Illinois Director of Insurance Michael McRaith has released a bulletin to insurance companies, letting them know that if they rescind a policy and the policyholder files a complaint with the insurance department, the insurer will have to provide complete copies of its underwriting policies to the department. According to the bulletin, state law says an insurance company may rescind coverage only “when an insured has provided a false statement on an application which materially affected the acceptance of a risk or hazard.” To determine this, the department must examine the insurer's underwriting practices. The new rules go into effect immediately.

The change in rules has drawn reactions across the board from insurance companies, McRaith said, some of whom claim that their full underwriting guidelines are confidential and protected. He said he rejects that argument, since the department routinely deals with proprietary information and trade secrets without compromising their confidentiality.

Illinois DOI to Require Documentation for Recissions (American Medical News 1/21/10)

January 27, 2010