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CA Department of Insurance

Certificate of Authority Section IV - Item #3

Profile

One of the most important items in any Certificate of Authority application is a full and complete profile of the applicant. By providing organization charts along with an in-depth plan of operation at the outset, the applicant will avoid a delay in the review of its application. For purposes of these guidelines, the word "entity" refers to the applicant, its parent, its affiliate, or any non-affiliate. The profile should include the organization charts and list of affiliates referenced in Section III: Documents Required for Certificate of Authority Application, accompanied by a detailed plan of operation, as discussed in this guideline.

The plan of operation must be verified by an officer of the applicant who has knowledge of the facts set forth in the plan. Sample Plan of Operation Verification Form. The plan must cover the following topics.

  • Competition
    California is a highly competitive insurance market. The applicant must explain in detail how the applicant plans to break into that market successfully. Please note that California Insurance Code Section 12919 provides that communications to the department concerning an application for a certificate of authority are confidential.
  • Products
    Provide a detailed description of the products that will be marketed in California. A general description of the classes to be transacted is not an adequate response. For example, if the applicant plans to market credit life and disability products tailored for use by credit unions, simply stating that it will transact credit life and disability is inadequate.

    If a parent, subsidiary and/or affiliated insurer is admitted for the classes of insurance requested in the pending application, please differentiate the products and/or markets of the applicant from those of the admitted insurer(s).
  • Sales
    Provide a detailed description of the applicant's sales techniques. The description should include information regarding recruitment and training of sales representatives.

    Identify whether the applicant will be a direct writer or will use agents, brokers or a combination thereof. Explain the compensation and control to be provided by the applicant to its agents, brokers or sales personnel. Provide sample copies of any agreements entered into between the applicant and its agents or brokers.

    If the applicant will use a specific agency or managing general agent in California, identify the agency or managing general agent and provide a copy of the agreement for this arrangement.
  • Underwriting
    If personnel for underwriting will be shared with another entity or if another entity will be performing the applicant's underwriting, please explain this arrangement and provide a copy of the agreement for this service.
  • Claims Adjusting/Payment
    Explain in detail how the applicant will adjust and pay claims. Identify the entity which will perform the applicant's claims adjusting and claims payment functions. This explanation must also describe how the personnel handling claims adjusting and claims payment will be trained, supervised and compensated. (See CIC §815 and 816.)

    If personnel for claims adjusting or claims payment will be shared with another entity or another entity will be performing the applicant's claims adjusting and claims payment, please explain this arrangement and provide a copy of the agreement for this service.

    Also provide detailed information as to how and by whom claims reserves will be set and modified.
  • Advertising
    Provide a detailed description of the advertising that will be used by the applicant to market its products in California. Include a detailed explanation as to how the applicant will develop, purchase, control and supervise its advertising.
  • Investment
    Identify the entity which will manage the applicant's investments. Provide detailed information as to how the applicant will supervise the management of its investments, including detailed information as to the compensation that will be paid for management of the applicant's investments. Also provide copies of the applicant's investment management agreements and any investment guidelines.
  • Compensation
    Provide detailed information as to all compensation (including but not limited to salary) of the applicant's officers, directors, and key managerial personnel. In this context, see California Insurance Code Sections 10434 and 1649.

    Sample Plan of Operation. While your Plan of Operation will obviously differ from the sample plan, it may be used as a guide to determine whether or not your plan is sufficient to satisfy the state's admission requirements.

    Attach to your Plan of Operation a sample copy of the applicant's conflict of interest statement, as completed annually by all of its officers, directors, and key managerial personnel.

Back to Section IV: Guidelines & Sample Language

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