Dave Edwards, CPCU, AIC May 3, 2018 California Department of Insurance Consumer Services Division Regulatory Overview Dave Edwards, CPCU, AIC May 3, 2018

History Created in 1868 1900s: Anti-fraud legislation 1988: Proposition 103 ≈ 1400 Insurance Companies & 400,000 Producers ≈ 1400 Professionals April 20, 2018

Regulatory Overview Mission Statement We act to ensure vibrant markets where insurers keep their promises and the health and economic security of individuals, families, and businesses are protected Operational Goals to Support Mission Together we provide excellent, fair, and responsive service April 20, 2018

Regulatory Overview Consumer Services & Market Conduct Enforcement Financial Surveillance Legal Licensing Rate Regulation April 20, 2018

Consumer Services & Market Conduct Branch Consumer Services Division Market Conduct Division Important information is shared across Divisions

Consumer Services Division Consumer Communications Claims Services Health Claims Rating & Underwriting Services Our consumer services compliance officers have an average of 15 years of insurance industry experience in claims, underwriting, rating and sales. April 20, 2018

Consumer Services Division (CSD) Protect consumers through enforcement of insurance laws and regulations Respond to consumer inquiries and complaints Provide education to the public on insurance issues Analyze proposed bills Keep abreast of insurance trends and related consumer issues April 20, 2018

Consumer Communications Bureau First contact with CDI Phone Lines: 1-800-927-4357 (HELP) 1-800-482-4833 (TDD Line) In-Person: Public Walk-in Counter Speak to officer of the day Public phones in various locations throughout the state Web site: www.insurance.ca.gov Contact Us (Inquiries) Request for Assistance Forms (Complaints) April 20, 2018

Consumer Communications Bureau Respond to phone inquiries in all lines of insurance Help in primary spoken language (over 150 languages) Respond to written inquiries (Web & snail mail) Handle phone and written complaints that are time-sensitive in nature Respond to legislative inquiries Administer the Disaster Management Program Administer the Mediation Program (Post Disaster) April 20, 2018

Claims Services Bureau (CSB) CSB handles written consumer complaints regarding claim issues Complaints cover all lines of insurance other than health Most common complaints are delays in payment, delays in communications, amount of benefits & denials of claims First step in disaster related claims mediation April 20, 2018

Mediation Program (Post Disaster) 1995 - Earthquake Claims 2001 – Auto Physical Damage 2004 – Residential Property (Wildfires) EQ & Residential Triggered by Declared Disaster April 20, 2018

Mediation Program (Post Disaster) Issues Eligible for Mediation - Generally Scope of Loss Mandated Building Code Upgrades Preexisting Damage vs. Proximate Cause ALE Proof of Loss & Other Personal Property Issues Underinsurance Issues Recovery : $18,077,115 As of 12/31/2017 April 20, 2018

Mediation Program (Post Disaster) Issues Not Eligible for Mediation Commercial Properties Matters in Current Litigation Legal Interpretation of Policy Provisions Allegations of Bad Faith Coverage Issues (cancellation, non-renewals, etc.) April 20, 2018

Health Claims Bureau (HCB) HCB handles written health claim complaints Common Complaints: Claim handling delays Low claim payments Confusing explanations of how benefits were calculated Denials of claims especially due to lack of medical necessity and experimental nature of treatment HCB also administers the Independent Medical Review (IMR) Program April 20, 2018

Rating & Underwriting Services Bureau (RUSB) RUSB is responsible for investigating all consumer rating and underwriting complaints Rating Complaints - Cost of Insurance Underwriting Complaints - Cancellation, non-renewal, acceptability Sales and Servicing Complaints - Billing problems, failing to process policyholder request for changes, sales practices. April 20, 2018

Disaster Management Program Respond to Natural and Other Disasters Monitor Current Events Work Closely with CalOES Staff Local Assistance Centers (LACs) Work Closely with Licensee CAT Teams Work with Enforcement Branch to Protect Victims from Unscrupulous Individuals April 20, 2018

Complaint Handling Process Step 1: Consumer contacts CDI for Assistance Step 2: CDI Acknowledges Contact Step 3: CDI Contacts the licensee (CRC) Step 4: Officer Reviews & Investigates Step 5: Brings Complaint to Conclusion Step 6: Follow up contact to consumer & licensee if necessary April 20, 2018

Complaint Handling Process – Continued Mediate complaint Conduct regulatory review April 20, 2018

2017 CSD Statistics Calls Received/In-Person Assist: 151,354 Complaint Cases Opened: 44,557 Complaint Cases Closed: 43,715 Consumer Dollars Recovered: $62,400,189 April 20, 2018

Types of Complaint Reasons # Types of Complaint Reasons 2017 1 Denial of Claim 27% 2 Claim Handling Delay 20% 3 Unsatisfactory Settlement Offer 14% 4 Premium & Rating / Misquotes 6% 5 Premium Notice / Billing Problem 3% 6 Cancellation 7 Premium Refund 8 Coverage Question 9 Agent Handling 2% 10 Premium Surcharge  11 All Other Reasons 17% April 20, 2018

Complaints by Line of Coverage 2017 Automobile 45.58% Accident & Health 25.01% Homeowners 9.22% Life & Annuity 5.64% All Others 14.55% April 20, 2018

Complaint Handling Tips Consumer Perspective Set reasonable expectations & provide thorough explanation of transaction process at the onset Respond timely Emphasize soft skills Regulatory Perspective Provide complete response to the Department Address ALL the issues raised by the consumer Provide timely response When in doubt, pick up the phone and talk to the compliance officer April 20, 2018

Emerging Issues/Hot Topics Sharing Economy Cannabis Insurance Drones Big Data and AI in Underwriting and Claim response. Disaster Response – 2017 & 2018 April 20, 2018

2017 – Early 2018 Disaster Events 7117 Fires; 505,956 Acres Burned 5 out of 20 Most Destructive California Wildfires Major Periods October Wildfires December Wildfires January 2018 Mudslides $12.33 Billion in Insured Losses (48k insurance claims filed) – October & December Wildfires $400 Million in Insured Losses to date (2,038 claims filed – Montecito Mudslide April 20, 2018

October 2017 Wildfires Tubbs & Pocket Fires (Napa & Sonoma) – 5,643 destroyed Nuns Fire (Sonoma) – 1355 Atlas Fire (Napa and Solano) – 781 Redwood Valley Complex (Mendocino) – 544 Wind Complex (Yuba, Nevada and Butte) Canyon 2 Fire (Orange) Point Fire (Calaveras) Sulphur (Lake) April 20, 2018

December Wildfires & Subsequent January 2018 Mudslide 6 Major Wildfires Thomas Fire (Ventura & Santa Barbara) - 1063 Lilac Fire (San Diego) Creek Fire (Los Angeles) Rye Fire (Los Angeles & Ventura) Skirball fire (Los Angeles) Little Mountain Fire (San Bernardino) Montecito Mudslide April 20, 2018

Microsoft Engineering Excellence End of presentation April 20, 2018 Microsoft Confidential