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The examiners reviewed files drawn from the category of Closed Claims for the period June 1, 2004 through May 31, 2005, commonly referred to as the "review period". The examiners reviewed 109 ABLAC claims files and 248 ABIC claim files. The examiners cited 111 claims 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. Money recovered within the scope of this report was $364.50.
CREDIT
CHARGE GUARD DISABILITY

1. The Company failed to pursue diligently an investigation of a claim, or persisted in seeking information not reasonably required for or material to resolution of a claim dispute. In one instance, ABLAC persisted in asking for signed authorization which was already in the claim file. The Department alleges this act is in violation of CCR §2695.7(d)

Summary of Company Response: This instance was an isolated error. The individual involved has been made aware of this compliance issue.


CHARGE GUARD LIFE

2. The Company failed to acknowledge notice of claim within 15 calendar days. In one instance, ABLAC failed to acknowledge notice of claim within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(e)(1).

Summary of Company Response: ABLAC's normal procedure is to promptly acknowledge all claims. This instance was an oversight. The individual involved has been made aware of this compliance issue.


VOYAGER DISABILITY

3. The Company failed to respond to communications within 15 calendar days. In one instance, ABLAC failed to acknowledge a letter within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(b).

Summary of Company Response: ABLAC's normal procedure is to promptly acknowledge all communications. This instance was an oversight. The individual involved has been made aware of this compliance issue.

4. 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. In one instance due to a system coding error, reference to the California Department of Insurance was omitted from denial letter. The Department alleges this act is in violation of CCR §2695.7(b)(3).

Summary of Company Response: The letter is system-generated using a specific letter code for type of denial. As result of the examination, system coding has been updated to automatically generate the California Department of Insurance Statement along with a denial letter when denial is processed on the system.

5. The Company attempted to settle a claim by making a settlement offer that was unreasonably low. In two instances, the retroactive elimination period was overlooked resulting in an under payment of benefits. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: The Company acknowledges these instances that were the result of unintentional oversights. ABLAC reevaluated one claim and issued supplemental payment of $57.40. The other claim involved revealing of the elimination period. The Company said it was 60 days while the policy called for 14 days. A correction was issued on the claim. The individuals involved have been made aware of this compliance issue.

6. In two 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. The Department alleges these acts are in violation of CCR §2695.11(b).

Summary of Company Response: ABLAC acknowledges that in two instances due to claims examiner oversight no explanation of benefits letter was sent. The Company views these as unintentional oversights. The individuals involved have been made aware of this compliance issue.

CHARGE GUARD UNEMPLOYEMENT

7. In one instance, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges this act is in violation of CCR §2695.7(b).

Summary of Company Response: ABIC acknowledges in one instance the claim was not placed in line for timely processing/follow up, thus resulting in delay in decision being rendered on claim. The Claims Examiner has been counseled on this matter and guidelines for timely processing/follow up reiterated.

8. 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. In two instances, due to a system coding error reference to the California Department of Insurance was omitted from denial letter. The Department alleges these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: ABIC acknowledged that in two instances the reference to the California Department of Insurance in the denial letter were omitted. The letter is system generated using specific letter code for type of denial. As result of the examination, system coding has been updated to automatically generate California Department of Insurance Statement along with denial letter when denial is processed on the system.


CREDIT RETAIL PROPERTY
9. In 27 instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. ABIC failed to reveal to the insured/certificate holder the amount paid on the claim to the retailer. The Department alleges these acts are in violation of CCR §2695.4(a).

ABIC accepts the calculation provided by the Creditor/Retailer as indicated on the Notice of Loss. The Notice of Loss is signed by the insured/certificate holder. The policy provides for the Company to pay the cost of replacement. The claimant/insured is made whole by full replacement of the item(s) claimed. This information is not required on the settlement letter in order for the claimant to redeem property from the creditor.

The Company disagrees that the Account/Creditor is allowed to adjust the claims. The Account/Creditor assists the Insurer in completing the claim form because the amount of insurance and claim payment are tied to the original purchase price and/or the current outstanding balance.

The claim settlement notification letter serves as a certificate of redemption for replacement of the claimed items. The letter directs the claimant to the Account/Creditor for replacement of the items claimed.

This is an unresolved issue and may result in further administrative action.

10. In 26 instances, the Company failed to maintain all documents, notes and work

papers in the claim file. ABIC Credit Retail Property files lacked documentation in support of the value paid on claims. The Company pays whatever amount the retailer writes on Notice of Claim/Proof of Claim. The Notice of Claim/Proof of Claim is one single document. The examiners could not determine whether the proper amount was allowed or that the certificate holder received replacement product. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: ABIC accepts the calculation provided by the Creditor as indicated on the Notice of Loss. There is no additional supporting documentation. This is a replacement certificate. The policy provides for the Company to pay the cost of replacement. When claim documentation is submitted, the Claims examiner reviews all documentation submitted to ensure validity of the claim prior to resolving. The Claims Department is exploring the possibility of updating the Notice of Loss form to include more detail from the Creditor pertaining to the total claim amount.

