PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION

OF THE CLAIMS PRACTICES OF THE


ANCHOR GENERAL INSURANCE COMPANY
NAIC # 40010 CDI # 3123-7

AS OF APRIL 30, 2006


STATE OF CALIFORNIA


DEPARTMENT OF INSURANCE

MARKET CONDUCT DIVISION

FIELD CLAIMS BUREAU

TABLE OF CONTENTS

SALUTATION.......................................................................................1


SCOPE OF THE EXAMINATION...............................................................2
CLAIMS SAMPLE REVIEWED AND OVERVIEW OF FINDINGS......................3
TABLE OF TOTAL CITATIONS.................................................................4
TABLE OF CITATIONS BY LINE OF BUSINESS...........................................5
SUMMARY OF EXAMINATION RESULTS...................................................6

STATE OF CALIFORNIA	Steve Poizner,	Insurance Commissioner
DEPARTMENT OF INSURANCE
Consumer Services and Market Conduct Branch Field Claims Bureau, 11th Floor 300 South Spring Street Los Angeles, CA 90013

June 1, 2007

The Honorable Steve Poizner

Insurance Commissioner

State of California

45 Fremont Street

San Francisco, California 94105


Honorable Commissioner:
Pursuant to instructions, and under the authority granted under Part 2, Chapter 1, Article 4, Sections 730, 733, 736, and Article 6.5, Section 790.04 of the California Insurance Code; and Title 10, Chapter 5, Subchapter 7.5, Section 2695.3(a) of the California Code of Regulations, an examination was made of the claims practices and procedures in California of:

Anchor General Insurance Company
NAIC # 40010
Group NAIC # 0000

Hereinafter referred to as Anchor General or as the Company

This report is made available for public inspection and is published on the California Department of Insurance web site ( www.insurance.ca.gov) pursuant to California Insurance Code section 12938.

SCOPE OF THE EXAMINATION


The examination covered the claims handling practices of the aforementioned Company during the period May 1, 2005, through April 30, 2006. The examination was made to discover, in general, if these and other operating procedures of the Company conform with the contractual obligations in the policy forms, to provisions of the California Insurance Code (CIC), the California Code of Regulations (CCR), the California Vehicle Code (CVC) and case law. This report contains only alleged violations of Section 790.03 and Title 10, California Code of Regulations, Section 2695 et al. The alleged violations of other relevant laws which resulted from this examination are included in a separate report which will remain confidential subject to the provisions of CIC Section 735.5.

To accomplish the foregoing, the examination included:

1. A review of the guidelines, procedures, training plans and forms adopted by the Company for use in California including any documentation maintained by the Company in support of positions or interpretations of fair claims settlement practices.
2. A review of the application of such guidelines, procedures, and forms, by means of an examination of claims files and related records.
3. A review of consumer complaints received by the California Department of Insurance (CDI) in the most recent year prior to the start of the examination.
The examination was conducted at the offices of the Company in San Diego, California.
The report is written in a "report by exception" format. The report does not present a comprehensive overview of the subject insurer's practices. The report contains only a summary of pertinent information about the lines of business examined and details of the non-compliant or problematic activities or results that were discovered during the course of the examination along with the insurer's proposals for correcting the deficiencies. When a violation is discovered that results in an underpayment to the claimant, the insurer corrects the underpayment and the additional amount paid is identified as a recovery in this report. All unacceptable or non-compliant activities may not have been discovered. Failure to identify, comment on or criticize activities does not constitute acceptance of such activities.
Any alleged violations identified in this report and any criticisms of practices have not undergone a formal administrative or judicial process.

CLAIMS SAMPLE REVIEWED AND OVERVIEW OF FINDINGS

The examiners reviewed files drawn from the category of Closed Claims for the period May 1, 2005, through April 30, 2006, commonly referred to as the "review period". The examiners reviewed 339 Anchor General claim files. The examiners cited 22 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.

Anchor General
LINE OF BUSINESS / CATEGORY	CLAIMS FOR REVIEW PERIOD	REVIEWED	CITATIONS
Private Passenger Automobile - Bodily Injury	751	62	1
Private Passenger Automobile - Property Damage	6,320	67	4
Private Passenger Automobile - Collision	7,242	67	6
Private Passenger Automobile - Comprehensive	1,503	65	7
Private Passenger Automobile - Medical Payment	47	28	0
Private Passenger Automobile Uninsured Motorist Bodily Injury	55	30	1
Private Passenger Automobile Uninsured Motorist Property Damage	28	20	3
TOTALS	15,946	339	22

