BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE

OFFICE OF THE MONTANA STATE AUDITOR

 

In the matter of the adoption of New Rules I through V pertaining to Regulatory Sandbox Waivers

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NOTICE OF ADOPTION

TO: All Concerned Persons

 

1.  On August 25, 2023, the Commissioner of Securities and Insurance, Office of the Montana State Auditor (CSI) published MAR Notice No. 6-281 pertaining to the public hearing on the proposed adoption of the above-stated rules at page 782 of the 2023 Montana Administrative Register, Issue Number 16.

 

2. On September 14, 2023, a public hearing was held in-person and electronically to consider the rulemaking. No one attended. One written comment was received on September 18, 2023, by email.

 

3. CSI has adopted NEW RULE I (6.6.9001), NEW RULE III (6.6.9003), NEW RULE IV (6.6.9004), and NEW RULE V (6.6.9005) as proposed.

 

4. CSI has adopted NEW RULE II with the following changes from the original proposal, new matter underlined, deleted matter interlined:

 

NEW RULE II (ARM 6.6.9002)  WAIVER MONITORING  (1)  At the time of granting a waiver, the commissioner shall provide an insurer granted a waiver under [HB 836, Section 1] with a list of reporting requirements and dates for reporting as warranted by the facts and circumstances of the particular waiver.

 

AUTH: 33-2-2501, MCA

IMP: 33-2-2501, MCA

 

5.  CSI has thoroughly considered the comments and testimony received.  CSI received one comment in the form of a series of questions about how the program would apply to a specific party.  During the comment period, parties were invited to submit "data, views, or arguments" relating to the proposed rule.  2‑4‑302(4), MCA.  It is not clear from many of these questions whether the party posing those questions meant to support or oppose the rule.  To the extent the questions posed related to the general structure of the proposed rules, or the statute itself, answers were set forth in response to each question below.

 

However, to the extent the rules asked the commissioner to apply the rules to a specific party's legal situation, this is inappropriate for the general rulemaking process, which requires CSI to give a "concise statement of the principal reasons for and against [the rule's] adoption, incorporating in the statement the reasons for overruling the considerations urged against its adoption."  2‑4‑305(1)(b), MCA.  This process does not require CSI to render specific legal advice to a particular party on how the rules may apply to them.

 

A summary of the comments received and CSI's responses are as follows:

 

COMMENT #1: The language mentions that the carrier needs to have a "physical presence" in the state to qualify.  How exactly is "physical presence" defined?  Does [the company] qualify because it is already licensed to do business in Montana?  [The company] has some employees physically in the state; does that suffice?

 

RESPONSE #1:  The term "physical presence" in the proposed rule comes from 33-2-2501, MCA, where that term is used but not defined.  The commissioner will consider an entity's physical presence on a case-by-case basis based on the full factual record provided in an entity's waiver application.  Questions seeking legal advice about the fact-specific application of the rules to a particular entity are outside the scope of the notice-and-comment process.

 

COMMENT #2:  Are there any restrictions on the program duration such as a maximum number of years?

 

RESPONSE #2:  The period for which an initial waiver and any extension may be granted is set forth in subsection (3) of the statute.

 

COMMENT #3: What is the likelihood that the commissioner would revoke a waiver?  Under what conditions would that likely occur?  [The company] asks because it would be cost-prohibitive to submit the application and implement the program, but then have the program terminated prematurely.  [The company] would like to assess that risk.

 

RESPONSE #3: The conditions under which a waiver may be revoked by the commissioner are set forth in subsection (10) of the statute and in ARM 6.6.9003.

 

COMMENT #4: How would the unwinding of an approved program look?  For example, say a customer enrolls in a sandbox program on January 1, and the program is slated to conclude March 1.  The customer's policy is six months in duration and so her renewal would be up June 1.  Would [the company] have to intervene mid-term for this individual's policy by March and change an applicable rating or could [the company] wait until her policy is up for renewal to put her on the non-sandbox rating?

 

RESPONSE #4: Unwinding of a program would be dictated by the terms and conditions of the waiver on a case-by-case basis as set forth in subsection (4) of the statute.  Per ARM 6.6.9001(1)(j), the applicant must submit a plan for winding down the program at the time the applicant applies for a waiver.  To the extent this comment was intended as opposition to adoption of the proposed rule, the commissioner will adopt the rule as written.  Requiring a party to submit its own plan for winding down best serves the needs of the waiver program because it allows each individual applicant to tailor the winding-down process to the particular proposed activity.

 

COMMENT #5: The proposed regulatory language states that an insurer would need to provide reports of any program to CSI/Commissioner. What exactly needs to be reported and how often?

 

RESPONSE #5: Per ARM 6.6.9002, reporting requirements will be provided to a waiver grantee on a case-by-case basis.  In response to this comment, ARM 6.6.9002 was clarified to reflect the fact-specific considerations for each waiver's reporting requirements.

 

COMMENT #6: If an insurer applies for a new sandbox program, may it run the sandbox program concurrently with its current insurance model and have different consumers in two separate programs at the same time?  Is a separate entity required to set up a sandbox program or can these be run under the umbrella of the existing insurance company?

 

RESPONSE #6: Section 33-2-2501, MCA, and the proposed rules do not contain any limitation on the number of waivers that may be granted to a single entity.

 

 

/s/ Andrew Cziok                              /s/ Mary Belcher______                 

Andrew Cziok                                   Mary Belcher

Rule Reviewer                                  Deputy Auditor

                                                            Commissioner of Securities and Insurance,

                                                            Office of the Montana State Auditor

 

Certified to the Secretary of State October 10, 2023.