California-Title 10-SIU requirement

Chapter 5. Insurance Commissioner

Subchapter 9. Insurance Fraud

Article 2. Special Investigative Units 

Amend 2698.30. Definitions.

As used in this article, the following definitions shall apply:

(a) “Act” means any violation of California Code of Regulations, Title 10, Chapter 5,

Section 2698.30-42, inclusive.

(b) “Authorized governmental agency (agencies)” shall have the same meaning as used in the

Insurance Frauds Prevention Act (IFPA).

(c) “Claims handler” means every employee and agent of an insurer whose principal

responsibilities include the investigation, adjustment, settlement, and resolution of claims.

(d) “Commissioner” means the Insurance Commissioner of the State of California.

(e) “Communication” includes the referral of suspected insurance fraud to the Department of

Insurance and providing information and documents requested by the Fraud Division.

(f) “Contracted entity” means any entity with which an insurer contracts to perform SIU or

integral anti-fraud personnel duties or functions on behalf of the insurer. “Contracted entity”

includes subcontractors and sub-subcontractors contracted to perform SIU or integral anti-fraud

personnel duties or functions on behalf of the insurer. The term “contracted entity” does not

include the insurer’s affiliates, or subsidiaries, with which the insurer contracts to perform SIU or

integral anti-fraud personnel duties or functions on behalf of the insurer. “Contracted entity”

does not include entities with whom an insurer, or another of the insurer’s contracted entities,

contracts to provide an expert opinion on a medical, technical, or scientific topic, or perform a

discreet, specific investigative task such as surveillance, accident reconstruction, background

checks, scene inspections, social media checks, interviews, witness canvassing, Arising Out of

Employment/Course of Employment (AOE/COE) investigations, activity checks, or database

vendor services including, but not limited to, ISO ClaimSearch, LexisNexis, and Accurint, on behalf of the insurer in connection with the insurer’s performance of its SIU or integral antifraud personnel duties or functions. However, the immediately preceding sentence

notwithstanding, entities that (1) participate in the claims handling function of the insurer,

(2) make decisions on behalf of the insurer with respect to the insurer’s SIU or integral anti-fraud

functions, or (3) contract with other entities to perform SIU or integral anti-fraud duties or

functions on behalf of the insurer, are included within the meaning of the term “contracted

entity.”

(gf) “Department” means the California Department of Insurance.

(hg) “Fraud Division” means the California Department of Insurance Fraud Division formerly

known as the Bureau of Fraudulent Claims.

(ih) “Hearing” means an adjudicative proceeding initiated by the Insurance Commissioner

pursuant to the provisions of California Insurance Code Ssection 1875.24(d).

(ji) “Inadvertent” means unintentional.

(kj) “Insurer” means every insurer admitted to do business in this state except the following:

(1) Reinsurers.

(2) Title insurers.

(3) Fraternal fire insurers.

(4) Fraternal benefit societies.

(5) Firemen, policemen, or peace officer benefit and relief associations.

(6) Grant and annuity societies.

(7) Home protection.

(lk) “Integral anti-fraud personnel” includes insurer personnel who the insurer has not identified

as being directly assigned to its SIU but whose duties may include the processing, investigating,

or litigation pertaining to payment or denial of a claim or application for adjudication ofor claim

or application for insurance. These personnel may include claims handlers, underwriters, policy

handlers, call center staff within the claims or policy function, legal staff, and other insurer

employee classifications that perform similar duties.

(ml) “Reasonable belief” is a level of belief that an act of insurance fraud may have or might be

occurring for which there is an objective justification based on articulable fact(s) and rational

inferences therefrom.

(nm) “Red flag” or “red flag event” means facts, circumstances, or events which, singly or in

combination, support(s) an inference that insurance fraud may have been committed., and

includes patterns or trends that may indicate fraud, facts or circumstances present on a claim, and

behavior or history of person(s) submitting a claim or application.

(on) “Regulations” means these regulations, California Code of Regulations, Title 10, Chapter 5,

Subchapter 9, Article 2.

(po) “Special Investigative Unit” (SIU) means an insurer’s unit or division that is established to

investigate suspected insurance fraud. The SIU may be comprised of insurer employees or by

contracting with other entities for the purpose of complying with applicable sections of the

Insurance Frauds Prevention Act (IFPA) for the direct responsibility of performing the functions

and activities as set forth in these regulations.

(qp) “Suspected insurance fraud” includes any misrepresentation of fact or omission of fact

pertaining to a transaction of insurance including claims, premium, and application fraud. These

facts may include evidence of doctoring, altering or destroying forms;, prior history of the

claimant, policy holder, applicant, or provider;, receipts;, estimates;, explanations of benefits

(EOBs), medical evaluations or billings;, medical provider notes (commonly known as SOAPE

notes:); Subjective complaint, Objective findings, Assessment, Plan and Evaluation);, Health

Care Financing Administration (HCFA) forms;, police and/or investigative reports;, relevant

discrepancies in written or oral statements and examinations under oath (EUO);, unusual policy

activity; and falsified or untruthful application for insurance. An identifiable pattern in a claim

history may also suggest the possibility of suspected fraudulent claims activity. A claim may

contain evidence of suspected insurance fraud regardless of the payment status.

(rq) “The Insurance Frauds Prevention Act” or “(IFPA)” shall refer to California Insurance Code

sections 1871-through 1879.8.

(sr) “Willful” means a purpose or willingness to commit the act or make the omission referred to

in the California Insurance Code or in these regulations. The Commissioner shall use the factors

set forth at California Code of Regulations, Title 10, Section 2591.3(d)(1)(A-E) to determine

whether or not an act is willful.

NOTE: Authority cited: Sections 1872.4, 1875.24, 1877.3, 1879.5 and 1879.6, Insurance Code;

Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247;

Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d

993; and Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference:

Sections 1875.20, 1875.21, 1875.24, 1879.5, 9080, 10970, 11400, 11520, 11760, 11880,

12400.1, 12743, 12921(a) and 12926, Insurance Code.

Amend Section 2698.33. SIU and Integral Anti-Fraud Personnel Contracted Responsibilities.

(a) Any contract entered into by an insurer, or an entity under contract with an insurer for the

performance of SIU or integral anti-fraud personnel duties or functions as provided under these

regulations, shall not relieve the insurer of any obligation under these regulations or the IFPA.

(b) Notwithstanding any other provisions of these regulations, a complete and executed copy of

any such agreement, including all attachments, exhibits and amendments thereto, shall be

provided to the Fraud Division upon request by the Fraud Divisionon execution.

(c) Any contract entered into by an insurer with a contracted entity under this section shall:

(1) Specify all SIU or integral anti-fraud personnel duties and functions to be performed

by the parties to the contract and how the insurer monitors performance of the contract

responsibilities;

(2) Not include provisions that could provide disincentives to the referral and/or

investigation of suspected insurance fraud;

(3) Not include provisions that purport to relieve an insurer of any obligation to comply

with the requirements of these regulations and the IFPA.; and

(4) Expressly include a provision to require the contracted entity to comply with all

applicable provisions of the IFPA and this articlethese regulations.; and

(5) Expressly require the contracted entity to include the following provisions in any

agreement the contracted entity may enter into with any subcontractor to perform SIU or

integral anti-fraud personnel duties or functions for the contracted entity on behalf of the

insurer:

(A) Subcontractor to provide entire agreement to the Fraud Division upon request:

An express provision requiring that the contractor provide to the Fraud Division a

complete and executed copy of any such agreement between the contractor and its

subcontractor, including all attachments, exhibits and amendments thereto, upon

request by the Fraud Division,

(B) Subcontractor to be bound by same requirements as contractor: An express

provision that any such agreement between the contractor and its subcontractor

shall conform to the requirements set forth in subdivisions (c)(1), (c)(2), (c)(3),

and (c)(4) of this Section 2698.33, and

(C) Limitations on subcontractor contracting with other entities: An express

provision that, in the event any subcontractor to the contracted entity contracts

with any other entity or entities to perform SIU or integral anti-fraud personnel

duties or functions on behalf of the insurer, the agreement between the

subcontractor and the entity so contracted (hereinafter a “sub-subcontractor”)

shall contain the following provisions:

1. Sub-subcontractor to be bound by same requirements as contractor and

subcontractor: The express provision described in subdivision (c)(5)(B) of

this section,

2. Sub-subcontractor to provide entire agreement to the Fraud Division

upon request: An express provision identical in substance to the provision

described in subdivision (c)(5)(A) of this section, binding the

subcontractor to provide, upon request by the Fraud Division, the

documents specified in that subdivision (c)(5)(A) but with respect to the

agreement between the subcontractor and its sub-subcontractor, and

3. No further subcontracting: An express provision prohibiting the

sub-subcontractor from permitting, or contracting with, any other entity to

perform the SIU or integral anti-fraud personnel duties or functions which

the sub-subcontractor has contracted with the subcontractor to perform on

behalf of the insurer.

(d) An insurer shall no later than April 1, 2021 ensure that the provisions described in

subdivisions (c)(5)(A) through (c)(5)(C) of this section are included in any and all of its contracts

with contracted entities for the performance of SIU or integral anti-fraud personnel duties or

functions.

NOTE: Authority cited: Sections 1875.23, 1875.24, 1879.5 and 1879.6, Insurance Code; Calfarm

Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit

Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993;

and Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Sections

1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926, Insurance Code.

Amend Section 2698.34. Communication with the Fraud Division and Authorized Governmental

Agencies.

(a) The insurer and any entity performing the SIU function(s) shall comply with specific

sections of the IFPA regarding communication with the Fraud Division and authorized

governmental agencies.

(b) On written request by the Fraud Division or an authorized governmental agency, an insurer

or its agents, shall release in a timely and complete manner any or all relevant information

deemed important that the insurer may possess relating to any specific incident of insurance

fraud. SuchThe information released pursuant to this subdivision (b) shall include:

(1) Insurance policy information;

(2) Applications;

(3) Policy premium payment records;

(4) History of claims;

(5) Information relating to the carrier’s investigation, including statements, proof and

notice of loss;

(6) Claim file documents;

(7) Claim notes;

(8) Investigation files;

(9) Investigator notes; and

(10) Other information which the Fraud Division or an Aauthorized Ggovernmental

Aagency may deem relevant and important.

(c) For the purpose of this section, timely release of information means immediate, but no more

than thirty (30) calendar days after the request or, in the event of a request relating to workers’

compensation insurance fraud, sixty (60) calendar days after the request, unless otherwise agreed

to by the Fraud Division or by the other authorized governmental agency making the request.

(d) Information released pursuant to this Section 2698.34 shall be transmitted only as follows,

unless otherwise agreed to by the Fraud Division:

(1) Via the Fraud Division’s electronic portal provided for this purpose;

(2) As hardcopy; or

(3) In an electronic file.

For purposes of this subdivision (d)(3):

(A) If the file is password-protected, the password must be provided to the Fraud

Division and must not expire.

(B) If the file is encrypted, the insurer shall provide Fraud Division with any

materials necessary in order for the encrypted information to be accessed by the

Fraud Division.

(ec) A single written request shall be considered sufficient to compel production of all

information deemed relevant by the requesting governmental agency relating to any specific

insurance fraud investigation. The single request is applicable throughout the duration of the

investigation and is applicable to the requested records of the insurer named in the request and

the records of all persons, agents, and brokers employed by and conducting business on behalf of

the insurer.

NOTE: Authority cited: Sections 1872.4, 1875.24, 1877.3, 1879.5 and 1879.6, Insurance Code;

Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247;

Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d

993; and Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. 

Reference: Sections 1872.3, 1873, 1874.2, 1874.4, 1875.4, 1875.20, 1875.21, 1875.24, 1877.1,

1877.2, 1877.3, 1877.4, 1877.5, 1879.5, 12921(a) and 12926, Insurance Code.

Amend Section 2698.35. Detecting Suspected Insurance Fraud.

(a) An insurer’s integral anti-fraud personnel are responsible for identifying suspected insurance

fraud during the handling of insurance transactions and referring it to the SIU as part of their

regular duties.

