[IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE … Conduct Exam... · 2017. 7. 5. · NATIONWIDE...

Format 12938 ed. 7-1-16

[IN ACCORDANCE WITH CALIFORNIA INSURANCE CODE SECTION 12938, THIS REPORT WILL BE MADE PUBLIC AND BE PUBLISHED ON THE CALIFORNIA

DEPARTMENT OF INSURANCE (CDI) WEBSITE]

WEBSITE PUBLISHED REPORT OF THE MARKET CONDUCT EXAMINATION OF THE

RATING AND UNDERWRITING PRACTICES OF THE

NATIONWIDE INSURANCE GROUP (NAIC GROUP #0140)

AS OF APRIL 30, 2013

ADOPTED ON JUNE 5, 2017

STATE OF CALIFORNIA

CALIFORNIA DEPARTMENT OF INSURANCE

MARKET CONDUCT DIVISION

FIELD RATING AND UNDERWRITING BUREAU

Format 12938 ed. 7-1-16

NOTICE

The provisions of Section 735.5(a), (b), and (c) of the California

Insurance Code describe the Commissioner's authority and exercise

of discretion in the use and/or publication of any final or preliminary

examination report or other associated documents. The following

examination report is a report that is made public pursuant to

California Insurance Code Section 12938(b)(1) which requires the

publication of every report on an examination of unfair or deceptive

practices in the business of insurance as defined in Section 790.03

that is adopted as filed, or as modified or corrected, by the

Commissioner pursuant to Section 734.1.

Format 12938 ed. 7-1-16

TABLE OF CONTENTS PAGE

FOREWORD 1

SCOPE OF THE EXAMINATION 2

EXECUTIVE SUMMARY 5

METHOD OF DOING BUSINESS 6

AUTHORIZED CLASSES OF BUSINESS 7

PREMIUM AND LOSS EXPERIENCE STUDY 9

LINES OF BUSINESS REVIEWED 21

HOMEOWNERS 21

PRIVATE PASSENGER AUTOMOBILE 22

COMMERCIAL AUTOMOBILE 23

COMMERCIAL MULTIPLE PERIL 24

DETAILS OF THE CURRENT EXAMINATION 26

SUMMARY OF POLICY SAMPLE REVIEWED 26

SUMMARY OF RELEVANT LAWS 29

SUMMARY OF EXAMINATION RESULTS 30

1

FOREWORD

This report is written in a “report by exception” format. This report does not

present a comprehensive overview of the subject insurer’s practices. The report

contains only a summary of pertinent information about the lines of business examined

and of the non-compliant or problematic activities or results that were discovered during

the course of the examination, along with the insurer’s proposals for correcting the

deficiencies.

This report contains alleged violations of CIC § 790.03 and its implementing

regulations that were identified during the examination. While this report contains

alleged violations of law that were cited by the examiner, additional violations of CIC §

790.03 or other laws not cited in this report may also apply to any or all of the non-

compliant or problematic activities that are described herein. All unacceptable or non-

compliant activities may not have been discovered. Failure to identify, comment on, or

criticize non-compliant activities in this state or other jurisdictions does not constitute

acceptance of such practices.

Alleged violations identified in this report, any criticisms of practices, and the

Companies' responses, if any, have not undergone a formal administrative or judicial

process.

This report is made available for public inspection and is published on the

California Department of Insurance website (www.insurance.ca.gov) pursuant to

California Insurance Code Section 12938(b)(1).

http://www.insurance.ca.gov/

2

SCOPE OF THE EXAMINATION

Under the authority granted under the California Insurance Code (CIC) Part 2,

Chapter 1, Article 4, Sections 730, 733, and 736 and Article 6.5, Section 790.04; and

Chapter 9, Article 6, Sections 1857.2, 1857.3, and 1857.4; an examination was

conducted of the rating and underwriting practices and procedures in California of the

NATIONWIDE INSURANCE GROUP (NAIC Group #0140), comprised in California of

the:

