Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) Each
insurer shall file a report as prescribed herein, at the time its initial
Certificate of Authority is issued, and annually thereafter. After the filing of the
report at the time of the initial issuance of its Certificate of Authority, an
insurer may satisfy the requirement stated in the preceding sentence by ensuring
that each year the information required to be reported pursuant to this Section
2698.40 with respect to the performance
of the insurer's SIU functions is reported truthfully, accurately, and completely by
another insurer in the insurer's holding company group (hereinafter a "primary
reporting insurer"), which conducts the insurer's SIU operations on behalf of the
insurer. The annual report shall be due no later than ninety (90) days after the
date of mailing of the notification by the Department. The Department shall issue
the notification in June of each year.
(b) A complete, accurate, and truthful annual
report shall be submitted on a form as prescribed by the Department and shall
include the following information.
(1) The
insurer's California Certificate of Authority Number, the lines of insurance the
insurer is currently writing in California, the insurer's contact information and,
in the case of a primary reporting insurer, the names and California Certificate of
Authority Numbers of the insurers serviced by the primary reporting insurer's
SIU.
(2) The name(s), title(s), and
contact information of the insurer's SIU personnel working on California fraud
investigations; or the name of the organization and organizational contacts with
whom the insurer has contracted for the maintenance of the SIU that investigates
suspected insurance fraud occurring in California, or for any function of that
SIU.
(3) The names of personnel whose
duties include communication with the Fraud Division on matters related to the
reporting, investigation, and prosecution of suspected fraudulent claims or other
suspected insurance fraud.
(4) A
description of the insurer's methods and copies of written procedures used by the
insurer or its contracted entities for detecting, investigating, and reporting
suspected insurance fraud. The material that is required to be included pursuant to
this subdivision (b)(4) shall include at least the following:
(A) A description of any written procedures or
other methodologies used to identify claims, applications, or other transactions as
following patterns or trends that may indicate possible insurance fraud;
(B) A description, by line of business, of
insurance fraud patterns or trends and the procedures put in place to deter, and
detect instances of, the identified patterns or trends; and
(C) A description of the insurer's processes and
activities to ensure that all integral anti-fraud personnel are identifying
instances of suspected insurance fraud and referring those instances to the
SIU.
(5) A description of, and
copies of, the insurer's plan, and the plans of any contracted entities, for initial
and ongoing fraud education and training for integral anti-fraud personnel pursuant
to this article, including identification of the topics covered, a description of
the process used in order to ensure the training is received, and proof that the
training occurred.
(6) A written
description or chart outlining the organizational arrangement of the insurer's SIU
and integral anti-fraud personnel, including personnel of any contracted entities,
who are responsible for the detection, investigation, and reporting of suspected
insurance fraud that occurred in California.
(7) A description of how the SIU is adequately
staffed to meet the requirements herein and the expertise of the staff. The
description shall include:
(A) The total number of
SIU staff employed by the insurer to investigate suspected insurance fraud occurring
in California;
(B) An indication of
whether (1) all of the staff members included in the number reported pursuant to
subdivision (b)(7)(A) of this Section
2698.39 investigate only suspected
insurance fraud occurring in California, or (2) some or all of those staff members
also investigate suspected insurance fraud investigate suspected insurance fraud
occurring in other states;
(C) Total
hours of insurer employee time spent working on fraud investigations of suspected
insurance fraud that occurred in California;
(D) In the event it is impracticable to report the
total hours of insurer employee time spent working on fraud investigations of
suspected insurance fraud that occurred in California pursuant to subdivision
(b)(7)(C) of this section, the product resulting from the mathematical operation
described in subdivision (b)(7)(D)3. of this section may instead be reported,
together with a notation to the effect that the alternate method described, below,
in this subdivision (b)(7)(D) was used in lieu of reporting the hours count called
for in subdivision (b)(7)(C):
1. Divide the number
of California claims or other transactions resulting in the SIU's opening an
investigation, reported pursuant to subdivision (b)(8)(C) of this section, by the
number of investigations opened nationwide by the insurer's SIU during the last
calendar year;
2. Multiply the number of
SIU staff employed by the insurer nationwide to investigate suspected insurance
fraud by the quotient resulting from the operation described in subdivision
(b)(7)(D)1. of this section;
3. Multiply
the product resulting from the operation described in subdivision (b)(7)(D)2. of
this section by 2080 hours.
(E) Total hours of contracted SIU personnel time
spent working on fraud investigations related to the insurer's claims and, if
applicable, other transactions, occurring in California; and
(F) A description of how the insurer measures the
effectiveness of its SIU.
(8)
For each reported company:
(A) The number of
California claims processed by the insurer during the last calendar year;
(B) The number of claims or other transactions
referred to the SIU during the last calendar year that involved suspected insurance
fraud occurring in California; and
(C)
The number of those referred claims or other transactions reported pursuant to
subdivision (b)(8)(B), above, that resulted in the SIU's opening an
investigation.