(b) The SIU shall establish, maintain, distribute, and monitor written procedures to be used by

the integral anti-fraud personnel to detect, identify, document, and refer suspected insurance

fraud to the SIU. The written procedures shall include a listing of the red flags to be used to

detect suspected insurance fraud for the insurer. The red flags listed pursuant to the immediately

preceding sentence shall be specific to each line of insurance, or each insurance product,

transacted in or issued by the insurer.

(c) The procedures for detecting suspected insurance fraud shall provide for comparison of any

insurance transaction against red flags and other criteria that may indicate possible fraud.:

(1) Patterns or trends of possible fraud;

(2) Red flags;

(3) Events or circumstances present on a claim;

(4) Behavior or history of person(s) submitting a claim or application; and

(5) Other criteria that may indicate possible fraud.

NOTE: Authority cited: Sections 1875.24, 1879.5 and 1879.6, Insurance Code; Calfarm Ins. Co.

v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen.

Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; and Garris

v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Sections 1875.20,

1875.21, 1875.24, 1879.5, 12921(a) and 12926, Insurance Code.

Amend Section 2698.36. Investigating Suspected Insurance Fraud.

(a) The SIU shall establish, maintain, distribute, and adhere to written procedures for the

investigation of possible suspected insurance fraud. An investigation of possible suspected

insurance fraud shall include:

(1) A thorough analysis of a claim file, application, or insurance transaction, that

includes consideration of factors indicating insurance fraud.

(2) Identification and interviews of potential witnesses who may provide information on

the accuracy of the claim or application.

(3) Utilizing one or more industry-recognized databases identified by the SIU as

appropriate for use in fraud investigations involving the particular line of insurance in

question.

(4) Preservation of documents and other evidence obtained during an investigation.

(5) Writing a concise and complete summary of the entire investigation, which is

specific to the investigation at hand, is separate from any other document prepared in

connection with the investigation, and includesing the investigators’s findings regarding

the suspected insurance- fraud and the basis for their findings. The summary shall answer

the following questions:

(A) What facts caused the reporting party to believe insurance fraud occurred or

may have occurred?

(B) What are the suspected misrepresentations and who allegedly made them?

(C) How are the alleged misrepresentations material and how do they affect the

claim or insurance transaction?

(D) Who are the pertinent witnesses to the alleged misrepresentation, if there are

pertinent witnesses?

(E) What documentation is there of the alleged misrepresentation, if

documented?

(F) In addition, the summary prepared pursuant to this subdivision (a)(5) shall

include a statement as to whether or not the investigation is complete.

(b) Each investigation of suspected insurance fraud shall include performing at least the

procedures specified pursuant to subdivision (a) of this Section 2698.36, to the extent they are

applicable.

(c) The SIU shall investigate each credible referral of suspected insurance fraud that it receives

from integral anti-fraud personnel, including automated or system-generated referrals. A credible

referral of suspected insurance fraud is one that includes a red flag or red flags. However, the

first sentence of this subdivision (c) notwithstanding, in the event that upon a preliminary review

the SIU determines that it is reasonably clear that the red flag or red flags contained in the

referral is not or are not the result of suspected insurance fraud, the SIU need not open an

investigation. In the event that the SIU refrains from opening an investigation pursuant to the

immediately preceding sentence, the SIU shall document in the claim file or SIU investigation

file the reasons supporting its conclusion that the red flag or red flags contained in the referral is

not or are not the result of suspected insurance fraud.

NOTE: Authority cited: Sections 1875.24, 1879.5 and 1879.6, Insurance Code; Calfarm Ins. Co.

v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen.

Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; and Garris

v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Sections 1875.20,

1875.21, 1875.24, 1879.5, 12921(a) and 12926, Insurance Code.

Amend Section 2698.37. Referral of Suspected Insurance Fraud.

(a) The SIU shall provide for the referral of acts of suspected insurance fraud to the Fraud

Division and, as required, district attorneys.

(b) Referrals shall be submitted in any insurance transaction where the facts and circumstances

create a reasonable belief that a person or entity may have committed or is committing insurance

fraud.

(c) Referrals shall be made within the period specified by statute.

(d) The SIU shall complete as much of its investigation as is reasonable prior to the time the

referral is made to the Fraud Division. Each referral of suspected insurance fraud shall indicate

whether the investigation is complete or further investigation is needed.

(ed) The requirements of this section do not affect the immunity granted under California

Insurance Code section 1872.5 or other such similar codes contained in the Insurance Frauds

Prevention Act.

(fe) The requirements of this section do not diminish statutory requirements contained in the

Insurance Frauds Prevention Act regarding the confidentiality of any information provided in

connection with an investigation.

NOTE: Authority cited: Section 1708, Civil Code; Sections 1872.4, 1874.6, 1875.24, 1875.4,

1877.3, 1877.5, 1879.5 and 1879.6, Insurance Code; Calfarm Ins. Co. v. Deukmejian (1989) 48

Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247;

For workers compensation only. Section 56-47-112 requires insurers to prepare, implement, maintain and submit anti-fraud plans to the Department of Commerce and Insurance. “Each insurer’s antifraud plan shall outline specific procedures to: (A) prevent, detect and investigate all forms of insurance fraud, including fraud involving the insurer’s employees or agents; fraud resulting from misrepresentations in the application, renewal or rating of insurance policies, claims fraud; and security of the insurer’s data processing system; (B) educate appropriate employees on fraud detection and the insurer’s anti-fraud plan; (C) provide for the hiring of or contracting for fraud investigators; (D) report insurance fraud to appropriate law enforcement and regulatory authorities in the investigation and prosecution of insurance fraud; and (E) pursue restitution for financial loss caused by insurance fraud where appropriate.”

(b) The plan shall include the following provisions: (1) Establishment of a full time Special Investigation Unit separate from the underwriting or claims functions of the insurer, which shall be responsible for investigation of cases of suspected fraudulent activity and for implementation of the insurer’s fraud prevention and reduction activities under the Fraud Prevention Plan. In the alternative the insurer may contract with a provider of services to perform all or part of this function, but shall remain primarily responsible for the development and implementation of its Fraud Prevention Plan. The agreement under which such services are provided shall be filed with the Insurance Frauds Bureau as part of the Fraud Prevention Plan, and must provide for specific levels of staffing devoted to the investigation of suspected fraudulent claims. In the event that investigators employed by a provider of services will be working for more than one insurer or on cases in states other than New York, the plan must apportion the percentage of the investigator’s efforts which will be devoted to working for the insurer on its New York cases. The agreement shall also require that the provider of services cooperate fully with the Department of Insurance in any examination of the implementation of the Fraud Prevention Plan, and provide any and all assistance requested by the Insurance Frauds Bureau, any other law enforcement agency or any prosecutorial agency in the investigation and prosecution of insurance fraud and related crimes. (2) A description of the organization of the Special Investigation Unit, including the titles and job descriptions of the various investigators and investigative supervisors, the minimum qualifications for employment in these positions in addition to those required by this regulation, the geographical location and assigned territory of each investigator and investigative supervisor, the support staff and other physical resources, including database access available to the Unit and the supervisory and reporting structure within the Unit and between the Unit and the general management of the insurer. If investigators employed by the Unit will be responsible for investigating cases in more than one State, the plan must apportion that percentage of the investigators’ efforts which will be devoted to New York cases. (3) The rationale for the level of staffing and resources

I. Except for insurance companies writing only credit, home warranty, travel, or title insurance, every insurance company licensed to write direct business in this state shall have antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent insurance acts, including: (a) Fraud investigations, who may be insurer employees or independent contractors; or (b) An antifraud plan submitted to the commissioner. II. Antifraud plans submitted to the commissioner shall be privileged and confidential and shall not be a public record and shall not be subject to discovery or subpoena in a civil or criminal action. PART Ins 4601 ANTIFRAUD PLANS Ins 4601.01 Purpose. The purpose of this chapter is to establish standards for the insurance fraud investigation unit, insurance company special investigative unit (SIU) and any other interested parties regarding the preparation of an antifraud plan that meets the mandated requirements for submitting a plan with the department pursuant to RSA 417:30. Ins 4601.02 Applicability and Scope. This chapter shall be applicable to every insurance company licensed to write direct business in this state except for insurance companies writing only credit, home warranty, travel, or title insurance. Ins 4601.03 Definitions. (a) “Commissioner” means.he insurance commissioner. (b) “Department” means the New Hampshire Insurance Department. (c) “National Association of Insurance Commissioners (NAIC)” means the organization comprised of elected or appointed state government officials of the 50 states, the district of columbia and the U.S. territories whose departments regulate the business of insurance. (d) “National Health Care Antifraud Association (NHCAA)” means the organization founded in 1985 by private health insurers and federal and state governments whose activities focus exclusively on fighting health care fraud. (e) “National Insurance Crime Bureau (NCIB)” means the not-for-profit organization created by the insurance industry to address insurance-related crime. (f) “Online Fraud Reporting System (OFRS)” means the online fraud reporting system developed by the NAIC for regulators, consumers and insurance industry to report insurance fraud. (g) “Special Investigations Unit (SIU)” means the non-law enforcement units of an insurer or insurer affiliated entity whose sole mission is to detect, deter, defeat and report insurance fraud. An SIU includes any of the following: (1) An internal unit of the insurance company; (2) An external unit of more than one insurance company that is part of the same insurance holding company system; or (3) An independent third-party unit under contract with an insurer or insurers. Ins 4601.04 Antifraud Plan Submission Requirement. (a) An insurer, if required by the department, subject to RSA 408-D:14 and RSA 417:30, shall submit to the commissioner a detailed description of the company’s antifraud plan. (b) All antifraud plans submitted shall be subject to review by the commissioner. Ins 4601.05 Antifraud Plan Requirements. (a) The antifraud plan shall be an acknowledgement by the insurer and its SIU that they have established criteria that shall be used to detect suspicious or fraudulent insurance activity relating to the different types of insurance offered by that insurer. (b) One SIU antifraud plan may cover several insurer affiliated entities if one STU has the fraud investigation mission for all entities. (c) The following information shall be included in the submitted antifraud plan to satisfy the requirements of this chapter, RSA 408-D:14 and RSA 417:30: (1) General information requirements including: a. An acknowledgment that the SIU has established criteria that shall be used for the investigation of acts of suspected insurance fraud relating to the different types of insurance offered by that insurer; b. An acknowledgment that the insurer or SIU shall record the date that suspected fraudulent activity is detected, and shall record the date that reports of such suspected insurance fraud were sent directly to the department with a specific time frame which is.consistent with RSA 417:28; c. A provision stating whether the SIU is an internal unit or an external or third party unit; d. If the SIU is an internal unit, provide a description of whether the unit is part of the insurer’s claims or underwriting departments, or whether it is separate from such departments; e. A written description or chart outlining the organizational arrangement of the insurer’s antifraud positions responsible for the investigation and reporting of possible fraudulent insurance acts, including: 1. If the SIU is an internal unit, the insurer shall provide general contact information for the company’s SIU; 2. If the SIU is an external unit, the insurer shall provide: (i) The name of the company or companies used; (ii) Contact information for the company; (iii) A company organizational chart; and (iv) The person or position at the insurer responsible for maintaining contact with the external SIU company; 3. If an external SIU is employed for purposes of surveillance, the insurer shall include a description of the policies and procedures implemented; f. A provision where the insurer provides the NAld. individual and group code numbers; g. A statement as to whether the insurer has implemented a fraud awareness or outreach program. If the insurer has an awareness or outreach program; a brief description of the program shall be included; h. If the SIU is a third party, a description of the insurer’s policies and procedures for ensuring that the third party unit fulfills its contractual obligations to the insurer and a copy of the contract with the third party vendor. (2) Prevention, detection and investigation of fraud information, including: a. A description of the insurer’s corporate policies for preventing fraudulent insurance acts by its policy holders; b. A description of the insurer’s established fraud detection procedures, such as technology and other detection procedures; c. A description of the internal referral criteria used in reporting suspicious claims of insurance fraud for investigation by the SIU; d. A description of the SIU investigation program, such as by business line, external form claims adjustment, vendor management standard operating procedures; and e. A description of the insurer’s policies and procedures for referring suspicious or fraudulent activity from the Claims or underwriting departments to the SIU. (3) Reporting of fraud information, including: a. A description of the insurer’s reporting procedures for the mandatory reporting of possible fraudulent insurance acts to the commissioner pursuant to RSA 408-D:14, RSA 417:28, and RSA 417:30; b. A description of the insurer’s criteria or threshold for reporting fraud to the commissioner; RSA 408-D:14, RSA 417:28, and RSA 417:30 and c. A description of the insurer’s means of submission of reports of suspected fraud to the commissioner such as through the NAIC, OFRS, NICB, NHCAA, electronic state system, or other. (4) Education and training information, including, if applicable, a description of the insurer’s plan for antifraud education and training initiatives of any personnel involved in antifraud related efforts. Which description shall include: a. The internal positions the insurer offers regular education and training, such as underwriters, adjusters, claims representatives, appointment agents, and attorneys, etc. b. If the training will be internal and/or external; c. Number of hours expected per year; and d. If training includes ethics, false claims or other legal-related issues. (5) Internal fraud detection and prevention information, including: a. A description of the insurer’s internal fraud detection policy for employees, consultants or others, such as underwriters, claims representatives, appointed agents, etc.; and b. A description of the insurer’s internal fraud reporting system. Ins 4601.06 Compliance with 18 USC 1033 & 1034. The insurer shall include a description of its policies and procedures for candidates for employment and existing employees for compliance with 18 USC 1033 & 1034. Ins 4601.07 Regulatory Compliance. Pursuant to RSA 417:30, the department shall review insurer antifraud plans in order to determine compliance with appropriate state laws. Further, the department shall in accordance with RSA 417:30 IV take appropriate administrative action against an insurer that fails to comply with’the mandated requirements and/or state laws. Ins 4601.08 Confidentiality of Antifraud Plans. The submission of required information shall not constitute a waiver of an insurer’s privilege, trade secret, confidentiality or any proprietary interest in its antifraud plan or its antifraud related policies and procedures. The commissioner shall maintain the antifraud plan as confidential. Submitted plans shall not be subject to RSA 91-A if submitted properly under the state statutes or rules which would afford protection of these materials under RSA 408-D:14 and RSA 417:30 II. Ins 4601.09 Required Antifraud Plan Submission. An insurer shall submit its antifraud plan within 90 days of receiving a certificate of authority. Plans shall be submitted every 5 years thereafter. An Surer shall submit revisions to its plan within 30 days of a material change being made.

