2015 marked by improved insurance consumer protection, new product approvals and fraud busts
News: 2016 Press Release
SACRAMENTO, Calif. - When he was sworn-in on January 5, 2015, Insurance Commissioner Dave Jones promised his second term, like his first, would be defined by action. Throughout the first year of his second term Commissioner Jones took action to protect consumers, hold insurers accountable, fight fraud, and make sure that insurance products are available to meet the expanding insurance needs in the marketplace.
The culmination of the Department of Insurance's efforts in 2015 resulted in more than $69 million recovered for Californians from consumer complaints and market conduct exams. More than $56 million in grants were awarded to district attorney's to fight insurance fraud, there was nearly $25 million recovered through lawsuits in which the Department joined whistleblowers to combat health insurance fraud, and more than $200 million obtained by the Department to settle a long standing dispute over a failed insurance company. Commissioner Jones also approved first of their kind insurance products for the sharing economy and built new web-based consumer tools to benefit Californians. To help Californians reduce the risk of damage to their homes from an earthquake, $3 million was also obtained in general funding for the California Earthquake Brace + Bolt program.
"As I promised when I was sworn in for a second term, we have worked aggressively to investigate and assist in the prosecution of those committing insurance crimes, taken strong actions to protect consumers, and approved new insurance products to meet new and evolving risks," said Commissioner Jones. "I look forward to another year of fulfilling the department's mission of ensuring a vibrant insurance market where insurers keep their promises and the health and economic security of individuals, families and businesses are protected."
In 2015 Commissioner Jones led the Department of Insurance in accomplishing the following:
Fighting insurance fraud and curbing California's underground economy
Fighting fraud continues to be a priority for Commissioner Jones. Insurance fraud is a multi-billion dollar drain on California's economy. For fiscal year 2015/2016 Commissioner Jones awarded $34.95 million in grants to district attorneys to combat workers compensation fraud and more than $21.95 million in grant funding to fight auto and organized auto fraud. As of November 30, Department of Insurance detectives arrested 745 individuals for alleged insurance fraud this year.
In an effort to curb California's underground economy the department led a statewide multi-agency outreach effort visiting more than 75 businesses to educate business owners about their obligations to comply with insurance, licensing, workplace safety, labor laws and tax codes. This effort resulted in more than 15 citations, multiple stop work orders and nearly $300,000 in fines.
Assisted consumers recovering from California's devastating wildfires
Two of the largest wildfires in California's history occurred in 2015. Commissioner Jones visited the burn zones and worked with state and local officials in Lake and Calaveras counties to help thousands of residents begin the recovery process. In an effort to speed recovery, Commissioner Jones obtained agreements from insurers representing 90 percent of the claims resulting from the Valley and Butte fires to claims handling reforms that provide for faster payments to consumers and flexibility with some of the deadlines and documentation typically required by insurers. Under the agreement, policyholders may receive advance payment for up to four months of additional living expenses, 25 percent of policy limits for personal property, and expedite the process for debris removal -- a first step in the rebuilding process. Commissioner Jones continues to monitor wildfire claims to ensure claims are paid timely so residents are able to rebuild quickly.
Continued international leadership on climate change
In 2015, Jones continued to be a national and international leader on climate change and the regulation of insurance. He leads the multi-state annual climate risk survey of insurers, which includes more than 1,000 companies writing more than $100 million in premium and represents approximately 77 percent of the entire U.S. insurance market, and allows regulators, insurance companies and interested members of the public the ability to identify trends, vulnerabilities and best practices with regard to how the insurance industry is responding to climate change. Jones serves as Vice Chair of the NAIC Climate Change and Global Warming Working Group, and this year, he was the first United States insurance regulator to join the United Nations Environmental Program's Principles for Sustainable Insurance (UNEP-PSI). In 2015, Commissioner Jones was invited to make a presentation to the G-20 Financial Stability Board about U.S. insurance company disclosure requirements and participated in various meetings and conferences at the United Nations Framework Convention on Climate Change (COP21) in Paris, where he joined the Paris Pledge for Action on climate change.
Expedited approval process and approved 6 new insurance products for TNC drivers
As demand for ridesharing services continues to grow, Commissioner Jones swiftly acted to address insurance gaps associated with ridesharing and approved first of their kind endorsements to personal auto insurance policies that help
Expanded funding to protect vulnerable homes and property from earthquakes
To help homeowners seismically retrofit their homes, Commissioner Jones helped secure $3 million in general funding for the California Earthquake Brace + Bolt program. Next year, 1,000 homeowners across the state will receive up to $3,000 to seismically retrofit and protect their homes from earthquake damage. The Earthquake Brace + Bolt program is expanding to include more than 150 ZIP codes in vulnerable areas in Northern and Southern California.
