20 CSR 500 - 6.960 PLAN OF OPERATION FOR THE WORKERS COMPENSATION RESIDUAL MARKET

Purpose

This rule is to formalize the plan of operation for a new workers compensation residual market, known as the Alternative Residual Market Plan. The regulation also specifies the procedures for the transition to the Alternative Residual Market Plan from the workers compensation insurance plan previously filed by the National Council on Compensation Insurance, Inc. and approved as of October 14, 1993. Pursuant to Section 287.896, RSMo, Alternative Residual Market Plan will provide for the equitable apportionment among all insurers authorized to write workers compensation and employers liability insurance in Missouri of insurance which may be afforded applicants who are in good faith entitled to such insurance, but who are unable to procure such insurance through ordinary methods. The Alternative Residual Market Plan will guarantee insurance coverage and quality loss prevention and control services to employers seeking coverage through the plan. The plan will provide such insurance at actuarially sufficient premium rates agreed to by the Department of Insurance. The plan will also provide that the processing of applications, the conduct of safety engineering and other loss control services and the handling of claims for the plan shall be accomplished within the state of Missouri or adjoining states.

Under the Alternative Residual Market Plan, the Department of Insurance shall contract with an entity (the contract carrier) to issue workers compensation and employers liability policies for a one-year period to eligible employers seeking such coverage. If losses on the policies issued pursuant to this contract produce a deficit as defined herein, all insurers writing workers compensation insurance in Missouri are required to reimburse the contract carrier in accordance with the Missouri Aggregate Excess of Loss Reinsurance Mechanism.

The Alternative Residual Market Plan replaces the prior WCIP. The Alternative Residual Market Plan and any future modification thereof is subject to the approval of the director of the Missouri Department of Insurance, provided, however, that such amendments shall not change the performance standards required of the contract carrier during the period of the contract, except where mutually agreed to by the contract carrier and the department.

Editor’s Note:
The following material is incorporated into this rule by reference:

  1. Missouri Department of Insurance, Requests for Proposals for an Alternative Residual Market Plan for the Missouri Workers’ Compensation System (Re-bid Amended) (Jefferson City, MO: Missouri Department of Insurance, January 13, 1995);
  2. NCCI’s Workers Compensation Insurance Plan (WCIP), Exhibit III, Workers Compensation and Employers Liability, National Council on Compensation Insurance (effective February 9, 1993); and
  3. NCCI’s Definition of Allocated Loss Adjust Expense (Item U-1292) Memorandum Government, Consumer and Industry Affairs. National Council on Compensation Insurance (Boca Raton, FL: National Council on Compensation Insurance, December 7, 1992).

In accordance with Section 536.031(4), RSMo. The full text of material incorporated by reference will be made available to any interested person at the Office of the Secretary of State and the headquarters of the adopting state agency.

SECTION 1—DEFINITIONS

Affiliated Insurers
An insurer that, directly or indirectly, through one (1) or more intermediaries, controls, or is controlled by, or is under common control with the insurer specified. The term control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an insurer whether through the ownership of voting securities, by contract, or otherwise. Control shall be deemed to exist if any person or business enterprise, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies, representing ten percent (10%) or more of the voting securities of any other insurer. Any insurer which is under the management or control of a state regulatory authority, receiver or other similar body, either pursuant to statute or the order of a court of competent jurisdiction, shall be deemed to be under the control of its former management for purposes of the Missouri Aggregate Excess of Loss Reinsurance Mechanism until such time as management or control is transferred to a successor in interest pursuant to a lawful plan, contract or order.

Allocated Loss Adjustment Expense (ALAE)
ALAE, as used in this rule, shall have that meaning set forth in the National Council on Compensation Insurance, Inc. (NCCI’s) Workers Compensation Statistical Plan, as approved by the department for use in Missouri, in effect on July 1, 1995.

Alternative Residual Market Plan (A.R.M.)
The Missouri workers compensation residual market mechanism commenced insurance operations on July 1, 1995, replacing the residual market mechanism known as the Workers Compensation Insurance Plan (WCIP).

Articles of Agreement or Articles
The mechanism authorized under the WCIP to provide reinsurance to the servicing carriers on employers assigned to them under the WCIP.

Collected Premium or Premium Collected
Premiums for workers compensation and employers liability insurance actually received by the contract carrier for policies issued during the period of the contract under the request for proposal (RFP).

Contract Carrier
A respondent to the department’s request for proposals who has been selected by the department to administer the A.R.M. Plan.

