Navigating a California Claims or Rating and Underwriting Exam

(1)

Navigating a California

Claims or Rating and

Underwriting Exam

Association of Insurance

Compliance Professionals

WELCOME!

(2)

Who Are We?



Field

Field Rating & Underwriting

Rating & Underwriting Bureau

Bureau

(FRUB)



Field

Field Claims Bureau

Claims Bureau

(FCB)

(3)

What Do We Do?



Statutory Examinations



Routine Examinations



Data

Data--Only Examinations

Only Examinations



Data

Data--Only Examinations

Only Examinations



Target Examinations



(4)

How Are Exam Costs Recouped?



Prop

Prop 103 assessment

103 assessment

(All FRUB P&C Exams) (All FRUB P&C Exams) 



Direct Billed to Insurer

(All FCB, and non(All FCB, and non--Prop 103)Prop 103)



 Rate is $152 per hourRate is $152 per hour 

 Recalculated on an annual basisRecalculated on an annual basis 

(5)

How are Companies Selected?



Statutory Requirements



Market Analysis



 ComplaintsComplaints 

 Market Conduct Annual Statement (MCAS)Market Conduct Annual Statement (MCAS) 

 Financial InfoFinancial Info 

 Info From Other Units (Investigations, Financial, etc.)Info From Other Units (Investigations, Financial, etc.)



Premium Writings



 Lines of Business and Type of ExamLines of Business and Type of Exam



(6)

How Do We Do It?



Notification of Exam



Examiner In Charge Contact



Opening Meeting

File Review



File Review



Exit Meeting



Non

Non--Compliance Letter (FRUB)

Compliance Letter (FRUB)



Draft Report



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What Are We Looking For?



Statutory Compliance



Internal

Internal Compliance

Compliance



Unfair Discrimination



Documentation

Notices to Policyholders



Notices to Policyholders



Compliance w/ New Laws or Changes in Law



Compliance with Filed Rates



Eligibility Guidelines



(8)

What Happens From There?



Resolved

Resolved Without Further

Without Further Action

Action



Resolved With Ongoing Insurer Action



Direct

Direct Enforcement Action

Enforcement Action



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What Do We Commonly Find?

(10)

Private Passenger Automobile

At

At--Fault Regulations

Fault Regulations

CCR

CCR §§ 2632.132632.13



51 51% of legal

% of legal cause

cause



Bodily

Bodily injury or

injury or death

death



PD

PD excess $1,000

excess $1,000



None of the statutory

exceptions apply

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POP

POP QUIZ

QUIZ

How many points may an insurer charge

for an accident if the insured fails to

respond to a request for additional

information?

(12)

Notice of 3

rd

Party Designee

Auto, HO, Disability Income

CIC

CIC §§ 396396

Effective January 1, 2016



Upon New Business



(13)

Loss Exchange Reports

CCR

CCR §§ 2632.13(f)(2)2632.13(f)(2)



 Policyholder’s addressPolicyholder’s address 

 Driver’s NameDriver’s Name 

 Date of IncidentDate of Incident 

 AtAt--fault Indicatorfault Indicator 

 Property DamageProperty Damage 

 Bodily Injury/DeathBodily Injury/Death 

(14)

Private Passenger Automobile

Second Mandatory Rating Factor

Annual Mileage

Annual Mileage –– CCR CCR §§ 2632.5(c)(2)2632.5(c)(2)



Estimated vs. Verified



Insured’s Estimate

New Business



New Business



Renewal



(15)

What do you think?

Is there a 60 day

underwriting period in

Private Passenger

Automobile?

(16)

Effective January 1, 2013, CIC

Effective January 1, 2013, CIC §§

661(b) was removed from the

California Insurance Code.

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Allowable Reasons For Cancellation



Substantial Increase in

Hazard Insured Against



Fraud or Material



Fraud or Material

Misrepresentation



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Homeowners Losses



Substantial Relationship to Loss

Exposure

 

Underwriting

 

Underwriting

 

Rating

(19)

POP QUIZ #2!

Can an insurer have a rule that any

additional or return premiums due

less than $10 may be waived?

(20)

CIC § 481.5 requires that all unearned

premium be returned to the

policyholder upon termination or if

there is a reduction in coverage.

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Commercial Lines



(22)

Schedule Rating Plan



DOCUMENT, DOCUMENT, DOCUMENT!!!