ALLIED PROPERTY & CASUALTY INSURANCE COMPANY

(NAIC #42579, CDI #2982-7),

AMCO INSURANCE COMPANY (NAIC #19100, CDI #2192-3),

CRESTBROOK INSURANCE COMPANY (NAIC #18961, CDI# 3016-3),

DEPOSITORS INSURANCE COMPANY (NAIC #42587, CDI #3114-6),

FARMLAND MUTUAL INSURANCE COMPANY (NAIC #13838, CDI#4598-9),

HARLEYSVILLE INSURANCE COMPANY (NAIC #23582, CDI#3033-8),

NATIONWIDE AGRIBUSINESS INSURANCE COMPANY

(NAIC# 28223, CDI# 4599-7),

NATIONWIDE GENERAL INSURANCE COMPANY (NAIC#23760, CDI#4422-2),

NATIONWIDE INSURANCE COMPANY OF AMERICA (NAIC #25453, CDI #1628-7),

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY (NAIC #23779, CDI #1804-4),

NATIONWIDE MUTUAL INSURANCE COMPANY (NAIC #23787, CDI #1805-1),

NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY

(NAIC #37877, CDI #2820-9),

TITAN INDEMNITY COMPANY (NAIC #13242, CDI #3574-1),

and

VICTORIA FIRE & CASUALTY COMPANY (NAIC #42889, CDI #4845-4)

3

Hereinafter, these companies will be referred to individually as Allied (APCIC),

AMCO (AIC), Crestbrook (CB), Depositors (DIC), Farmland (FMIC), Harleysville (HAR),

Nationwide Agribusiness (NWAG), Nationwide General (NGIC), Nationwide Insurance

(NICOA), Nationwide Mutual Fire (NMFIC), Nationwide Mutual Insurance (NMIC),

Nationwide Property & Casualty (NPCIC), Titan (TIC), and Victoria Fire (VFCC), or

collectively, as Nationwide, the Companies, or the Group. The California Department of

Insurance will be referred to as the Department.

The examination covered the rating and underwriting practices of the

aforementioned Companies in the homeowners, private passenger automobile,

commercial automobile, and commercial multiple peril lines of business during the

period from April 1, 2013 through June 30, 2013. The examination was made to

discover, in general, if these and other operating procedures of the Companies conform

to provisions of the California Insurance Code (CIC), the California Code of Regulations

(CCR), and other applicable insurance law.

To accomplish the foregoing, the examination included:

1. A review of the rates, rating plans, and underwriting rules made or adopted by the Companies for use in California, including a review of records of data, statistics, or information maintained by the Companies in support of or relating to such rates and rules.

2. A review of the application of such rates and rules by means of an

examination of policy files and related records, including forms, to evaluate rating, underwriting, and risk selection practices.

3. A review of the Group’s advertising materials, which consisted of print

advertisements distributed through direct mail, product brochures that are available in the offices of Nationwide’s appointed agents, and the Companies’ internet sites at www.nationwide.com, www.alliedinsurance.com and www.titansurance.com.

4. A review of the Department's market analysis results, a review of any consumer complaints and inquiries received by the Department about these Companies in the year prior to the start of the examination, a review

4

of prior market conduct examination reports on these Companies, and a review of any prior enforcement actions by the Department regarding these Companies.

The examination was conducted at Nationwide’s regional office in Sacramento,

California.

5

EXECUTIVE SUMMARY

This examination included a review of policies that were issued, renewed,

cancelled, non-renewed, or declined during the period of February 1, 2013 through April

30, 2013, referred to as the “review period,” and a review of the Companies’ general

practices and procedures related to rating, underwriting, advertising and marketing, and

risk selection. The examiners reviewed 590 in-force policies and 390 terminated and

declined policies.

Within the scope of this report, one general practice was alleged to be in

violation of CIC § 790.03 and its implementing regulations. Nationwide’s homeowners

replacement cost notification form implied that the homeowners coverage contract

failed to include coverage for demolition and debris removal costs as part of the

replacement cost calculation. Details regarding the examination results are provided in

the final section of this report.

6

METHOD OF DOING BUSINESS

Nationwide uses marketing channels to distribute the programs offered in its

various companies. NICOA is used as the direct and exclusive marketing channel on

the personal lines side. The independent marketing channel includes APCIC and

AMCO, and is marketed by licensed individual producers who represent the

independent marketing channel companies in addition to other insurance companies or

groups. Commercial products are marketed through a combination of various

companies and utilize both the independent and direct marketing channels.