Deficit
The determination made under the A.R.M. Plan that the amount of losses paid and allocated loss adjustment expense paid by the contract carrier which, when divided by the amount of premium collected by the contract carrier is greater than one hundred fifteen percent (115%) for the policies issued during the one (1)-year period of the contract as periodically calculated and adjusted under the Missouri Aggregate Excess of Loss Reinsurance Mechanism set forth in Exhibit A of this rule.

Department (or Regulator)
The Missouri Department of Insurance.

Direct Assignment Carrier
An insurer, other than a servicing carrier, that has been elected and authorized to receive direct assignments pursuant to Option 1 under Section III of the WCIP.

Director
The director of the Missouri Department of Insurance.

Employer
Any business organization or enterprise that is required under Chapter 287, RSMo to maintain workers compensation insurance in Missouri, or which has voluntarily decided to elect to be covered by such laws. The term shall include any business organizations or enterprises that are affiliated as a result of common management or common ownership.

Employer Relations Consultant
The entity which has contracted to facilitate dispute resolution between the contract carrier, employers and producers, under Section (8) of this rule.

Missouri Aggregate Excess of Loss Reinsurance Mechanism
A mechanism under the A.R.M. Plan which, when approved by the director, specifies the system for distributing any residual market deficit through an assessment on insurance carriers authorized to write workers compensation insurance in proportion to the respective share of the voluntary market premium written by such carrier. The provisions of Missouri Aggregate Excess of Loss Reinsurance Mechanism are set forth in Exhibit A.

National Council on Compensation Insurance, Inc. (NCCI)
An advisory organization licensed in this state to make and file classifications, loss costs and rating plans for workers compensation insurance. NCCI is also authorized to function as the administrator of the WCIP residual market mechanism, and in this capacity shall be replaced by the contract carrier under the A.R.M. Plan. NCCI is also the organization named in the Missouri Aggregate Excess of Loss Reinsurance Mechanism to administer insurance carrier participation, deficit assessments and other components of the mechanism.

Plan Administrator
The organization designated under the WCIP to administer the affairs of the WCIP. Said plan administrator shall be replaced by the contract carrier, who shall administer the A.R.M. Plan after the transition described in this rule.

Producer
A licensed insurance agent, broker or agency, as defined in Section 375.012, RSMo, whose privileges under either the WCIP or the A.R.M. Plan have not been suspended or revoked, provided, however, that such producer shall, for purposes of this rule, be considered to be acting on behalf of the employer when placing coverage through the A.R.M. Plan and not as an agent of the contract carrier or other insurer.

Reinsurance Administrator
The organization identified under the A.R.M. Plan to administer the Missouri Aggregate Excess of Loss Reinsurance Mechanism and which organization is hereby appointed as the agent of each of the insurers required to participate in the A.R.M. Plan to execute the Missouri Aggregate Excess of Loss Reinsurance Mechanism with the contract carrier. In addition, the reinsurance administrator is hereby appointed as the agent of each of the insurers under the A.R.M. Plan to initiate civil prosecution, defend, submit to arbitration, settle and to propose or accept a compromise with respect to any claim existing in favor or against any participating company based on or involving any matter relating to the Missouri Aggregate Excess of Loss Reinsurance Mechanism.

RFP
The amended 12/94 RFP, issued by the department on January 13, 1995, setting forth the specifications for an alternative residual market mechanism and inviting potential respondents to submit proposals by which the department could select a contractor to administer the A.R.M. Plan. Request for proposal shall also mean any subsequent RFPs issued by the department for this purpose.

Servicing Carrier
An insurer, other than a direct assignment carrier, selected by the WCIP administrator pursuant to Section V, paragraph (1) of the WCIP, to receive assignments.

Standard Premium
The state premium determined on the basis of authorized rates, any experience modification, any applicable schedule rating modification, loss constants and minimum premiums. The expense constant shall be excluded from determination of the standard premium.

Workers Compensation Insurance

  1. Statutory workers compensation and occupational disease including liability under the Longshore and Harbor Workers’ Compensation Act, as amended, and the Federal Coal Mine Health and Safety Act of 1969, as amended. By policy endorsement approved by the department, the contract carrier may specify the circumstances under which such coverage shall be defined for those employees of a Missouri employer who are temporarily engaged in employment-related activities for the employer outside the boundaries of the state of Missouri;
  2. Employers liability insurance written in connection with a workers compensation policy; and
  3. Such other coverages as are approved by the director, including those approved after being recommended by the advisory board of the Missouri Aggregate Excess of Loss Reinsurance Mechanism.

