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[IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE (CIC) SECTION 12938, THIS REPORT WILL BE MADE PUBLIC AND PUBLISHED ON THE

CALIFORNIA DEPARTMENT OF INSURANCE (CDI) WEBSITE]

WEBSITE PUBLISHED REPORT OF THE MARKET CONDUCT EXAMINATION OF THE CLAIMS PRACTICES OF

AXIS INSURANCE COMPANY NAIC # 37273 CDI # 5025-2

AXIS REINSURANCE COMPANY

NAIC # 20370 CDI # 3619- 4

AS OF JANUARY 31, 2017

ADOPTED JANUARY 24, 2018

STATE OF CALIFORNIA

CALIFORNIA DEPARTMENT OF INSURANCE MARKET CONDUCT DIVISION

FIELD CLAIMS BUREAU

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NOTICE

The provisions of Section 735.5(a) (b) and (c) of the California

Insurance Code (CIC) describe the Commissioner’s authority

and exercise of discretion in the use and/or publication of

any final or preliminary examination report or other

associated documents. The following examination report is

a report that is made public pursuant to California Insurance

Code Section 12938(b)(1) which requires the publication of

every adopted report on an examination of unfair or

deceptive practices in the business of insurance as defined

in Section 790.03 that is adopted as filed, or as modified or

corrected, by the Commissioner pursuant to Section 734.1.

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TABLE OF CONTENTS

FOREWORD ................................................................................................................... 1

SCOPE OF THE EXAMINATION ................................................................................... 2

EXECUTIVE SUMMARY ................................................................................................ 4

DETAILS OF THE CURRENT EXAMINATION .............................................................. 5

TABLE OF TOTAL ALLEGED VIOLATIONS ................................................................ 7

SUMMARY OF EXAMINATION RESULTS .................................................................... 9

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FOREWORD

This report is written in a “report by exception” format. The report does not

present a comprehensive overview of the subject insurer’s practices. The report

contains a summary of pertinent information about the lines of business examined,

details of the non-compliant or problematic activities that were discovered during the

course of the examination and the insurer’s proposals for correcting the deficiencies.

When a violation that reflects an underpayment to the claimant is discovered and the

insurer corrects the underpayment, the additional amount paid is identified as a

recovery in this report.

While this report contains violations of law that were cited by the examiners,

additional violations of CIC § 790.03 or other laws not cited in this report may also apply

to any or all of the non-compliant or problematic activities that are described herein.

All unacceptable or non-compliant activities may not have been discovered.

Failure to identify, comment upon or criticize non-compliant practices in this state or

other jurisdictions does not constitute acceptance of such practices.

Alleged violations identified in this report, any criticisms of practices and the

Companies’ responses, if any, have not undergone a formal administrative or judicial

process.

This report is made available for public inspection and is published on the

California Department of Insurance website (www.insurance.ca.gov) pursuant to

California Insurance Code section 12938(b)(1).

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SCOPE OF THE EXAMINATION

Under the authority granted in Part 2, Chapter 1, Article 4, Sections 730, 733,

and 736, and Article 6.5, Section 790.04 of the California Insurance Code; and Title 10,

Chapter 5, Subchapter 7.5, Section 2695.3(a) of the California Code of Regulations, an

examination was made of the claim handling practices and procedures in California of:

Axis Insurance Company NAIC # 37273

Axis Reinsurance Company

NAIC # 20370

Group NAIC # 3416

Hereinafter, the Companies listed above also will be referred to individually as

AIC, ARC, or the Company, and collectively as the Companies.

This examination covered the claim handling practices of the aforementioned

Companies on Accident and Health, and Commercial Property claims closed during the

period from February 1, 2016 through January 31, 2017. The examination was made to

discover, in general, if these and other operating procedures of the Companies conform

to the contractual obligations in the policy forms, the California Insurance Code (CIC),

the California Code of Regulations (CCR) and case law.

To accomplish the foregoing, the examination included:

1. A review of the guidelines, procedures, training plans and forms adopted by

the Companies for use in California including any documentation maintained by the

Companies in support of positions or interpretations of the California Insurance Code,

Fair Claims Settlement Practices Regulations, and other related statutes, regulations

and case law used by the Company to ensure fair claims settlement practices.

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2. A review of the application of such guidelines, procedures, and forms, by

means of an examination of a sample of individual claim files and related records.