The Group’s world headquarters are located in Columbus, Ohio, which provides

insurance services, including policy processing, underwriting, claims handling and

billing for personal and commercial lines. The Group also has service centers in

California, Iowa, Nebraska and Texas. These centers underwrite, issue, and process

policies and serve as call centers for both agent and policyholder questions.

Titan Indemnity Company distributes its non-standard commercial auto products

through 4,280 independent agents and five employee associates at the company

owned Titan Insurance Agency.

Victoria Fire and Casualty Company distributes its non-standard private

passenger auto products through 4,281 independent agents and four employee

associates at the company owned Titan Indemnity Agency and via the internet.

Managing General Agents

Nationwide does not use Managing General Agents for any of its business units

in California.

7

AUTHORIZED CLASSES OF BUSINESS

The Companies are authorized to transact the following classes of business in

California:

Clas

s

No.

Class Of Insurance VFCC

C

TIC NICOA NPCIC NMFIC NMIC FMIC

1. Life

2. Fire X X X X X X

3. Marine X X X X X X

4. Title

5. Surety X X X X X

6. Disability X X X

7. Plate Glass X X X X X X

8. Liability X X X X X X X

9. Workers’ Compensation

X X X X

10 Common Carrier Liability

X X X X

11. Boiler and Machinery

X X X X X

12. Burglary X X X X X X

13. Credit X

14. Sprinkler X X X X X

15. Team and Vehicle X X X

16. Automobile X X X X X

17. Mortgage

18. Aircraft X X

19. Mortgage Guaranty

19.6 Legal Insurance

20. Miscellaneous X X X X X X

24. Financial Guaranty

8

Class

No.

Class Of Insurance CB HAR APCIC AIC DIC NWA

G

NGIC

1. Life

2. Fire X X X X X X

3. Marine X X X X X X X

4. Title

5. Surety X X X X

6. Disability X X X X

7. Plate Glass X X X X X X

8. Liability X X X X X X X

9. Workers’ Compensation

X X X X

10 Common Carrier Liability

X X X X X

11. Boiler and Machinery X X X X X

12. Burglary X X X X X X X

13. Credit X X X

14. Sprinkler X X X X X X

15. Team and Vehicle X X X X X X

16. Automobile X X X X X X X

17. Mortgage

18. Aircraft X X X

19. Mortgage Guaranty

19.6 Legal Insurance X

20. Miscellaneous X X X X X X

24. Financial Guaranty

9

PREMIUM AND LOSS EXPERIENCE STUDY

The following tables show the California premium and loss experience for each

Nationwide company by line of business for calendar year 2013, based on data from

the Statutory Page 14 of the Annual Statement filed with the Department. The

“Nationwide Insurance Group, Consolidated” table includes combined California

premium and loss experience for all companies. The loss ratio for each line is

calculated by dividing Direct Losses Incurred by Direct Premiums Earned. (Figures with

no meaning due to division by zero are indicated as “NM,” as are calculations including

a negative premium earned. All ratios are capped at 999%.) Nationwide General

Insurance Company and Harleysville Insurance Company did not have any premium

writings for 2013.

10

Nationwide Insurance Group, Consolidated

California Premium and Loss Experience by Line for the Year 2013

Line Of Coverage Direct Premiums

Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 57,688,146 55,870,078 18,069,219 27%

Allied lines 29,286,628 25,272,821 25,567,777 101%

Federal flood 4,136,987 3,869,673 27,000 1%

Farmowners multiple peril 100,795,145 100,306,249 36,143,868 36%

Homeowners multiple peril 264,227,909 258,675,679 140,643,956 54% Commercial multiple peril

(non-liability portion) 152,399,828 145,293,309 67,137,958 46% Commercial multiple peril

