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INSURERS: Justified Complaint Regulations
Consumer Complaint Study

DEFINITIONS

California Insurance Code Section 12921.1

12921.1. (a) The commissioner shall establish a program on or before July 1, 1991, to investigate complaints and respond to inquiries received pursuant to Section 12921.3, to comply with Section 12921.4, and, when warranted, to bring enforcement actions against insurers. The program shall include, but not be limited to, the following:

    (1) A toll-free number published in telephone books throughout the state, dedicated to the handling of complaints and inquiries.
    (2) Public service announcements to inform consumers of the toll-free telephone number and how to register a complaint or make an inquiry to the department.
    (3) A simple, standardized complaint form designed to assure that complaints will be properly registered and tracked.
    (4) Retention of records on complaints for at least three years after the complaint has been closed.
    (5) Guidelines to disseminate complaint and enforcement information on individual insurers to the public, that shall include, but not be limited to, the following:
        (A) License status.
        (B) Number and type of complaints closed within the last full calendar year, with analogous statistics from the prior two years for comparison. The proportion of those complaints determined by the department to require that corrective action be taken against the insurer, or leading to insurer compromise, or other remedy for the complainant, as compared to those that are found to be without merit. This information shall be disseminated in a fashion that will facilitate identification of meritless complaints and discourage their consideration by consumers and others interested in the records of insurers.
        (C) Number and type of violations found.
        (D) Number and type of enforcement actions taken.
        (E) Ratio of complaints received to total policies in force, or
premium dollars paid in a given line, or both.  Private passenger automobile insurance ratios shall be calculated as the number of complaints received to total car years earned in the period studied.
        (F) Any other information the department deems is appropriate public information regarding the complaint record of the insurer that will assist the public in selecting an insurer. However, nothing in this section shall be construed to permit disclosure of information or documents in the possession of the department to the extent that the information and those documents are protected from disclosure under any other provision of law.
    (6) Procedures and average processing times for each step of complaint mediation, investigation, and enforcement. These procedures shall be consistent with those in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 for complaints within the purview of that article, consistent with those in Article 7 (commencing with Section 1858) of Chapter 9 of Part 2 of Division 1 for complaints within the purview of that article, and consistent with any other provisions of law requiring certain procedures to be followed by the department in investigating or prosecuting complaints against insurers.
    (7) A list of criteria to determine which violations should be pursued through enforcement action, and enforcement guidelines that set forth appropriate penalties for violations based on the nature, severity, and frequency of the violations.
    (8) Referral of complaints not within the department's jurisdiction to appropriate public and private agencies.
    (9) Complaint handling goals that can be tested against surveys carried out pursuant to subdivision (a) of Section 12921.4.
    (10) Inclusion in its annual report to the Governor, required by Section 12922, detailed information regarding the program required by this section, that shall include, but not be limited to: a description of the operation of the complaint handling process, listing civil, criminal, and administrative actions taken pursuant to complaints received; the percentage of the department's personnel years devoted to the handling and resolution of complaints; and suggestions for legislation to improve the complaint handling apparatus and to increase the amount of enforcement action undertaken by the department pursuant to complaints if further enforcement is deemed necessary to insure proper compliance by insurers with the law.

(b) The commissioner shall promulgate a regulation that sets forth the criteria that the department shall apply to determine if a complaint is deemed to be justified prior to the public release of a complaint against a specifically named insurer.

(c) The commissioner shall provide to the insurer a description of any complaint against the insurer that the commissioner has received and has deemed to be justified at least 30 days prior to public release of a report summarizing the information required by this section. This description shall include all of the following:
    (1) The name of the complainant.
    (2) The date the complaint was filed.
    (3) A succinct description of the facts of the complaint.
    (4) A statement of the department's rationale for determining that the complaint was justified that applies the department's criteria to the facts of the complaint.

(d) An insurer shall provide to the department the name, mailing address, telephone number, and facsimile number of a person whom the insurer designates as the recipient of all notices, correspondence, and other contacts from the department concerning complaints described in this section. The insurer may change the designation at any time by providing written notice to the Consumer Services Division of the department.

(e) For the purposes of this section, notices, correspondence, and other contacts with the designated person shall be deemed contact with the insurer.

Complaint Categories - Disposition Codes

The Company Performance Table displays complaint data that was divided into four categories.  The following four categories were determined by the final disposition of the complaint as identified by the National Association of Insurance Commissioners (NAIC).

