New York Department of Financial Services (DFS) has imposed a penalty of $3m against Applied Underwriters, a Berkshire Hathaway owned company, for inflating insurance prices.
The financial regulators alleged that Applied Underwriters overcharged many small and medium-sized employers for unapproved workers’ compensation products that violated New York law.
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Applied provided workers compensation insurance from January 2010 to late 2016 in New York under various names, such as “SolutionOne” and “EquityComp.”
Applied subsidiary Continental Indemnity Company underwrote insurance plans which included guaranteed-cost workers’ compensation policies on forms and rates agreed by DFS together with a side agreement known a “Reinsurance Participation Agreement” that employers were also required to sign as part of the bundle.
The insurer failed to submit its side agreement with DFS, and as a result the RPA and the Programme as a whole were not verified or sanctioned by the New York DFS.
During the investigation, the DFS found that Applied’s offering was misleading in how it represented potential costs, required employers to wait three years, or in some cases up to seven years, for advertised “profit distributions”.
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By GlobalDataThe probe also found that Applied’s offering often resulted in fees that were higher than the rates in the filed and approved insurance policy.
New York Financial Services Superintendent Linda Lacewell said: “Small businesses are the backbone of New York’s economy, making up 98% of businesses in the State and employing more than half of our private-sector workforce.
“DFS is committed to protecting all consumers, including our small business owners and today we are holding Applied Underwriters responsible for illegally operating outside of the Department’s oversight to sell a complex product to hundreds of New York small and medium-sized businesses.”
As per the DFS’s Consent Order, Applied has stopped providing the bundle in New York. The company will not provide any equivalent side agreements in future, and will file any future products with the DFS for approval.
The company also agreed that it will not enforce any arbitration provisions under contracts agreed to in New York or with New York employers.
