or producer even has authority from the insurance company to issue a binder or short-term policy. Ask the agent or producer for something to show that he/she does have full authority, and that the insurer will honor the terms of the binder. The binder must be replaced by a full policy in 90 days or less and the policy must match (or not conflict with) the full policy when the consumer receives it.
Q. I have a prepaid funeral contract with a funeral home. I now want to switch funeral homes and want to transfer the money I paid the first funeral home to the new one. Can I cancel with the first funeral home and transfer the money to the new one?
A. Yes, as long as the prepaid funeral contract was entered into by you before July of 1995. You need to notify the first funeral home you want to transfer your prepaid funds over to a substitute funeral provider (the new funeral home). The law requires the first funeral home to transfer all of the proceeds to the new funeral home, what you paid down to fund the contract, minus the built up interest.
Q. Do the State or Federal Do Not Call laws apply to the business of insurance and insurance agents?
A. Yes. The Department is able to provide you some general information, but please remember that the enforcement authority for the Do Not Call law (both State and Federal) lies with the Arkansas Attorney General's Office. Below is the link to their website for further information; you will need to contact the Consumer Protection Division of the Public Protection Department: www.ag.arkansas.gov
Unlike the Federal Trade Commission's Do-Not-Call rule, the Federal Communication Commission's (FCC) Do-Not-Call Rule applies to the insurance industry. Insurance agents who use the telephone or send faxes will have to follow the FCC's Rule and check the national do-not-call list even in states that have exempted insurance agents from their do-not-call rules (like Arkansas!). If an agent has an "established business relationship" with a client and that client has placed his or her name on the do-not-call list, the agent is still allowed to call his or her client at home. An established business relationship exists where the client has made a purchase or entered into another transaction within the 18 month period prior to the call or when an inquiry or application has been made within 3 months before the call. Nonetheless, "cold" calls to numbers on the Do-Not-Call list are prohibited unless express written permission has been given to call.
Compliance with the FCC Do-Not-Call Telemarketing Rule has been required since 10/1/2003. There is also a Do-Not-Fax Rule effective 1/1/2005.
Also, the National Association of Insurance and Financial Advisors has made a joint filing with the American Council of Life Insurers (ACLI) in 11/2003 asking the FCC to clarify the definition of "established business relationship" under the do-not-call rules.
The Department encourages you to contact the FCC directly and inquire about the applicability of the federal Law to intra-state phone calls, i.e., phone calls made in-state only from an AR producer to an AR consumer. It is the Department’s understanding that there is existing confusion as to the applicability of the former state-exception for insurance under the new Do Not Call provisions. The FCC's website and contact information is: http://www.fcc.gov/contacts.html
Q. Are proceeds on life insurance protected from creditors?
A. Yes, life proceeds are exempt as stated in Ark. Code Ann. 23-79-131.
Q. Are annuity proceeds protected from creditors?
A. Yes, annuity proceeds are exempt as stated in Ark. Code Ann 23-79-134.
Q. If a company selling long-term care insurance goes into liquidation what would be covered under the Guaranty Fund?
A. The amount of coverage would be $300,000, or policy limits, whichever is less. The policies not in claim status would be sold to a solvent insurance company. The policyholder would receive notice of this, a certificate from the assuming company and information as to where to send premium payments, make inquiries, file claims, etc. If the policy is in claim status, the guaranty fund would pay on the policy until the limit of coverage was reached.
Q. I have a policy issued by Union Life Insurance Company. Can you tell me who has control of this policy and who can I contact to discuss the policy?
A. In 1990 Union Life Insurance Company was merged into Jefferson National Life Insurance Company. Jefferson National was later merged into Great American Reserve and Great American Reserve was later merged into Conseco Life Insurance Company. Union Life’s life business was transferred into Conseco Variable Insurance Company. Conseco Variable Insurance Company changed its name to Jefferson National Life Insurance Company and entered into an agreement with Protective Life Insurance Company of Birmingham, Alabama to service the Union Life business. You may call 1-800-866-3555 to talk to a customer service representative. To inquire about your policy use the letters KK and then your original policy number when referring to your policy number.
Q. Must a licensed automobile dealer provide primary insurance on loaner cars?
A. No. Typically, insurance coverage follows the automobile and not the person. However, Ark. Code Ann. § 27-19-713(l) provides an exception to licensed automobile dealerships; under this statute, they are not required to carry primary insurance coverage on every vehicle in their car lot. This law eases the insurance burden on the dealerships by extending the insured’s coverage to instances in which the dealership loans a vehicle to the insured.