Workers Compensation Insurance Plan (WCIP)
The plan of operation for Missouri’s workers compensation residual market, submitted to the department by NCCI under Section 287.896, RSMo, and approved by the director on October 14, 1993, was replaced by the A.R.M. Plan on July 1, 1995.

SECTION 2—RULES FOR ELIGIBILITY AND ASSIGNMENT
  1. The A.R.M. Plan is the Missouri workers compensation residual market mechanism which shall commence insurance operations on or after July 1, 1995, replacing the previous residual market mechanism known as the WCIP. The A.R.M. Plan provides for a new residual market approved by the director to guarantee insurance coverage and quality loss prevention and control services for employers seeking coverage through the plan. Employers assigned to WCIP servicing carriers and direct assignment carriers shall be nonrenewed by said carriers and informed of their options under the A.R.M. Plan, as set forth in Section (3) of this rule.
  2. The contract carrier under the A.R.M. Plan shall become responsible for losses incurred by its insured employers after the effective date of coverage under the A.R.M. Plan.
  3. The following rules will govern the insuring of employers who are in good faith entitled to workers compensation insurance as defined herein, but who are unable to procure such insurance through ordinary methods. Any employer insured under the A.R.M. Plan shall receive at least the same quality of service as is available to those employers who are voluntarily insured. This includes, but is not limited to, safety engineering, loss control, claims handling, employee classification and reserving practices. Any dispute arising hereunder shall be subject to Section (8) of this rule.
    1. Application for insurance shall be filed with the contract carrier by the employer or its representative on a form approved by the department.
    2. Good faith will be presumed in the absence of clear and convincing evidence to the contrary. An employer is not in good faith entitled to insurance if any of the following circumstances exist, at the time of application or thereafter, or other evidence exists that such employer is not in good faith entitled to insurance:
      1. If, at the time of application, a self-insured employer is aware of pending bankruptcy proceedings, insolvency, cessation of operations, or conditions that would probably result in occupational disease or cumulative injury claims from exposure incurred while the employer was self-insured;
      2. If the employer, while insurance is in force, knowingly refuses to meet reasonable health and safety requirements designed to remove an imminent threat of serious bodily harm;
      3. If the employer has an outstanding obligation for workers compensation premium on previous insurance about which there is no formal dispute; or
      4. If the employer, or its representative and/or the producer knowingly makes a material misrepresentation on the application by omission or otherwise, including any of the following: estimated annual premium, estimated payroll, offers of workers compensation insurance, nature of business, name or ownership of business, previous insurance history, or outstanding premium obligation of the employer.
    3. Coverage may be bound under the A.R.M. Plan, consistent with plan rules, in accordance with the following procedures:
      1. The producer should forward the completed application to the contract carrier with a certified, cashier’s or agency check payable to the contract carrier for the estimated annual or deposit premium as computed by the producer, or determined by contacting the contract carrier prior to submission of the application. The employer or its representative shall also include with and as a part of the application a copy of the employer’s latest filed federal employer 941, 941E, 942 or 943 form or equivalent federal- or state-verifiable current payroll record, for example, unemployment wage report. The application form, as approved by the department, shall indicate the employer’s agreement to authorize its current carrier to release any safety and loss information described in Subsection (3)(E) of this rule to the contract carrier. For all employers other than those formerly self-insured, coverage will be bound at 12:01 a.m. on the first day following the postmark time and date on the envelope in which the application is mailed, including the estimated annual or deposit premium, or the expiration of existing coverage, whichever is later. If there should be no postmark, coverage will be effective 12:01 a.m. of the date of receipt by the contract carrier unless a later date is requested. Those applications hand delivered to the contract carrier will be effective as of 12:01 a.m. the date following receipt by the contract carrier unless a later date is requested;
