Applied Underwriters fined $250K for selling unapproved comp policies

The Illinois Department of Insurance has fined Applied Underwriters Inc. and its subsidiary Continental Indemnity Co. $250,000 for selling unapproved workers compensation policies to small businesses in the state, the department announced Tuesday.

The department conducted a market examination of former Berkshire Hathaway Inc.-owned Applied Underwriters and Continental, determining that the companies marketed and sold approved workers comp policies, packaged with side agreements, in violation of Illinois state law.

The department claimed that the companies sold reinsurance participation agreements as part of its workers comp insurance to small businesses without state approval, and found that the packaging of RPAs with the insurance misled policyholders “into assuming all of the risk, effectively insuring themselves, and resulted in policyholders paying more for the insurance part of the package than for the workers comp policy itself.”

The department also said the RPAs lacked standard information about premium amounts, charged penalties for cancelations and used “complex and confusing calculations for costs.

As part of its settlement with Illinois, Continental and Applied are no longer selling RPAs in the state and have agreed to file any new insurance products and rates with the insurance department.

Applied Underwriters has paid fines for selling similar products in California, New Jersey and New York, and is currently in a court battle with the State of California and its insurance commissioner after the state placed Applied subsidiary California Insurance Co. under conservatorship in November 2019.