October 20, 2003

The California Depart-ment of Insurance (CDI) reached a settlement agreement requiring State Farm Mutual Automobile Insurance Company (State Farm) to pay $250,000 for reportedly selling long-term care (LTC) insurance policies that violated the California Insurance Code. CDI served a Cease and Desist Order Sept. 2002 alleging that State Farm continued to actively market and sell its product after Oct. 1, 2001, when the Insurance Code imposed additional standards on LTC policies, which standards the State Farm’s policies did not meet. The standards require LTC policies to provide enhanced benefits, and mandated that insurers stop selling policies that do not meet the new standards. State Farm sold 1,981 such policies between Oct. 1, 2001 and June 12, 2002. Without admitting or denying the allegations, State Farm agreed to the monetary settlement and other provisions, including reimbursing premiums or providing premium credits for various categories of consumers who were issued LTC policies that did not meet the new standards.

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