Issued emergency health insurance medical provider network adequacy regulations and created a healthcare price and quality ratings comparison tool so consumers can make better decisions about where to seek medical care
Within minutes of being sworn in for his second term, Commissioner Jones issued emergency regulations strengthening requirements for health insurers to have sufficient doctors, hospitals and clinics in their medical provider networks to ensure consumers have timely access to health care. The regulations were approved on February 2, 2015. Additionally, Commissioner Jones lead a partnership with the University of California San Francisco and Consumer Reports to create California Healthcare Compare, a first of its kind online tool to help Californians get price and quality information before deciding where to seek needed medical care.
Won important legal victories for consumers resulting in multi-million dollar settlements, halting of drug marketing fraud by major pharmaceutical companies, and fairer treatment of life insurance policyholders
In a major pay-for-play qui tam health insurance fraud case, pharmaceutical company Warner Chilcott agreed to pay $23.2 million for defrauding California insurers through drug marketing fraud. Jones insisted that Warner Chilcott agree to discontinue the unlawful promotion of pharmaceutical products identified in the whistleblower complaint and sold in California. Additionally, the Commissioner settled another qui tam insurer fraud case brought against Daiichi-Sanyo for $950,000 for making illegal kickbacks to healthcare providers.
This year Commissioner Jones brought to a conclusion a 15-year-old case involving Executive Life Insurance Company which was placed into liquidation over 25 years ago by the department, French company Artemis S.A. agreed to pay $200 million in recoveries the department pursued for allegedly defrauding Executive Life in addition to $110 million it paid previously bringing the total recovery against all defendants to over $930 million.
In February, Commissioner Jones announced a $1 million penalty obtained from Mercury Insurance Company, stemming from a department-initiated exam that found Mercury violated California law more than 350,000 times based on more than 50 illegal rating and underwriting practices. In addition to the $1 million fine, Mercury agreed to important business practice reforms.
Later in the year, Jones issued an order approving a settlement agreement and requiring GEICO to pay $6 million dollars in penalties and to implement changes to their business practices to end misleading and discriminatory practices, including discontinuing using consumers' education level or occupation to quote coverage limits.
In 2015, Commissioner Jones announced five national settlements with insurers as a result of investigations of their failure to use the Death Master File database to pay life insurance benefits. Jones is leading a national multi-state insurance regulators' investigation of life insurers failure to properly pay out life insurance benefits. As a result of this investigation insurers representing over 73 percent of the life insurance market have agreed to reform their practices and use the Death Master File database to identify deceased policyholders in order to pay benefits to their beneficiaries. Allianz Life Insurance Company of North America, Guardian Life Insurance Company and Pacific Life Insurance Company, Jackson National Life Insurance Company and Axa Life Insurance entered into settlements with California in 2015. These settlements require insurers to pay life insurance benefits to hundreds of thousands of beneficiaries. In total, combined settlements over the years have resulted in life insurers returning more than $1 billion in life insurance benefits to beneficiaries nationwide.
Tens of millions in insurer investments help California's underserved communities, bring jobs, housing, social programs and neighborhood revitalization
The Department's California Organized Investment Network (COIN) Community Development Financial Institution (CDFI) tax credit program attracted $71.05 million in insurance, bank, and private investments into California's underserved communities this year. A priority for Commissioner Jones, the program spurs innovative public-private partnerships that help revitalize neighborhoods by creating jobs, affordable housing, community centers, schools, and health clinics. The tax credit program also supports small business loans, green investments, and water/wastewater investments.
Insurer investments in COIN Bulletins increased from $6 million in 2014 to $40 million in 2015. For example, insurers are financing an affordable housing fund that invests in 100 to 200 unit housing facilities to improve the low to moderate communities and create value for investors.
- On average $5,000-15,000 is spent renovating each rental unit. Improvements include fixtures, finishes and tenant amenities, common areas, drive-up appeal, and functionality
- Housing based services include adult education classes, after school and summer programs for youth, computer training, nutrition education, and job readiness and career development workshops
- Green improvements include solar electricity for common areas, LED lighting, and low irrigation landscaping
Commissioner's Insurance Diversity Initiative increases insurance industry spending with California diverse businesses by $587 million
The Commissioner's Insurance Diversity Initiative resulted in insurers procuring $1.52 billion in goods and services from insurance companies last year-a $587 million increase since 2012-according to the 2015 Insurer Supplier Diversity Survey. The Commissioner's Insurance Diversity Initiative expands economic opportunities for the state's minority, women, disabled veteran, and LGBT-owned businesses by encouraging insurers to open their procurement process to California's diverse businesses, which in turn helps boost California's economy. To advise the Commissioner on how to meet Initiative goals, which also includes increasing diversity among insurer governing boards, the Commissioner appointed a new Insurance Diversity Task Force made up of industry representatives, diverse business owners, and community advocates.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.