11:16-6.4 Special Investigations Unit (SIU)-duties, qualifications, and composition ( a) Except for automobile insurers that insure fewer than 2,500 New Jersey automobile policies, and health insurers that insure fewer than 10,000 lives, the plan in accordance with N.J.A.C. 11:16-6.3 shall establish a full-time Special Investigations Unit (“SIU”). (b) The SIU shall be responsible for the following: 1. Conducting investigations of claims referred by the claim personnel or applications referred by underwriting personnel whenever the adjuster, processor, or underwriter identifies specific facts and circumstances which, upon further SIU investigation, may lead to a reasonable conclusion that a violation of N.J.A.C. 17:33A-4 has occurred; 2. Providing liaison with OIFP, other law enforcement personnel and the DAFC; 3. Providing in-service training to claims personnel, underwriting personnel, and adjusters in accordance with the provisions of N.J.A.C. 1:16-6.5; 4. Maintaining a database of fraudulent claims and application fraud which shall contain, at a minimum, the names, addresses and other identifying information regarding all parties to the investigation referred to in (b) 1 above; 5. Informing insurance underwriters of ineligible risks by reason of prior fraudulent activities from the database in (b)4 above; 6. Identifying persons and organizations that are involved in suspicious claim activity and application fraud, as described in (b)1 above; 7. Referring matters to OIFP in accordance with N.J.A.C. 11:16-6.6(b) and N.J.A.C. 11:16-6.7 and providing notice of suspicious claims in accordance with N.J.A.C. 11:16-6.6(c); and 8. Ensuring that all evidence on matters referred to the SIU including, but not limited to, checks issued in payment of claims, taped statements, original receipts, and original documents submitted by a person or entity in support of or in opposition of a claim applicant, are identified, collected and preserved in order to be turned over to OIFP in connection with the referral of cases to OIFP. (c) The SIU shall have the following composition: 1. SIU investigators and SIU specialists shall be a separate unit from the claims adjusting or underwriting function. For purposes of this paragraph, it shall not violate this provision if the SIU issues a check paying a claim or denies payment of a claim so long as: i. The SIU personnel are a separate and distinct unit and ii. When closing the file at the completion of the investigation, the SIU records its findings in writing together with its recommendations to pay or deny the claim with the reasons. 2. Automobile insurers shall employ at least one SIU investigator or SIU specialist (when permitted by N.J.A.C. 11:16-6.4(d)2) for each 30,000 New Jersey automobile policies serviced. 3. Health insurers offering comprehensive benefits contracts shall employ at least one SIU investigator or SIU specialist (when permitted by N.J.A.C. 11:16-6.4(d)2) for every 60,000 insured lives. 4. Health insurers offering limited benefit contracts shall employ at least one SIU or SIU specialist (when permitted by NJAC 11:16-6.4(d)2) for every 250,000 insured lives. Limited benefits contracts shall include, but not be limited to, the following: accident only; credit; disability; long-term care; Medicare supplement; dental only; vision only; insurance issued as a supplement to liability insurance; and any other supplemental hospital indemnity benefits. (d) Qualifications of SIU investigators and specialists shall be as follows: 1. SIU investigators shall have at least one of the following: i. A Bachelor’s degree; ii. An Associate’s degree plus a minimum of two years experience with insurance related employment; iii. A minimum of four years of experience with insurance related employment; or iv. A minimum of five years of law enforcement experience. 2. When approved by the Department in the plan, an insurer shall be permitted to employ a limited number of SIU specialists who shall possess unique qualifications by way of training, technical skill, and/or experience to investigate and identify cases of fraud, but lack the specific educational requirements set forth in (d)1 above, to be SIU investigators. (e) The plan may provide that the functions of the SIU may be assigned to an outside vendor or third party administrator. In such case, the plan shall provide that the outside vendor or third party administrator shall be also be responsible together with the insurer, for compliance with NJAC 11:16-6. § 11:16-6.5 Training program and manual for the prevention and detection of fraud      (a) The requirements with respect to fraud prevention and detection training programs are set forth in this subsection. Except for automobile insurers that insure fewer than 2,500 New Jersey automobile policies and health insurers that insure fewer than 10,000 lives, the plan shall provide anti-fraud education for SIU investigators, SIU specialists, claims adjusters, and underwriters that shall include a detailed and comprehensive program of insurance fraud awareness and education to prepare claims adjusting and underwriting personnel for insurance fraud prevention and detection.   1. The training program shall include Basic Entry Level Training and Continuing Education Training for all adjusters, claims processors, underwriters, SIU investigators, and SIU specialists, and shall be submitted to and approved by the Department. The Continuing Education Training instructions format may be classroom instruction, self-guided instruction, videotape, seminar, computer based, or by any other means.   2. The training programs referred to in (a)1 above shall be provided as follows:   i. In the case of automobile insurers, training shall include, but not be limited to, the following areas as appropriate: automobile theft investigations, automobile property damage and fire investigations, personal injury protection investigations, bodily injury liability claim investigation, statutory requirements for fraud referrals, techniques for the identification of fraudulent applications for coverage, insurance rate making practices, tier rating plans used by the insurer, PIP medical expense benefits and medical treatment protocols and precertification plans, and current indicators of fraud.   ii. In the case of health insurers, training shall include, but not be limited to, the following areas as appropriate: overcharging and overpayment detection, claims processing guidelines, medical coding, duplicate bills, excessive charges, unnecessary services or supplies, over-utilization, services never rendered, miscoded or misleading claim information, hospital inpatient or outpatient billing abuse or inappropriate commitment or confinement, abusive or fraudulent referrals, statutory requirements dealing with fraud referrals, techniques for the identification of fraudulent applications for coverage, the type, methods of service and operating procedures of various health insurers, and current indicators of fraud.   iii. Each company shall submit for approval the Basic Entry Level Training, which shall be no less than nine hours of classroom instruction for SIU personnel and no less than four and one-half hours of classroom instruction for non-SIU personnel. Continuing Education Training shall be no less than nine hours of training per year for SIU personnel and no less than two hours per year for claims and underwriting personnel. Basic Entry Level Training shall be given to all employees within 180 days from the commencement of their employment at each of these positions: underwriters, adjusters, claims processors, SIU investigators, or SIU specialists. The no less than two hours of continuing education training provided to non-SIU personnel shall emphasize the responsibility of all employees to identify and report indications of internal and external fraud to the proper authority.   (b) The requirements with respect to fraud prevention and detection procedures manuals are set forth in this subsection. Except for insurers which insure fewer than 2,500 New Jersey automobile policies, or health insurers fewer than 10,000 lives, the plan shall provide a fraud prevention and detection procedure manual and disseminate it to, or make it available to, as appropriate, all SIU, claims adjusters, and underwriting personnel. The fraud prevention and detection procedure manual shall include, at a minimum, the following:   1. Information for claim adjusters, underwriting personnel, SIU investigators and SIU specialists regarding general investigation guidelines; unfair claims practices; conducting interviews; report writing; information disclosure; law enforcement relations; and the New Jersey Insurance Fraud Prevention Act;   2. The process to be employed for reporting to OIFP when specific facts and circumstances are identified, in connection with a claim or application, which upon further SIU investigation leads to a reasonable conclusion that a violation of N.J.S.A. 17:33A-4 has occurred;   3. For automobile insurers, the “fraud indicators” used for automobile theft, automobile physical damage fraud, personal injury claims fraud, bodily injury claims fraud, and application fraud;   4. For health insurers, “fraud factors” or “indicators” for health fraud, application fraud, and claims fraud;   5. The duties and functions of the SIU;   6. The procedure for referral of a claim or application to the SIU;   7. The post-referral procedure for communication between the claims unit and/or the underwriting unit and the SIU regarding claim resolution and file closure;   8. All update pages for the protocol, training program, and procedure manual shall include a description of the content being updated, the page number, and its effective date;   9. Hard copy procedure manuals shall include version/filing numbers in footers along with page numbering and a table of contents;   10. Internet-based procedure manuals shall provide home pages displaying hyperlinks or other navigation to the required content; and   11. Updates shall be referenced in hard copy and Internet manuals.   (c) As used in (b) above:   1. “Unfair claims practices” is understood to include copies of or valid hyperlinks to both:   i. N.J.S.A. 17B:30-13 and N.J.A.C. 11:2-17, Unfair Claim Settlement Practices, (health insurers); and   ii. N.J.S.A. 17:29B-4(9) and N.J.A.C. 11:2-17, Unfair Claim Settlement Practices, (property/casualty);   2. “New Jersey Insurance Fraud Prevention Act” is understood to include copies of or valid hyperlinks to both:   i. N.J.S.A. 17:33A-1 et seq., New Jersey Insurance Fraud Prevention Act; and   ii. N.J.A.C. 11:16-6, Fraud Prevention and Detection; and   3. “Information disclosure” is understood to include copies of or valid hyperlinks to:   i. P.L. 106-102, Gramm-Leach-Bliley;   ii. P.L. 104-191, Health Insurance Portability and Accountability Act of 1996;   iii. N.J.S.A. 56:11-44 et seq., Identity Theft Prevention Act;   iv. N.J.S.A. 17:23A-13, Disclosure limitations and conditions; and   v. N.J.A.C. 13:45F, Identity Theft.   (d) Specimen formats of the anti-fraud prevention and detection protocol, anti-fraud prevention and detection training program, and anti-fraud prevention and detection procedure manual are available for viewing on-line at http://www.state.nj.us/dobi/division_consumers/insurance/mceu.html. 11:16-6.6 Fraud prevention and detection plan (a) The plan shall provide for underwriting inquiry to verify that the insured is an eligible person and the policy is properly rated within 60 days of receipt of the application. These underwriting inquiries shall verify the insured’s residency provided by the insured on his or her application for insurance. The plan may provide that these inquires are generally done “in-house” by telephone and by using information from the New Jersey Division of Motor Vehicle Services (or similar agencies in other states) and prior insurers. (b) The following concern referral of application and claims: 1.The plan shall provide that an application or claim shall be referred as a case to OIFP, for further OIFP investigation or other appropriate action, on the prescribed Referral Form (OIFP-1A for Claim Fraud Referral, OIFP-1B for Application Fraud Referral, OIFP-2 for Suspicious Claim/Application Notification, OIFP-3A for Health Claim Fraud Referral, OIFP-3B for Health Application Fraud Referral, and OIFP-4 for Suspicious Health Claim/Application notification incorporated herein by reference in the subchapter Appendix), with all other information required by the form, when the investigation complies with the requirements set forth in N.J.A.C. 11:16-6.7. 2. The plan shall provide that all applications and claims, which meet the standard for referral set forth in N.J.A.C. 11:16-6.7, shall be referred to OIFP by the SIU as soon as practicable, but in no case later than 30 days from when the investigation is complete. 3. The plan shall provide criteria and levels of economic impact for the referral of insurance claims and application fraud in accordance with the requirements of NJAC 11:16-6.7. (c) The plan shall provide that after completion of an SIU investigation, or after identification by an SIU of a pattern of applications or claims, the insurer shall provide notice to OIFP on Notification Form OIFP-2 and for Health insurance Notification on OIFP-4 (incorporated herein by reference in the subchapter Appendix), unless this form is superseded by an electronic reporting form, of instances in which a violation of N.J.S.A. 17:33A-4 is suspected on the basis of fraud factors or indicators, but where sufficient evidence to support a case referral pursuant to N.J.A.C. 11:16-6.7 has not been developed. (d) The plan shall provide that all referrals of application and claims fraud and notifications of suspected application or claims fraud by the insurer to OIFP shall be made by personnel in the insurer’s SIU or other personnel designated in the plan so long as records are kept of all referrals and notifications and the appropriate form is used. (e) Where an insurer contracts any of its SIU functions to an outside vendor or third party administrator in accordance with NJAC 11:16-6.4(e), the plan shall provide the name and address of the outside vendor or third party administrator used by the insurer to conduct investigations or perform SIU functions together with a copy of the contract between the insurer and the outside vendor or third party administrator. (f) The plan may include such other items as the insurer may wish to provide. 11:16-6.7 Referrals to OIFP (a) The plan shall provide that upon completion of its investigation, as described in (d) below, an SIU shall refer cases, on form OIFP-1A, OIFP-1B, OIFP-3A or OIFP-3B which meet the following standard to OIFP: 1. Any application or claim where the facts and circumstances crate a reasonable suspicion that a person or entity has violated N.J.S.A. 17:33A-4: and; 2. There is sufficient independent evidence corroborating the reasonable suspicion described in (a)1 above, from which a person could reasonably conclude that the person or entity has violated N.J.S.A. 17:33A-4. (b) The facts and circumstances referred to in (a)1 above can include, but are not limited to, “fraud indicators” contained in an insurer’s approved plan, and such other facts and circumstances as would lead a reasonable person to suspect that a violation of N.J.S.A. 17:33A-4 has occurred. (c) As referred to in (a)2 above, independent evidence corroborating the reasonable suspicion that a person has violated N.J.S.A. 17:33A-4 includes, but is not limited to: 1. A statement from a witness; 2. Documentary evidence that directly negates a material element of the claim or directly establishes the falsity of a material element of an insurance application; 3. A report of an expert; or 4. Additional apparent misrepresentations tending to negate a possibility that the misrepresentation was merely an error. (d) An investigation shall be complete for purposes of referral to OIFP when all reasonable and appropriate investigative leads and opportunities have been exhausted. When an investigation has identified a pattern of possible violations of N.J.S.A. 17:33A-4, the investigation will be deemed complete for purposes of referral as a case to OIFP when one or more violations included in the identified pattern have been sufficiently investigated and corroborated, in accordance with (a) above for referral to OIFP. 11:16-6.8 Record retention (a) Insurers shall maintain up-to-date and accurate records on their fraud prevention and detection plan, which shall at minimum include those necessary to prepare the report required in (b) below. (b) As of January 1 of each year, insurers shall submit an annual report for the prior calendar year to the Commissioner on DAFC From #1 found in this Appendix. 1. The report referred to in (b) above shall be filed with the Department on or before February 1 of each year and sent to the following address: New Jersey Department of Banking and Insurance Division of Anti-Fraud Compliance PO Box 324 Trenton, N.J. 08625-0324 2. Insurers shall submit the report referred to in (b) above in written copy and on an MS-DOS formatted disk. The disk shall be a 3.5 inch 1.44 MB disk. The information shall be provided in an Access Database provided by DAFC. Insurers may submit a disk, together with a self-addressed stamped diskette mailer to the DAFC. The DAFC will properly format the disk and return to the insurer to facilitate compliance. 3. As an alternative to the filings described in (1) and (2) above, insurers may submit this annual informational filing to the Department at the following e-mail address: DAFC@DOBI.STATE.NJ.US. Insurers can acquire the required Access Database format from the Department by directing a request for the “annual filing template” to the DAFC e-mail address referenced here. 11:16-6.9 Approval and filing of fraud prevention and detection plans (a) An insurer’s fraud prevention and detection plan shall be deemed approved by the Commissioner if not affirmatively approved or disapproved by the Commissioner within 90 days of the date of filing. (b) The Commissioner may request such amendments to the plan as he or she deems necessary. (c) An insurer must submit amendments to its plan when necessary to achieve compliance with these rules. Any amendments to a plan filed with the Commissioner shall be deemed approved by the Commissioner if not affirmatively approved or disapproved within 90 days of the date of filing. (d) The insurer shall permit the DAFC access to its offices upon reasonable notice and at reasonable hours to conduct an audit of the insurer’s compliance with its fraud prevention plan. Nothing in this section shall be construed as to preclude the DAFC from conducting reviews of an insurer’s compliance with its fraud prevention and detection plan at the office of the DAFC when determined to be necessary by the DAFC. (e) In those instances in which an insurer uses an outside agent, third party administrator or contractor to perform SIU functions or claims investigations, the Plan and contract with the outside vendor or third party administrator shall provide the Department shall be permitted to audit the records, books and documents maintained by the outside contractor or third party administrator in the same manner and fashion as it would be able to examine the books and records in accordance with N.J.S.A. 17:33A-15 and N.J.S.A. 17:23-22. (f) All information included in an insurer’s plan submitted to the DAFC pursuant to this subchapter or any other information including training programs submitted to DAFC pursuant to this subchapter shall be confidential and not subject to public disclosure or inspection. 11:16-6.10 Penalties Failure to comply with the provisions of this subchapter shall subject the insurer to penalties as prescribed by law. 11:16-6.11 Transition No later than 120 days following the adoption of this subchapter, all insurers shall file with the Department a new fraud prevention and detection plan and manual in conformance with these rules. 11:16-6.12 Confidential records and information (a) All information and materials in the possession of the Office of Insurance Fraud Prosecutor concerning the existence or occurrence of insurance fraud or related criminal activities are confidential and privileged against disclosure, and shall not be deemed public records, so as to protect the public interest in the prosecution of insurance fraud, including protecting witness security, the State’s relationship with informants and witnesses, the privacy interests of persons investigated by OIFP where no fraud has been proven and other confidential relationships. (b) The confidentiality which extends to information and materials possessed by the Office of Insurance Fraud Prosecutor with respect to the existence or occurrence of insurance fraud or related criminal activities extends to all papers, documents, reports, evidence and databases, such as investigative reports, referrals, reports or notifications of suspicious claims or applications or suspected insurance fraud, computer maintained databases of such investigative information, and such other materials and information as the Insurance Fraud Prosecutor, on the basis of his experience and exercise of judgment, believes must be kept confidential in order to ensure the orderly investigation and prosecution of insurance fraud. c. Confidentiality of the information and materials in the possession of OIFP shall not preclude OIFP from fulfilling its statutory obligations of working with other law enforcement agencies, the Department of Health and Senior Services, the Department of Human Services, any professional board in the Division of Consumer Affairs in the Department of Law and Public Safety, the Department of Banking and Insurance, the Division of State Police and such local government units as may be necessary or practicable and of coordinating and providing information to and among referring entities on pending cases of suspected insurance fraud, where such action would serve the public interest n facilitating the investigation or prosecution of insurance fraud.