(9) For each
reported company, the number of incidents of suspected insurance fraud reported to
the Department and to district attorney offices in California, during the last
calendar year.
(10) A description of any
significant changes, and any significant anticipated changes, to the insurer's
structure and operations that have impacted or will impact the insurer's SIU
operation, as well as a description of the impact of any such significant changes or
significant anticipated changes on the insurer's SIU operation.
(11) A listing of all lines of insurance the
insurer issues in California, the number of active policies for each line of
insurance, and a description of each product or program offered for each line of
insurance.
(12) Insurers who enter into
contracts for the purpose of compliance with these regulations shall for each such
contract provide a complete copy of the fully executed, existing contract, including
all attachments and addenda, to the Department and shall specify the manner in which
the contract is monitored. The material included pursuant to this subdivision
(b)(12) shall include a listing of all entities so contracted with, a description of
the services provided by each such entity, and a description of each entity's
SIU.
(13) The number and type of civil
actions initiated in California by each reported company alleging acts of insurance
fraud during the preceding calendar year, the case name of each such action, the
county in which it was filed, the court name and case number, and the Department of
Insurance case number indicated on the letter sent to the insurer from the Fraud
Division acknowledging receipt of the fraud referral.
(c) A statement signed under penalty of perjury
pursuant to the laws of the state of California must accompany all reports mentioned
herein. This statement must be signed by an officer of the holder of or applicant
for the Certificate of Authority who attests to the accuracy of the reported
information and the signor's personal knowledge of the existence and proper
maintenance of an SIU described in this report and these regulations.
(d) The insurer is to maintain a copy of the
annual report that will be available for review during examinations as conducted
pursuant to section
2698.41 of these regulations or as
otherwise requested by the Department.
(e) For the purpose of these regulations, the
name(s) of the insurer's personnel who will communicate with the Fraud Division
shall not be made part of the public record and shall be released only pursuant to
the provisions of Insurance Code section
1873.1
applicable to information acquired pursuant to Article 3 of the Insurance Frauds
Prevention Act.
1. New article
and section filed 5-3-94; operative 6-2-94 (Register 94, No. 18).
2.
Repealer of article 2 (sections 2698.40-2698.45) and repealer and new section filed
9-4-2003 as an emergency; operative 9-4-2003 (Register 2003, No. 36). A Certificate
of Compliance must be transmitted to OAL by 1-2-2004 or emergency language will be
repealed by operation of law on the following day.
3. Repealer of article
2 (sections 2698.40-2698.45) and repealer and new section refiled 1-2-2004 as an
emergency; operative 1-3-2004. (Register 2004, No. 1). A Certificate of Compliance
must be transmitted to OAL by 5-3-2004 or emergency language will be repealed by
operation of law on the following day.
4. Repealer of article 2 (sections
2698.40-2698.45) and repealer and new section refiled 5-4-2004 as an emergency;
operative 5-4-2004 (Register 2004, No. 19). A Certificate of Compliance must be
transmitted to OAL by 9-1-2004 or emergency language will be repealed by operation
of law on the following day.
5. Editorial correction of HISTORY 4
(Register 2004, No. 36).
6. Repealer of article 2 (sections
2698.40-2698.45) and repealer and new section refiled 9-1-2004 as an emergency;
operative 9-1-2004 (Register 2004, No. 36). A Certificate of Compliance must be
transmitted to OAL by 12-30-2004 or emergency language will be repealed by operation
of law on the following day.
7. Repealer of article 2 (sections
2698.40-2698.45) and repealer and new section refiled 12-28-2004 as an emergency;
operative 12-30-2004 (Register 2004, No. 53). A Certificate of Compliance must be
transmitted to OAL by 4-29-2005 or emergency language will be repealed by operation
of law on the following day.
8. Repealer of article 2 (sections
2698.40-2698.45) and repealer and new section refiled 4-29-2005 as an emergency;
operative 4-29-2005 (Register 2005, No. 17). A Certificate of Compliance must be
transmitted to OAL by 8-29-2005 or emergency language will be repealed by operation
of law on the following day.
9. Certificate of Compliance as 4-29-2005
order, including repealer and new section, transmitted to OAL 8-26-2005 and filed
10-7-2005 (Register 2005, No. 40).
10. Amendment filed 7-30-2020;
operative 10-1-2020 (Register 2020, No. 31).
Note: Authority cited: Sections
1875.24,
1879.5 and
1879.6,
Insurance Code; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal.
Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d
651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; and Garris v. Carpenter (1939) 33 Cal.
App. 2d. 649, 653, 92 P.2d 688. Reference: Sections
1875.20,
1875.21,
1875.24,
1879.5,
12921(a)
and
12926, Insurance
Code.