(liability portion) 99,581,209 95,495,821 27,366,930 29%

Inland Marine 14,171,051 15,439,859 3,802,472 25%

Earthquake 2,588,252 2,466,556 (2,979) 0%

Workers’ compensation 1,181,903 2,129,709 (5,837,401) (274)%

Other liability - occurrence 76,143,471 71,853,844 46,237,562 64%

Other liability – claims made 118,332 112,257 (11,274) (10)%

Products liability 12,665,485 12,725,382 19,094,575 150%

Private passenger auto liability 322,197,967 319,520,722 202,237,707 63%

Commercial auto liability 127,046,213 120,088,478 69,142,176 58%

Private pass auto physical damage 204,786,460 202,593,416 126,185,438 62%

Commercial auto physical damage 30,927,963 30,693,012 21,838,142 71%

Fidelity 669,465 611,464 77,405 13%

Surety 3,834,836 3,976,410 429,186 11%

Burglary and Theft 622,074 548,446 (3,062) (1)%

Boiler and Machinery 8,127,162 7,474,381 1,580,049 21%

TOTALS 1,513,196,486 1,419,147,488 799,726,704 56%

11

Allied Property and Casualty Insurance Company


Line Of Coverage

Direct

Premiums

Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 12,258,689 12,073,391 3,361,154 28%

Allied lines 5,557,845 5,529,536 5,214,232 94%

Homeowners multiple peril 65,138,941 64,113,458 37,003,557 58%

Inland Marine 1,781,247 1,787,806 586,985 33%

Other liability 4,715,969 4,626,796 2,448,381 53%

Private pass auto liability 67,299,689 66,475,448 37,012,849 56%


Surety 200 8 38 475%

Boiler and machinery 108,278 70,015 34,665 50%

TOTALS 198,663,071 196,418,622 110,717,380 56%

12

AMCO Insurance Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 35,459,300 34,889,598 10,387,566 30%

Allied lines 16,622,016 13,375,314 14,921,856 112%

Farmowners multiple peril 0 0 (30,731) NM


Commercial multiple peril

(non-liability portion) 100,461,328 97,959,032 47,493,808 48%

Commercial multiple peril (liability

portion) 74,746,633 74,692,341 25,436,029 34%

Inland Marine 5,133,124 5,065,520 1,350,056 27%

Earthquake 870,385 837,581 (1) 0%

Workers’ compensation 0 0 (14) NM

Other liability 20,585,132 19,745,837 12,551,095 64%

Products liability 1,227,750 2,117,139 397,769 19%


Commercial auto liability 1,498,001 707,756 526,459 74%


Commercial auto physical damage 0 (186) (290) NM

Fidelity 1,183 3,076 110 4%

Surety 599,372 690,968 (17,140) (2%)

Burglary and Theft 1,751 1,384 12 1%

Boiler and Machinery 5,701,397 5,504,238 905,279 16%

TOTALS 661,438,430 651,065,355 345,505,133 53%

13

Depositors Insurance Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Homeowners multiple peril (111) (111) 0 NM

Other liability 600 600 68 11%


Private pass auto physical damage 1,427,784 1,520,568 816,440 54%


Commercial auto physical damage 880,683 785,590 489,373 62%

TOTALS 8,715,091 8,296,090 4,856,292 59%

Crestbrook Insurance Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 5,409 1,315 2,138 163%

Allied 1,170 373 270 72%

Homeowners 3,694,523 3,276,203 1,473,003 45%

Inland marine 408,319 338,125 32,612 10%

Other liability 343,024 283,185 35,110 13%

Burglary and theft 40,285 35,287 50 0%

TOTALS 4,492,730 3,934,487 1,543,183 39%

14

Farmland Mutual Insurance Company


Line Of Coverage

Direct

Premiums

Written

($)

Direct

Premiums

Earned

($)

Direct

Losses Incurred

($)

Loss

Ratio

(%)

Fire 2,108 (18) 777 (43%)

Allied lines 446 32 101 315%


(non-liability portion) 2,828,333 1,968,467 532,240 27%


portion) 65,498 63,231 (5,474) (8%)

Workers compensation 846,417 804,194 81,603 10%

Inland Marine 123,778 63,240 61,985 98%

Other liability 2,350,011 1,903,867 638,436 34%

Products liability 1,397,895 1,175,969 226,169 19%



Fidelity 68,510 51,784 2,287 4%


TOTALS 11,970,928 9,253,729 4,413,633 48%

15

Nationwide Property and Casualty Insurance Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)


portion) 0 0 (36,749) NM

Workers’ compensation 0 0 65 NM

Other liability 0 0 (4,793) NM

Products liability 0 0 (14,685) NM

Private passenger auto liability 0 0 841 NM

Private pass auto physical damage 0 0 912 NM

TOTALS 0 0 (54,409) NM

16

Nationwide Agribusiness Insurance Company California Premium and Loss Experience by Line for the Year 2013


Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 906,996 678,639 180,298 27%

Allied lines 98,527 93,748 1,627,600 999%


(non-liability portion) 22,458,986 20,625,375 5,844,852 28%


portion) 6,371,889 6,072,996 1,672,429 28%

Earthquake 15,800 12,172 0 0%

Workers' compensation 316,565 1,305,871 1,795,356 137%

Inland Marine 119,668 118,180 2,789 2%

Other liability 24,126,081 23,489,212 15,926,993 68%




Fidelity 169,579 174,537 65,950 38%

Burglary and Theft 11,779 11,932 9,396 79%

Boiler and Machinery 379,888 290,954 255,786 88%

TOTALS 125,425,946 121,568,131 65,991,962 54%

17

Nationwide Mutual Fire Insurance Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Fire 308,376 302,405 7,245 2%

Allied lines 111,244 112,866 139,513 124%

Federal Flood 3,634,403 3,379,354 40,654 2%

Farmowners multiple peril 0 0 (2,758) NM



(non-liability portion) 0 0 (35,277) NM


portion) 0 0 (347,171) NM

Workers' compensation 18,921 19,644 (808,888) 999%

Inland Marine 98,238 117,281 14,847 13%

Earthquake 0 0 (2,978) NM

Other liability – occurrence (390) 7,178 1,019,775 999%

Other liability- claims made 0 0 (1,613) NM

Products liability 0 0 (59,160) NM

Private passenger auto liability 0 0 2,892 NM

Private pass auto physical damage 0 0 5,396 NM

TOTALS 10,099,345 10,200,760 5,197,308 51%

18

Nationwide Insurance Company of America


Line Of Coverage

Direct Premiums

Written ($)

Direct Premiums

Earned ($)

Direct Losses Incurred

($)

Loss Ratio (%)

Fire 2,667,515 2,481,077 416,909 17%

Allied lines 1,348,592 1,265,517 1,381,903 109%

Farmowners multiple peril 31,147 73,573 14,897 20%


Commercial multiple peril (non-liability portion) 3,025,712 2,829,145 1,722,112 61%

Commercial multiple peril (liability portion) 2,251,161 2,144,781 1,764,244 82%

Inland Marine 448,060 431,931 358,711 83%

Earthquake 12,869 8,353 0 0%

Other liability 1,932,170 1,784,504 (414,975) (23)%

Products liability 70,961 82,379 382 0


Commercial auto liability 1,329,940 1,258,656 729,225 58%




Boiler and Machinery 200,948 184,490 74,482 40%

TOTALS 153,280,316 148,207,303 92,205,372 62%

19

Nationwide Mutual Insurance Company


Line Of Coverage

Direct Premiums

Written ($)

Direct Premiums

Earned ($)

Direct Losses Incurred

($)

Loss Ratio (%)

Fire 6,0749,753 5,443,671 3,713,132 68%

Allied lines 5,546,788 4,895,435 2,282,202 47%

Federal flood 502,584 490,319 (13,654) (3)%

Farmowners multiple peril 100,763,998 100,232,676 36,131,729 36%

Homeowners multiple peril 75,000 75,000 52,510 70% Commercial multiple peril (non-liability portion) 23,625,469 21,911,290 11,580,223 53% Commercial multiple peril (liability portion) 16,146,028 12,522,472 (1,153,127) (9)%

Workers’ compensation 0 0 (6,905,523) NM

Inland Marine 7,828,708 7,507,751 1,389,844 19%

Earthquake 1,689,198 1,608,450 0 0%

Group accident & health 25,347 23,347 1,279,505 999%

Other liability occurrence 22,084,743 20,010,824 14,037,430 70%

Other liability claims made 118,332 112,257 (9,661) (8)%


Private passenger auto liability 0 0 837,389 NM


Private pass auto physical damage 0 0 926 NM


Fidelity 430,193 382,067 9,058 2%

Surety 3,235,264 3,285,434 446,288 14%

Burglary and Theft 554,166 486,798 (12,707) (2)%

Boiler and Machinery 1,736,651 1,424,684 309,837 22%

TOTALS 258,579,912 244,675,777 118,955,342 49%

20

Titan Indemnity Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Inland marine 10,049 9,068 4,627 51%