KRS 304.47-080 — (1) Every insurer admitted to do business in the Commonwealth shall maintain a unit to investigate possible fraudulent claims by insureds or by persons making claims for services or repairs against policies held by insureds. (2) Insurers may maintain the unit required by subsection (1) of this section, using its employees or by contracting with others for that purpose. (3) Insurers shall establish the unit required by this section no later than July 15, 1995. (4) The unit may include the assignment of fraud investigation to employees whose principal responsibilities are the investigation and disposition of claims. If an insurer creates a distinct unit, hires additional employees, or contracts with another entity to fulfill the requirements of this article, the additional cost incurred shall be included as an administrative expense. 806 KAR 47:030 — … Section 2. All insurers shall implement the following in conjunction with their SIUs: (1) Systematic and effective methods to detect and investigate suspected fraudulent insurance claims; (2) Development and implementation of a corporate antifraud strategy to provide for the appropriate disposition of fraudulent insurance claims; (3) Provisions to educate and train all claims handlers to identify possible insurance fraud; (4) Policies for the SIU to cooperate with the insurer’s claims handlers, the insurer’s legal personnel, technical support personnel, and database support personnel; (5) Procedures to facilitate insurer communications with the Insurance Fraud Unit and compliance with mandatory reporting of suspected fraudulent insurance acts, pursuant to KRS 304.47-050; and (6) Procedures to encourage, coordinate, and effectuate communications and cooperation between the SIU, the Insurance Fraud Unit and other relevant law enforcement agencies.

5. Insurer antifraud plans. Within 6 months of the effective date of this Act, every insurer writing direct insurance shall prepare and implement an antifraud plan. This subsection does not apply to any agency, producer or other person acting on behalf of an insurer. The superintendent may review an insurer’s antifraud plan to determine if the plan complies with the requirements of this subsection. The antifraud plan must outline specific procedures, appropriate to the lines of insurance the insurer writes in the State, to: A. Prevent, detect and investigate all forms of insurance fraud; B. Educate appropriate employees on the antifraud plan and fraud detection; C. Provide for the hiring of or contracting for fraud investigators; and D. Report insurance fraud to appropriate law enforcement and regulatory authorities in the investigation and prosecution of insurance fraud.

