Information from the Florida Office of Insurance Regulation re Exotic Warranty Ordered Into Receivership & Commissioner Praises Law Regulating Discount 4/24/06

Jan 10, 2007

Please see the below information from the Office of Insurance Regulation. Should you have any questions or concerns, please do not hesitate to contact this office.

 

EXOTIC WARRANTY ORDERED INTO RECEIVERSHIP

Exotic Warranty Company has been ordered into receivership for purposes of liquidation by Judge Thomas H. Bateman III of the Second Judicial Circuit Court in Leon County and the Florida Department of Financial Services named Receiver.

A Florida corporation since January 2003, Exotic was headquartered in Bradenton, Florida. Investigation by the Florida Office of Insurance Regulation and the Florida Department of Financial Services discovered the company was selling motor vehicle service agreement contracts (“warranties”), an insurance product it was not licensed in Florida to sell.

At the time of liquidation, the company provided car, boat, and RV warranties to more than 1,000 warranty owners in at least 43 states and four foreign countries. By court order, the warranties are cancelled effective April 12, 2006. The Receiver is sending notices of the liquidation proceeding and warranty contract cancellation to all known warranty owners and the dealerships that handled sales of these contracts. Currently, the Receiver is aware of 10 claims submitted to Exotic for warranty coverage. As a result of the April 12, 2006 cancellation, certain warranty owners may be entitled to a return of some of the contract price they paid for coverage. There is no guaranty association coverage for claims arising under either unauthorized insurers or motor vehicle service agreements.

Consumers with questions on this matter are directed to call the Florida Department of Financial Services at 1-800-882-3054. A copy of the liquidation order and additional information regarding Exotic and the receivership process may be found at www.floridainsurancereceiver.org.

###

Commissioner Praises Law Regulating Discount

Medical Plans on Eve of Anniversary

Tallahassee � Insurance Commissioner Kevin McCarty praised the effectiveness of the “Affordable Health Care for Floridians Act” passed by the 2004 Florida Legislature, which made Florida the first state to comprehensively regulate discount medical plan organizations (DMPOs).

“The results have been impressive,” Commissioner McCarty noted after a recent internal review of the two-year old law, “Whether it is the increased financial oversight, more truth in advertising, or ensuring that consumers receive fair value for their purchase, the new law has accomplished its objectives.”

Prior to the law, the Department of Financial Services (DFS) received over 1,000 complaints annually by angered Floridians duped by unscrupulous discount medical plan organizations. Complaints ranged from consumers that unknowingly dropped their health insurance, plans that falsely advertised discounts and provider networks, and even “fly-by-night” companies that accepted large initiation fees only to declare bankruptcy and keep the consumer�s money.

The most recent DFS complaint statistics show that complaints for DMPOs have dropped over 70% since the new law became effective. Some of the accomplishments include:

Financial Stability � the new law requires DMPOs to maintain a net worth of $150,000, and requires submission of annually audited financial statements. This has enabled the Office of Insurance Regulation (Office) to suspend one DMPO, and intervene with other troubled plans to ensure that DMPOs could honor the advertised benefits.

� the new law requires DMPOs to maintain a net worth of $150,000, and requires submission of annually audited financial statements. This has enabled the Office of Insurance Regulation (Office) to suspend one DMPO, and intervene with other troubled plans to ensure that DMPOs could honor the advertised benefits.

Stability in the Marketplace � Of the roughly 60 DMPOs operating in Florida prior to the law, only 38 received certificates of authority upon passage of the new law eliminating many of the “bad actors” that were preying on consumers.

� Of the roughly 60 DMPOs operating in Florida prior to the law, only 38 received certificates of authority upon passage of the new law eliminating many of the “bad actors” that were preying on consumers.

Reasonably Priced Products � Prior to the new law some DMPOs charged up to $100 for nonrefundable application fees, and $269 monthly fees. Consumers often confused such high priced plans with health insurance. The new law and subsequent revision in 2005 capped the monthly fees to $30 a month. This has helped ensure that consumers received benefits in relation to their monthly fee, and that consumers are not confusing the product with health insurance.

� Prior to the new law some DMPOs charged up to $100 for nonrefundable application fees, and $269 monthly fees. Consumers often confused such high priced plans with health insurance. The new law and subsequent revision in 2005 capped the monthly fees to $30 a month. This has helped ensure that consumers received benefits in relation to their monthly fee, and that consumers are not confusing the product with health insurance.

Despite this success, recent market conduct examinations have shown that several licensed companies have continually violated laws relating to form filings, and the use of prohibited language in advertising materials.

“The OIR is not resting on its laurels,” Commissioner McCarty added, “Several DMPOs continue to advertise their products as health insurance. The new law makes it clear that this practice will not be tolerated. We have over two million Floridians without health insurance. The state of Florida needs to continue to ensure consumers are buying a viable DMPO product that will actually provide benefits when they are used.” Despite some continued abuses in the system, the Commissioner considers the 2004 statute an overwhelming success, and this regulatory effort has put the state of Florida on the forefront of protecting consumers.

� Insurance Commissioner Kevin McCarty praised the effectiveness of the “Affordable Health Care for Floridians Act” passed by the 2004 Florida Legislature, which made Florida the first state to comprehensively regulate discount medical plan organizations (DMPOs). � the new law requires DMPOs to maintain a net worth of $150,000, and requires submission of annually audited financial statements. This has enabled the Office of Insurance Regulation (Office) to suspend one DMPO, and intervene with other troubled plans to ensure that DMPOs could honor the advertised benefits. � Of the roughly 60 DMPOs operating in Florida prior to the law, only 38 received certificates of authority upon passage of the new law eliminating many of the “bad actors” that were preying on consumers. � Prior to the new law some DMPOs charged up to $100 for nonrefundable application fees, and $269 monthly fees. Consumers often confused such high priced plans with health insurance. The new law and subsequent revision in 2005 capped the monthly fees to $30 a month. This has helped ensure that consumers received benefits in relation to their monthly fee, and that consumers are not confusing the product with health insurance.