      2. For employers formerly self-insured, coverage will be bound at 12:01 a.m. not later than sixty (60) days following the postmark time and date on the envelope in which the application is mailed including the estimated annual or deposit premium, or the expiration of existing coverage, whichever is later. If there should be no postmark, coverage will be effective 12:01 a.m. not later than sixty (60) days following the date of receipt by the contract carrier unless a later date is requested. Those applications hand delivered to the contract carrier will be effective 12:01 a.m. not later than sixty (60) days following the date of receipt by the contract carrier, unless a later date is requested;
      3. If coverage is bound pursuant to the above, the contract carrier shall issue a binder with copies to the producer, insured, and appropriate state agency; and
      4. Under performance standards approved by the department, the contract carrier may specify the circumstances under which coverage may be bound as the result of the filing of an application by facsimile.
    4. Assignments shall not be made under this Plan unless all workers compensation premium obligations on any previous insurance have been met by the employer, unless a formal dispute regarding such payments has been made. If, subsequent to policy issuance, the insured employer does not meet all workers compensation insurance premium obligations under a previous policy or under a present policy, the contract carrier retains the right to cancel a policy currently in force under the A.R.M. Plan.
    5. The policy shall be issued for a term of one (1) year, unless insurance for a shorter term has been requested or unless a longer period is authorized by the department. A copy of the policy declarations and all endorsements, properly stamped A.R.M. Plan, will be retained by the contract carrier.
    6. If, after the issuance of a policy, the contract carrier determines that an employer is not entitled to insurance, or has failed to comply with reasonable safety requirements, or has violated any of the terms and conditions under which the insurance was issued, and after providing opportunity for cure, the contract carrier shall initiate cancellation by filing the reason with the employer relations consultant for approval prior to issuing a cancellation. Approval shall not be required for cancellation for nonpayment of premium. The contract carrier shall be fully informed of all cancellations and of any reestablishment of eligibility or of entitlement by an insured employer. Any insured employer so canceled must reestablish eligibility or must demonstrate entitlement before any further assignment can be made under the A.R.M. Plan.
    7. All policies issued pursuant to the A.R.M. Plan shall be written utilizing the classifications, forms, rates and rating data set forth in the contract carrier’s RFP response or as otherwise approved by the director.
    8. At least sixty (60) days prior to the expiration date of insurance, the contract carrier shall send a renewal proposal or notice of impending expiration of coverage to the insured and the insured’s producer. Upon receipt of the required premium, the policy shall be renewed and a copy of policy Information Page and all endorsements, properly stamped A.R.M. Plan, retained by the contract carrier.
    9. Any otherwise eligible employer who agrees to have its workers compensation and employers liability insurance provided by an insurer other than the contract carrier on a voluntary basis may do so at any time. The contract carrier shall cancel coverage on a pro rata basis as of the effective date of the voluntary insurer’s insurance.
    10. Any employer desiring insurance for operations in states other than Missouri must notify the contract carrier regarding the need for insurance in such additional states in accordance with Section (6) of this rule.
    11. The employer may designate a licensed producer and, with respect to any renewal of the contract carrier, may change the designated producer by notice to the contract carrier prior to the date of such renewal or, with the consent of the contract carrier, at any other time. The contract carrier shall pay a fee to the producer designated by the employer on new and renewal policies effective (July 1, 1995) and thereafter upon payment of all premium due under the policy. The fee shall be based on the state standard premium and paid at the rate as set forth in the contract carrier’s RFP response.
  4. Producers through whom employers seek workers compensation coverage shall endeavor to place such coverage through the voluntary market; only where the producer certifies on an application approved by the department that the producer has been unable to obtain such coverage at comparable cost and service through the voluntary market shall such coverage be placed in the A.R.M. Plan. At the direction of the department, a risk may be removed from the A.R.M. Plan if the department subsequently determines coverage was available through the voluntary market at comparable cost and service and this fact was known to the producer.
  5. For purposes of assisting in the placement of risks in the voluntary market. an expiration list of risks in the A.R.M. Plan, compiled and provided by the contract carrier, shall be made available by the department to producers and insurers, at the normal copying costs.
SECTION 3—PARTICIPATION

