The California Department of Insurance (CDI) served a Cease and Desist order on State Farm Mutual Automobile Insurance Company (State Farm) for marketing and selling long-term care (LTC) insurance policies in violation of the Insurance Code.
The order alleges State Farm continued to actively market and sell their long-term care product after Oct. 1, 2001. Newly enacted statutes requiring LTC policies to provide enhanced benefits mandated that insurers stop selling policies that did not meet the new standards by that date. Between Oct. 1, 2001 and June 12, 2002, State Farm sold 1,981 LTC policies that did not meet the new standards.
The Cease and Desist order demands State Farm refund premiums paid by consumers whose policies were purchased after Oct. 1, 2001 and were cancelled or have lapsed; and policies sold after Oct. 1, 2001 that are in force be replaced with a policy meeting current legal requirements at no additional cost to the consumer. State Farm also faces a fine of up to $500,000 under Insurance Code Sections 10234.3(b) and 10232.2.
“We are very concerned when any insurer acts outside the scope of the statutes,” said Insurance Commissioner Harry Low. “There is a good reason companies must obtain approval for consumer products, and we will vigorously enforce the statute to protect consumers.”
State Farm has requested a hearing on the issue.
Was this article valuable?
Here are more articles you may enjoy.