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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
AMENDED
DOI; DFI; omnibus
Purpose
Makes various changes to the Arizona Department of Insurance and Financial Institutions.
Background
The Arizona Department of Insurance (DOI) regulates and monitors insurance companies and professionals operating in Arizona to protect the public and help ensure that these entities follow Arizona and federal laws (Ariz. Const. art. 15 § 5). DOI is responsible for: 1) licensing qualified insurance professionals and companies; 2) investigating consumer complaints and suspected fraud; 3) overseeing insurance companies’ financial solvency; 4) reviewing insurance policies, rates and products; and 5) administering funds (A.R.S. §§ 20-285; 20-376; 20-466; 20-491.03; 20-662; and 20-683).
The Department of Financial Institutions (DFI) executes the laws of Arizona relating to financial institutions and enterprises (A.R.S. § 6-110). DFI licenses, supervises and regulates state‑chartered financial institutions and enterprises and is responsible for annual assessments of the financial institutions and enterprises to ensure the safety and stability of the financial services industry (A.R.S. § 6-121). DFI may also conduct examinations and investigations within or outside Arizona against acts that constitute unsafe practice or a violation of any law or rule or to aid in the enforcement of DFI's duties (A.R.S. § 6-124).
The Automobile Theft Authority (ATA) was created to determine the scope of the problem of motor vehicle theft including particular areas of Arizona where the problem is greatest, analyze the various methods of combating motor vehicle theft, develop and implement a plan of operation and a financial plan and solicit and accept gifts and grants (A.R.S. § 41-3451).
Laws 2019, Chapter 252 absorbed DFI and ATA into DOI and renamed DOI the Arizona Department of Insurance and Financial Institutions (DIFI), effective July 1, 2020. DIFI assumes the responsibilities that are prescribed to the DFI, ATA and DOI. The 2019 legislation required Legislative Council staff to prepare conforming legislation in the Fifty-Fifth Legislature, First Regular Session.
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Director of DIFI and Appointees
1. Requires the Governor's Director of DIFI appointee to have business experience and be well versed in insurance and financial institutions.
2. Requires the Director of DIFI to appoint:
a) a Deputy Director of DIFI, rather than a Superintendent, to assist with the execution of Arizona laws relating to financial institutions and enterprises;
b) an Assistant Director of DIFI, rather than a Deputy Superintendent; and
c) a Deputy Director of the Insurance Division of DIFI to assist the Director of DIFI with the execution of Arizona laws relating to insurance.
3. Requires the Deputy Director of DIFI to serve at the pleasure of and report directly to the Director of DIFI.
4. Requires the Deputy Director of the Insurance Division of DIFI to serve at the pleasure of and report directly to the Director of DIFI.
5. Transfers the powers and duties of the Superintendent to the Deputy Director of DIFI and the powers and duties of the Deputy Superintendent to the Assistant Director of DIFI.
6. Requires the Director of DIFI to appoint an individual to operate the Fraud Unit in conjunction with operating ATA.
7. Defines Deputy Director and Superintendent as the Deputy Director of the Financial Institutions Division of DIFI.
Fraud Unit within DIFI
8. Removes the requirement for the Director of DIFI to annually revise the amount assessed on each insurer authorized to transact business in Arizona to equal at least 95 percent and not more than 110 percent of the budget of the Fraud Unit.
9. Requires the monies appropriated to the Fraud Unit be included as a separate line item in the General Appropriations Act and requires DIFI to use all appropriated monies exclusively to operate the Fraud Unit.
Revision of DIFI Fees
10. Requires the Director of DIFI to determine agency fees within established statutory ranges.
11. Removes the requirement for the Director of DIFI to revise all fees within the statutory limits, if the revenues collected from fees during the prior fiscal year is less than 95 percent or more than 110 percent of the appropriate budget for the current fiscal year.
12. Removes the requirement for the Director of DIFI to revise the fees in a manner that the revenue derived from the fees during the subsequent fiscal year equals at least 95 percent but not more than 110 percent of the appropriated budget for the current fiscal year.
Insurer Claim Disclosure
14. States that a disclosure of documentation by the Director of DIFI relating to an insurer claim is not a waiver of any applicable privilege or claim of confidentiality in the disclosed document.
Insurance Compliance Audit Privilege
15. Requires the Director of DIFI to provide an insurer with copies of all documents that they believe support a violation of insurance law or that justify any regulatory or other action against the insurer.