Other liability 5,330 1,197 34 3%

Private passenger auto liability 370,906 1,583,500 296,617 19%

Private pass auto physical damage 276,025 563,695 365,303 65%



Burglary and theft 180 176 0 0%

TOTALS 15,439,960 17,966,457 9,824,637 55%

Victoria Fire Casualty Company



Written

($)

Direct

Premiums

Earned

($)

Direct Losses

Incurred

($)

Loss

Ratio

(%)

Inland marine 1,137 957 16 0%

Other liability 801 642 8 1%



Commercial auto liability 1,756,212 415,840 170,243 41%


Burglary and theft 45 17 2 12%

TOTALS 66,536,380 65,562,561 42,037,927 64%

21

LINES OF BUSINESS REVIEWED

The Nationwide Insurance Group examination included a review of the following

lines of business.

Homeowners

AMCO Insurance Company #12-3706 Allied Property and Casualty Insurance Company #12-3707 (Filed: July 10, 2012; Effective: December 7, 2012)

Nationwide Insurance Company of America #12-7334 (Filed: December 3, 2012; Effective: April 1, 2013)

Nationwide offers two preferred homeowners’ products for sale to the general

public through NICOA, AMCO, and APCIC. NICOA writes a homeowners’ product that

offers H0-2, 3, 4, 5 and 6 forms with a wide variety of endorsements and is sold on a

direct basis or through exclusive agents.

AMCO and APCIC offer a preferred homeowners program utilizing HO-2, 3, 4, 5

and 6 forms with a wide variety of amendatory endorsements and share a common

rating plan and eligibility guidelines. This product is sold through agents who participate

in the two companies’ independent agency contracts. Discounts are offered to

policyholders who are over the age of 50, married policyholders, homes with

renovations, for various protective devices, and when multiple policies are purchased

by the policyholder. The product also offers a gated community discount, a retention

credit, and a tile roof credit.

22

Private Passenger Automobile

Allied Property and Casualty Insurance Company 12-7815 AMCO Insurance Company 12-7816 Depositors Insurance Company 12-7817 Nationwide Insurance Company of America: 12-7818 Crestbook Insurance Company: 12-7819 (Filed: January 24, 2013; Effective: March 23, 2013)

Victoria Fire and Casualty Insurance 11-7657 (Filed: November 4, 2011; Effective: January 16, 2012)

Nationwide offers a standard, voluntary Private Passenger Automobile program

for California good drivers and qualifying non-good drivers. The independent agent

channel uses AMCO and APCIC while NICOA is used by the direct market. Both

programs have identical eligibility guidelines, underwriting rules and rating plans.

VFCC offers the Group’s non-standard Private Passenger Automobile program,

which is sold through Titan Insurance, Inc. a wholly owned agency of VFCC. The

VFCC personal auto coverage is available through four different programs; Traditional,

Affinity, Lite and Plus. The Affinity program is only available to those in certain filed

affinity groups while the Lite program offers restricted coverage for a lower rate. The

Plus program is the only VFCC program which is limited to statutory good drivers who

also must be a member of a qualifying Business/Professional group.

California Automobile Assigned Risk Plan (CAARP)

Insurers that sell private passenger automobile policies are required by law to

accept risks that are assigned to them by the California Automobile Assigned Risk

Program. AMCO, APCIC, DIC, NICOA, and VFC have a limited assignment distribution

(LAD) agreement with Lincoln General Insurance Company. Therefore, no CAARP

policies were reviewed during the examination.