The Company disagrees with the alleged violation. The Account/Creditor provides the outstanding balance and original purchase price necessary for ABIC to make the determination to adjust the claim. The Account/Creditor currently provides all the necessary information on the claim form for ABIC to adjust the claim.

This is an unresolved issue and may result in further administrative action.

11. In four instances, the Company's claims agent failed to immediately transmit notice of claim to the insurer. The Creditor or Retailer is normally the first point of contact and gathers all information in relationship to the claim prior to submitting to ABIC. The files lacked documentation as to the date the Creditor or Retailer received notice of claim. Four claims were reported more than 85 days after the date of loss. The Department alleges these acts are in violation of CCR §2695.5(d).

Summary of Company Response: ABIC resolves the claim timely once the Creditor or Retailer submits the claim information. ABIC relies on the Creditor to get the necessary information together timely. The back side of Notice of Claim has in bold print instructions to check the status of claim after 15 business days to call ABIC's toll free number.

The Company disagrees that the Account/Creditor is allowed to adjust the claims. The Account/Creditor provides the outstanding balance and/or the original purchase price, which is information the Company needs in order to make the determination on the claim.

This is an unresolved issue and may result in further administrative action.

12. In one instance, the Company failed to provide the written basis for the denial of the claim. The Department alleges this act is in violation of CCR §2695.7(b)(1).

Summary of Company Response: In one ABIC file, copy of denial letter was not imaged to the claim file. The file note documents a denial letter was sent but a copy is not available. This instance was an inadvertent oversight. The letter is now system generated using specific letter code for type of denial, system coding has been updated to automatically generate California Department of Insurance Statement along with denial letter when denial is processed on the system and documents are imaged.

13. 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. In five instances, due to an ABIC system coding error reference to the California Department of Insurance was omitted from denial letter. The Department alleges these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: ABIC acknowledged that in five instances the reference to the California Department of Insurance in the denial letter was omitted. The letter is system-generated using a specific letter code for type of denial. As result of the examination, system coding has been updated to automatically generate the California Department of Insurance Statement along with denial letter when denial is processed on the system.


14. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In two instances, the ABIC claim file had unexplained gaps of 4 months in claim handling. The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of Company Response: ABIC acknowledges the files lacked explanation for the break in handling. ABIC has a diary system and views these two exceptions as individual claim handler errors. The Company has conducted training on this issue.

HOMEOWNERS

MOBILE HOME OWNERS

15. In two instances, the Company failed to maintain claim data that are accessible, legible and retrievable for examination. The Department alleges these acts are in violation of CCR §2695.3(b)(1).

Summary of Company Response: ABIC could not produce two claims files for the exam. The Company maintained financial information record of the claims but no notes or documents. The Company acknowledges these instances and has reemphasized the need to use imaging and tracking of all claims.


16. In 12 instances, the Company failed to disclose all benefits, coverage, time limits or other provisions of the insurance policy. ABIC failed to explain replacement cost coverage. The Department alleges these acts are in violation of CCR §2695.4(a).

Summary of Company Response: ABIC acknowledges the explanation of how to recover the depreciation on policy with replacement costs endorsement was not included in settlement letter. These exceptions were oversights by individual claim handlers. ABIC has counseled the employees. The Company agreed and sent letters on claims paid for the review period and two prior years advising the insured if the depreciated items were replaced within the policy prescribed time the Company will pay the amount withheld. The Company sent out letters. Refresher training was conducted for the individual Claim Examiners on how to calculate the payments on this type of claim.

As a result of the examination, ABIC has taken the necessary measures to correctively improve in this area. ABIC has automated standardized letters. The letters have been automatically programmed to disclose the recoverable depreciation statement required by California Department of Insurance. ABIC has also conducted training to address this issue with the examiners to ensure compliance.

17. In one instance, the Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days. The Department alleges this act is in violation of CCR §2695.7(b).

Summary of Company Response: ABIC acknowledges in one instance the claim was not placed in line for timely processing/follow up, thus resulting in delay in decision being rendered on claim. The Claims Examiner has been counseled on this matter and guidelines for timely processing/follow up reiterated.


18. In four instances, 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 these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: ABIC acknowledges reference to the California Department of Insurance in the denial letters was omitted. The letter writing system has since been updated to automatically include the California Statement on all denial letters.

As a result of the examination, ABIC has taken the necessary measures to correctively improve in this area. ABIC has automated denial letters to disclose the California Department of Insurance statement for wrongful denials. ABIC has also conducted training to address this issue with the examiners to ensure compliance.


