COMMISSIONER POIZNER ANNOUNCES CALIFORNIA TO RECEIVE MORE THAN $2 MILLION FROM MULTI-STATE SETTLEMENT


You are subscribed to Press Releases for the California Department of Insurance. You are receiving this email because new information has recently been released.

You can access the department's Communications Office Web page by clicking here.

SACRAMENTO ― Insurance Commissioner Steve Poizner today announced today that California will be receiving in excess of $2 million from a $20 million multi-state national settlement with The MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company of Tennessee and The Chesapeake Life Insurance Company. This settlement was the result of a three-year multi-state exam that led to the discovery of the companies’ failure to comply with standards for product disclosure, claims handling and other problems.

“This settlement sends a clear warning to insurance companies – play by the rules or pay the consequences,” said Commissioner Poizner. “I am pleased that through the hard work of the California Department of Insurance, in collaboration with a number of states, we were able to come to this monetary agreement, and set standards to improve the companies’ sales practices in the future.”

The examination covered a six-year period ending Dec. 31, 2005, and stemmed from the volume, scope and nature of complaints made against the companies by consumers in many states, including California. Participating states allege that in many instances, the agent or company did not adequately explain the benefits covered by the health plan, the company did not properly oversee and train agents, and did not maintain proper claims-handling or complaint-handling practices.

The $20 million penalty will be divided among the participating states based on the companies’ premium volume in each state. California’s share—estimated to be more than $2 million—will be deposited into the state’s General Fund. Also under this settlement agreement, failure to meet the performance standards may result in additional penalties of up to $10 million.

According to the terms of the settlement, The MEGA Life and Health Insurance Company, Mid-West National Life Insurance Company of Tennessee and The Chesapeake Life Insurance Company must implement an outreach program that includes the following:

  • Sending a notice to all policyholders with policies issued prior to Aug. 1, 2005 that includes a toll-free number, mailing address and e-mail address where policyholders can ask questions about their coverage. The notice also must include a website for each company.
  • Each method of communication must be staffed by someone able to provide detailed information about the policyholder’s specific plan.
  • A website with “frequently asked questions”, general coverage descriptions, contact information and instructions for appealing a claim or file a grievance.

In addition, the companies must report their progress on performance standards targeted for improvement twice a year through Dec. 31, 2009. California, in collaboration with Alaska, Oklahoma, Texas and Washington, is overseeing the status of improvements. Performance standards targeted for improvement include:
  • Agent training and oversight
  • Claims handling
  • Handling of complaints and grievances
  • Cancellation, non-renewal and discontinuance notices

The settlement documents are available at www.insurance.ca.gov.

# # #

Please visit the Department of Insurance Web site at www.insurance.ca.gov. Non media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Callers from out of state, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833