Consumers FAQ
PRIVATE PASSENGER AUTOMOBILE INSURANCE
Q. What coverages are mandatory?
A. Every automobile owner must have liability coverage. Liability coverage pays for any claims when you are at fault in an accident. The minimum liability you are required to carry by law is $25,000 per person for bodily injury, $50,000 per accident and $25,000 to cover property damage to other’s property. Almost all insurers offer higher limits. When you apply for liability coverage, you must be offered an opportunity to purchase coverage for uninsured motorist bodily and property damage, underinsured motorist coverage for bodily injury and personal injury protection coverage.
Uninsured motorist coverages cover you and your automobile if the other driver is at fault and does not have liability insurance.
Underinsured motorist coverage gives you additional protection if the other driver is at fault and doesn’t have enough coverage to cover your injuries.
Personal Injury Protection provides you with wage loss, death benefits and medical coverage regardless of fault.
Q. What other coverages are available?
A. You may also purchase comprehensive and collision coverages. Comprehensive coverage protects against damage to your automobile from acts of nature or other events not associated with operating the automobile. Collision coverage protects against damage to your automobile when it is involved in an accident.
Q. Are there any discounts that must be offered?
A. Yes, the Defensive Driver Discount for those insureds 55 and over for a three-year period following completion of a course approved by the Office of Driver Services. To maintain this discount, the insured must successfully complete the course every three years. Check with your agent for any other discounts your insurer may offer.
Q. Why have my rates gone up when I haven’t had an accident and/or claim?
A. Probably because the insurer increased its overall rates because it has paid out more losses than expected. You may personally receive a lower or higher rate based upon various factors.
Q. Why haven’t my physical damages premiums decreased as my vehicle ages?
A. The price of repairing vehicles does not go down as a vehicle ages.
Q. Will my policy cover me if I rent an automobile?
A. This can vary by company. You should ask your agent if your policy covers you, those you might injure if at fault, and the rental agency’s automobile.
Q. Must a licensed automobile dealer provide primary insurance on loaner cars?
A. No. Typically, insurance coverage follows the automobile and not the person. However, Ark. Code Ann. § 27-19-713(l) provides an exception to licensed automobile dealerships; under this statute, they are not required to carry primary insurance coverage on every vehicle in their car lot. This law eases the insurance burden on the dealerships by extending the insured’s coverage to instances in which the dealership loans a vehicle to the insured.
HOMEOWNERS INSURANCE
Q. What coverages are mandatory?
A. You are not required to have homeowners coverage by any Arkansas law. However, if you have a mortgage on your home, you may be required by your mortgage agreement or loan agreement to carry full coverage or be in breach of your agreement. Your lending institution may have more information on what levels of coverage it requires you to maintain.
Q. What different types of homeowners coverages are available?
A. There are several different types, but most homeowners carry full coverage for all perils including losses associated with any sudden and accidental event. In the case your home is totally destroyed, you may wish to consider having replacement cost coverage so that you can rebuild your home. The all perils coverage usually includes coverage for your liability to your guests.
Other types of homeowners insurance cover only fire and weather events. Some are designed specifically for renters.
Q. What is a public protection classification?
A. A public protection classification refers to a rating system used to evaluate a community’s fire protection services. The rating is determined by considering water distribution, fire department equipment and manpower, water source and other factors. Classifications range from 1 to 10, with 10 being a very rural area with very little fire protection.
Q. Who determines a public protection classification?
A. The Insurance Services Office, or ISO, inspects local fire departments and sets the classification.
Q. How do public protection classifications affect my homeowners premium?
A. Generally, the lower the protection class rating the lower the base premium. You can contact your local fire department and ask them for their “ISO public protection class rating”.
Q. What is the difference in replacement cost and actual cash value?
A. Actual cash value allows for depreciation in determining how much to pay you on your claim while replacement cost does not.
