insurance regulation



Third-Party Administrators (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 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.

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, or TPAs because they are not writing or selling insurance policies
and are not admitted insurance carriers in California.

This Website is Using Cookies

At, we utilize cookies to optimize your browsing experience. While some cookies are necessary for the basic functionality of the site, others assist us in analyzing usage patterns to enhance and personalize your interaction with our platform. By clicking “Continue”, you consent to the use of cookies as described, or you can review our “Cookies Policy” for detailed information on the types of cookies used and choose your preferences accordingly.