PUBLIC REPORT OF THE MARKET CONDUCT EXAMINATION
OF THE CLAIMS PRACTICES OF THE
TABLE OF CONTENTS
April 4, 2007
The Honorable Steve Poizner
Insurance Commissioner
State of California
45 Fremont Street
San Francisco, California 94105
Hereinafter referred to as RLIC, RLICNY, SLDIC, the Company or, collectively as the Companies.
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.
The examiners reviewed files drawn from the category of Closed Claims for the period June 1, 2005, through May 31, 2006, commonly referred to as the "review period". The examiners reviewed 348 RLIC claim files, 6 RLICNY claim files and 22 SLDIC claim files. The examiners cited 70 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.
Reliastar Life Insurance Company Of New York | |||
LINE OF BUSINESS/CATEGORY |
CLAIMS FOR REVIEW PERIOD |
REVIEWED |
CITATIONS |
Individual Life |
74 |
6 |
1 |
TOTALS |
74 |
6 |
1 |
Security Life Of Denver Insurance Company | |||
LINE OF BUSINESS/CATEGORY |
CLAIMS FOR REVIEW PERIOD |
REVIEWED |
CITATIONS |
Individual Life |
216 |
22 |
0 |
TOTALS |
216 |
22 |
0 |
Summary of Company Response: It is the Company's procedure to acknowledge the notice of claim within 15 calendar days. The Company states that these instances were the result of unintentional oversights by two individuals who have since left the Company. The Company provides ongoing training and reminders to staff regarding timeliness of claim acknowledgement and processing and most recently provided reminders to claim staff at their October 11, 2006 and January 24, 2007 staff meetings. In addition, the Company is currently implementing a new claim system which will allow for automated monitoring of claim turn-around times when fully implemented by year end 2007. This will allow the Company to take prompt corrective action should any issues with timeliness arise in the future.
2. In five instances, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(2).
Summary of Company Response: It is the Company's procedure to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Company states that these instances were the result of unintentional oversights by two individuals who have since left the Company. The Company provides ongoing training and reminders to staff regarding the importance of timeliness in providing the necessary forms, instructions and assistance to claimants and most recently provided reminders to claim staff at their October 11, 2006 and January 24, 2007 staff meetings. In addition, the Company is currently implementing a new claim system which will allow for automated monitoring of claim turn-around times when fully implemented by year end 2007. This will allow the Company to take prompt corrective action should any issues with timeliness arise in the future.
3. In five instances, the Company failed to begin investigation of the claim within 15 calendar days. The Department alleges these acts are in violation of CCR §2695.5(e)(3).
Summary of Company Response: It is the Company's procedure to begin investigation of a claim within 15 calendar days. The Company states that these instances were the result of unintentional oversights by two individuals who have since left the Company. The Company provides ongoing training and reminders to staff regarding the importance of timeliness in claim investigations and most recently provided reminders to claim staff at their October 11, 2006 and January 24, 2007 staff meetings. In addition, the Company is currently implementing a new claim system which will allow for automated monitoring of claim turn-around times when fully implemented by year end 2007. This will allow the Company to take prompt corrective action should any issues with timeliness arise in the future.
Summary of Company Response: It is the Company's procedure to include a statement in a claim denial regarding a review by the California Department of Insurance. The Company acknowledges these instances which were the result of unintentional oversights. The three instances occurred in cases where the group policy was sitused in California but the claimant lived outside of California. The Company provides ongoing training and reminders to staff regarding state-specific claim denial wording. The Company provided specific reminders to claim staff at their October 11, 2006 meeting regarding the use of the California wording and placed particular emphasis on situations where the group is sitused in California and the claimant lives outside of California.
5. 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. In these two instances the explanation of benefits that was provided to the claimant failed to state the amount of an offset and did not identify what the offset was for or the time period covered by the offset. The Department alleges these acts are in violation of CCR §2695.11(b).
Summary of Company Response: It is the Company's procedure to identify the offset by name, amount and the time period it covers in their Disability approval letter. The Company acknowledges these instances which were the result of unintentional oversights. The individuals involved have been made aware of this compliance issue and all claim staff was reminded of this requirement at their October 11, 2006 meeting.
6. In two instances, the Company failed to represent correctly to claimants, pertinent facts or insurance policy provisions relating to a coverage at issue. In the two instances cited, there was a statement included in the approval letters that misrepresented the policy contract provisions. The statement read "The Policy requires that your LTD benefit be reduced by an estimated amount for Social Security Disability benefits." This statement however does not appear in the policy contract. The Department alleges these acts are in violation of CIC §790.03(h)(1).