Q. How do I know whether I have a real cash value or actual cash value policy?
A. You may wish to contact your agent. You can also read the loss settlement provision of your policy.
Q. Why have my rates gone up when I haven’t filed any claims?
A. Probably because the insurer increased its overall rates because it has paid out more losses than expected. You may personally receive a lower or higher rate based upon various factors.
INSURANCE PREMIUMS
Q. Does the Insurance Department set insurance rates?
A. No, that is a common misconception regarding the Department’s oversight of rates. Proposed rate changes by insurers must be filed with the Arkansas Insurance Department at least twenty (20) days prior to the effective date. We have broad authority to review how the rate is distributed among insureds according to factors that might predict future losses, but we cannot disapprove an overall rate unless it is actuarially “excessive, inadequate or unfairly discriminatory.”
“Excessive.” A rate becomes excessive when the loss ratio (losses divided by premiums paid) drops to a point which results in the insurance company earning an excessive amount of profit.
“Inadequate.” A rate is inadequate if it will lead to solvency problems immediately or has the potential for long-term solvency implications in that it may not provide sufficient fund to pay future claims, the costs of adjusting those claims and operating the business.
“Unfairly Discriminatory.” All insurance discriminates among various risks. There is “fair,” i.e., “legal” discrimination, and “unfair,” i.e., illegal discrimination. Cross-subsidies encourage risky behavior in some risk categories. Therefore, allocating the premiums among risks tends to discourage risky behavior. “Unfair” discrimination basically means not treating similar risks the same in rates and coverages.
Q. What rates are reviewed?
A. We review life, health, private passenger auto, homeowners, workers’ compensation and professional liability insurance rates.
WORKERS COMPENSATION
Q. What part does the Arkansas Insurance Department play in workers’ compensation issues and claims?
A. The Arkansas Insurance Department is only involved in approving what rates and forms insurance companies use to insure the employer. We have no part in the determination of whether a claim is covered under workers’ compensation. That responsibility rests with the Arkansas Workers’ Compensation Commission.
HEALTH INSURANCE
Q: How can I obtain health insurance?
A: Please review information for consumers specifically related to health insurance found here.
Q: What is a short-term, limited-duration health insurance plan?
A: A short-term limited-duration health insurance plan is a type of health insurance coverage that is primarily designed to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another, such as transitioning between health coverage offered by one employer to health coverage offered by another employer. These types of plans are generally not subject to federal individual market consumer protections and requirements for comprehensive coverage. For example, these plans are not subject to the prohibitions on discrimination based on health status, pre-existing condition exclusions, and lifetime and annual dollar limits on essential health benefits. Thus, individuals who enroll in these plans are not guaranteed these key consumer protections under federal law.
Q. What is the difference between a “self-funded” health benefits plan and a “fully insured” health benefits plan?
A. A self-funded or self-insured health benefit plan refers to a group health benefits plan in which the employer assumes the financial risk for providing health benefits. A fully insured plan is a group health benefits plan in which an employer or association purchases coverage directly from a health insurance company and the insurance company assumes the financial risk.
Q. Why should I care whether my plan is considered “self-funded” or “fully insured”?
A. It is important to know how your plan is funded because the Arkansas Insurance Department does not have jurisdiction over benefits received through health benefit plans self-funded by employers in the private sector. Depending upon the health benefit that is the subject of an inquiry, the Department may have jurisdiction over self-funded health benefit plans offered by state and local governmental entities.
Q. What if I receive benefits through a self-funded health benefit plan offered by a private-sector employer and want to file a complaint?
A. You can file a complaint with the United States Department of Labor’s Employee Benefits Security Administration. Arkansans should contact the Employee Benefits Security Administration at the Dallas Regional Office. You can contact this office by phone, (972) 850-4500, or by mail to the Dallas Regional Office, 525 South Griffin St., Room 900, Dallas, TX 75202-5025.
