2005
Insurance Reference Manual
Personal Insurance Federation of California Insurance Reference Book
CALIFORNIA DEPARTMENT OF INSURANCE
The Department of Insurance regulates insurance companies licensed to operate in California. The Department manages security deposits and collects fees, gross premium taxes, surplus line taxes and other revenues. Departmental operating expenses are appropriated annually by the Legislature from the Insurance Fund.
DEPARTMENT OF INSURANCE LOCATIONS:
Los Angeles Office
300 S. Spring Street, 14th Floor
213-346-6400
Sacramento Office
300 Capitol Mall, 17th Floor
916-492-3500
San Francisco Office
45 Fremont Street , 23rd Floor
415-538-4010
INSURER FINANCIAL CONDITIONS
Under the provision of Section 730 of the California Insurance Code, the insurance commissioner is required to examine the business and affairs of every admitted insurer, whenever deemed necessary, to determine its financial condition and its compliance with applicable laws.
Domestic insurers (those based in California ) are usually examined triennially except when financial or other conditions warrant examinations at shorter intervals of time. The examination of foreign (those based in other states) and alien (those based outside of the United States ) insurers transacting insurance is of vital interest to the insurance commissioner. These examinations are usually conducted triennially in conjunction with the home state regulator or supervisory authorities. The medium through which such examinations, called "association examinations," are arranged is the Financial Condition Subcommittee of the National Association of Insurance Commissioners.
These examinations are at the expense of the insurer as provided under Section 736 of the California Insurance Code.
FINANCIAL SURVEILLANCE
This Division analyzes and maintains financial condition information through ongoing surveillance of admitted insurers and other organizations and recommends corrective action when necessary. Through its Reinsurance and Financial Statements Bureau, the Division is responsible for the coordination and development of reinsurance regulatory policies and performs reinsurance audits and analyses.
Additionally, the Division, through the Tax Return and Audit Bureau, administers premium and surplus line tax laws and audits tax returns filed by insurers and surplus line brokers. The basis of the tax is the amount of "gross premiums" received, less return premiums, upon business conducted in the state, with the exception of title insurance and ocean marine insurance. Insurers transacting title insurance are taxed upon all income received in this state, with the exception of income arising out of investments. Ocean marine insurers are taxed upon underwriting profits.
A tax rate of 2.35% is imposed on "gross premiums" received, with the exception that a lower rate of 0.50% is applied to premiums received under pension and profit sharing plan contracts which are "qualified" under certain sections of the United States Internal Revenue Code. Title insurers are also taxed at a rate of 2.35% of "income." Ocean marine insurers are taxed at a rate of 5% of underwriting profits.
This Division also collects retaliatory taxes from certain foreign companies doing business in California. A retaliatory tax is charged to a foreign company doing business in California when the domicile state of that company charges a higher tax rate to California companies doing business in that state than it does for domestic insurers doing business in that state. In which case, the tax rates for both states become equal.
ENFORCEMENT
The Enforcement Bureau is charged with the responsibility of enforcing the insurance laws in the State of California and protecting the public from economic loss and distress caused by violations of those laws.
LICENSING
The License Bureau processes applications for insurance licenses, prepares and administers written qualifying license examinations, issues all production licenses, and maintains license records.
In connection with examination qualifications, the Bureau compiles manuals to assist applicants for licenses to prepare for examinations, formulates standards and guides for training courses required by law, and reviews and passes upon such courses submitted for approval by insurers, educational institutions, and others.
FRAUD
This bureau investigates allegations of insurance fraud and related crimes in California . These investigations involve everything from individual fraudulent activities to organized insurance fraud operations.
LEGAL DIVISION
The primary duty of the Legal Division is to enforce compliance with the California Insurance Code by all admitted insurers, insurance producers, and any other person or organization engaging or applying to engage in the business of insurance in the State of California.
POLICY APPROVAL BUREAU
The Policy Approval Bureau performs most of the Legal Division functions involving life, disability (accident and health), and workers' compensation insurance products. It reviews policy forms for those lines of insurance when required by law. It develops and administers Department regulations and bulletins on life and disability insurance product design, advertising, and administration. The Bureau also hears appeals from Workers' Compensation Insurance Rating Bureau classification decisions.
COMPLIANCE BUREAU
The purpose of the Compliance Bureau is to resolve complaints alleging violation of statutes by insurers, producer licensees, and applicants for producers' licenses by determining the existence of wrongful acts and, when such acts have been found, implementing appropriate action and imposing appropriate penalties, including the screening out of unqualified applicants and the removal of unqualified persons from the insurance business.
CONSUMER SERVICES DIVISION
The Consumer Services Division consists of the following bureaus and units: Claims Services Bureau; Field Rating & Underwriting Bureau; Rate Specialist Unit; Rating Services Bureau; Statistical Services Unit; and the Underwriting Services Bureau.
CLAIMS SERVICES BUREAU
This bureau receives and investigates complaints from the general public concerning claims matters to determine whether insurers are carrying out their contracts pursuant to the California Insurance Code.
FIELD RATING & UNDERWRITING BUREAU
The Field Rating & Underwriting Bureau conducts on-site examinations of insurers writing property and casualty insurance in California. These examinations include examination of all lines of such insurance written by each insurer.
Examinations are conducted to determine that adopted rates meet the requirements stated in the California Rating Law. The law requires that rates be adequate, not excessive nor unfairly discriminatory. They determine that rating plans are in compliance with California law, and that rates are being applied in a manner consistent with the adopted plans.
RATING SERVICES BUREAU
The Rating Services Bureau is responsible for handling consumer complaints regarding rating matters. The complaints include, but are not limited to, misquotes in premium by agent or broker, improper application of surcharges, and general inquiries regarding rate increases adopted by companies operating in the State of California.
RATE SPECIALIST UNIT
The Rate Specialist Unit was established to handle various technical issues and projects. The Unit provides technical advice relating to underwriting and rating matters to the insurance commissioner, division chiefs, other departmental staff and to the insurance industry.
STATISTICAL SERVICES UNIT
The Statistical Services Unit was created in early 1987 in response to the increasing need for the Department to gather and analyze statistical information.
This unit provides technical advice relating to rating and data collection systems to the insurance commissioner, division chiefs, other departmental staff, the insurance industry and to the public.
UNDERWRITING SERVICES BUREAU
The Underwriting Services Bureau is accountable for evaluating, investigating, and resolving all consumer complaints based on underwriting questions. They also give assistance or advice of a non-claims nature to the insurance consumer, insurance agents and brokers and insurance company staff.
ACTUARIAL DIVISION
Section 10479.5 of the California Insurance Code provides that the insurance commissioner value the reserve liabilities of a life insurance company and issue an official certificate or certificates describing the reserve liabilities. Such valuations are made for all life insurers domestic to the State of California.
The Code also requires that life insurance policies or riders providing for future premium determination, estimates of future experience, or inability to determine minimum values must be filed with the commissioner before they can be marketed. These items are reviewed and evaluated in this Division.
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