19. The Company attempted to settle a claim by making a settlement offer that was unreasonably low. In one instance, the Company applied depreciation to labor costs and in another file the Company withheld depreciation contrary to the terms of the policy. The Department alleges this act is in violation of CCR §2695.7(g).

Summary of Company Response: ABIC acknowledges these instances and views them as unintentional oversights by individual claim handlers. The Company issued payments totaling $107.10. The individuals involved have been made aware of this compliance issue.


This is an unintentional oversight by the claims handler. ABIC has provided additional training to the claims handler and reiterated the states guidelines in an effort to ensure compliance.
20. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In one instance, the Company failed to inspect the damaged property before closing the claim. The Department alleges this act is in violation of CIC §790.03(h)(3).

Summary of Company Response: ABIC asked the insured to provide proof of the damage. The Company has since hired field claims handlers and does inspect damage to the structure of the Mobile Home.


RENTERS
21. The Company failed to provide thorough and adequate training regarding these regulations to all its claims agents. The Company failed to verify and provide training to one Third Party Administrator. The Department alleges this act is in violation of CCR §2695.6(b).

Summary of Company Response: ABIC agrees a Third Party Administrator was not provided training. The Company has provided instruction and training since the exam and will maintain record of the training in compliance with the regulations.

22. The Company failed to maintain a copy of the certification required by §2695.6(b)(1), (2) or (3) at the principal place of business. The Department alleges this act is a violation of CCR §2695.6(b)(4).

Summary of Company Response: ABIC agrees a Third Party Administrator was not provided training. The Company has provided instruction and training since the exam and will maintain record of the training in compliance with the regulations.

23. In three instances, the Company failed to provide the written basis for the denial of the claim. The Department alleges these acts are in violation of CCR §2695.7(b)(1).

Summary of Company Response: The three claims were not denied. ABIC closed the claims when the additional documentation was not submitted by the insured. The Company considered the information insufficient to either accept or deny the claims. It is the Company's policy to provide written explanation for the denial of a claim.

This is an unresolved issue and may result in further administrative action.


24. In two instances, 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 these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: ABIC acknowledges reference to the California Department of Insurance was omitted in the denial letters. The letter is system-generated using specific letter code for type of denial. As result of the examination, system coding has been updated to automatically generate California Department of Insurance Statement along with denial letter when denial is processed on the system.


25. In three instances, the company failed to conduct and pursue a thorough, fair and objective investigation of a claim. The Department alleges these acts are in violation of CCR §2695.7(d).

Summary of Company Response: ABIC received descriptions of claimed items. The Company persisted in asking the insured to provide proof of purchase. The Company did not conduct independent investigation and closed the claims without payment. ABIC heard nothing after the forms were returned to the insured for more information. ABIC did not have the required information to adjust the claim.


The Company disagrees with the alleged findings. The adjuster followed standard procedure and requested proof of loss from the insured in order to substantiate the claim. The adjuster did not have sufficient information to support the claim.

This is an unresolved issue and may result in further administrative action.


26. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In two instances, the Company failed to provide depreciation guide to Third Party Administrator resulting in application of varied depreciation. The Department alleges these acts are in violation of CIC §790.03(h)(3).

Summary of Company Response: ABIC acknowledges the Third Party Administrator was not provided with a copy of the depreciation guide. The Company has instructed all claims handlers to use the depreciation guide in resolving claims.

As a result of the examination, ABIC has provided extensive training to the TPA and implemented a depreciation guideline in order to properly adjudicate claims.

27. The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. In two instances, the deductible was mistakenly applied to the claim rather than the loss. The Department alleges these acts are in violation of CIC §790.03(h)(5).

Summary of Company Response: ABIC acknowledges in two instances the Third Party Administrator deducted the deductible from the net claim rather than the amount claimed. The Company has issued payments totaling $200.00. The Company has conducted training to the Third Party Administrator and claim staff on this issue.


VOYAGER UNEMPLOYEMENT
28. In two instances, 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 these acts are in violation of CCR §2695.7(b)(3).

Summary of Company Response: ABIC acknowledges reference to the California Department of Insurance was omitted in the denial letters. The letter is system generated using specific letter code for type of denial. As result of the examination, system coding has been updated to automatically generate California Department of Insurance Statement along with denial letter when denial is processed on the system.


29. The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In one instance there was an unexplained gap in claim handling The Department allege this act is in violation of CIC §790.03(h)(3).

Summary of Company Response: ABIC acknowledges the file was off diary. This was an inadvertent oversight by a Third Party Administrator. As of August 1, 2004, American Bankers Insurance Company of Florida resumed administration and processing of claims for this business.

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Last Revised - October 13, 2006
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