Subjective vs. Objective

Subjective vs. Objective Criteria

Criteria



Characteristics of a risk not otherwise

contemplated in the rating plan

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Prior Approval of Rates



Adhere to filed rating plan



“a” rating



Rate Ranges



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Required Mail Time



 Additional Mail Time Based on LocationAdditional Mail Time Based on Location 

 Code of Civil Procedures Code of Civil Procedures §§ 1013(a1013(a) ) –– Add 5/10/20 Days Add 5/10/20 Days 

 Private Passenger AutomobilePrivate Passenger Automobile 

 CIC CIC §§ 662 662 –– CancellationsCancellations 

 CIC CIC §§ 663 663 –– Notice of Renewal/NonNotice of Renewal/Non--RenewalRenewal 

 HomeownersHomeowners 

 CIC CIC §§ 677.4 677.4 –– CancellationsCancellations 

 CIC CIC §§ 678 678 –– Notice of Renewal/NonNotice of Renewal/Non--RenewalRenewal 

 Commercial InsuranceCommercial Insurance 

 CIC CIC §§ 677.2(c) 677.2(c) –– Cancellations Cancellations 

 CIC CIC §§678.1 678.1 –– NonNon--renewal renewal ((Commercial/Excess Umbrella)Commercial/Excess Umbrella) 

 CIC CIC §§ 676.2(c)(1) 676.2(c)(1) –– Midterm premium change, Reduction in Coverage, Change in Midterm premium change, Reduction in Coverage, Change in

conditions conditions



 Workers’ CompensationWorkers’ Compensation 

 CIC CIC §§ 676.8 676.8 –– Cancellations Cancellations 

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Annuity Sales

Annuity Sales -- Suitability

Suitability

CIC

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Life & Annuity

Free Look Notices



What are the required timeframes?

•• 30 30 DAYS for Group DAYS for Group Life Seniors age 65 Life Seniors age 65 + [CIC + [CIC §§ 786] 786] •• 1010--30 DAYS 30 DAYS for Ind. Life/Annuities [CIC for Ind. Life/Annuities [CIC §§ 10127.9]10127.9]

•• 30 DAYS for Ind. Life/Annuities age 60+ [30 DAYS for Ind. Life/Annuities age 60+ [CIC CIC §§ 10127.910127.9]] •• 30 DAYS for Replacements [30 DAYS for Replacements [CIC CIC §§ 10509.6]10509.6]

(27)

Life Insurance

33 rd

rd

Party Designee

CIC

CIC §§ 10113.7210113.72



Upon New Business



(28)

Electronic Transmission

Life and Annuity Records



CIC

CIC §§ 38.6 Effective January 1, 2016

38.6 Effective January 1, 2016



OptOpt--in Consent Disclosurein Consent Disclosure 

Two Standards of Delivery Two Standards of Delivery 

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Claim Handling



Automobile

In total loss settlements, were all required taxes and fees

included and was any deduction for salvage value based on a guaranteed bid? [CCR § 2695.8(b)]

Does the company have procedures for identifying if there

was a child passenger restraint system damaged or in use in the accident? [CIC § 11580.010]

in the accident? [CIC § 11580.010]



Property

Is the basis for depreciation documented in the file,

explained in writing to the claimant, and determined considering the age, condition, and useful life of the item?[CCR§ 2695.9(f)]

(30)

Claim Handling



General

General ––

All lines: Although there may be different

specifics in timeline, etc., for certain lines and products, the following points are valuable to keep in mind overall:

Does acknowledgment of claim occur promptly and are

claimant contacts and inquiries responded to promptly?

Are investigations thorough and diligent? Are procedures in

place to prevent duplicate requests, or requests not

Are investigations thorough and diligent? Are procedures in

place to prevent duplicate requests, or requests not

pertinent to resolving the claim? (Special focus for health and disability income claims)

Are claims paid timely once liability is determined?

Is appropriate interest included when claims payments do

not meet regulatory requirements for promptness? (Especially relevant to life and health claims)

(31)

Life Insurance



CIC

CIC §§ 10172.5(a)

10172.5(a)



Was Was the payment made within 30 the payment made within 30 daysdays

after date

after date of death? of death?



If no, was interest included If no, was interest included

in the

in the death death proceedsproceeds?? in the

in the death death proceedsproceeds??



CIC

CIC §§ 10172.5(c)

10172.5(c)



Disclosure of interest rateDisclosure of interest rate



CCR

CCR §§ 2695.4(a)

2695.4(a)



Were all available settlementWere all available settlement

options disclosed? options disclosed?

(32)

Health Insurance

CIC

CIC §§ §§ 10123.13(a), (b), (c)

10123.13(a), (b), (c)



Paid within 30

Paid within 30 working

working days

days



Late Payment

Late Payment -- Uncontested claim interest

Uncontested claim interest



Late Payment

Late Payment –– Contested claim interest

Contested claim interest



(33)

Disability Income

Long Term Care



INVESTIGATION

INVESTIGATION -- CCR

CCR §§ 2695.7(d)

2695.7(d)



(34)

Salvage Certificate Fee

Increased to $20

effective 01/01/2015

(35)

Reminders

Documentation is Key

Transparency is a Plus

Meetings Are Welcome

We are here to help

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