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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

RELIASTAR LIFE INSURANCE COMPANY NAIC # 67105 CDI # 0267-5

RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK

NAIC # 61360 CDI # 0781-5

SECURITY LIFE OF DENVER INSURANCE COMPANY NAIC # 68713 CDI # 1608-9

AS OF AUGUST 31, 2017

ADOPTED MAY 17, 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 examiner,

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:

ReliaStar Life Insurance Company NAIC # 67105

ReliaStar Life Insurance Company of New York

NAIC # 61360

Security Life of Denver Insurance Company NACI # 68713

Group NAIC # 4832

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

RLIC, RLICNY, SLDIC or the Company, and collectively as the Companies.

This examination covered the claim handling practices of the aforementioned

Companies on Life, Annuity, and Disability claims closed during the period from

September 1, 2016 through August 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,

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

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

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 September1, 2016 through August 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 Department of Insurance, in Los Angeles, California.

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EXECUTIVE SUMMARY

The Life, Annuity, and Disability lines of business claims reviewed were closed

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

The examiners randomly selected 121 RLIC claim files, 2 RLICNY and 2 SLDIC claim

files for examination. The examiners cited 8 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 reference the California

Department of Insurance in claims denials, the failure to provide the reasons for the

denial of a claim, the failure to reference and explain the application of specific policy

provisions, conditions or exclusions in the denial of a claim, the failure to provide a clear

explanation of the computation of benefits, the failure to conduct and diligently pursue a

thorough, fair and objective investigation, and the failure to provide necessary forms,

instructions, and reasonable assistance within 15 days.

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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:

RLIC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Life/ Individual 705 3 0

Life/ Group 1545 4 0

Annuity 390 9 1

Supplemental Health/Accident 379 17 1

Supplemental Health/ Cancer 626 20 2

Supplemental Health /Critical illness 488 13 0

Supplemental Health/ Wellness 3470 20 0

Disability/ Long Term Disability Income 92 15 2

Disability/ Short Term Disability Income 850 20 2

TOTALS 8545 121 8

RLICNY SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Individual Life 113 1 0

Individual Annuity 8 1 0

TOTALS 121 2 0

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SLDIC SAMPLE FILES REVIEW

LINE OF BUSINESS / CATEGORY CLAIMS IN

REVIEW PERIOD

SAMPLE FILES

REVIEWED

NUMBER OF ALLEGED

VIOLATIONS

Individual Life 374 2 0

TOTALS 374 2 0

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TABLE OF TOTAL ALLEGED VIOLATIONS

Citation Description of Allegation

RLIC Number of

Alleged Violations

RLICNY Number of

Alleged Violations

SLDIC Number of

Alleged Violations

CCR §2695.5(e)(2) [CIC §790.03(h)(3)]

The Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days.

1 0 0

CCR §2695.7(b)(1) [CIC §790.03(h)(13)]

The Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason given.

1 0 0

CCR §2695.7(b)(1) [CIC §790.03(h)(13)

The Company failed to provide in its written denial a reference to and explanation of the applications of specific statutes, applicable laws, and policy provisions, conditions or exclusions.

1 0 0

CCR §2695.7(b)(3) [CIC §790.03(h)(3)]

The Company failed to reference the California Department of Insurance in its claims denial.

3 0 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 0

CCR §2695.11(b) [CIC §790.03(h)(3)]

The Company failed to provide a clear explanation of the computation of benefits.

1 0 0

Total Number of Alleged Violations 8 0 0

*DESCRIPTIONS OF APPLICABLE UNFAIR CLAIMS SETTLEMENT PRACTICES

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.

CIC §790.03(h)(13)

The Company failed to provide promptly a reasonable explanation of the bases relied upon in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.

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TABLE OF ALLEGED VIOLATIONS BY LINE OF BUSINESS

ACCIDENT AND HEALTH

Supplemental Health and Disability Income

RLIC 2016 Written Premium: $164,332,047 RLICNY 2016Written Premium: $3,779,245

SLDIC 2016 Written Premium: $0.00 AMOUNT OF RECOVERIES $2,366.20

NUMBER OF ALLEGED VIOLATIONS

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

CCR §2695.7(b)(1) [CIC §790.03(h)(13) 2

CCR §2695.7(d) [CIC §790.03(h)(3)] 1

CCR §2695.11(b) [CIC §790.03(h)(3)] 1

SUBTOTAL 7

LIFE / ANNUITY

RLIC 2016 Written Premium: $132,482,903 RLICNY 2016 Written Premium: $3,120,550 SLDIC 2016 Written Premium: $135,784,774

AMOUNT OF RECOVERIES $ 0.00

NUMBER OF ALLEGED VIOLATIONS

CCR §2695.5(e)(2) [CIC §790.03(h)(3)] 1

SUBTOTAL 1

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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 Companies are required to identify remedial or

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

Companies are obligated to ensure that compliance is achieved.