All insurers licensed to write workers compensation insurance in Missouri are required to participate in the A.R.M. Plan. An insurer must satisfy its participation requirement by subscribing to the Missouri Aggregate Excess of Loss Reinsurance Mechanism document. After the transition of the Missouri residual market from the WCIP to the A.R.M. Plan, carriers shall continue to be responsible for residual market assessments under the WCIP, as determined by NCCI under the provisions of the articles of agreement, in addition to any deficits experienced under the A.R.M. Plan.

After the transition of the Missouri residual market from the WCIP to the A.R.M. Plan, the WCIP’s servicing carriers and direct assignment carriers shall be replaced by the contract carrier.

No less than ninety (90) days before the date on which the coverage under the A.R.M. Plan shall commence, the Department of Insurance or its designee shall, by bulletin or other notification, specify to each insurance carrier authorized to write workers compensation insurance in Missouri the date upon which the responsibility for providing workers compensation insurance through the residual market shall shift from the WCIP to the A.R.M. Plan.

    1. Said notification shall require that, for each WCIP policy which would otherwise renew during the following year, that the policy’s WCIP servicing carrier or direct assignment carrier shall provide the insured employer with no less than sixty (60) calendar days’ notice that coverage under the WCIP policy will terminate and that, should the employer desire coverage under the successor A.R.M. Plan, the employer will be required to submit a new application to the A.R.M. Plan contract carrier. The director may waive the requirement of a new application for employers serviced by the contract carrier under the WCIP and may approve a shorter notification period for out-of-state employers receiving Missouri coverage under the WCIP through the WCIP’s associated interstate assignment mechanism.
    2. The form of the notice to employers shall be specified by the department and shall include a discussion of the availability of coverage in the voluntary market. The A.R.M. Plan contract carrier may offer voluntary market coverage to any employer.
  1. Policies issued by the A.R.M. Plan shall be issued under the presumption that payroll and classification information of an individual policy under the WCIP is accurate; employers and/or their agents or brokers shall not be permitted to modify such information as part of their application to the A.R.M. Plan without the written permission of the A.R.M. contract carrier. The contract carrier, however, is authorized to modify such information.
  2. WCIP servicing carriers and direct assignment carriers shall provide such historical policy loss run information as is reasonable, and which is not otherwise available from NCCI, to the contract carrier, and which has been requested by the contract carrier for individually specified insureds. NCCI shall provide experience rating, inspection reports and classifications through normal affiliation distribution channels. NCCI shall provide status on uncollected premiums under the terms of any approved Uncollectible Status Service Agreement approved by the department.
  3. The transition from the WCIP to the A.R.M. Plan shall not change the obligations of employers insured under the WCIP to pay premiums to that Plan. This responsibility shall include the responsibility to pay premiums owed after the WCIP policies are terminated which reflect adjustments to the employers’ estimated premium made as the result of premium audits conducted within one hundred and twenty (120) days of termination. Failure to pay such audit premiums shall result in the employers’ loss of its good faith entitlement to coverage under the A.R.M. Plan, absent the existence of a formal dispute. The requirement that the A.R.M. Plan contract carrier cooperate with WCIP carriers regarding unpaid premiums shall be conditioned on WCIP carriers’ cooperation with the A.R.M. Plan contract carrier regarding historical account information on policies transferred to the A.R.M. Plan which is not otherwise available to the contract carrier from NCCI.
SECTION 4—DEFICIT ADMINISTRATION
  1. A deficit under the A.R.M. Plan shall be handled as follows:
    1. Under the A.R.M. Plan, and in accordance with Section 287.896, RSMo, while the plan shall be designed to provide workers compensation and employers liability insurance at premium rates which are actuarially sufficient to cover losses and reasonable operating expenses, the plan must also provide a system to distribute any deficit experienced by the plan. Under this rule, a deficit as defined under the A.R.M. Plan has occurred whenever the amount of losses and allocated loss adjustment expenses paid by the contract carrier, when divided by the amount of premium collected by the contract carrier, produces a percentage greater than or equal to one hundred fifteen percent (115%) for the policies issued during the one (1)-year period of the contract. An insurer licensed to write workers compensation coverage in Missouri shall be assessed for the amount of such deficit in proportion to the share of the voluntary market premium written by such insurer, in accordance with the provisions of the Missouri Aggregate Excess of Loss Reinsurance Mechanism, set forth in Exhibit A. Failure of an insurer to pay its proper assessment shall be grounds for discipline of the insurer by the department, and for legal action by the contract carrier or the advisory board to recover such unpaid-assessment owed under this rule.
    2. In order to assist the determination of the existence of a deficit, the A.R.M. Plan contract carrier and its affiliated insurers shall, at a minimum, segregate their Missouri voluntary market workers compensation financial experience and business transactions from their Missouri residual market financial experience and business transactions.
    3. The means for the determination of the existence of a deficit and the assessment thereof to insurers based on their Missouri voluntary workers compensation insurance premium is as described in the Missouri Aggregate Excess of Loss Reinsurance Mechanism.
