Why complaining to the right "person" is worth it!

To those who don't think making a complaint to the state Department of Insurance has any effect, please read on. One insurance company (doing business under two names) was the subject of a "market conduct" examination (having previously been fined for similar market conduct violations five years prior). When examiners looked at 596 random claim files, they found 661 assorted violations. What would they have found if they examined 100% of the claim files?

Market conduct exams happen about every five years, or more often if enough complaints are received by the regulators.

NEWS RELEASE
Commissioner Poizner Announces Settlement of Enforcement
Action for $505,000 Against Two Insurers
Examination findings include multiple violations of Insurance Code and Regulations

Insurance Commissioner Steve Poizner announced today that a settlement has been reached in an enforcement action against Civil Service Employees Insurance Company and CSE Safeguard Insurance Company. The settlement marks the end of a market conduct examination that found numerous violations of the Insurance Code and Regulations for the period May 1, 2005 through April 30, 2006. Specifically, Department examiners reviewed the companies' claims handling practices in automobile, homeowners, and commercial liability lines of insurance, randomly selected 596 claim files closed during the review period and found 661 claim-handling violations.

"Let me be clear - I will continue to pursue and sanction any insurance company that engages in such gross misconduct," Commissioner Poizner said. "The laundry list of violations perpetrated by each of these companies is unacceptable. I am pleased with the work of my department in holding them accountable for their irresponsible actions. This settlement is a victory for policyholders in California, as well as a notice to all insurers that deficient and illegal business practices will not be tolerated."

The violations include such acts as failing to provide their policyholders with necessary facts, including policy provisions and other pertinent policy information upon filing of a claim, failing to properly advise the insured of the determination of fault, failing to provide the claimant with a copy of an automobile repair estimate, failing to provide claimant with a written basis for total automobile loss settlement, failing to pay all fees and taxes incident to an automobile total loss settlement, failing to explain the basis for depreciation, failing to effectuate prompt, fair and equitable settlements of claims and failing to adhere to the claims processing laws of the State of California

This is not the first time that these companies were charged with violations the Insurance Code. A prior examination, for the period May 2000 through April 2001, uncovered violations similar to the ones identified in the 2005 - 2006 examination. The companies paid $155,000 to settle those charges. The current settlement was preceded by a two-week hearing in Oakland that was continued for additional testimony to August 2010. The settlement was reached during the recess of the hearing.

The Order, signed September 20, 2010, requires the two companies to cease and desist from the acts in which violations were found and pay a $505,000 monetary penalty, $450,000 of which was applied under CIC Sections 790.03 and 790.035, with the remaining $55,000 applied under CIC Sections 790.05 and 790.07.

The "Order" referred to above may be viewed at http://www20.insurance.ca.gov/pdf/ORDER/147910.pdf

FYI . . .

Section 790.03 is a laundry list of acts and practices that are "defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance."

Section 790.035 reads, in part: "(a) Any person who engages in any unfair method of competition or any unfair or deceptive act or practice defined in Section 790.03 is liable to the state for a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000) for each act, or, if the act or practice was willful, a civil penalty not to exceed ten thousand dollars ($10,000) for each act. This is how the fine reached $450,000 -- it could have been much higher.

Sections 790.05 and 790.07 are the sections of the Insurance Code dealing with Cease and Desist orders and violations of them. A willful violation of a Cease and Desist order is worthy of a $55,000 fine, as the offender received. They came within a whisker's breadth of losing their certificate of authority.