3. A review of the California Department of Insurance’s (CDI) market analysis

results; and if any, a review of consumer complaints and inquiries about these

Companies closed by the CDI during the period February 1, 2016 through January 31,

2017, a review of previous CDI market conduct claims examination reports on these

Companies; and a review of prior CDI enforcement actions.

The review of the sample of individual claim files was conducted at the offices of

the California Department of Insurance in Los Angeles, California.

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EXECUTIVE SUMMARY

The Accident and Health, and Commercial Property claims reviewed were closed

from February 1, 2016 through January 31, 2017, referred to as the “review period”.

The examiners randomly selected 107 AIC claim files and 12 ARC claim files for

examination. The examiners cited 19 alleged claims handling violations of the

California Insurance Code and the California Code of Regulations and other specified

codes from this sample file review.

Findings of this examination included the failure to acknowledge notice of claim

within 15 calendar days; failure to respond to communications within 15 calendar days;

and the failure to include a statement in its claim denial that, if the claimant believes the

claim has been wrongfully denied or rejected, he or she may have the matter reviewed

by the California Department of Insurance.

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DETAILS OF THE CURRENT EXAMINATION

Further details with respect to the examination and alleged violations are

provided in the following tables and summaries:

AIC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Accident and Health / Fixed Indemnity Hospital

6,293 58 12

Accident and Health / Fixed Indemnity Dental 167 2 0

Accident and Health / Fixed Indemnity Vision 10 1 0

Accident and Health / Fixed Indemnity Accident Only

39 1 0

Accident and Health / Accident Medical Only 5 1 0

Accident and Health / Accidental Death and Dismemberment

1 1 2

Accident and Health / Business Blanket Travel 22 1 1

Accident and Health / College Sports Accident - Med Aggregate

1 1 0

Accident and Health / College Sports Accident - Med Base

1 67 0

Accident and Health / Participant Accident-

Other Sports 45 1 1

Special Risk- Other 232 1 0

Commercial Property 45 25 3

TOTALS 6861 107 19

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ARC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Commercial Property 12 12 0

TOTALS 12 12 0

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TABLE OF TOTAL ALLEGED VIOLATIONS

Citation Description of Allegation

AIC Number of

Alleged Violations

ARC Number of

Alleged Violations

CCR §2695.5(e)(1) *[CIC §790.03(h)(2)]

The Company failed to acknowledge notice of claim within 15 calendar days.

9 0

CCR §2695.5(b) *[CIC §790.03(h)(2)]

The Company failed to respond to communications within 15 calendar days

4 0

CCR §2695.7(b)(3) *[CIC §790.03(h)(3)]

The Company failed to include a statement in its claim denial that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance.

2 0

CCR §2695.7(c)(1) *[CIC §790.03(h)(3)]

The Company failed to provide written notice of the need for additional time or information every 30 calendar days.

2 0

CCR §2695.7(d) *[CIC §790.03(h)(3)]

The Company failed to conduct and diligently pursue a thorough, fair and objective investigation.

1 0

CIC §10172.5(c) *[CIC §790.03(h)(3)]

The Company failed to notify the beneficiary of the specified rate of interest paid on the death benefit.

1 0

Total Number of Alleged Violations 19 0

*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES

CIC §790.03(h)(2) The Company failed to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.

CIC §790.03(h)(3) The Company failed to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.

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TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS

ACCIDENT AND HEALTH

AIC 2015 Written Premium: $1,352,218.00 ARC 2015 Written Premium: $0.00

AMOUNT OF RECOVERIES $0.00

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.5(e)(1) [CIC §790.03(h)(2)] 9

CCR §2695.5(b) [CIC §790.03(h)(2)] 3

CCR §2695.7(b)(3) [CIC §790.03(h)(3)] 2

CCR §2695.7(d) [CIC §790.03(h)(3)] 1

CIC §10172.5(c) [CIC §790.03(h)(3)]

1

SUBTOTAL 16

COMMERCIAL PROPERTY

AIC 2015 Written Premium: $6,544,719.00 ARC 2015 Written Premium: $20,968.00

AMOUNT OF RECOVERIES $0.00

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.7(c)(1)[CIC §790.03(h)(3)] 2

CCR §2695.5(b)[CIC §790.03(h)(2)] 1

SUBTOTAL 3

TOTAL 19

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SUMMARY OF EXAMINATION RESULTS

The following is a brief summary of the criticisms that were developed during the

course of this examination related to the violations alleged in this report.

