for allegedly marketing a long term care policy that failed to include consumer protections that were mandated by the legislature.

Nancy Kramer speaking for the commissioner said he was very concerned and thought the company "seemed arrogant" when they continued to market the product improperly despite a face to face meeting.

She said after the company had been contacted the commissioner opened up the San Francisco Chronicle and saw an add from the company that marketed the unchanged policy.

Under the state's revised requirements, Ms. Kramer said the policy should have included a provision which sets a ceiling on any premium increases and requires prior approval for such rate boosts.

The department issued its cease and desist order Oct. 2 alleging that State Farm violated state statutes by continuing to actively market and sell its long-term care product between Oct. 1, 2001 and June 12, 2002.

According to the department, State Farm sold 1,981 long-term care policies that did not meet the new standards requiring that the policies provide enhanced benefits.

State Farm spokesman Bill Sirola in Sacramento said the department's cease and desist announcement stated the maximum possible fine. "It is just that, it is an announcement. It is part of the process we go through in settling the issue," he said. "We have asked for a hearing and we are even now continuing to work on the issue."

Ms. Kramer said the decision on the amount of the fine would follow a hearing before an administrative law judge expected to take place within four or five weeks.

The policies in force throughout the period in question are "part of the new policy form that's been approved by the department of insurance," Mr. Sirola said. "We'll look at what premium adjustments will have to be made, but I don't know that there's any order to pay back the premiums of all those policies."

Ms. Kramer said that the department wants the insurer to convert all the policies involved to the new standard at no charge to the consumer.

Mr. Sirola said the company is currently working with the department to determine "how much and under what circumstances." So far, he explained, the policy language has been approved and rates have been filed based on the new policy language.

"We're now waiting for approval of those rates, which have been filed," he said. "As soon as we get that completed we'll be in a position to develop marketing materials and submit that for approval."

He continued that, "I can assure you that we would like to get this matter put to rest tomorrow if possible. The process is clicking right along, but it's a regulatory matter and sometimes these take longer than we could hope."

In the meantime, he said, State Farm has not sold the product since early June, "when the department decided we were not in compliance."

Ms. Kramer told NU last week that, "We've had repeated correspondence with State Farm since April of last year, before the statute deadline even hit."

She said, even after attorneys contacted State Farm the company still continued to market the products. "The commissioner had a meeting with them and was personally involved in telling them they were more than six months past the deadline," Ms. Kramer said.

She said the department continued to see the company's direct mail marketing materials even after being asked to stop by Mr. Low. State Farm eventually began running ads "with a small disclaimer" stating the product was not available in California, she said.

Mr. Sirola said State Farm hopes to resolve the matter soon, as coverage for the product "is critical. This is part of our policyholders' financial planning and we want to be able to offer it as soon as possible."

The statute, enacted to address the "volatile nature of the long-term care market" requires that under Insurance Code Sections 10231.2 and 10236.11, insurers selling long-term care products include the new consumer price protections. The statute also prohibits insurers that no longer meet the new standards from selling their products, according to the insurance department.