  • Positive Outcome - Complaints categorized in a positive outcome disposition for the consumer are those that were determined by the department to require that corrective action be taken against the insurer, or leading to insurer compromise, or other remedy for the complainant.  Examples of the positive outcome disposition codes are policy issued/restored, additional payment, refund, etc.
  • Without Merit - Complaints categorized as a without merit disposition either have no action requested by the department or that the company position was upheld.
  • Other Outcome - Complaints categorized as an other outcome disposition were determined to not fall under the positive and without merit categories.
  • Justified Complaint - The criteria applied to determine if a complaint is justified are specified in the California Code of Regulations, Title 10, Subchapter 7.4. Consumer Complaints, Section 2694. (See more detailed definition under Justified Complaint).  In the Company Performance Table, the Justified Complaint data is a subset of all complaints that fall under the positive outcome, without merit, and other outcome categories.  For example, a complaint can be listed under the positive outcome category and can also be determined to fall under the justified complaint criteria and category.

Complaint Share

A complaint share is similar to a market share in that the amount (or percentage) of complaints an insurer receives is  compared to the "total" number of complaints received by all licensed insurers for a particular line of business.

Exposure

In general, an exposure is defined as the risk or loss potential an insurance company assumes from its policyholder in exchange for premium. However, it is important to note that there can be multiple exposures under one policy. For example, an insurer may cover several vehicles, or exposures, under one automobile policy.

This report studied exposures on an EARNED basis. Earned exposure is defined as a condition where the exposure is recognized by the insurance company after time has passed and the insurance company has delivered the services promised under the insurance policy.

Index

The Index measures the insurer's share of justified complaints the California Department of Insurance closed for all insurers relative to the amount of business the company writes in California. The index is calculated by line of business on a calendar year basis. For example, an index of 1.00 means the insurer's share of all complaints received is equal to its share of all the business written in California. An index of 2.00 means that the insurer's share of complaints is twice as large as its share of business written in California. An index of 0.50 means that the insurer's share of complaints is half as large as its share of business.

In-Force Business

Number of insurance policies that are paid-up (or are being paid) that a life or health insurance company has on its books.

Justified Complaint

The criteria applied to determine if a complaint is justified are specified in the California Code of Regulations, Title 10, Subchapter 7.4. Consumer Complaints, Section 2694.

(a) A consumer complaint shall be deemed justified within the meaning of CIC section 12921.1(b) where it meets any one or more of the following criteria:

(1) the Department determines that the licensee's act, acts, omission or omissions were in noncompliance with a specific provision or provisions of the California Insurance Code, California Code of Regulations, or other applicable laws and/or regulations;

(2) the Department determines that the licensee's act, acts, omission or omissions were in contravention of an approved rate filing or filings;

(3) the Department determines that the licensee's act, acts, omission or omissions were in contravention of the licensee's rules, policies, procedures or guidelines as relates to sales, marketing, advertising, underwriting, rating, claims and/or customer service, including rate manual filings, underwriting guidelines and/or other filings, statements or guidelines either submitted to the Department or to which the Department would have access during a market conduct examination and the Department determines that there was no substantial justification for deviation from such rules, policies, procedures or guidelines on the facts presented. For purposes of this subsection, all time restrictions or requirements for reply, response, or other legally required insurer action, shall be measured as against applicable time restrictions or parameters established in the California Insurance Code, California Code of Regulations, or other applicable laws and/or regulations.

(4) the Department determines that the licensee's act, acts, omission or omissions were in contravention of, or were otherwise inconsistent with, a provision or provisions of the insurance policy, contract, bond, or other agreement entered into by the relevant parties;

(5) the Department determines that after receiving a written or documented oral communication related to a claim, benefit underwriting or rating transaction, from a policyholder, insured, applicant, third party claimant, beneficiary, principal, or other party with a legitimate interest in the transaction, where that communication reasonably suggests that a response is expected, the licensee has failed to respond or did not provide a complete response, based on the facts then known by the licensee, within the applicable time restrictions established in the California Insurance Code, California Code of Regulations, other applicable laws and/or regulations or, in the absence of such restrictions, the licensee fails to respond within 15 days. A complete response is defined as one that addresses all issues raised and includes copies of any documentation needed to support the licensee's position.

(6) the Department determines that the specific facts surrounding the complaint as against an insurer merit remedial action within the authority of the Commissioner.

Justified Complaint Ratio

A justified complaint ratio is based on the number of justified complaints per 100,000 policies or exposures.

Line of Coverage

The line of coverage is the line of business where the complaint was recorded.  Not necessarily the lines of business an insurer currently writes or is licensed to write.  Among the lines of coverage included are homeowners, automobile, commercial multi-peril, group accident, and more.  It is also possible for a single complaint to involve more than one line of coverage.

Market Share

A market share is the amount (or percentage) of business written by an insurer as compared to the "total" business written by all licensed insurers for a particular line of business.

Policy

The written agreement that puts insurance coverage into effect.

Total Number of Complaints

The aggregate number of complaints received by the department for a specific calendar year and which fall under the positive outcome, without merit, other outcome, and justified complaint categories.

Type of Complaint

The type of complaint is a description of the reason the consumer is complaining.  The reasons include, but are not limited to, excessive rates, misleading advertising, claim delays and denial of claims.  A single complaint may have more than one reason for the complaint.


Last Revised - May 14, 2004

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