16. States that a disclosure of insurance compliance audit documents by the Director of DIFI is not a waiver of any applicable privilege or claim of confidentiality in the disclosed document
Examinations
17. Requires DIFI to prepare detailed billing statements that provide reasonable specificity of the time and expenses billed in connection with an examination and that cite the statute or rule that authorizes the fees being charged.
19. Requires DIFI to adopt rules to establish fees relating to direct and indirect costs in connection with examinations of insurance matters conducted by the Director of DIFI.
20. Exempts DIFI from rulemaking for one year to establish fees relating to direct and indirect costs.
21. Requires the Director of DIFI, subject to the restrictions of the multi-state data sharing statute, to provide an insurer who is being examined with copies of all documents, materials and other information that:
a) the Director of DIFI intends to rely on as evidence of an alleged violation of insurance law; or
b) justifies any regulatory or other action against the insurer to allow the insurer.
Insurance Administrators
22. Exempts, from collection agency statutes, a licensed insurance administrator who is authorized to act as an administrator for an insurer and that collects charges in accordance with the written agreement between the administrator and the insurer.
23. Prohibits, unless the insurance administrator is a licensed collection agency, an insurance administrator from collecting charges that have remained unpaid on an account that has been inactive for more than 12 months.
24. Allows an insurance administrator to collect charges in accordance with a written agreement between an administrator and an insurer.
25. Requires a written agreement between an administrator and an insurer to prescribe the applicable standards for the permissible collection of charges by the administrator.
26. Defines charges as cost sharing requirements, including applicable coinsurance, copayments, deductibles or other amounts payable by an insured under the terms of an insurance contract.
State Government Inspections and Audits
27. Requires an agency inspector, auditor or regulator, who enters any premises of a regulated person to conduct an inspection or audit, to disclose any applicable inspection or audit fees.
28. Specifies that a regulated person being audited is responsible for only the direct and reasonable costs of the inspection or audit and is entitled to receive a detailed billing statement that provides reasonable specificity of the fees imposed and that cites statute or rule.
Miscellaneous
29. Raises, from 30 days to 60 days after filing, the review period for a long-term insurance policy.
30. Requires the Director of DIFI to provide a captive insurer with a copy of any document that the Director of DIFI believes supports a violation of insurance law or that justifies any regulatory or other action against the captive insurer.
31. Requires monies appropriated from the ATA Fund that are included in the General Appropriations Act to include separate line items for:
a) the ATA operating lump sum appropriation;
b) Arizona Vehicle Theft Task Force; and
c) local grants.
32. Repeals the Insurance Advisory Board, the Uniform Employee Health Status Questionnaire Committee and the Continuing Education Review Committee.
33. Removes the definitions for credit property insurance and domiciliary state.
34. Requires the Department of Insurance and Financial Institutions to be known as DIFI.
35. Requires Legislative Council staff to prepare proposed conforming legislation for consideration in the Fifty-Fifth Legislature, First Regular Session.
36. Makes technical and conforming changes.
37. Becomes effective on the general effective date, retroactive to July 1, 2020.
Amendments Adopted by Committee
1. Requires the Director of DIFI to determine agency fees within established statutory ranges.
2. Makes technical changes.
Amendments Adopted by Committee of the Whole
1. Specifies that, beginning January 1, 2022, a person being examined to determine whether they have violated any insurance laws is responsible for only the direct costs of an examination that are supported by a detailed billing statement.
2. Subjects the requirements of the Director of DIFI to provide insurer's with copies of documents to the restrictions of the multi-state data sharing statute.
3. Exempts, from collection agency statutes, a licensed insurance administrator who is authorized to act as an administrator for an insurer and that collects charges in accordance with the written agreement between the administrator and the insurer.
4. Allows an insurance administrator to collect charges in accordance with a written agreement.
5. Requires a written agreement to prescribe the applicable standards for the permissible collection of charges by the administrator.
6. Prohibits, unless the administrator is a licensed collection agency, an administrator from collecting charges that have remained unpaid on an account that has been inactive for more than 12 months.
7. Defines charges.
8. Requires DIFI to adopt rules to establish fees relating to direct and indirect costs in connection with examinations of insurance matters conducted by the Director of DIFI and exempts DIFI from rulemaking for one year for this purpose.
9. Makes conforming changes.
Senate Action
FIN 2/5/20 DPA 8-0-2
Prepared by Senate Research
February 24, 2020
MG/gs