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WARWICK, R.I.--Rhode Island's dominant workers compensation insurer, Beacon Mutual Insurance Co., has agreed to pay a $1 million penalty and return $7 million to eligible policyholders as a result of a market conduct exam that revealed improprieties.
Warwick, R.I.-based Beacon's announcement of the settlement on Thursday accompanied the release of the market conduct exam, which Rhode Island Gov. Donald L. Carcieri called a "damning indictment" of the insurer's behavior.
In addition to the monetary impact, the market conduct exam of Beacon by Rhode Island's Department of Business Regulation resulted in 79 recommendations related to board practices, financial controls, underwriting procedures and management structure.
Beacon said it has plans to carry out the recommendations. Originally, the DBR ordered Beacon to pay $2.5 million, but $1.5 million of the administrative penalty will be suspended, the insurer said.
The insurer also pointed out in a statement that the problems stem from activities carried out before it implemented reforms and changes in April 2006. Those changes included replacing eight of its nine board members.
The market conduct exam found the insurer's problems were worse than he expected, Gov. Carcieri said in a prepared statement.
More than a year ago, the governor called for firing several board members when an audit uncovered several problems such as a board member misclassifying losses for a business he owned to obtain favorable rates. (BI, April 24, 2006).
Among other problems, the market conduct exam uncovered hundreds of thousands of dollars spent on golf outings and golf membership fees for senior management.
Beacon was created by state legislators and is the state's insurer of last resort.