Insurance and the training of insurance professionals, like all parts of modern society, is subject to the deprivations of the law of unintended consequences. The "law" is defined as the understanding that "actions of people—and especially of government—always have effects that are unanticipated or 'unintended.'" 1
In the United States alone, people pay insurers more than $700 billion in premiums, and insurers pay out in claims and expenses as much or more than they take in. Profit margins are small because competition is fierce, and a year's profits can be lost to a single firestorm, hurricane, or flood.
Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, insurance is a necessity. No person would take the risk of starting a business, buying a home, or driving a car without insurance. The risk of losing everything would be too great. By using insurance to spread the risk among all the costs of taking the risk to start a business, buy a home, or drive a car becomes possible.
Insurance contracts can be simple or exceedingly complex, depending on the risks insured. Regardless, insurance is neither more nor less than a contract whose terms are agreed to by the parties to the contract. Over the last few centuries, almost every word and phrase used in insurance contracts has been interpreted and applied by one court or another. Ambiguities in contract language became certain. However, the average person saw the insurance contract as incomprehensible and impossible to understand.
To protect the public, insurance regulators decided to require that insurers write their policies in "easy to read" language. Because they were required to do so by law, the insurers changed the words in their contracts into language that people with a fourth-grade education could understand. Precise language interpreted by hundreds of years of court decisions was disposed of and replaced with imprecise, easy-to-read language.
The attempts by the regulators and courts to control insurers and protect consumers were made with the best of intentions. The judges and regulators found it necessary to protect the innocent against what they perceived to be rich and powerful insurers.
The newest attempt to control insurers by regulation is the requirement for continuing education or training of insurance personnel. For example, if your company is admitted to do insurance business in California, the Department of Insurance has made almost every employee part of your integral anti-fraud personnel. California defines the term as follows:
"Integral anti-fraud personnel" includes insurer personnel who the insurer has not identified as being directly assigned to its SIU (Special Fraud Investigation Unit) 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. (Emphasis added.)
If employees are not trained and no training program is in force, you are in violation of the new California SIU regulations. If you do not have a training program that can train all employees who fit within the definition of "integral anti-fraud personnel" within 90 days of their employment, you will be in violation of the SIU regulations. The regulations, Section 2698.40, require every admitted insurer to train all integral anti-fraud personnel annually.
In addition to training provided to integral antifraud personnel, the SIU personnel must receive anti-fraud training that includes 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.
All insurers must also provide an anti-fraud orientation program to all SIU and integral antifraud personnel within 90 days after they are hired. Thereafter, insurers must provide anti-fraud training to SIU and integral anti-fraud personnel on an annual basis. Regulations also require that the admitted insurer maintain:
Records of the anti-fraud training provided to all staff [and that it] 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.
This onerous mandate carries with it the potential for serious fines for failure, which include, but are not limited to, "a penalty of not more than $5,000 for each violation unless intentional and then $10,000 for each violation.
Therefore, if your company hired any new personnel after August 20, 2003, you were required to provide them with anti-fraud training and you were required to provide such training to all of your integral anti-fraud personnel within annually thereafter and each new hire within 90 days of hire. Similar training requirements exist in other states requiring training in various insurance fields all of which expose the insurer to multiple lawsuits.
Today, it is imperative that insurance claims personnel keep current on changing education requirements and methods of compliance. While traditional education courses can be costly and time-consuming, many Internet-based insurance programs are now available that are both interactive and captivating. Available in a cost-effective format that can be taken by insurer employees at their desk, such programs keep insurance personnel well informed and compliant. 2
As the new year begins, make a resolution to train all personnel throughout the year, rather than waiting for the end-of-the-year continuing education panic.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.