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The examiners reviewed files drawn from the category of Closed Claims for the period May 1, 2004, through April 30, 2005, commonly referred to as the "review period". The examiners reviewed 50 CIC claim files and 94 CLIC claim files. The examiners cited 39 claim handling violations of the Fair Claims Settlement Practices Regulations and/or California Insurance Code Section 790.03 within the scope of this report. Further details with respect to the files reviewed and alleged violations are provided in the following tables and summaries.


The following is a brief summary of the criticisms that were developed during the course of this examination related to the violations alleged in this report. This report contains only alleged violations of Section 790.03 and Title 10, California Code of Regulations, Section 2695 et al. In response to each criticism, the Company is required to identify remedial or corrective action that has been or will be taken to correct the deficiency. Regardless of the remedial actions taken or proposed by the Company, it is the Company's obligation to ensure that compliance is achieved. There were no recoveries discovered within the scope of this report.
LIFE

1. In 11 instances, the Company failed to provide to the claimant an explanation of benefits including the name of the provider or services covered, dates of service, and a clear explanation of the computation of benefits. Six of these instances involved the failure to send an explanation of benefits letter. The other five instances involved letters that were sent, but they did not contain a clear explanation of the computation of benefits. The Department alleges these acts are in violation of CCR §2695.11(b).

Summary of Company Response: The Company acknowledges that the explanations of benefits were either not sent, or were not clear in the explanation of the computation of benefits. To ensure future compliance, the Company has implemented letter templates to be used by the Annuity Claims Examiners. Additionally, all Annuity Claims Examiners have been made aware that the computation is to be included on all explanations of benefits.

2. In two instances, the Companies failed to respond to communications within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(b).

Summary of Companies Response: The Companies acknowledge that there was either a late response, or no response, in these instances. As a remedial measure, the Claims Department is taking steps to correct this issue by logging requests and responses in the system, and generating reminders for response due dates. Currently, all correspondence is acknowledged when it is received, and again every 15 days when necessary.

3. In one instance, the Company failed to include a statement in its claim denial that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance. The Department alleges this act is in violation of CCR §2695.7(b)(3).

"The Rules and Regulations of the California Department of Insurance require that our company advise you that if you wish to take this matter up with the California Department of Insurance, it maintains an office in Los Angeles at 300 S. Spring Street, Los Angeles, California 90013. The phone number in California is 1-800-927-4357; outside of California is 213-897-8921."


DISABILITY

4. In 19 instances, the Companies, in their claim denials, advised the insured of the right to a review by the California Department of Insurance, and included the address, but failed to include the telephone number. The Department alleges these acts are in violation of CCR §2695.7(b)(3).

Summary of Companies Response: The Companies acknowledge that the Department's telephone number was inadvertently omitted. The forms have been amended and the telephone number is now included.

5. In three instances, the Companies failed to respond to communications within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(b).

Summary of Companies Response: The Companies acknowledge that there was either a late response, or no response, in these instances. As a remedial measure, the Claims Department is taking steps to correct this issue by logging requests and responses in the system, and generating reminders for response due dates. Currently, all correspondence is acknowledged when it is received, and again every 15 days when necessary.

6. In two instances, the Companies failed to acknowledge notice of claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(1).

Summary of Companies Response: The Companies acknowledge that timely acknowledgement was not made in these instances. These were oversights that the company considers isolated incidents. Nevertheless, the claims personnel have been reminded of the importance of timely acknowledgment of all new claims.

7. In one instance, the Company failed, upon acceptance of the claim, to tender payment within 30 calendar days. Bills that were received on April 22, 2004, were not paid until May 25, 2004. The Department alleges this act is in violation of CCR §2695.7(h).

Summary of Company Response: The Company acknowledges that payment was not made timely in this instance. The Company considers this an isolated incident attributed to human error. Nevertheless, claims personnel have been reminded of the importance of making timely payments.

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Last Revised - August 17, 2006
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