§ 626.9891. Insurer anti-fraud investigative units; reporting requirements; penalties for noncompliance. (1) As used in this section, the term: (a) “Anti-fraud investigative unit” means the designated anti-fraud unit or division, or contractor authorized under subparagraph (2)(a)2. (b) “Designated anti-fraud unit or division” includes a distinct unit or division or a unit or division made up of employees whose principal responsibilities are the investigation and disposition of claims who are also assigned investigation of fraud. (2) By December 31, 2017, every insurer admitted to do business in this state shall: (a) 1. Establish and maintain a designated anti-fraud unit or division within the company to investigate and report possible fraudulent insurance acts by insureds or by persons making claims for services or repairs against policies held by insureds; or 2. Contract with others to investigate and report possible fraudulent insurance acts by insureds or by persons making claims for services or repairs against policies held by insureds. (b) Adopt an anti-fraud plan. (c) Designate at least one employee with primary responsibility for implementing the requirements of this section. (d) Electronically file with the Division of Investigative and Forensic Services of the department, and annually thereafter, a detailed description of the designated anti-fraud unit or division or a copy of the contract executed under subparagraph (a)2., as applicable, a copy of the anti-fraud plan, and the name of the employee designated under paragraph (c). An insurer must include the additional cost incurred in creating a distinct unit or division, hiring additional employees, or contracting with another entity to fulfill the requirements of this section, as an administrative expense for ratemaking purposes. (3) Each anti-fraud plan must include: (a) An acknowledgement that the insurer has established procedures for detecting and investigating possible fraudulent insurance acts relating to the different types of insurance by that insurer; (b) An acknowledgment that the insurer has established procedures for the mandatory reporting of possible fraudulent insurance acts to the Division of Investigative and Forensic Services of the department; (c) An acknowledgement that the insurer provides the anti-fraud education and training required by this section to the anti-fraud investigative unit; (d) A description of the required anti-fraud education and training; (e) A description or chart of the insurer’s anti-fraud investigative unit, including the position titles and descriptions of staffing; and (f) The rationale for the level of staffing and resources being provided for the anti-fraud investigative unit which may include objective criteria, such as the number of policies written, the number of claims received on an annual basis, the volume of suspected fraudulent claims detected on an annual basis, an assessment of the optimal caseload that one investigator can handle on an annual basis, and other factors. (4) By December 31, 2018, each insurer shall provide staff of the anti-fraud investigative unit at least 2 hours of initial anti-fraud training that is designed to assist in identifying and evaluating instances of suspected fraudulent insurance acts in underwriting or claims activities. Annually thereafter, an insurer shall provide such employees a 1-hour course that addresses detection, referral, investigation, and reporting of possible fraudulent insurance acts for the types of insurance lines written by the insurer. (5) Each insurer is required to report data related to fraud for each identified line of business written by the insurer during the prior calendar year. The data shall be reported to the department by March 1, 2019, and annually thereafter, and must include, at a minimum: (a) The number of policies in effect; (b) The amount of premiums written for policies; (c) The number of claims received; (d) The number of claims referred to the anti-fraud investigative unit; (e) The number of other insurance fraud matters referred to the anti-fraud investigative unit that were not claim related; (f) The number of claims investigated or accepted by the anti-fraud investigative unit; (g) The number of other insurance fraud matters investigated or accepted by the anti-fraud investigative unit that were not claim related; (h) The number of cases referred to the Division of Investigative and Forensic Services; (i) The number of cases referred to other law enforcement agencies; (j) The number of cases referred to other entities; and (k) The estimated dollar amount or range of damages on cases referred to the Division of Investigative and Forensic Services or other agencies. (6) In addition to providing information required under subsections (2), (4), and (5), each insurer writing workers’ compensation insurance shall also report the following information to the department, on or before March 1, 2019, and annually thereafter: (a) The estimated dollar amount of losses attributable to workers’ compensation fraud delineated by the type of fraud, including claimant, employer, provider, agent, or other type. (b) The estimated dollar amount of recoveries attributable to workers’ compensation fraud delineated by the type of fraud, including claimant, employer, provider, agent, or other type. (c) The number of cases referred to the Division of Investigative and Forensic Services, delineated by the type of fraud, including claimant, employer, provider, agent, or other type. (7) An insurer who obtains a certificate of authority has 6 months in which to comply with subsection (2), and one calendar year thereafter, to comply with subsections (4), (5), and (6). (8) If an insurer fails or otherwise refuses to comply with the provisions of this section, the department, office, or commission may: (a) Impose an administrative fine of not more than $2,000 per day for such failure until the department, office, or commission deems the insurer to be in compliance; (b) Impose an administrative fine for failure by an insurer to implement or follow the provisions of an anti-fraud plan or anti-fraud investigative unit description; or (c) Impose the provisions of both paragraphs (a) and (b). (9) On or before December 31, 2018, the Division of Investigative and Forensic Services shall create a report detailing best practices for the detection, investigation, prevention, and reporting of insurance fraud and other fraudulent insurance acts. The report must be updated as necessary but at least every 2 years. The report must provide: (a) Information on the best practices for the establishment of anti-fraud investigative units within insurers; (b) Information on the best practices and methods for detecting and investigating insurance fraud and other fraudulent insurance acts; (c) Information on appropriate anti-fraud education and training of insurer personnel; (d) Information on the best practices for reporting insurance fraud and other fraudulent insurance acts to the Division of Investigative and Forensic Services and to other law enforcement agencies; (e) Information regarding the appropriate level of staffing and resources for anti-fraud investigative units within insurers; (f) Information detailing statistics and data relating to insurance fraud which insurers should maintain; and (g) Other information as determined by the Division of Investigative and Forensic Services. (10) The department may adopt rules to administer this section, except that it shall adopt rules to administer subsection (5). (11) (a) The information submitted to the department pursuant to paragraphs (3)(d), (e), and (f) and paragraphs (5)(d), (e), (f), (g), and (k) is exempt from s. 119.07(1) and s. 24(a), Art. I of the State Constitution. (b) This subsection is subject to the Open Government Sunset Review Act in accordance with s. 119.15 and shall stand repealed on October 2, 2022, unless reviewed and saved from repeal through reenactment by the Legislature. (c) This exemption applies to records held before, on, or after the effective date of this act. 69D-2.001 Purpose and Scope. The purpose of this rule chapter is to implement the provisions of Section 626.9891, FS., establishing guidelines and reporting requirements for insurer anti-fraud investigative units and anti-fraud plans. Specific Authority: 624.308, FS., 626.9891, FS., 626.9891(8), FS.; Law Implemented: 624.307, FS., 626.9891(8), FS.; History-New. 69D-2.002 Definitions. For the purposes of this rule: (1) “Division” refers to the Department of Financial Services, Division of Insurance Fraud. (2) “NAIC” refers to the National Association of Insurance Commissioners. (3) “Office” refers to the Office of Insurance Regulation. (4) “SIU” refers to an insurer’s internal or contracted anti-fraud investigative unit. Specific Authority: 624.308, FS., 626.9891, FS., 626.9891(8), FS.; Law Implemented: 624.307, FS., 626.9891(8), FS.; History-New. 69D-2.003 Insurer SIUs. (1) An insurer subject to Section 626.9891(1), FS., shall file with the Division a detailed description of their SIU, and shall submit the following information in the SIU description to satisfy this filing requirement: (a) The names of all personnel assigned to the SIU, and a description of each person’s work responsibilities relating to the SIU’s anti-fraud efforts; (b) An acknowledgment that the SIU has established criteria that will be used to detect suspicious or fraudulent activity during investigations relating to the different types of insurance offered by that insurer; (c) An acknowledgment that the SIU has established criteria that will be used for the investigation of acts of suspected insurance fraud relating to the different types of insurance offered by that insurer. (d) An acknowledgment that the insurer or SIU shall report all suspected fraudulent insurance acts directly to the Division electronically via Form DFS-L1-1691 (Eff._____) “Suspected Fraud Referral Form,” or an electronic reporting interface that is linked to such form, as provided on the Division’s website at www.fldfs.com/fraud/. Form DFS-L1-1691 (Eff.______) Suspected Fraud Referral Form is hereby adopted and incorporated by reference. (e) An acknowledgment that all such reports of suspected insurance fraud shall contain information that clearly defines and supports the allegation of suspicious activity. (f) An acknowledgement that the insurer or SIU shall record the date that suspected fraudulent activity is detected, and shall record the date that reports of such suspected insurance fraud are sent directly to the Division; (g) An acknowledgement that the insurer or SIU shall provide training relating to the detection and investigation of fraudulent insurance acts for all personnel involved in anti-fraud related efforts. (h) An acknowledgement that the insurer or SIU shall provide on-going training during the reporting period; (i) The contact information including names, email addresses, and telephone numbers, for personnel designated by the insurer or SIU to be responsible for achieving and maintaining compliance with Section 626.9891(1), FS., and this rule chapter; (j) The insurer’s NAIC individual and group code numbers; (2) An insurer or SIU subject to Section 626.9891(1), F.S., and this rule chapter, shall submit this SIU description electronically via the Division’s website at www.fldfs.com/fraud/. The SIU description shall be submitted electronically on Form DFS-L1-1689 (Eff.____) “SIU Description Form” as provided on the Division’s website at www.fldfs.com/fraud/. Form DFS-L1-1689 (Eff.____) SIU Description Form is hereby adopted and incorporated by reference. The insurer’s filing of the information required in subsection (1) above shall constitute an adequately detailed description of its SIU as required by Section 626.9891(1), FS. (3) Nothing in this rule shall require that an SIU utilize all established criteria in every circumstance. (4) The filing of the information required herein is not intended to constitute a waiver of an insurer’s privilege, trade secret, confidentiality or any proprietary interest in its SIU, its SIU description, or its SIU policies and procedures. Specific Authority: 624.308, FS., 626.9891, FS., 626.9891(8), FS.; Law Implemented: 624.307,FS., 626.989, FS., 626.9891(1), FS.; History-New. 69D-2.004 Insurer Anti-Fraud Plans. (1) An insurer subject to Section 626.9891(2), F.S., shall file with the Division of Insurance Fraud such anti-fraud plan, and such anti-fraud plan shall include: (a) A written description or chart outlining the organizational arrangement of the insurer’s anti-fraud personnel who are responsible for the investigation and reporting of possible fraudulent insurance acts. (b) A description of the insurer’s procedures for detecting and investigating possible fraudulent insurance acts. Nothing in this rule shall require that an insurer utilize all established criteria in every circumstance. This description shall include: 1. An acknowledgment that the insurer has established criteria that will be used to detect suspicious or fraudulent activity during investigations relating to the different types of insurance offered by that insurer; 2. An acknowledgment that the insurer has established criteria that will be used for the investigation of acts of suspected insurance fraud relating to the different types of insurance offered by that insurer. (c) A description of the insurer’s procedures for the mandatory reporting of possible fraudulent insurance acts to the Division pursuant to Section 626.989(6), F.S. This description shall include: 1. An explanation of the insurer’s method for reporting all suspected fraudulent insurance acts directly to the Division electronically on Form DFS-L1-1691, as incorporated and provided for in paragraph 69D-2.003(1)(d), F.A.C. 2. An acknowledgment that all such reports of suspected insurance fraud shall contain information that clearly defines and supports the allegation of suspicious activity. 3. An acknowledgment that the insurer shall record the date that suspected fraudulent activity is detected, and shall record the date that reports of such suspected insurance fraud are sent directly to the Division. (d) A description of the insurer’s plan for anti-fraud education and training of its claims adjusters and any other personnel involved in anti-fraud related efforts. This description shall include: 1. A plan that involves training relating to the detection and investigation of fraudulent insurance acts for all employees involved in anti-fraud related efforts. 2. A plan that involves on-going training during the reporting period; (e) The contact information, including names, e-mail addresses, and telephone numbers, for personnel designated by the insurer to be responsible for achieving and maintaining compliance with Section 626.9891(2), F.S., and this rule chapter; (f) The insurer’s NAIC individual and group code numbers; (2) An insurer subject to Section 626.9891(2), F.S., and this rule chapter, shall submit this anti-fraud plan electronically via the Division’s website at www.myfloridacfo.com. The anti-fraud plan shall be submitted electronically on Form DFS-L1-1690 (Eff. 10-5-06) “Anti-Fraud Plan Form as provided on the Division’s website at www.fldfs.com/fraud/. Form DFS-L1-1690 (Eff. 10-5-06) Anti-Fraud Plan Form is hereby adopted and incorporated by reference. The insurer’s filing of the information required in subsection (1) above shall constitute an acceptable anti-fraud plan as required by Section 626.9891(2), F.S. (3) The filing of the information required herein is not intended to constitute a waiver of an insurer’s privilege, trade secret, confidentiality or any proprietary interest in its anti-fraud plan or its anti-fraud related policies and procedures. 69D-2.005 Compliance and Enforcement. (1) The Division shall review the filings of SIU descriptions and insurer anti-fraud plans and the Office shall conduct audits pursuant to Section 624.3161, F.S., to determine compliance with Section 626.9891, F.S., and this rule chapter. (2) If an insurer fails to timely file an anti-fraud plan or SIU description, fails to implement or follow the provisions of their anti-fraud plan or SIU description, or in any other way fails to comply with the requirements of Section 626.9891, F.S., and this rule chapter, the Office shall take appropriate administrative action as provided in Sections 626.9891(7) and 624.4211, F.S.