TABLE OF TOTAL CITATIONS
Citation	Description	Anchor General
CIC §790.03(h)(5)	The Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear.	7
CCR §2695.7(g)	The Company attempted to settle a claim by making a settlement offer that was unreasonably low.	4
CCR §2695.3(a)	The Company failed to maintain all documents, notes and work papers in the claim file.	2
CCR §2695.8(b)(1)	The Company failed to include, in the settlement, the license fee and other annual fees, computed based upon the remaining term of the current registration.	2
CIC §790.03(h)(1)	The Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions relating to a coverage at issue.	2
CIC §790.03(h)(3)	The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies.	2
CCR §2695.7(b)	The Company failed, upon receiving proof of claim, to accept or deny the claim within 40 calendar days.	1
CCR §2695.7(f)	The Company failed to provide written notice of any statute of limitation or other time period requirement not less than 60 days prior to the expiration date.	1
CCR §2695.7(h)	The Company failed, upon acceptance of the claim, to tender payment within 30 calendar days.	1
Total Citations		22

TABLE OF CITATIONS BY LINE OF BUSINESS
PRIVATE PASSENGER AUTOMOBILE	NUMBER OF CITATIONS
CIC §790.03(h)(5)	7
CCR §2695.7(g)	4
CCR §2695.3(a)	2
CCR §2695.8(b)(1)	2
CIC §790.03(h)(1)	2
CIC §790.03(h)(3)	2
CCR §2695.7(b)	1
CCR §2695.7(f)	1
CCR §2695.7(h)	1
TOTAL	22

SUMMARY OF EXAMINATION RESULTS

1. In seven instances, the Company failed to effectuate prompt, fair and equitable settlements of claims in which liability had become reasonably clear. These instances involved the Company's failure to settle claims in situations involving an insured who was unable to effect repairs immediately. In lieu of issuing payment, the Company provided the insured with a two party Release that required the signature of both the insured and the loss payee (lien holder). If the executed Release was not returned, the claim was closed without payment. The Department alleges these acts are in violation of CIC §790.03(h)(5).

Summary of Company Response: The Company has, at the CDI's request, discontinued the use of a release form in cases in which the insured does not have the vehicle repaired. For future claims, the Company will elect to repair the vehicle, but if the insured fails to choose a repair shop or to bring the vehicle to a shop, the Company will issue a cash settlement to the insured, or to the insured and the loss payee, within the timeframes specified in the applicable regulations. These seven claims have been reopened and payments issued totaling $8,653.22. In addition, the Company will perform an audit of past claims that previously had been closed without payment from January 1, 2005 to the present to ensure that all such claims have been paid as appropriate.

2. In four instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. Two instances involved storage charges that were inadvertently limited. Another instance involved a calculation error that resulted in a lower total loss settlement. The fourth instance involved the underpayment of a supplemental subrogation demand. The Department alleges these acts are in violation of CCR §2695.7(g).

Summary of Company Response: "In response to the examiners findings, the Company has reopened the four claims, and payments have been made totaling $1,486.63. These instances have been discussed with the handling claim representatives, and the issue will be revisited on a regular basis."

3. In two instances, the Company failed to maintain all documents, notes and work papers in the claims file. One instance involved the failure to document that a copy of the appraisal was provided to the claimant. The other instance involved a letter that was sent but a copy was not maintained. The Department alleges these acts are in violation of CCR §2695.3(a).

Summary of Company Response: "In response to the examiners findings, the instances have been discussed with the handling claim representatives and the issue will be revisited on a regular basis."

4. In two instances, the Company failed to include, in the settlement, the license fee and other annual fees, computed based upon the remaining term of the registration. The Department alleges these acts are in violation of CCR §2695.8(b)(1).

Summary of Company Response: "In response to the examiners findings, both claims have been reopened and payments totaling $81.00 have been made. The requirement of the code has been discussed with the handling claim representatives, and the issue will be reinforced on a regular basis."

5. In two instances, the Company failed to represent correctly to claimants pertinent facts or insurance policy provisions relating to a coverage at issue. One instance involved advice to the insured that a police report was required to trigger coverage when this was not a requirement of the policy contract. The other instance involved correspondence to the insured indicating that the policy only carried liability coverage, and the insured was not informed of the applicable Uninsured Motorist Property Damage coverage. The Department alleges these acts are in violation of CIC §790.03(h)(1).

Summary of Company Response: "In response to the examiners findings, the Company has reinforced with the handling claim representatives the importance of being extremely careful when providing the insured with instruction or information."

Summary of Company Response: "In response to the examiners findings, the requirement of the code has been discussed with the handling claim representatives and the issue will be reinforced on a regular basis."

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 these acts are in violation of CCR §2695.7(b).

Summary of Company Response: "In response to the examiners findings, the requirement of the code has been discussed with the handling claim representatives and the issue will be reinforced on a regular basis."

8. In one instance, the Company failed to provide written notice of any statute of limitation or other time period requirement not less than 60 days prior to the expiration date. The insured's passengers were not advised of the applicable statute of limitations. The Department alleges this act is in violation of CCR §2695.7(f).

Summary of Company Response: "In response to the examiners findings, the requirement of the code has been discussed with the handling claim representatives and the issue will be reinforced on a regular basis."

Summary of Company Response: "In response to the examiners findings, the matter was discussed with the claims handling representative and will be reinforced on a regular basis."

Last Revised - July 11, 2007
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