23

Commercial Automobile

Nationwide Mutual Insurance Company #12-9381 (Filed: March 12, 2013; Effective: June 1, 2013) Nationwide Mutual Insurance Company #12-3876 (Filed: July 23, 2012; Effective: November 1, 2012)

Nationwide Agribusiness Insurance Company #12-6240 (Filed: November 13, 2012; Effective: March 1, 2013) Titan Indemnity Company: #12-6569 (Filed: October 23, 2012; Effective: January 28, 2013)

Nationwide Mutual Insurance Company offers a preferred commercial

automobile program to a variety of classes of business in various industries. NMIC

policies are written under one rating plan based on established rules, rates and rating

procedures for Business Auto. Nationwide Agribusiness Insurance Company offers

commercial auto targeted to preferred risks in in the agribusiness community. Policies

are written based on driver qualification criteria and clients that meet financial,

operational and risk management guidelines. NWAG applies ISO forms and pricing

structures with several filed exceptions and modifications specific to the agribusiness

industry.

Titan Indemnity Company writes a non-standard commercial automobile

program. It offers coverage to high risk business types such as Towing for hire, Hauling

for hire, Dirt, Sand & Gravel Haulers, Couriers and Pizza Delivery. New business

ventures or applicants with a significant lapse in coverage are also acceptable. In

addition, the program will accommodate drivers with multiple violations including DUI's

which are not acceptable to the standard or preferred markets.

24

Commercial Multiple Peril

Businessowners (BOP) AMCO Insurance Company #12-8864 (Filed: February 13, 2013; Effective: June 1, 2013) AMCO Insurance Company #12-3212 (Filed: June 6, 2012; Effective: September 15, 2012) Commercial Multi-Peril Package Nationwide Mutual Insurance Company #11-8901 (Filed: May 11, 2012; Effective: June 1, 2012) Nationwide Agribusiness Insurance Company #11-3901 (Filed: August 15, 2011; Effective: February 1, 2012)

Nationwide writes commercial multi-peril business (both monoline and package)

in Nationwide Mutual Insurance Company and Nationwide Agribusiness Insurance

Company. AMCO Insurance Company offers a preferred Businessowners program.

The Businessowners program is designed for small to medium sized risks for eligible

classifications and provides both property and liability coverage. The BOP programs

include Auto Service, Food Service, Habitational, Motel, Office, Service, Retail, and

Wholesale risks in targeted classes of business.

The commercial multi-peril package program is designed for eligible

classifications such as contractors, churches, printers, wholesalers/distributors and

certain agribusiness. Coverages include property and liability; however, two separate

policies are issued, one for commercial property and the other for general liability.

Nationwide Mutual Insurance Company offers the commercial multi-peril (CMP)

package program for risks whose classes or exposure exceed those allowed under the

BOP program. NMIC subscribes to ISO rules, loss cost and forms with several

deviations, exceptions and modifications.

Nationwide Agribusiness Insurance Company offers a commercial multi-peril

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package program for preferred risks in the agribusiness community. This program

provides property and liability coverage for owner or tenant occupied risks with an

insurable interest in farming, ranching and/or commercial agricultural operations.

NWAG uses ISO forms and pricing structure with several exceptions and modifications

specific to the agribusiness industry.

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DETAILS OF THE CURRENT EXAMINATION

The examination included a review of a sample of in-force and terminated

policies and declined risks to evaluate rating, underwriting, and risk selection practices.

This section of the report provides summary information regarding the examination, and

regarding the provisions of CIC § 790.03 and its implementing regulations that were

cited, or to which reference was made.

SUMMARY OF POLICY SAMPLE REVIEWED

The policies reviewed were selected at random from the Companies’ listing of

policies issued, renewed, non-renewed, cancelled, and declined during the period of

February 1, 2013 through April 30, 2013. The In-Force Policies Reviewed table shows

the number of new and renewal policies reviewed by line of business and company.

The Termination Transactions Reviewed table shows the number of termination

transactions reviewed per line of business and by company.

