As insurers well know, the cost of non-compliance is steep.

Now National Union Fire Insurance Co. (NUFIC) ofPittsburgh, a member of AIG's Chartis Group, isintimately familiar with such consequences, having agreed to paythe California Department of Insurance (CDI) nearly $6 millionin penalties for violating fair business practices.

The products covered under the settlement include group andblanket limited benefit plans, supplemental accident and disabilitypolicies, and accident and disability coverage provided with travelinsurance policies.

According to California Insurance Commissioner Dave Jones,insurance regulators cited a number of improper practices andviolations, including delays and errors in processing claims,product limitations not explained clearly, failure to use properlylicensed professionals to sell insurance products, and failure tofulfill and administer policies after sale, among others. As aresult of these violations, the California Department of Insurance(CDI) participated in a multi-state insurance regulatorsinvestigation and enforcement action against NUFIC.

“This sends an important message to insurers about the cost ofnot complying with laws and regulations designed to protectconsumers,” Jones said in a press release.

The settlement agreement includes a required two-year monitoringperiod with an implementation audit performed by insuranceregulators and a series of other audits and reports by theinsurance company to ensure compliance. The agreement includesprovisions for an additional $21 million in penalties, should thecompany fail to comply with any of the stipulated conditions.

Under California law, the $5,991,132.37 penalty paymentcollected by the CDI was deposited in the General Fund of theState of California.