    4. The department is to be apprised at least annually by the contract carrier as to its actuarial estimate as to the likelihood of a deficit. Such estimates shall include a valuation of the probability of any future deficits based on amounts already incurred, determined by an evaluation procedure approved by the department; such an evaluation procedure may be recommended to the department by the advisory board. Should a deficit be indicated by the actuarial estimate, a projection as to when assessments are expected to begin under the terms of the Missouri Aggregate Excess of Loss Reinsurance Mechanism is also to be provided to the department by the contract carrier.
    5. NCCI shall be the reinsurance administrator of the Missouri Aggregate Excess of Loss Reinsurance Mechanism, under the oversight of an advisory board appointed by the director of insurance after consultation with NCCI and other interested parties. Subject to the direction and approval of this advisory board, NCCI, as reinsurance administrator, shall perform as described in the Missouri Aggregate Excess of Loss Reinsurance Mechanism (Exhibit A), including the following:
      1. Advising all carriers of their requirement to participate in the Missouri Aggregate Excess of Loss Reinsurance Mechanism, and informing the director of insurance of any insurer who informs NCCI that they are unwilling to participate in said mechanism.
      2. Administering the deficit sharing mechanism;
      3. Advising the department as to the oversight activities requisite to ensuring appropriate performance by the contract carrier; and
      4. Acting as secretary for the advisory board.
    6. Any assessment made shall clearly distinguish the extent to which it is an A.R.M. Plan deficit assessment or a WCIP assessment.
  2. Advisory Board
    1. The advisory board shall be composed of at least nine (9) but no more than thirteen (13) members, appointed by the director as follows:
      1. No fewer than nine (9) insurers who write workers compensation insurance in Missouri’s voluntary market, and who are representative of the interests of such carriers;
      2. Other members as determined by the director, with consideration given to members recommended by the advisory board.
    2. The function of the advisory board is to oversee NCCI in its administration of the Missouri Aggregate Excess of Loss Reinsurance Mechanism, and to assist and advise the director regarding the execution of this mechanism by the contract carrier and the member insurers required to be reinsurers under this mechanism. The advisory board may consider any matter referred to it by the reinsurance administrator or the director which relates to the operation of the mechanism.
    3. Each advisory board member shall serve a term of two (2) years, but may serve additional terms.
    4. No advisory board member shall fill more than one (1) position on the board. All advisory board members shall serve until their successors are designated by the director. Any vacancy on the advisory board, by resignation or otherwise, shall be filled by a representative of the member’s insurer or organization, until a replacement is appointed.
    5. The advisory board members, in person or by proxy, shall hold an annual meeting at which they shall elect a chairperson. The advisory board shall hold such additional meetings as necessary whenever requested by the chairperson, the director or upon petition of three (3) advisory board members.
  3. The reinsurance administrator of the Missouri Aggregate Excess of Loss Reinsurance Mechanism shall be responsible for determining expenses and fees for the operation of the deficit sharing mechanism and shall invoice, for its own account, each insurer participating in the A.R.M. Plan for these expenses and fees on an equitable basis. Such basis shall be determined by the advisory board, not later than sixty (60) days following the implementation of the filing. Such administrative expenses and fees shall be labeled as such on any assessments to clearly distinguish them as being in addition to the amount of the underlying deficit as defined herein. Additionally, it is recognized that administrative expenses may be incurred even if there is no deficit.
  4. All insurers required to participate in the A.R.M. Plan shall indemnify and hold harmless the reinsurance administrator, its officers, and/or employees from and against all judgments, fines, damages, losses, amounts paid in settlement, reasonable costs and expenses, including attorney’s fees, and any other liabilities that may be incurred as a result of any action, claim, suit, or proceeding arising out of the performance of the rights or obligations of the reinsurance administrator under the A.R.M. Plan and/or the Missouri Aggregate Excess of Loss Reinsurance Mechanism.
SECTION 5—CONTRACT CARRIER
  1. The contract carrier shall be selected by the director after a competitive bidding process by means of an RFP.
  2. The services to be provided and performance standards to be met by the contractor under the A.R.M. Plan are those set forth in the amended 12/94 RFP or successor RFPs, as supplemented by any subsequent agreements between the director and the contract carrier regarding administrative details subsequent to the award of the contract. In no event shall the performance standards to be met by the contract carrier be less rigorous than those required of a servicing carrier under the WCIP except as authorized by the director. The performance standards under which the contract carrier shall operate shall pay such commissions as are specified in the RFP or as are otherwise necessary and approved by the department to encourage the objectives of the A.R.M. Plan, such as improving workplace safety. The performance standards shall also require the use of retrospective rating plans where required under Section 287.896, RSMo.
  3. The amended 12/94 RFP shall be considered incorporated into this regulation by reference.
SECTION 6—INTERSTATE ASSIGNMENTS
  1. Any employer assigned to the contract carrier under this A.R.M. Plan and desiring coverage for workers compensation benefits of states other than Missouri for its Missouri-based employees who may have business reason to travel to other states may request the contract carrier to furnish such insurance on an endorsement form approved by the department. Such form shall indicate that employees operating out of states other than Missouri are not covered by this endorsement.
  2. Employers with known exposures in states other than Missouri may request the contract carrier to assist them in obtaining coverage in these other states. If the contract carrier does not wish to provide coverage for the additional states on a voluntary basis, the contract carrier shall advise the employer and the producer to submit an application to the appropriate administrator having jurisdiction.
SECTION 7—ASSIGNMENT FORMULA

