California Department of Insurance


Third Party Administrator (TPAs) and Private Self-Insured Employers are regulated by the Department of Industrial Relations. These Private Self-Insureds undergo audits and here are The 10 Most Common Issues Identified During an OSIP Audit. Notice that none of these audits include any Department of Insurance nor any SIU requirements.
California Insurance Code Section 1877.9 states:
“(a) Every insurer and every other entity that issues insurance policies, certificates, or contracts, including, but not limited to, entities issuing policies under the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1001 et seq.) and third-party administrators, that transacts insurance in this state shall establish and maintain a special investigative unit to investigate suspected fraudulent claims or acts that are reasonably suspected of being committed against the insurer or entity.
(b) Each special investigative unit shall submit an annual report to the commissioner, in a format prescribed by the commissioner, summarizing its anti-fraud plan and activities for the previous year.”
In order to investigate claims, insurance companies must create a Special Investigations Unit (SIU). In California, the California Code of Regulations, Article 2, Special Investigation Unit Regulations, Section 2698.30, lays out the legal requirement for insurance companies to form a Special Investigations Unit.

Section 2698.40 explicitly requires “Insurers.” It does not require Self-Insureds, MGAs, nor TPAs to complete an Annual SIU Report.

Claims handlers managing claims and acting as an agent of an insurance company that is writing insurance policies in California must receive the Anti-Fraud Training and follow the companies SIU internal guidelines so the Insurance Company can report those statistics annually. This requirement is not extended to Self-Insureds, MGAs, nor TPAs because they are not writing or selling insurance policies and are not admitted insurance carrier in the State of California.

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