In response to each criticism, the Company is required to identify remedial or

corrective action that has been or will be taken to correct the deficiency. The Company

is obligated to ensure that compliance is achieved.

Any noncompliant practices identified in this report may extend to other

jurisdictions. The Company should address corrective action for other jurisdictions

when applicable.

There were no recoveries discovered within the scope of this report.

ACCIDENT AND HEALTH [AIC only] 1. In nine instances, the Company failed to acknowledge notice of claim within 15 calendar days. The Company failed to acknowledge claims which were presented in paper form or non-electronic form. The Department alleges these acts are in violation of CCR §2695.5(e)(1) and are unfair practices under CIC §790.03(h)(2).

Summary of the Company’s Response: The Company agrees with the findings and indicates that these instances pertain to paper claims which were not uploaded to the Company’s electronic system. As a result of the examination, the Company advised the Department that its third party administrator (TPA) has created an automated acknowledgment template letter to be transmitted after the paper or non-electronic claim is converted and uploaded to its electronic system. The Company provided the Department with a copy of its revised acknowledgement letter. In addition, the Company included a copy of the new policy and procedure guidelines dated July 31, 2017 which were given to adjusters to ensure future compliance. 2. In three instances, the Company failed to respond to communications within 15 calendar days. The Company did not respond to correspondence with respect to the claims presented. The Department alleges these acts are in violation of CCR §2695.5(b) and are unfair practices under CIC §790.03(h)(2).

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Summary of the Company’s Response: The Company agrees with the findings and discussed compliance reinforcement with its TPA. The TPA has implemented necessary corrective actions to ensure full adherence to California requirements. This includes emphasis on timely responses to correspondence or claims communication which may be received as manual paper documents. The Company indicates that a conversion of the manual documents to electronic format will also provide for a timely response system to comply with this regulation. Further, a training session has been scheduled in December 2017. All AXIS P&C claim staff will be invited as well as independent adjusters from the Company’s three third party administrators (TPAs). 3. In two instances, the Company failed to include a statement in its claim denial that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance. The Department alleges these acts are in violation of CCR §2695.7(b)(3) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the findings and addressed compliance reinforcement with its TPA. The Company states that the required Department of Insurance (CDI) contact information has now been added into the Explanation of Benefits (EOB) template notice. In instances of denied claims, the Company will include the CDI language in its EOB notice for expediency. 4. In one instance, the Company failed to conduct and diligently pursue a thorough, fair and objective investigation. The claim revealed a delay in claims handling and a lack of significant activity from January 31, 2017 through May 4, 2017.The Department alleges this act is in violation of CCR §2695.7(d) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the finding and has addressed the issue with pertinent staff for reinforcement. 5. In one instance, the Company failed to notify the beneficiary that interest will be paid. In this instance, interest payment was paid however the Company failed to provide the beneficiary with the specific rate of interest used to calculate the settlement payment. The Department alleges this act is in violation of CIC §10172.5(c) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the finding and has addressed the issue with pertinent staff for reinforcement. The Company will also monitor that future claims containing applicable interest payments will include the interest rate as required by CIC §10172.5.

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COMMERCIAL PROPERTY [AIC only] 6. In two instances, the Company failed to provide written notice of the need for additional time or information every 30 calendar days. The Department alleges these acts are in violation of CCR §2695.7(c)(1) and are unfair practices under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company agrees with the findings and indicates that it verbally discussed the status without transmitting the regulatory written notices. The Company will monitor quality control of this notice requirement as required by CCR 2695.7(c)(1). A training session has been scheduled in December 2017. All AXIS P&C claim staff and independent adjusters from the Company’s three third party administrators (TPAs) are participating.

7. In one instance, the Company failed to respond to communications within 15 calendar days. The Department alleges this act is in violation of CCR §2695.5(b) and is an unfair practice under CIC §790.03(h)(2).

Summary of the Company’s Response: The Company agrees with the finding and addressed this matter with pertinent staff for compliance. Additionally, the Company has developed a plan that includes a training component as well as reinforcement and improved communications around expectations of adjusting firms currently utilized. A training session has been scheduled in December 2017. All AXIS P&C claim staff and independent adjusters from the Company’s three third party administrators (TPAs) are participating.