Q. Are other types of health benefit plans outside the jurisdiction of the Arkansas Insurance Department?
A. Yes. Health benefit plans providing benefits to federal employees are also outside of the Department’s jurisdiction. Health benefits received through health care sharing ministries and through nonprofit agricultural membership organizations are also outside of the Department’s jurisdiction as Arkansas law prohibits the Department from regulating these benefits. Medicare plans are also outside the jurisdiction of the Department. The Department can regulate the licensure and solvency of Medicare Advantage plans but cannot regulate the activities of Medicare Advantage plans. If you have questions relating to Medicare or Medicare Advantage, please visit the Arkansas Senior Health Insurance Information Program page. Medicaid plans are regulated by the Arkansas Department of Human Services.
Q. What if I have a question about a Medicare Plan, Medicare Advantage Plan, Medicare Supplement Plan, or Medicare Part D Plan?
A. Please visit the Arkansas Senior Health Insurance Information Program page.
Q. What if I have a question about a Medicaid Plan?
A. Please contact the Arkansas Department of Health.
Q. What is an essential health benefit?
A. The Affordable Care Act requires non-grandfathered health insurance coverage in the individual and small group markets to cover essential health benefits, which include items and services in at least the following ten benefit categories: (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. These benefits do not apply to large, employer-sponsored plans.
Q. In what situation is a newborn automatically covered under an insurance policy?
A. Pursuant to Ark. Code Ann. §23-79-129, if an insured has a policy (individual or group), that covers the insured and at least one family member (spouse or child), then a newborn must be covered from birth for at least 90 days. The insurer may require that the insured give notice to his or her insurer of any newborn children within ninety (90) days of the birth or before the next premium due date, whichever is later.
Q. Can a medical provider file a complaint with the Department for slow payment issues against a health insurer or HMO?
A. Yes. The Department, however, requires that the medical provider provide evidence in the complaint showing a "pattern of slow payment" practices by the health insurer or HMO.
EXTERNAL REVIEW
Q. Do I have a right to appeal an adverse decision related to my healthcare benefits?
A. If you receive a determination from your health carrier, following completion of any applicable internal appeal process procedures that may be required by your health carrier, that a request for treatment or service has been reviewed, and based upon the information provided, does not meet the health carrier’s requirements for coverage, you may be eligible to request an independent review of the treatment or service by an Independent Review Organization. External Reviews are coordinated by the Arkansas Insurance Department and conducted by an Independent Review Organization (IRO) once all proper forms and documents have been received. Please see Department Rule 76 for more information.
MISCELLANEOUS
Q. Is insurance available for damage caused by earthquakes?
A. Yes. Insurers in Arkansas offer residential earthquake coverage. If your homeowners insurer is unable to provide you with earthquake insurance, please contact Argenia, a company that has partnered with Arkansas’s Earthquake Authority to make sure Arkansans have access to earthquake coverage. Please contact them at 1 (800) 482-5968.
Q. May producers charge insureds fees over and above gross premiums charged by carriers on the policies delivered to the insureds?
A. In general, Ark. Code Ann. § 23-66-310 allows a producer to charge a fee in excess of premiums as long as (1) the fee is separately disclosed on the insured’s bill, and (2) the fee does not exceed 20% of the premium.
Q. May I buy an insurance policy on other people or property?
A. It depends. If you are related to a person in ways approved under the law, you may. You may if you have title to real property or personal property, such as a car or boat. If your company considers you to be a key officer or director or manager, it may take out a life policy on your life to benefit the business.
Anyone seeking to buy insurance on other people or property must have an "insurable interest" at the time the insurance contract is made and sometimes when the loss occurs, too. The law is found at Ark. Code Ann. §§ 23-79-103 (for insurance interests in people) and 23-79-104 (for insurance interests in property).
Q. Can insurance companies use my credit information to deny me insurance or to increase the premium I pay?
A. An insurance company may use credit AS PART of the process of determining whether coverage will be provided and what it costs. A Consumer Brochure on use of credit in homeowners and personal automobile insurance is now available. This brochure, “Understanding How Insurers Use Credit Information,” contains information about Act 1452 of 2003 and its effect on the use of credit information in homeowners and personal automobile insurance underwriting and rating.