The California Department of Insurance (DOI) requires registration and approval to sell insurance policies. Licensing ensures that companies meet certain minimum requirements. These requirements broadly include: minimum capital and surplus amounts, an insurer’s financial stability, the ethics and integrity of management, the insurer’s claims handling procedures, and the company’s fairness and honesty overall.
Insurers can face harsh outcomes for noncompliance because the DOI has broad powers over companies that sell insurance or purport to sell insurance. This includes the power to order companies to stop selling insurance policies.
Recently, California Insurance Commissioner Dave Jones upheld a cease and desist order against a Central Valley insurer and its affiliates. The original cease and desist order alleged, Agricultural Contracting Services Association Inc. and its affiliates, the American Labor Alliance Workers’ Compensation Fund and Trust, CompOne USA were “soliciting, marketing, selling and issuing” workers compensation policies to employers throughout California, but were not properly registered and thus were operating without authority.
Policyholders would do well to heed of this result as well. Most of the time, an insurer likely has complied with state regulations and is licensed to sell insurance. However, an unusual type of insurance policy may require purchasing from a lesser well-known company. It is important to research a potential insurer to determine whether they are allowed to sell insurance in California.