Calif. Regulators Say Zurich Attempted to Evade State Review Process

Two insurers have been slapped with an administrative enforcement action by the California Department of Insurance. Zurich American Insurance Co. and Zurich American Insurance Company of Illinois have allegedly been using a type of workers' compensation insurance agreement without getting a review by the CDI in violation of the California Insurance Code.

The CDI is seeking an order to force Zurich to immediately cease issuing agreements that have not been filed for review, and accused the company of deliberately evading the CDI's required review process.

Zurich's large deductible workers' compensation agreement has the fundamental policy terms about payment, expenses, collateral, default and other matters. But if the company continues allegedly issuing unreviewed agreements, they could be suspended or barred from doing business in the state under terms of an order that the state is seeking.

Steven McKay, media and public relations director for Zurich, stated in an email the company is reviewing the enforcement action and will look to resolve with the CDI any concerns.

The CDI also settled a noncompliance issue action against GeoVera Co. for violations of the California Insurance code regarding its underwriting practices for earthquake insurance policyholders. GeoVera denied the violations, but agreed to pay refunds to policyholders in addition to a $235,000 fine. GeoVera allegedly improperly delivered renewal and cancellation notices; violated procedures for automatically charging renewal premium to policyholders' credit cards; and used burdensome and unfair processes for considering policyholder objections to public information concerning the policyholder's residence, among other practices.

The company agreed to corrective actions on its underwriting and policy renewal procedures.

Zurich in North America is part of the Zurich Financial Services Group, an insurance-based financial services provider with a global network of subsidiaries. It currently has a Best's Financial Strength Rating of A+ (Superior). GeoVera Insurance Co. provides residential insurance products and is a wholly owned subsidiary of GeoVera Holdings Inc. It currently has a Best's Financial Strength Rating of A (Excellent).

The top five insurance companies providing workers' compensation in California according to BestLink are State Compensation Insurance Fund of California, with 16% market share; Travelers Group, with 7.7%; American International Group, with 6.6%; Hartford Insurance Group, with 6.4%; and Zurich Financial Services NA Group, with 5.9%.

(By David Hodes, associate editor, BestWeek: David. [email protected])