Section 2570.06 - Exhibits to be Submitted by ApplicantAn applicant for a license to conduct a home protection company business shall submit the following exhibits with its application.
(a) Fees. (2) Name(s) of marketing representatives (Make check payable to the California Department of Insurance.)(b) Taxes. Executed tax bond or security deposit.
(c) Name Approval. (1) Request for corporate name approval letter.(2) Request for marketing representatives name(s) approval letter.(d) Authorization for Disclosure of Financial Records. Executive disclosure of financial records authorization.
(e) Organization. (1) Articles of incorporation and all amendments certified by the secretary of state.(2) By-laws certified by the corporate secretary.(3) Minutes of initial meeting of the incorporators or board of directors certified by the corporate secretary if the applicant is being organized on or after January 1, 1979.(4) Completed registration statement Form "B," if your company is a member of a holding company system.(5) Functional staffing organization chart showing the name and title of all directors, officers and key managerial personnel.(6) Biographical affidavit on a form furnished by the Commissioner for each person controlling 10% or more of applicant's stock directly or indirectly and each person named on the applicant's functional staffing organization chart who does not have a recent biographical affidavit on file with the Commissioner.(7) The name of each director of the applicant who is a director of any insurer or other home protection company together with the name of all such insurers or other home protection companies.(8) Procedures of the applicant to determine the existence of possible conflicts of interest with directors, officers or key managerial personnel.(9) Copy of any current or proposed outside management, consulting, employment or administration agreement certified by the corporate secretary.(10) Certificate of good standing from the home state.(f) Plan of Operation. (1) The plan of operation exhibit may be submitted in a narrative form and should include information with regard to the following: (A) Products. Briefly explain the applicant's home protection contract in regard to coverage, exclusions, terms, average price and other relevant items.(B) Marketing. Describe the manner in which these products will be marketed. Submit copies of applicant's marketing material such as pamphlets, brochures, handbooks and advertising.(C) Underwriting and Rating. Describe the applicant's underwriting and rating practices and procedures. Include a copy of the following:1. All contracts, applications, endorsements, amendments or rider forms intended for use in California.2. Underwriting manual or underwriting guidelines intended for use in California.3. Rate charts intended for use in California.4. Copy of any actuarial study, market research study, or summary of experience upon which applicant's proposed rates are based.5. Copy of applicant's rating manual or a description of applicant's rate making methodology.(D) Provision of Service. Briefly explain how and by whom service claims will be processed and service performed. Indicate whether applicant's service providers will be employees or independent contractors and explain how service providers will be compensated. Describe the extent of authority delegated to independent service providers and explain what check is made on the quality of service rendered. Include a copy of the applicant's service manual and service agreements.(g) Financial Reporting Requirements. (1) A copy of applicant's most recent audited financial statement prepared by an independent certified public accountant or independent licensed public account. If applicant's financial statement was not audited, it must be verified by the applicant's president and secretary.(2) A financial statement prepared in accordance with statutory requirements as of the date of application showing: (A) Assets. 3. Mortgage loans on real estate. b. other than first liens.4. Real estate, [FN*] less encumbrances.6. Cash on hand and on deposit. a. cash in company's office.7. Other invested assets.8. Protection contract fees receivable. [FN**]9. Service fees receivable. [FN***]10. Federal income tax recoverable.11. Electronic data processing equipment.12. Interest, dividends and real estate income due and accrued.13. Prepaid claim expense. [FN****](B) Liabilities, Surplus and Other Funds. 1. Service claims adjusted and unpaid or in process of adjustment.2. Other expenses (excluding taxes, licenses and fees).3. Taxes, licenses and fees (excluding federal and foreign income taxes).4. Federal and foreign income taxes (excluding deferred taxes).7. Unearned home protection contract fees.8. Dividends declared and unpaid to stockholders.9. All other liabilities.12. Gross paid-in and contributed surplus.13. Unassigned funds (surplus).14. Less treasury stock, at cost.15. Surplus as regards contract holders.(C) Summary of business in force. Provide the following information:
| California | Other | States | Total |
| Date that home protection company business in California commenced........................... | | | | |
| Number of contracts issued or renewed during the preceding calendar year.......................... | | | | |
| Number of contracts in force.......................... | | | | |
| Number of months of liability under unexpired contracts........................... | | | | |
| Average price per contract.......................... | | | | |
| Average amount expended per contract for direct provision of service........................... | | | | |
| Average amount per contract expended for acquisition and administration expenses.......................... | | | | |
| (3) Audited or verified financial statement for 1977 and 1978 for those companies conducting a home protection company business in California prior to January 1, 1979.......................... | | | | |
| (4) Copy of any actuarial study or market research report upon which the applicant's financial projection was based.......................... | | | | |
| (5) Copy of any contract by which business is shared or pooled with another home protection company or insurer.......................... | | | | |
| (6) Salaries and compensation paid or payable to directors, officers and key managerial personnel.......................... | | | | |
| (7) Estimate of all organizational expenses incurred or to be incurred, from initial promotion to issuance of a home protection company license for a company organized on or after January 1, 1979........................... | | | | |
State basis of valuation.[FN**]
Home protection contract fees receivable are allowed as assets to the extent that such fees are actually received subsequent to the end of the statement period on contracts which became effective prior to the end of the statement period.[FN***]
Service fees receivable are allowable as an asset to the extent that such fees are actually received within 15 days following the end of the statement period.[FN****]
Furniture, fixtures, office equipment and supplies, leasehold improvements, organization expenses, intangible assets, deferred charges and prepaid expenses are not allowable assets except that prepaid claims expense consisting of automobiles, trucks and appliances used solely and directly in servicing claims may be taken as an asset at depreciated cost.
Cal. Code Regs. Tit. 10, § 2570.06
Note: Authority cited: Section 2570, California Insurance Code. Reference: Sections 771.1, 831.1, 881.1, 882.5, 988, 1215.13 1/2, 1634, 1635, Part 7 commencing with Section 12740 of Division 2, Insurance Code.[FN*]