This case is interesting although I do not know the details beyond the article.
It appears that the company is financially sound and the regulators do not like the owner due to personality conflicts. Now it has become a power struggle.
The troubling part of this story is that regulators can destroy your business just for personality conflicts.
Actually this company was a bad actor. Their marketing reps sold a product they didn’t understand and misled brokers and employers. Then when it came time to sign the documents, they bypassed the broker and went directly to the clients and had them sign a convoluted document that had no resemblance to a work comp policy. Hidden in the fine print was a note about quadrupling the claims costs and automatically increasing the rates and withdrawing money directly from the clients’ bank account. One client’s monthly withdrawal went from $15,000 to $35,000, in just one month, based on two post termination claims with no medical reports or costs. Check out the multiple lawsuits filed by employers against them. This work comp/payroll service was a scam from the get go.
I think that selling captive policies to relatively small businesses can be dangerous in that your pulling people in the insurance business who may not be fully aware of the risks and downsides of self insurance. It appears that Applied was marketing the captive product without fully educating their clients and communicating with their brokers.
Captives may make sense for a large entity with a sophisticated risk management staff especially during a hard market.
This looks like California doing its best job to continue to run businesses out of the state. And even when you try to leave they’re coming after ya. All for political gain where their actions have no consequence.
With insurance non-renewals surging due to fires and insurers pulling out of the state, who is going to be left? Seems like the CDI should be trying to keep insurers instead of seemingly encouriging them to leave. I don’t usually side with the insurance agency, but in this case, it looks like they really got jerked around by the CDI.
We have followed this because we had clients impacted by this carrier.
They have a “reinsurance agreement” that is not presented or signed until AFTER binding coverage. It has loss development factors that are applied every month to all claims, open or closed, and the client is billed, presumably for more collateral to be held, but I don’t recall what they called these additional funds. *Presumably* they would return unneeded funds to the insured.
They have been sued widely across the country, and several states (NJ and NY come to mind) in addition to CA have refused to license the product after enough law suits were filed.
When asked at one of the hearings or trials how many clients had received any funds back, from several years prior, the answer was NONE. They had not sent any funds back to any of the insureds/employers. EVER.
I have no dog in this fight, but two things come to mind:
Applied Underwriters has continually hounded the agents at my agency to quote their clients and every single time (and I mean EVERY SINGLE TIME), the quote was denied for underwriting purposes. These were risks that we had written with admitted, A+ carriers and has reinforced our agency motto: Leave well enough alone.
Second, why would anyone in their right mind EVER get involved in doing business in California that requires governmental oversight, like the California Department of Insurance? This pseudo-governmental fiefdom that gave us the likes of John Garamendi is just ONE entity that should give pause to any red blooded american thirsty for an opportunity to business in The Golden State. Here is a little advice: Come for the beach, but DON’T STAY. Come for the golf, but DON’T STAY. Just sayin’.
This case is interesting although I do not know the details beyond the article.
It appears that the company is financially sound and the regulators do not like the owner due to personality conflicts. Now it has become a power struggle.
The troubling part of this story is that regulators can destroy your business just for personality conflicts.
Actually this company was a bad actor. Their marketing reps sold a product they didn’t understand and misled brokers and employers. Then when it came time to sign the documents, they bypassed the broker and went directly to the clients and had them sign a convoluted document that had no resemblance to a work comp policy. Hidden in the fine print was a note about quadrupling the claims costs and automatically increasing the rates and withdrawing money directly from the clients’ bank account. One client’s monthly withdrawal went from $15,000 to $35,000, in just one month, based on two post termination claims with no medical reports or costs. Check out the multiple lawsuits filed by employers against them. This work comp/payroll service was a scam from the get go.
Hi California:
Thank you for the further explanation.
I think that selling captive policies to relatively small businesses can be dangerous in that your pulling people in the insurance business who may not be fully aware of the risks and downsides of self insurance. It appears that Applied was marketing the captive product without fully educating their clients and communicating with their brokers.
Captives may make sense for a large entity with a sophisticated risk management staff especially during a hard market.
This looks like California doing its best job to continue to run businesses out of the state. And even when you try to leave they’re coming after ya. All for political gain where their actions have no consequence.
With insurance non-renewals surging due to fires and insurers pulling out of the state, who is going to be left? Seems like the CDI should be trying to keep insurers instead of seemingly encouriging them to leave. I don’t usually side with the insurance agency, but in this case, it looks like they really got jerked around by the CDI.
We have followed this because we had clients impacted by this carrier.
They have a “reinsurance agreement” that is not presented or signed until AFTER binding coverage. It has loss development factors that are applied every month to all claims, open or closed, and the client is billed, presumably for more collateral to be held, but I don’t recall what they called these additional funds. *Presumably* they would return unneeded funds to the insured.
They have been sued widely across the country, and several states (NJ and NY come to mind) in addition to CA have refused to license the product after enough law suits were filed.
When asked at one of the hearings or trials how many clients had received any funds back, from several years prior, the answer was NONE. They had not sent any funds back to any of the insureds/employers. EVER.
I have no dog in this fight, but two things come to mind:
Applied Underwriters has continually hounded the agents at my agency to quote their clients and every single time (and I mean EVERY SINGLE TIME), the quote was denied for underwriting purposes. These were risks that we had written with admitted, A+ carriers and has reinforced our agency motto: Leave well enough alone.
Second, why would anyone in their right mind EVER get involved in doing business in California that requires governmental oversight, like the California Department of Insurance? This pseudo-governmental fiefdom that gave us the likes of John Garamendi is just ONE entity that should give pause to any red blooded american thirsty for an opportunity to business in The Golden State. Here is a little advice: Come for the beach, but DON’T STAY. Come for the golf, but DON’T STAY. Just sayin’.