Section 2698.40 Definitions As used in this article, the following definitions shall apply: (a) “Authorized governmental agency (agencies)” shall have the same meaning as used in the Insurance Frauds Prevention Act (IFPA). (b) “Claims handler” means every employee and agent of an insurer whose principal responsibilities include the investigation, adjustment, settlement and resolution of claims. (c) “Commissioner” means the Insurance Commissioner of the State of California. (d) “Communication” includes the referral of suspected insurance fraud to the Department of Insurance and providing information and documents requested by the Fraud Division. (e) “Department” means the California Department of Insurance. (f) “Fraud Division” means the California Department of Insurance Fraud Division formerly known as the Bureau of Fraudulent Claims. (g) “Insurer” means every insurer admitted to do business in this state except the following: (1) Reinsurers. (2) Title insurers. (3) Fraternal fire insurers. (4) Fraternal benefit societies. (5) Firemen, policemen, or peace officer benefit and relief associations. (6) Grant and annuity societies. (7) Home protection (h) “Integral anti-fraud personnel” includes insurer personnel who the insurer has not identified as being directly assigned to its SIU but whose duties may include the receipt, processing, investigating, or litigation pertaining to payment or denial of a claim or application. These personnel may include claims handlers, underwriters, agents, policy handlers, call center staff, legal staff, and other insurer employee classifications that perform similar duties. (i) “Reasonable suspicion” is a level of belief that an act of insurance fraud may have or might be occurring for which there is an objective justification based on articulable fact(s) and rational inferences therefrom. (j) “Red flag” or “red flag event” means facts, circumstances or events which, singly or in combination, support(s) an inference that insurance fraud may have been committed. (k) “Regulations” means these regulations, California Code of Regulations, Title 10, Chapter 5, Subchapter 9, Article 2. (l) “Special Investigative Unit” (SIU) means an insurer’s unit or division that is established to investigate suspected insurance fraud. The SIU may be comprised of insurer employees or by contracting with other entities for the purpose of complying with applicable sections of the Insurance Frauds Prevention Act (IFPA) for the direct responsibility of performing the functions and activities as set forth in these regulations. (m) “Suspected insurance fraud” includes any misrepresentation of fact pertaining to a transaction of insurance including claims, premium and application fraud. These facts may include evidence of doctoring, altering or destroying forms, prior history of the claimant, policy holder, applicant or provider, receipts, estimates, explanation of benefits (EOB), medical evaluations or billings, medical provider notes (commonly known as SOAPE notes; Subjective complaint, Objective findings, Assessment, Plan and Evaluation), Health Care Financing Administration (HCFA) forms, police and/or investigative reports, relevant discrepancies in written or oral statements and examinations under oath (EUO), unusual policy activity and falsified or untruthful application for insurance. An identifiable pattern in a claim history may also suggest the possibility of suspected fraudulent claims activity. A claim may contain evidence of suspected insurance fraud regardless of the payment status. (n) “The Insurance Frauds Prevention Act” or “(IFPA)” shall refer to California Insurance Code section 1871 et seq. (a) Adequacy. The adequacy of an insurer’s SIU staffing shall be determined by its demonstrated ability to establish, operate and maintain an SIU that is in compliance with these regulations. (b) Knowledge. An SIU shall be composed of employees who have knowledge and experience in general claims practices, the analysis of claims for patterns of fraud, and current trends in insurance fraud, education and training in specific red flags, red flag events, and other criteria indicating possible fraud. They shall have the ability to conduct effective investigations of suspected insurance fraud and be familiar with insurance and related law and the use of available insurer related database resources. Section 2698.43 SIU Contracted Responsibilities (a) Any contract entered into by an insurer, or an entity under contract with an insurer as provided under these regulations, shall not relieve the insurer of any obligation under these regulations or the IFPA. (b) Notwithstanding any other provisions of these regulations, a complete and executed copy of any such agreement, including all attachments, exhibits and amendments thereto, shall be provided to the Fraud Division on execution. (c) Any contract entered into by an insurer under this section shall: (1) Specify all SIU duties and functions to be performed by the parties to the contract and how the insurer monitors performance of the contract responsibilities. (2) Not include provisions that could provide disincentives to the referral and/or investigation of suspected insurance fraud. (3) Not include provisions that purport to relieve an insurer of any obligation to comply with the requirements of these regulations and the IFPA. (4) Expressly include a provision to require the contracted entity to comply with all applicable provisions of the IFPA and these regulations. Section 2698.43 SIU Contracted Responsibilities (a) Any contract entered into by an insurer, or an entity under contract with an insurer as provided under these regulations, shall not relieve the insurer of any obligation under these regulations or the IFPA. (b) Notwithstanding any other provisions of these regulations, a complete and executed copy of any such agreement, including all attachments, exhibits and amendments thereto, shall be provided to the Fraud Division on execution. (c) Any contract entered into by an insurer under this section shall: (1) Specify all SIU duties and functions to be performed by the parties to the contract and how the insurer monitors performance of the contract responsibilities. (2) Not include provisions that could provide disincentives to the referral and/or investigation of suspected insurance fraud. (3) Not include provisions that purport to relieve an insurer of any obligation to comply with the requirements of these regulations and the IFPA. (4) Expressly include a provision to require the contracted entity to comply with all applicable provisions of the IFPA and these regulations. Section 2698.44 Communication with the Fraud Division and Authorized Governmental Agencies. (a) The insurer and any entity performing the SIU function(s) shall comply with specific sections of the IFPA regarding communication with the Fraud Division and authorized governmental agencies. (b) On written request by the Fraud Division or an authorized governmental agency, an insurer or its agents, shall release in an timely and complete manner any or all relevant information deemed important that the insurer may possess relating to any specific incident of insurance fraud. Such information shall include: (1) Insurance policy information. (2) Applications. (3) Policy premium payment records. (4) History of claims. (5) Information relating to the carrier’s investigation, including statements, proof and notice of loss. (6) Claim file documents. (7) Claim notes. (8) Investigation files. (9) Investigator notes. (10) Other information which the Fraud Division or an Authorized Governmental Agency may deem relevant and important. (c) For the purpose of this section, timely release of information means immediate unless otherwise agreed to by the Fraud Division. (d) A single written request shall be considered sufficient to compel production of all information deemed relevant by the requesting governmental agency relating to any specific insurance fraud investigation at the time the request is made and subsequent to require production of the requested records by the insurer named in the request and all persons, agents and brokers employed by and conducting business on behalf of the insurer. Section 2698.45 Detecting Suspected Insurance Fraud. (a) An insurer’s integral anti-fraud personnel are responsible for identifying suspected insurance fraud during the handling of insurance transactions and referring it to the SIU as part of their regular duties. (b) The SIU shall establish, maintain, distribute and monitor written procedures to be used by the integral anti-fraud personnel to detect, identify, document and refer suspected insurance fraud to the SIU. The written procedures will include a listing of the red flags to be used to detect suspected insurance fraud for the insurer. (c) The procedures for detecting suspected insurance fraud shall provide for comparison of any insurance transaction against: (1) Patterns or trends of possible fraud (2) Red flags (3) Events or circumstances present on a claim (4) Behavior or history of person(s) submitting a claim or application (5) Other criteria that may indicate possible fraud Section 2698.46 Investigating Suspected Insurance Fraud. (a) The SIU shall establish, maintain, distribute and adhere to written procedures for the investigation of possible suspected insurance fraud. An investigation of possible suspected insurance fraud will include: (1) A thorough analysis of a claim file, application, or insurance transaction. (2) Identification and interviews of potential witnesses who may provide information on the accuracy of the claim or application. (3) Utilizing industry-recognized databases. (4) Preservation of documents and other evidence. (5) Writing a concise and complete summary of the investigation, including the investigator’s conclusions regarding the suspected insurance fraud and the basis for their conclusions. Section 2698.47 Referral of Suspected Insurance Fraud. (a) The SIU shall provide for the referral of acts of suspected insurance fraud to the Fraud Division and, as required, district attorneys. (b) Referrals shall be submitted when in any insurance transaction the facts and circumstances create a reasonable belief that a person or entity may have committed or is committing insurance fraud. Section 2698.48 Referral Content A referral of an act of suspected insurance fraud to the Fraud Division shall be legible and in a format as directed by the Department and contain the information and data to the extent applicable, as provided in the following. (a) Fraud and referral type (1) Fraud type (2) New referral/amended referral indicator (b) Reporting party information (1) Reporting party type (2) Reporting party name (3) Reporting party California Company number (4) Reporting self-insured/contracted third party license number, as appropriate (5) Reporting party address, city, state and zip code (6) Reporting party email address (generally, contact address) (c) Alleged victim information, as appropriate (1) Alleged victim company name (2) Alleged victim California Company number (3) Alleged victim self-insured number (4) Alleged victim address, city, state and zip code (d) Insurance policy or claim information, as appropriate (1) Claim number associated with referral (2) Insurance policy number associated with referral (3) Date of loss or injury (4) Geographic location where loss or injury occurred (5) Insurance premium dollar loss (6) Total potential loss on claim prior to the identification of fraud (7) Total claim loss paid to date (8) Actual suspected fraudulent loss amount paid to date (9) A complete synopsis of all the facts on which the reasonable suspicion of the insurance fraud is based (10) Disaster claim indicator (e) Other agency referral information, as appropriate (1) Names of other authorized governmental agencies receiving this referral (2) Names of any District Attorney’s Office receiving this referral (3) National Insurance Crime Bureau (NICB) referral indicator (4) The names of any other agencies receiving this referral (f) Referral contact information, as appropriate (1) Referral contact name and phone number (2) Claim or case file handler and phone number (3) Name and phone number of person who completed referral (4) Date referral was completed (g) Information for each party associated with the referral (1) Identification of the role of the party to the loss (2) Phone number (3) Address, city, state and zip code (4) Date of birth or age (5) Social security number (6) Tax identification number (7) Drivers license number (8) State of party’s drivers license (9) Vehicle license plate number (10) Vehicle license plate state (11) Vehicle identification number (12) Other names or identifiers used by the party (13) Claim of injury indicator Section 2698.49 SIU Training Requirements for training provided by and for the SIU shall include: (a) The SIU shall establish and maintain an ongoing anti-fraud training program, planned and conducted to develop and improve the anti-fraud awareness skills of the integral anti-fraud personnel. (b) The insurer shall designate an SIU staff person to be responsible for the ongoing antifraud training program. (c) The anti-fraud training program shall include instruction on: (1) The function and purpose of the SIU. (2) Introduction/review of the written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIU. (3) Identification and recognition of red flags or red flag events. (4) Any changes to current procedures for identifying, documenting and referring incidents of suspected insurance fraud to the SIU. (5) Fraud Division insurance fraud reporting requirements. (6) Introduction and review of existing and new, emerging insurance fraud trends. (d) In addition to training provided to integral antifraud personnel provided herein, the SIU personnel shall receive anti-fraud training that include investigative techniques, communication with the Fraud Division and authorized governmental agencies, fraud indicators, emerging fraud trends, legal and related issues. This training shall be provided to SIU personnel by qualified and experienced entities in the subject matter being presented. (e) All insurers shall provide an anti-fraud orientation program to all SIU and integral antifraud personnel within thirty (30) days after hire. Thereafter, insurers shall provide anti-fraud training to SIU and integral antifraud personnel on an annual basis. (f) Records of the anti-fraud training provided to all staff shall be prepared at the time training is provided and be maintained and available for inspection by the Department on request. The training records shall include the title and date of the anti-fraud training course, name and title and contact information of the instructor(s), description of the course content, length of the training course, and the name and job title(s) of participating personnel. Section 2698.50 SIU Annual Report (a) Every insurer shall, at the time its initial Certificate of Authority is issued and annually on a date prescribed by the Fraud Division on at least sixty (60) days prior to the due date, submit an annual report: (b) A complete, accurate and truthful annual report shall be submitted in a format as prescribed by the Department and shall include the following information. (1) The name(s), title(s) and contact information of the insurer’s SIU personnel, or (2) The name of the organization and organizational contacts with whom the insurer has contracted for the maintenance of the SIU or any function thereof, and (3) The names of personnel whose duties include communication with the Fraud Division on matters related to the reporting, investigation and prosecution of suspected fraudulent claims or other suspected insurance fraud. (4) A description of the insurer’s methods and written procedures used for detecting, investigating and reporting suspected insurance fraud. (5) A description of the insurer’s plan for initial and ongoing fraud education and training for integral anti-fraud personnel pursuant to these regulations. (6) A written description or chart outlining the organizational arrangement of the insurer’s anti-fraud personnel who are responsible for the investigation and reporting of suspected insurance fraud. (7) A description of how the SIU is adequately staffed to meet the requirements herein and the expertise of the staff; (8) The number of claims processed by the insurer and the number of claims referred to the SIU, for each reported company, for the past calendar year; (9) The number of suspected insurance fraud reported to the Department and to district attorney offices, for each reported company, for the past calendar year. (10) A description of any significant, anticipated changes to the insurer’s operations. (11) Insurers who enter into contracts for the purpose of compliance with CIC Section 1875.20 et seq. shall provide a complete copy of the fully executed, existing contract, including all attachments and addendum, to the Department and shall specify the manner in which the contract is monitored. (12) The number and type of civil actions for each reported company alleging acts of insurance fraud during the preceding calendar year. (c) A statement signed under penalty of perjury must accompany all reports mentioned herein. This statement must be signed by an officer of the holder of or applicant for the Certificate of Authority who attests to the accuracy of the reported information and the signor’s personal knowledge of the existence and proper maintenance of an SIU as required by CIC Section1875.20 et seq. and these regulations. (d) The insurer is to maintain a copy of the annual report that will be available for review. (e) For the purpose of these regulations, the name(s) of the insurer’s personnel who will communicate with the Fraud Division shall not be made part of the public record and shall be released only pursuant to the provisions of CIC Section 1873.1 applicable to information acquired pursuant to Article 3 of the Insurance Frauds Prevention Act. Section 2698.51 Examinations (a) The commissioner may conduct examinations of an insurer’s SIU and related operations, including operations undertaken by entities under contract with the insurer, as deemed necessary to determine compliance with the requirements of this article. (b) A written report of examination, including identification of violations of these applicable provisions of statute and regulation and required corrective action, if any, will be provided to the insurer on completion of the examination. (c) Notwithstanding any penalty imposed pursuant to the regulations, within thirty (30) days of receipt of a written report identifying any violation(s) of these regulations, an insurer shall submit to the Department a plan demonstrating how the insurer will correct such violation(s) and achieve compliance. Such plan shall be subject to examination by the Department. If accepted by the Department, the plan shall be submitted as a supplement to any existing annual report and shall be accompanied by an statement of an officer of the insurer as otherwise required for annual reports. Failure to submit a corrective action and compliance plan or to comply with such plan when accepted by the Department shall be considered a violation of these regulations. Section 2698.52 Penalties (a) On notice and hearing in accordance with Government Code sections 11550 et seq,. the Commissioner may impose sanctions for violation of these regulations and/or Article 5.6 (commencing with section 1875.20) of the California Insurance Code. (b) Not withstanding any other provisions of law, for each act in violation of these regulations an insurer will be subject to a penalty of not more than $55,000 and/or suspension or revocation of the insurer’s Certificate of Authority.