NATIONWIDE INSURANCE GROUP

In-Force Policies Reviewed

Program

No. of Policies

Reviewed Homeowners AMCO 57 APCIC 30 NICOA 13

Total Homeowners 100 Private Passenger Automobile AMCO 51 APCIC 21 NICOA 38 VFCC 100

Total Private Passenger Auto 210

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Commercial Automobile NMIC 56 NWAG 30 NICOA 2 DIC 1 TIC 91

Total Commercial Auto 180 Commercial Multiple Peril Package NMIC 33 NICOA 6 NWAG 20 BOP AMCO 41 Total Commercial Multiple Peril 100

TOTALS 590

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Terminated Transactions Reviewed

Program No. of

Policies Reviewed

Homeowners Non-Renewed – AMCO 31 APCIC 18

NICOA 1

NMFIC 3 Cancelled – AMCO 6 APCIC 3 NICOA 0 NMFIC 4

Crestbrook 1

Total Homeowners 67

Private Passenger Automobile Non-Renewed – AMCO 15 APCIC 13 NICOA 17 VFCC 21 Cancelled – AMCO 5 APCIC 1 NICOA 18

VFCC 37

Total Private Passenger Automobile 127

Commercial Automobile Non-Renewed – NWAG 4 NMIC 11 TIC 15 Cancelled – TIC 50 NICOA 4 NWAG 1

NMIC 22

Declinations 21

Total Commercial Automobile 128

Commercial Multiple Peril Cancellations – NMIC Package 9

AMCO BOP 13

Non-Renewed – NMIC Package 6 NICOA Package 1 AMCO – BOP 14 Declinations – BOP and Package 25

Total Commercial Multiple Peril 68

TOTALS 390

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SUMMARY OF RELEVANT LAWS

The table below identifies the provision(s) of CIC § 790.03 and/or its

implementing regulations for which violations were alleged during the examination.

Each law listed on the following table may be due to a general practice which affects

many policyholders. One practice can also violate multiple laws or occur across

multiple companies within an insurer group.

Code Citation

Description of Law

1.

CIC § 790.03(b)

Making or disseminating to the public in this state, in any newspaper or publication, or in any other advertising device, a statement regarding the business of insurance that is untrue, deceptive, or misleading is a prohibited act.

2. CCR § 2695.183(a)(3)

No licensee shall communicate an estimate of replacement cost to an applicant or insured in connection with an application for or renewal of a homeowners' insurance policy that provides coverage on a replacement cost basis, unless the estimate of replacement cost includes the expenses that would reasonably be incurred to rebuild the insured structure(s) in its entirety, including the cost of demolition and debris removal.

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SUMMARY OF EXAMINATION RESULTS

During the Nationwide Insurance Group examination, and within the scope of this

report, one general practice was alleged to be in violation of CIC § 790.03 or its

implementing regulations. In response to each of the Department’s allegations of non-

compliance, the Companies were required to identify remedial or corrective action that

was or will be taken to correct the deficiency. Regardless of actions taken or proposed

by the insurer in this report, it is the insurer’s obligation to ensure that compliance with

California law is maintained continuously. Any non-compliant practice identified in this

report may extend to other jurisdictions. The Companies should address corrective

action for other jurisdictions where applicable.

No premium was returned to consumers as a result of the issue described in this

report.

Homeowners

1. The Replacement Cost Notice (RCE) provided to consumers on the Homeowner Reconstruction Cost Notification form utilized by AMCO, APCIC and NICOA listed the debris removal cost component of the replacement cost estimate to be $0. In quantifying replacement costs associated with rebuilding or replacing a damaged or destroyed structure, any remaining structure must first be demolished and the debris removed prior to the reconstruction of the dwelling. As such, demolition and debris removal costs are necessary parts of the replacement cost estimate. By communicating that the estimated demolition and debris removal costs are $0, the Companies are potentially making an untrue, deceptive or misleading statement with respect to their insurance business practices. As such, consumers may be potentially underinsured as these costs have not been portrayed to have been captured by the insurer when developing its replacement cost estimate.

CIC § 790.03(b) and CCR § 2695.183(a)(3)

Summary of Insurer Response: NICOA, AMCO, and APCIC responded that reasonable expenses for demolition and debris removal are included within applicable dwelling coverage limits and an additional 5% of the Coverage A limit is available if the amount to rebuild or replace exceeds the applicable dwelling limits. However, NICOA, AMCO, and APCIC will itemize demolition and debris removal cost amounts on the reconstruction costs estimates in order to address the Department’s concerns about possible confusion. The Companies will

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implement usage of the revised form on May 6, 2017.

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