All employers qualifying for coverage under the A.R.M. Plan shall be assigned to the contract carrier as long as the policies commence during the contract period, including any renewals thereof.

SECTION 8—DISPUTE RESOLUTION PROCEDURE
  1. Any person affected by the operation of the A.R.M. Plan including, but not limited to, insureds, producers, and the contract carrier, who may have a dispute with respect to any aspect of the plan, may seek a review of the matter by the employer relations consultant by setting forth in writing with particularity the nature of the dispute, the parties to the dispute, the relief sought and the basis thereof. The employer relations consultant may secure such additional information as it deems necessary to make a decision.
  2. Appeals from employers and insureds on plan matters regarding individual employer disputes shall be within the jurisdiction of the mechanism established to handle such appeals under the applicable insurance laws, including Section 287.335, RSMo. All other disputes shall be handled as follows:
    1. If the dispute relates to the general operation of the A.R.M. Plan, excluding individual employer disputes and those arising under the Missouri Aggregate Excess of Loss Reinsurance Mechanism (mechanism), the employer relations consultant will review the matter and render a written decision with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by a decision made by the employer relations consultant may seek a de novo review by the regulator by requesting such review, in writing, within thirty (30) days after the date of such decision. In reviewing any such matter, the department shall decide the dispute in accordance with the state law, regulation and policy and in the interests of the reasonable and proper administration of the A.R.M. Plan. The regulator’s decision shall be final, subject to court review.
    2. Except as provided below, if the dispute arises under the mechanism, the reinsurance administrator designated under the mechanism shall first review the matter and render a written decision to the complaining party with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by the decision may seek a review by the advisory board established under the mechanism by requesting such review, in writing, within thirty (30) days of the date of the decision by the reinsurance administrator under the mechanism. The advisory board must then review the matter and render its written decision pursuant to the procedures set forth in the mechanism. Any party affected by a decision of the advisory board may seek a de novo review by the director by requesting such a review in writing within thirty (30) days of the date of the board’s decision.
SECTION 9—RATE MONITORING
  1. It is essential for maintaining the long-run viability of the A.R.M. Plan that the contract carrier and prospective contract carriers have the data necessary to determine appropriate rates. As insureds may over time move between the A.R.M. Plan and the voluntary market, data for the total market must be maintained. On behalf of the department, NCCI shall maintain necessary loss cost data in order to permit the actuarial determination by the department and the contract carrier of rates, consistent with the NCCI-administered classification system, for the business insured through the A.R.M. Plan. The contract carrier is required to report its experience on business written under the A.R.M. Plan to NCCI in the same format required by NCCI for carriers writing voluntary market business. NCCI shall provide to the contract carrier and the department all requested information necessary for establishing reasonable classifications, rates and enabling financial information required for the successful operation of the A.R.M. Plan and the total market, and for whatever other purposes the department from time to time may require for said data.
  2. The contract carrier shall file any rate requests for the residual market in accordance with the provisions of Section 287.896, RSMo.
SECTION 10—NOTICE

Within sixty (60) days after this plan has been approved by the director, NCCI shall provide notice to all insurers that are required to participate in this plan under Section (3) of this rule. The notice shall include a copy of this plan, as well as the dates the plan is approved and effective and shall advise each insurer of the obligation to subscribe to the Missouri Aggregate Excess of Loss Reinsurance Mechanism. NCCI will inform the director of any insurer refusing to subscribe to the mechanism. NCCI shall contact the department whenever a carrier advises that they are refusing to participate, but will not be required to solicit responses from insurers on such participation. Any questions regarding the notice shall be directed to the department or the contract carrier.