State Insurance Code Section 1875.20 (Fraud unit required); Administrative Code – Title 10 Section 2698.42 (Purpose and objectives of insurer special investigative unit) Section 1875.20 — Every insurer admitted to do business in this state shall maintain a unit or division to investigate possible fraudulent claims by insureds or by persons making claims for services or repairs against policies held by insureds. SPECIAL INVESTIGATIVE UNIT REGULATIONS Effective October 7, 2005 California Code of Regulations Subchapter 9 Insurance Fraud Article 2 Special Investigative Unit Regulations Section 2698.30 Definitions As used in this article, the following definitions shall apply: (a) “Act” means any violation of California Code of Regulations, Title 10, Chapter 5, Section 2698.30-42, inclusive. (b) “Authorized governmental agency (agencies)” shall have the same meaning as used in the Insurance Frauds Prevention Act (IFPA). (c) “Claims handler” means every employee and agent of an insurer whose principal responsibilities include the investigation, adjustment, settlement and resolution of claims. (d) “Commissioner” means the Insurance Commissioner of the State of California. (e) “Communication” includes the referral of suspected insurance fraud to the Department of Insurance and providing information and documents requested by the Fraud Division. (f) “Department” means the California Department of Insurance. (g) “Fraud Division” means the California Department of Insurance Fraud Division formerly known as the Bureau of Fraudulent Claims. (h) “Hearing” means an adjudicative proceeding initiated by the Insurance Commissioner pursuant to the provisions of California Insurance Code Section 1875.24(d). (i) Inadvertent” means unintentional. (j) “Insurer” means every insurer admitted to do business in this state except the following: (1) Reinsurers. (2) Title insurers. (3) Fraternal fire insurers. (4) Fraternal benefit societies. (5) Firemen, policemen, or peace officer benefit and relief associations. (6) Grant and annuity societies. (7) Home protection. (k) “Integral anti-fraud personnel” includes insurer personnel who the insurer has not identified as being directly assigned to its SIU but whose duties may include the processing, investigating, or litigation pertaining to payment or denial of a claim or application for adjudication or claim or application for insurance.. These personnel may include claims handlers, underwriters, policy handlers, call center staff within the claims or policy function, legal staff, and other insurer employee classifications that perform similar duties. (l) “Reasonable belief” is a level of belief that an act of insurance fraud may have or might be occurring for which there is an objective justification based on articulable fact(s) and rational inferences therefrom. (m) “Red flag” or “red flag event” means facts, circumstances or events which, singly or in combination, support(s) an inference that insurance fraud may have been committed. (n) “Regulations” means these regulations, California Code of Regulations, Title 10, Chapter 5, Subchapter 9, Article 2. (o) “Special Investigative Unit” (SIU) means an insurer’s unit or division that is established to investigate suspected insurance fraud. The SIU may be comprised of insurer employees or by contracting with other entities for the purpose of complying with applicable sections of the Insurance Frauds Prevention Act (IFPA) for the direct responsibility of performing the functions and activities as set forth in these regulations. (p) “Suspected insurance fraud” includes any misrepresentation of fact or omission of fact pertaining to a transaction of insurance including claims, premium and application fraud. These facts may include evidence of doctoring, altering or destroying forms, prior history of the claimant, policy holder, applicant or provider, receipts, estimates, explanations of benefits (EOB), medical evaluations or billings, medical provider notes (commonly known as SOAPE notes); Subjective complaint, Objective findings, Assessment, Plan and Evaluation, Health Care Financing Administration (HCFA) forms, police and/or investigative reports, relevant discrepancies in written or oral statements and examinations under oath (EUO), unusual policy activity and falsified or untruthful application for insurance. An identifiable pattern in a claim history may also suggest the possibility of suspected fraudulent claims activity. A claim may contain evidence of suspected insurance fraud regardless of the payment status. (q) “The Insurance Frauds Prevention Act” or “(IFPA)” shall refer to California Insurance Code section 1871-1879.8. (r) “Willful” means a purpose or willingness to commit the act or make the omission referred to in the California Insurance Code or in these regulations. The Commissioner shall use the factors set forth at California Code of Regulations Section 2591.3(d)(1)(A-E) to determine whether or not an act is willful. NOTE: Authority: Insurance Code Sections, 1872.4, 1875.24, 1877.3, 1879.5, 1879.6,; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 9080, 10970, 11400, 11520, 11760, 11880, 12400.1, 12743, 12921(a) and 12926 Section 2698.31 Insurer Responsibility The insurer shall comply with applicable sections of the IFPA and these regulations regarding the establishment, operation and continuous existence of an SIU. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.32 SIU Staffing (a) Adequacy. The adequacy of an insurer’s SIU staffing shall be determined by its demonstrated ability to establish, operate and maintain an SIU that is in compliance with these regulations. Factors that may be considered in staffing the SIU include, but not limited to, the number of policies written and individuals insured in California, number of claims received with respect to California insureds on an annual basis, volume of suspected fraudulent California claims currently being detected and other factors relating to the vulnerability of the insurer to insurance fraud. (b) Knowledge. An SIU shall be composed of employees who have knowledge and/or experience in general claims practices, the analysis of claims for patterns of fraud, and current trends in insurance fraud, education and training in specific red flags, red flag events, and other criteria indicating possible fraud. They shall have the ability to conduct effective investigations of suspected insurance fraud and be familiar with insurance and related law and the use of available insurer related database resources. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.33 SIU Contracted Responsibilities (a) Any contract entered into by an insurer, or an entity under contract with an insurer as provided under these regulations, shall not relieve the insurer of any obligation under these regulations or the IFPA. (b) Notwithstanding any other provisions of these regulations, a complete and executed copy of any such agreement, including all attachments, exhibits and amendments thereto, shall be provided to the Fraud Division on execution. (c) Any contract entered into by an insurer under this section shall: (1) Specify all SIU duties and functions to be performed by the parties to the contract and how the insurer monitors performance of the contract responsibilities; (2) Not include provisions that could provide disincentives to the referral and/or investigation of suspected insurance fraud; (3) Not include provisions that purport to relieve an insurer of any obligation to comply with the requirements of these regulations and the IFPA.; and (4) Expressly include a provision to require the contracted entity to comply with all applicable provisions of the IFPA and these regulations. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24,1879.5, 12921(a) and 12926. Section 2698.34 Communication with the Fraud Division and Authorized Governmental Agencies. (a) The insurer and any entity performing the SIU function(s) shall comply with specific sections of the IFPA regarding communication with the Fraud Division and authorized governmental agencies. (b) On written request by the Fraud Division or an authorized governmental agency, an insurer or its agents, shall release in a timely and complete manner any or all relevant information deemed important that the insurer may possess relating to any specific incident of insurance fraud. Such information shall include: (1) Insurance policy information; (2) Applications; (3) Policy premium payment records; (4) History of claims; (5) Information relating to the carrier’s investigation, including statements, proof and notice of loss; (6) Claim file documents; (7) Claim notes; (8) Investigation files; (9) Investigator notes; and (10) Other information which the Fraud Division or an Authorized Governmental Agency may deem relevant and important. (c) For the purpose of this section, timely release of information means immediate, but no more than thirty (30) calendar days after the request unless otherwise agreed to by the Fraud Division. (d) A single written request shall be considered sufficient to compel production of all information deemed relevant by the requesting governmental agency relating to any specific insurance fraud investigation. The single request is applicable throughout the duration of the investigation and is applicable to the requested records of the insurer named in the request and the records of all persons, agents and brokers employed by and conducting business on behalf of the insurer. NOTE: Authority: Insurance Code Sections 1872.4, 1875.24, 1877.3, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1872.3, 1873, 1874.2, 1874.4, 1875.4, 1875.20, 1875.21, 1875.24, 1877.1, 1877.2, 1877.3, 1877.4, 1877.5, 1879.5, 12921(a) and 12926. Section 2698.35 Detecting Suspected Insurance Fraud. (a) An insurer’s integral anti-fraud personnel are responsible for identifying suspected insurance fraud during the handling of insurance transactions and referring it to the SIU as part of their regular duties. (b) The SIU shall establish, maintain, distribute and monitor written procedures to be used by the integral anti-fraud personnel to detect, identify, document and refer suspected insurance fraud to the SIU. The written procedures shall include a listing of the red flags to be used to detect suspected insurance fraud for the insurer. (c) The procedures for detecting suspected insurance fraud shall provide for comparison of any insurance transaction against: (1) Patterns or trends of possible fraud; (2) Red flags; (3) Events or circumstances present on a claim; (4) Behavior or history of person(s) submitting a claim or application; and (5) Other criteria that may indicate possible fraud. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.36 Investigating Suspected Insurance Fraud. (a) The SIU shall establish, maintain, distribute and adhere to written procedures for the investigation of possible suspected insurance fraud. An investigation of possible suspected insurance fraud shall include: (1) A thorough analysis of a claim file, application, or insurance transaction. (2) Identification and interviews of potential witnesses who may provide information on the accuracy of the claim or application. (3) Utilizing industry-recognized databases. (4) Preservation of documents and other evidence. (5) Writing a concise and complete summary of the investigation, including the investigator’s findings regarding the suspected insurance fraud and the basis for their findings. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.37 Referral of Suspected Insurance Fraud. (a) The SIU shall provide for the referral of acts of suspected insurance fraud to the Fraud Division and, as required, district attorneys. (b) Referrals shall be submitted in any insurance transaction where the facts and circumstances create a reasonable belief that a person or entity may have committed or is committing insurance fraud. (c) Referrals shall be made within the period specified by statute. (d) The requirements of this section do not affect the immunity granted under California Insurance Code section 1872.5 or other such similar codes contained in the Insurance Frauds Prevention Act. (e) The requirements of this section do not diminish statutory requirements contained in the Insurance Frauds Prevention Act regarding the confidentiality of any information provided in connection with an investigation. NOTE: Authority: California Civil Code Section 1708, Insurance Code Sections 1872.4, 1874.6, 1875.24, 1875.4; 1877.3 1877.5, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1872.5, 1873.2, 1874.2, 1874.4, 1875.20, 1875.21, 1875.24, 1877.3, 1879.5, 12921(a) and 12926. Section 2698.38 Referral Content A referral of an act of suspected insurance fraud to the Fraud Division shall be legible and on a form as directed by the Department and contain the information and data to the extent applicable, as provided in the following: (a) Fraud and referral type (1) Fraud type (2) New referral/amended referral indicator (b) Reporting party information (1) Reporting party type (2) Reporting party name (3) Reporting party California Company number (4) Reporting self-insured/contracted third party license number, as appropriate (5) Reporting party address, city, state and zip code (6) Reporting party email address (generally, contact address) (c) Alleged victim information, as appropriate (1) Alleged victim company name (2) Alleged victim California Company number (3) Alleged victim self-insured number (4) Alleged victim address, city, state and zip code (d) Insurance policy or claim information, as appropriate (1) Claim number associated with referral (2) Insurance policy number associated with referral (3) Date of loss or injury (4) Geographic location where loss or injury occurred (5) Insurance premium dollar loss (6) Total potential loss on claim prior to the identification of fraud (7) Total claim loss paid to date (8) Actual suspected fraudulent loss amount paid to date (9) A complete synopsis of all the facts on which the reasonable belief of the insurance fraud is based. (10) Disaster claim indicator (e) Other agency referral information, as appropriate (1) Names of other authorized governmental agencies receiving this referral (2) Names of any District Attorney’s Office receiving this referral (3) National Insurance Crime Bureau (NICB) referral indicator (4) The names of any other agencies receiving this referral (f) Referral contact information, as appropriate (1) Referral contact name and phone number (2) Claim or case file handler and phone number (3) Name and phone number of person who completed referral (4) Date referral was completed (g) Information for each party associated with the referral (1) Identification of the role of the party to the loss (2) Phone number (3) Address, city, state and zip code (4) Date of birth or age (5) Social security number (6) Tax identification number (7) Drivers license number (8) State of party’s drivers license (9) Vehicle license plate number (10) Vehicle license plate state (11) Vehicle identification number (12) Other names or identifiers used by the party (13) Claim of injury indicator NOTE: Authority: Insurance Code Sections 1872.4, 1874.2, 1875.24, 1877.3, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1877.3, 1879.5, 12921(a) and 12926. Section 2698.39 Anti-Fraud Training Requirements for training provided by and for the SIU shall include: (a) The insurer shall establish and maintain an ongoing anti-fraud training program, planned and conducted to develop and improve the anti-fraud awareness skills of the integral anti-fraud personnel (b) The insurer shall designate an SIU staff person to be responsible for coordinating the ongoing anti-fraud training program. (c) The anti-fraud training program shall consist of three (3) levels: (1) All newly- hired employees shall receive an anti-fraud orientation within ninety (90) days of commencing assigned duties. The orientation shall provide information regarding: (A) the function and purpose of the SIU; (B) an overview of fraud detection and referral of suspected insurance fraud to the SIU for investigation; (C) a review of Fraud Division insurance fraud reporting requirements: (D) an organization chart depicting the insurer’s SIU; and (E) SIU contact telephone numbers. (2) Integral anti-fraud personnel shall receive annual anti-fraud in-service training, which shall include: (A) review of the function and purpose of the SIU; (B) introduction/review of the written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIU; (C) identification and recognition of red flags or red flag events; (D) any changes to current procedures for identifying, documenting and referring incidents of suspected insurance fraud to the SIU; (E) Fraud Division insurance fraud reporting requirements; and (F) introduction/review of existing and new, emerging insurance fraud trends. (3) The SIU personnel shall receive continuing anti-fraud training that includes; (A) investigative techniques; (B) communication with the Fraud Division and authorized governmental agencies; (C) fraud indicators; (D) emerging fraud trends; and (E) legal and related issues. (d) Records of the anti-fraud training provided to all staff shall be prepared at the time training is provided and be maintained and available for inspection by the Department on request. The training records shall include the title and date of the anti-fraud training course, name and title and contact information of the instructor(s), description of the course content, length of the training course, and the name and job title(s) of participating personnel. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.40 SIU Annual Report (a) Each insurer shall file a report as prescribed herein, at the time its initial Certificate of Authority is issued, and annually thereafter. The annual report shall be due no later than 90 days after the date of mailing of the notification by the Department. The Department shall issue the notification in June of each year. (b) A complete, accurate and truthful annual report shall be submitted on a form as prescribed by the Department and shall include the following information. (1) The name(s), title(s) and contact information of the insurer’s SIU personnel; or (2) The name of the organization and organizational contacts with whom the insurer has contracted for the maintenance of the SIU or any function thereof; and (3) The names of personnel whose duties include communication with the Fraud Division on matters related to the reporting, investigation and prosecution of suspected fraudulent claims or other suspected insurance fraud. (4) A description of the insurer’s methods and written procedures used for detecting, investigating and reporting suspected insurance fraud. (5) A description of the insurer’s plan for initial and on-going fraud education and training for integral anti-fraud personnel pursuant to these regulations. (6) A written description or chart outlining the organizational arrangement of the insurer’s anti-fraud personnel who are responsible for the investigation and reporting of suspected insurance fraud. (7) A description of how the SIU is adequately staffed to meet the requirements herein and the expertise of the staff. (8) The number of claims processed by the insurer and the number of claims referred to the SIU, for each reported company, for the past calendar year. (9) The number of incidents of suspected insurance fraud reported to the Department and to district attorney offices, for each reported company, for the past calendar year. (10) A description of any significant, anticipated changes to the insurer’s structure and operations. (11) Insurers who enter into contracts for the purpose of compliance with these regulations shall provide a complete copy of the fully executed, existing contract, including all attachments and addendum, to the Department and shall specify the manner in which the contract is monitored. (12) The number and type of civil actions initiated by each reported company alleging acts of insurance fraud during the preceding calendar year. (c) A statement signed under penalty of perjury pursuant to the laws of the state of California, must accompany all reports mentioned herein. This statement must be signed by an officer of the holder of or applicant for the Certificate of Authority who attests to the accuracy of the reported information and the signor’s personal knowledge of the existence and proper maintenance of an SIU described in this report and these regulations. (d) The insurer is to maintain a copy of the annual report that will be available for review during examinations as conducted pursuant to section 2698.41 of these regulations or as otherwise requested by the Department. (e) For the purpose of these regulations, the name(s) of the insurer’s personnel who will communicate with the Fraud Division shall not be made part of the public record and shall be released only pursuant to the provisions of CIC Section 1873.1 applicable to information acquired pursuant to Article 3 of the Insurance Frauds Prevention Act. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.41 Examinations (a) The commissioner may conduct examinations of an insurer’s SIU and related operations, including operations undertaken by entities under contract with the insurer, as deemed necessary to determine compliance with the requirements of this article. (b) A written report of examination, including identification of violations of these applicable provisions of statute and regulation and required corrective action, if any, will be provided to the insurer on completion of the examination. (c)(1) Notwithstanding any penalty imposed pursuant to the regulations, within thirty (30) days of receipt of a written report identifying any violation(s) of these regulations, an insurer shall submit to the Department a plan demonstrating how the insurer will correct such violation(s) and achieve compliance. Such plan shall be subject to examination by the Department. If accepted by the Department, the plan shall be submitted as a supplement to any existing annual report and shall be accompanied by a statement of an officer of the insurer as otherwise required for annual reports. Failure to submit a corrective action and compliance plan or to comply with such plan when accepted by the Department shall be considered a violation of these regulations. (2) Any insurer submitting a written report pursuant to Subsection 2698.41 (c)(1) setting forth a corrective action plan may also submit any of the following information to the Commissioner in conjunction with the report required by Subsection 2698.41 (c)(1): (A) any written material that may rebut any matters contained in the examination report. NOTE: Authority: Insurance Code Sections 730 et. seq, 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926 . Section 2698.42 Penalties (a) If the Commissioner acts pursuant to the provisions of California Insurance Code Section 1875.24( c) or (d) and finds that the insurer has failed to comply with the provisions of this article, the Commissioner shall impose a monetary penalty in an amount not to exceed $5,000 for each act of non-compliance. Where the Commissioner determines that an insurer has willfully failed to comply with this article, the Commissioner may impose a monetary penalty in an amount not to exceed $ 10,000 for each willful act of non -compliance. The Commissioner shall consider the factors enumerated at California Code of Regulations Title 10 Chapter 5, Subchapter 3,Section 2591.3 (a)-(f) and determine if any of the enumerated factors are applicable to the insurer’s conduct in the establishment and operation of its special investigative unit. If the Commissioner finds such factors are applicable to the insurer’s conduct, the Commissioner may reduce the amount of the monetary penalty prescribed in subsection 2698.42(a). (b) If the Commissioner acts pursuant to the provisions of California Insurance Code Section 1875.24(c) or (d) and determines that the acts of non-compliance are inadvertent and are solely relative to the maintenance and operation of the special investigative unit of the insurer, then the Commissioner shall consider such violations to be a single act for the purposes of imposition of a monetary penalty that is no greater than $5,000 for that single act. For all other inadvertent acts, the Commissioner shall impose a penalty in the amount of up to $5,000 per inadvertent act that is not in compliance with this article. NOTE: Authority: Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926. Section 2698.43 Hearings (a) Any hearing conducted pursuant to these regulations shall be governed by the provisions of California Government code Section 11425.10(a). (b) The Commissioner shall give 30 days written notice of any hearing held pursuant to these regulations. NOTE: Authority: California Government Code Section 11425.10(a), Insurance Code Sections 1875.24, 1879.5, 1879.6; Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d. 805, 824, 258 Cal. Rptr. 161, 771 P.2d 1247; Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651, 656, 128 Cal. Rptr. 881, 547 P.2d 993; Garris v. Carpenter (1939) 33 Cal. App. 2d. 649, 653, 92 P.2d 688. Reference: California Government Code Section 11425.10(a), Insurance Code Sections 1875.20, 1875.21, 1875.24, 1879.5, 12921(a) and 12926 .

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