providing [the Department of Insurance] a well-crafted response.
Receiving a letter from the California Department of Insurance concerning a customer’s complaint is truly an unsettling experience for many agents. The initial response for many agents upon receiving the complaint letter is, “Did I do something wrong?” or “Am I going to be investigated?” Those concerns are generally unwarranted if the agent takes the time to thoroughly investigate the customer’s complaint and provide a concise response with the appropriate documentation.
In many instances, the department sends an agent a complaint letter not as a result of the agent’s misconduct, but solely because the agent was involved in procuring the policy and to obtain a full picture of the transaction. The department will send a complaint letter to all parties involved in the transaction, such as the insurer, surplus lines broker, wholesaler or general agent.
The Department’s Authority
The department has the authority under California Insurance Code §12921.1 et seq., to investigate consumer complaints against production agencies and insurers. The department makes it very easy for a customer to file a complaint. A consumer can file a complaint against an insurer or production agency by calling a toll free number, printing out and submitting a “Request for Assistance” form; or submitting a complaint online at the department’s Web site.
The department will consider customer complaints that allege wrongful conduct by an insurer or production agency, such as:
• improper denial or delay in settlement of a claim;
• alleged illegal cancellation or termination of a policy;
• alleged misrepresentation by an agent or broker;
• alleged theft of premiums paid to an agent or broker; and
• rating and premium issues.
The department will not pursue workers’ compensation claims or complaints concerning prepaid health plans or health maintenance organizations.
After receiving and reviewing the agent’s response, the department determines whether the complaint is “justified” and whether the matter should be referred to the department’s investigatory branch. The department will deem a consumer complaint justified if it meets one or more criteria set forth in California Code of Regulation Title 10, Section 2649.
The criteria include the department’s determination that the:
• Licensee’s acts or omissions violates any provision of the Insurance Code or Regulations, or any applicable law or regulation;
• Licensee’s acts or omissions were in contravention of a rate filing;
• Licensee’s acts or omissions were in contravention of the licensee’s rules, policies, procedures or guidelines as it relates to sales, marketing, advertising, underwriting, rates, claims and/or customer service;
• Licensee’s acts or omissions were in contravention of or inconsistent with an insurance policy, bond or other agreement entered into by the relevant parties;
• Licensee fails to respond to a written request or complaint from the department or fails to provide a complete response within the time specified in the complaint letter. A complete response is one that addresses all issues raised and includes copies of documentation needed to support the response; and
• Specific facts surrounding the complaint as against an insurer merit remedial action within the authority of the department.
The department’s authority is very broad and covers all areas associated with the transaction of insurance. Accordingly, an agent must pay careful attention to providing a well-crafted response.
How to Respond
The complaint letter generally will request that the agent include the following in the response letter:
• a direct response to the consumer’s specific complaints;
• a narrative description of the insurance transaction;
• enclosure of specific documents; and
• an accounting of premium and fees.
The first step is to thoroughly review the complaint letter and the customer’s file. The agent should start this process as soon as possible after receiving the complaint letter, as the agent will only have 21 days or as otherwise specified in the letter to respond. Additionally, the agent should make sure the customer file is complete and in chronological order. If documentation or information is missing in order to provide a complete response, the agent should immediately contact the general agent or insurer to obtain the missing documentation or information. It is also advisable to discuss with the general agent or insurer specific facts concerning the transaction, such as cancellation dates, earned and unearned premium, and endorsement dates, so that the response will be consistent with the response provided by the general agent or insurer.
The agent should only address and respond to the issues raised by the customer and the department in the complaint letter. For instance, if the customer challenges the disclosure of a broker’s fee, make sure the response makes reference to the enclosed broker fee agreement or to a quote where the broker fee is referenced. If the complaint pertains to a customer service matter, list all of the attempts to address the customer service issues, with specific reference to documents in the agent’s file evidencing attempts to resolve the matter directly with the customer. A good response will concisely address the customer’s complaint and include supporting documentation.
Statements to Avoid
An agent should never include any irrelevant information in the response, as it may be used against an agent by the department or a plaintiff’s attorney.
Also, the agent should never admit any wrong-doing or make an offer to settle a claim with the customer in the response. The department and/or plaintiff’s attorney could use the admission of liability or offer of settlement against the agent in a regulatory or civil action. Additionally, an admission of liability or offer of settlement could result in denial of coverage by the agent’s professional liability insurer if the customer’s complaint leads to a civil lawsuit that an agent attempts to tender to his or her professional liability insurer. Many professional liability insurers will deny coverage if the broker-agent insured admits liability or attempts to settle the claim.
If an agent has made a serious mistake or is unsure how to respond to a department complaint, he or she should consider contacting an experienced attorney. Otherwise, if the complaint is straight forward, the agent should remember to keep the response concise and specific to the customer’s issues.
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