Mercury Insurance agreed this week to pay $1 million and implement business practice reforms in order to settle charges that it violated California law more than 350,000 times.
California Insurance Commissioner Dave Jones announced the agreement Monday, stating that Mercury had been practicing more than 50 illegal rating and underwriting practices. Among other things, Mercury was determined to have:
- Failed to provide reasons for non-renewals and cancelations
- Using unapproved and unfiled rates
- Failing to consistently follow their own rating and underwriting rules
- Failing to make certain required disclosures in Spanish
The violations were discovered with the Department of Insurance conducted a regularly scheduled “market conduct exam,” which examines insurance companies’ adherence to the state insurance code and the California Code of Regulations.
“Market conduct exams help make sure insurers are fulfilling their obligation to consumers and following all insurance laws and regulations,” Jones said. “This routine market conduct exam of Mercury Insurance resulted in payment of a penalty and business practice reforms, and serves as an important reminder to all insurers to uphold commitments made to policyholders.”
The exam period was from March 1, 2007 through May 31, 2007.
This is not the first time Mercury has been in trouble with the California Department of Insurance. In January, Mercury paid a record $27.5 million fine for charging fees the department deemed “excessive” and for violating a strict separation between independent and captive insurance agents.
The fees matched the amount of money Mercury customers paid out in fees not approved by the department, and represented the largest fine ever levied on a property/casualty insurer in California.
“Mercury auto insurance consumers paid $27.5 million in unapproved fees,” Jones said at the time. “While the $27.5 million fine against Mercury is significant, it is commensurate with the amount of money that was unlawfully collected from Mercury policyholders.”