SECTION 11—CONFIDENTIALITY OF INFORMATION
  1. For purposes of this section, the term contract carrier shall include any reinsurers, subcontractors, vendors, or other entities or persons utilized by or associated with the contract carrier in the administration and insuring of the Missouri workers compensation residual market under the A.R.M. Plan. The provisions of this section shall not apply to the contract carrier beyond the period of the carrier’s contract.
  2. Detailed information, whether provided orally, in writing, via computer media, or by other means, given to agents, agencies, brokers, insurers, or their clients, required to properly evaluate, underwrite and insure risks under the A.R.M. Plan, shall be provided by such persons and entities to the contract carrier for evaluation, underwriting and insurance purposes. In consideration of the disclosure of such information, the contract carrier agrees to and shall comply with the following provisions:
    1. The contract carrier shall keep in confidence and shall not, except as directed by the insured, disclose to any third party, or use for the benefit of any third party, such detailed information, regardless of any third party, such detailed information, regardless of the form or format of the disclosure; such information shall be used by the contract carrier solely for evaluating, underwriting and insuring workers compensation and employers liability insurance coverage under the A.R.M. Plan, and not for any other purpose without the prior approval of the agency of record.
    2. The contract carrier shall take all reasonable measures necessary to protect the confidentiality of such information in its possession from disclosure to any other third party, except as directed by the insured.
    3. The contract carrier shall not directly or indirectly request, encourage, or advise any employers who have acquired or seek to acquire coverage through the A.R.M. Plan to utilize the services of any specific insurance agent, agency, broker, insurer or group of insurers for workers compensation and employers liability insurance coverage.
    4. The contract carrier shall not give any other person, firm or entity any rights that would circumvent or violate the provisions of Paragraphs (11)(B)1.3.
  3. Notwithstanding the confidentiality provisions set forth in Subsection (11)(B) of this rule, the contract carrier is expressly authorized to provide the information delineated in Subsection (11)(B) to the Missouri Department of Insurance, the Missouri Division of Workers’ Compensation and any other organization or entity designated by the Missouri Department of Insurance to gather and analyze data for the purpose of establishing rate or loss cost information, or in conjunction with the issuance of reports concerning the Missouri workers compensation market.
  4. In addition to any other remedies available to the department regarding any violation of the provisions of this section, including those contained in Section 374.280, RSMo, the department shall consider the nature and severity of any violations of the provisions of this section during its consideration of the letting of or renewal of any contract for the administration of and insurance of the Missouri workers compensation residual market under the A.R.M. Plan.

Auth: Sections 287.896 and 374.045, RSMo (1994).* Emergency rule filed June 15,1995, effective July 1, 1995, expired Oct. 28, 1995. Original rule filed April 3, 1995, effective Sept. 30, 1995.

* Original authority: 287.896. RSMo (1993) and 374.045. RSMo (1967), amended 1993.

Contract Modification

Effective 01 Jul 2001

Under the authority set fort in Emergency Rule 20 CSR 500-5.960, submitted to the Missouri Secretary of State on April 26, 2002 and effective May 6, 2002, the Missouri Director of Insurance hereby re-appoints Travelers Property Casualty Company of America —in cooperation with subcontractor Aon Risk Services of Missouri, Inc.—as the Contract Carrier for the Missouri Alternative Residual Market (A.R.M.) Plan for the upcoming contract period of July 1, 2002 to June 30, 2003, under the same terms and conditions as agreed to previously by the parties by means of the Departments Amended 12/94 RFP, the response to that RFP by Travelers, and the performance standards agreed to by the parties in the Missouri Alternative Residual Market Plan Best Practices (for the Contract Period July 1, 1995 until June 30, 1996), 1/30/96 Revision, except as follows:

    1. Consistent with the provisions of Emergency Rule 20 CSR 500-6.960, the provisions of the Amended 12/94 RFP to the contrary notwithstanding, the Contract Carrier shall be required to absorb a loss ratio of 100% of collected premium for the 7/1/02 to 6/30/03 contract period, after which any additional losses will be deemed to constitute a “deficit,” requiring the pro rata participation and contribution of the Missouri voluntary market carriers, in their capacity as Reinsurers; and,
    2. Consistent with the provisions of Section 287.896, RSMO, the premium rates to be charged under the A.R.M. Plan shall be modified for the contract period of 7/1/02 to 6/30/03 in accordance with the Department’s Rate Order dated June 4, 2002, issued after an April 9, 2002 rate filing by Travelers and a May 23, 2002 public hearing. Under said Rate Order, the Missouri Director of Insurance in part authorized an overall premium level increase of 905% for the A.R.M. Plan and also a reallocation of said increase among the various job classification codes.
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Missouri Department of Insurance

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Travelers Insurance Companies, on behalf of
Travelers Property Casualty Company of America

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Aon Risk Services of Missouri, Inc.
DBA Aon Risk Services of Kansas City

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