Summary of Company Response: The Company stated that the statement included in the approval letters was not a direct quote from the policy but rather that statement was based on the Other Income language found in the policy. The Company has revised approval letters by removing reference to the "policy requirement" that the LTD benefit be reduced by an estimated amount for Social Security and replacing it with a statement regarding "Other Income" offsets. The Company provides ongoing training and reminders to staff regarding appropriate claim letters and most recently provided reminders to claim staff at their October 11, 2006 and January 24, 2007 staff meetings.
7. In one instance, the Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under its insurance policies. In this instance medical records were not requested in a situation in which the attending physician recommended seven weeks disability for the claimant. The Company only allowed six weeks disability and did not investigate to determine if the extra week recommended by the attending physician was justified. The Department alleges this act is in violation of CIC §790.03(h)(3).
Summary of Company Response: The Company states the 6 weeks of disability for vaginal delivery is based on MDA Guidelines for a normal delivery, which is the diagnosis that was given by the Attending Physician's Statement dated 4/4/06. In this instance, since the attending physician indicated a release to return to work 7 weeks after delivery, the Company's standard practice is to obtain medical records from the attending physician. The medical records would be reviewed to see if there were medical factors indicating an extension of the claimant's time off of work beyond that generally indicated for this diagnosis. If the additional time off work was medically justified, benefits would have been extended. In this case, an oversight occurred on the part of the Disability Benefit Specialist who did not realize that the time period indicated by the physician was greater than 6 weeks, and therefore did not request medical records. The claimant, however, was given the opportunity to appeal the decision.
Summary of Company Response: It is the Company's procedure to include a statement on a claim denial regarding a review by the California Department of Insurance. The Company acknowledges these instances in which the Explanation of Benefits forms utilized did not contain the correct language. The Company instructed the TPA paying these claims to revise the Explanation of Benefits form to include the California language. The Company has provided notice of termination to the TPA and is no longer marketing Dental Insurance. There have been no California sitused groups covered since August 31, 2006.
Summary of Company Response: It is the Company's procedure to disclose all benefits, coverage, time limits or other provisions of the insurance policy. The Company provides claim forms and Settlement Option brochures for this purpose to its group policyholders via its website. Claimants obtain the required forms and brochures from the group policyholder. Subsequent to the Market Conduct Examination, the Company modified its procedure in this regard. In addition to providing current forms and Settlement Options brochures via its website, the Company revised its death claim form to require the group policyholder's certification that the Settlement Option brochure had been delivered to all claimants. If in a given situation this certification is not received, the Settlement Option brochure is mailed to the claimant by the Company.
10. In three instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In two of the instances cited, the interest that was included in the claim settlement was incorrectly calculated. In the remaining instance interest was not included in the claim settlement. The Department alleges these acts are in violation of CCR §2695.7(g).
Summary of Company Response: It is the Company's procedure to include interest in all claim settlements when applicable. The Company reviewed these three instances, recalculated the interest owed and issued an additional $1,117.22 in interest to the claimants involved. The Company states that these instances were the result of unintentional oversights. The individuals involved have been made aware of this compliance issue and all claim staff have been reminded of the correct procedures. In addition, in the third instance the error occurred when the claims examiner learned of an additional supplemental amount of insurance and revised the claim amount. The Company is in the process of implementing a system change to automatically recalculate interest when the amount of the claim is changed after the initial entry. This change is expected to be completed by April 1, 2007.
Summary of Company Response: It is the Company's procedure to include a statement in a claim denial regarding a review by the California Department of Insurance. The Company acknowledges this instance which was the result of an unintentional oversight. The individual involved has been made aware of this compliance issue and all claim staff has been reminded of this requirement.
12. In two instances, the Company attempted to settle a claim by making a settlement offer that was unreasonably low. In the two instances cited, the interest that was included in the claim settlement was incorrectly calculated. The Department alleges these acts are in violation of CCR §2695.7(g).
Summary of Company Response: It is the Company's procedure to include interest in all claim settlements when applicable. The Company reviewed these two instances, recalculated the interest owed and issued an additional $173.18 in interest to the claimants involved. The Company states that these instances were the result of unintentional oversights. The individuals involved have been made aware of this compliance issue and all claim staff have been reminded of correct procedures.