Any noncompliant practices identified in this report may extend to other

jurisdictions. The Companies should address corrective action for other jurisdictions

when applicable.

Money recovered within the scope of this report was $2,366.20 as described in

section number 3 below.

ACCIDENT AND HEALTH 1. In three instances, the Company failed to include a statement in its claim denial that, if the claimant believes all or part of 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 (RLIC) acknowledges in three instances denial letters failed to reference the California Department of Insurance. Standard operating procedures direct claim analysts to add the language required by California to full and partial Explanation of Benefits (EOB) denial notices. On July 17, 2017, claim analysts were reminded to include the correct denial language in all California denial notices.

2. In one instance, the Company failed to provide in its written denial a reference to and explanation of the application of specific statutes, applicable laws, and policy provisions, conditions or exclusions. The Department alleges this act is in violation of CCR §2695.7(b)(1) and is an unfair practice under CIC §790.03(h)(13).

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Summary of the Company’s Response: The Company acknowledges this finding. Although the policy provisions were applied in the evaluation of the claim, the analyst failed to include, in the determination letter, the specific language regarding continuation of coverage under the Family Medical Leave Act (FMLA), and the explanation of the rationale for the denial of benefits. The analyst has been counseled. The Company will monitor all claim handling activities to ensure regulatory compliance. 3. In one instance, the Company failed to provide in writing the reasons for the denial of the claim in whole or in part including the factual and legal bases for each reason given. The Company reduced disability income benefits to 25% of the monthly income benefit payable due to a pre-existing condition. The Company failed to provide a written explanation of the partial denial of benefits after the claimant verbally contested the reduced benefit payment. The Department alleges this act is in violation of CCR §2695.7(b)(1) and is an unfair practice under CIC §790.03(h)(13). Summary of the Company’s Response: The Company acknowledges the claims analyst did not follow established procedures in handling the claimant’s telephone phone call and verbal dispute of policy benefits. The Company further acknowledges the claimant should have been given a written explanation after the telephone call, pursuant to contractual provisions, which would have included the right to an appeal. As a result of the examination, the Company provided instructions to the staff on the proper procedures on verbally disputed benefit payments to ensure written explanations are provided to claimants. 4. In one instance, the Company failed to conduct and diligently pursue a thorough, fair and objective investigation. The Company failed to investigate the claimant’s verbal contention that policy benefits were misrepresented by the Company’s representative at the time of application. The Department alleges act is in violation of CCR §2695.7(d) and is an unfair practices under CIC §790.03(h)(3). Summary of the Company’s Response: The Company acknowledges this finding. The analyst should have initiated an investigation into the claimant’s allegation of misrepresentation and escalated the claim for management review. The Company believes that the claimant was provided with information regarding pre-existing conditions at enrollment, through the sales brochure provided to the insured, as well as through subsequent conversations with the enrollment firm, and as described in the insurance certificate. Nonetheless, the Company agreed to re-open and consider the claim for full disability income benefits. Additional disability income benefits including interest, in the amount of $2,366.20, were paid on January 31, 2018. 5. In one instance, the Company failed to provide a clear explanation of the computation of benefits. The Department alleges this act is in violation of CCR §2695.11(b) and is an unfair practice under CIC §790.03(h)(3).

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Summary of the Company’s Response: The Company acknowledges the explanation of benefit letter failed to explain the calculation and computation of the benefit payment. Feedback and coaching could not be provided to the analyst, in this instance, as the employee is no longer with the Company. To ensure regulatory compliance, on December 22, 2017, the Company sent a reminder to the claims staff that the benefit approval letter, as applicable, should state the benefit payable is less than the percent stated in the group policy when the amount exceeds the policy’s maximum monthly benefit. LIFE AND ANNUITY 1. In one instance, the Company failed to provide necessary forms, instructions, and reasonable assistance within 15 calendar days. The Company received notification of the claim on May 6, 2016. The Company sent claim forms to the beneficiary on May 24, 2016, 18 days after notice of claim. The Department alleges this act is in violation of CCR §2695.5(e)(2) and is an unfair practice under CIC §790.03(h)(3).

Summary of the Company’s Response: The Company acknowledges necessary forms and instructions were not provided to the beneficiary within regulatory timelines. Upon notice of death, the Company has a 5 business day time standard to place the contract in death pending status, research the beneficiary designation, and mail claim forms to the beneficiaries if contact information is on file. In this instance, the Company delayed claim processing activities while searching for a second beneficiary. The Company should have sent an acknowledgement letter and claim forms to the beneficiary with known contact information. On December 7, 2017, the Company reminded the claims staff to not delay a response to one beneficiary when waiting for information on another beneficiary.