California Insurance Commissioner Dave Jones announced today that a settlement agreement has been reached in an enforcement action against Travelers Companies. As a result, the Travelers companies have agreed to pay $9 million in refunds to policyholders who were overcharged on their premiums, as well as a $1.5 million fine.
"I am pleased with the extraordinary cooperation the Department of Insurance received from Travelers in making the remedial changes we requested, and in refunding premiums where appropriate," said Commissioner Jones. "This settlement with Travelers is a victory for consumers and demonstrates once again the value provided by the California Department of Insurance at no cost to the taxpayers."
The settlement agreement is the result of a market conduct examination by the California Department of Insurance that found the Travelers companies committed numerous violations of the Insurance Code and Regulations from January 1, 2006 through July 31, 2006. Specifically, Department examiners looked at whether the companies were properly applying rating rules and underwriting guidelines for both personal and commercial lines.
Department examiners reviewed 866 current policies and 424 policies that were cancelled, not renewed, or declined. They identified 125 rating errors (incorrect calculations of premium amount), 76 non-rating errors (improper application of underwriting or other internal company rules), and 19 termination transaction errors (policies improperly declined, cancelled or not renewed). Based on the results of the examination, the California Department of Insurance initiated an enforcement action against Travelers companies.
One example of rating and underwriting errors involved Travelers' use of the "good driver discount." The California Insurance Code requires all insurers marketing automobile insurance to offer and sell policies to any person who qualifies as a good driver. The California Code of Regulations sets forth procedures for determining whether a policyholder or potential policyholder qualifies as a good driver. The exam identified instances where Travelers did not follow the proper procedures, which resulted in people who should have qualified for the good driver discount policy being denied the discount.