Special Investigation Unit (SIU) requirements

California law requires insurers that write certain lines of business to maintain a Special Investigation Unit (SIU) or contract with one. The SIU helps detect, investigate, and prevent insurance fraud. It also works closely with the California Department of Insurance (CDI) Fraud Division and with law enforcement.

Core requirements for SIUs

Detect, investigate, and document suspected fraud

SIUs must have systems in place to identify potentially fraudulent claims or applications.
They must investigate cases that are flagged by fraud indicators and document what they find, including supporting evidence and analysis.
Documentation should be detailed enough to show that the insurer recognized the fraud indicators and followed its investigation procedures.

Refer suspected fraud cases to the fraud division

When fraud is reasonably suspected, the SIU must file a Suspected Fraudulent Claim (SFC) report with the CDI’s Fraud Division.
Referrals must be timely and include all relevant documentation (e.g., claim forms, statements, medical reports, investigative findings).
Failure to report suspected fraud can subject the insurer to regulatory penalties.

Maintain detailed records of training and investigation outcomes

Insurers must train claims adjusters, SIU staff, and other relevant personnel to recognize fraud indicators.
Training must be documented (dates, topics, attendees, materials).
SIUs must also keep detailed records of investigations and their outcomes, including whether a case was referred, closed, or confirmed fraudulent.
These records must be available for CDI audits and regulatory review.

Cooperate fully with law enforcement and CDI

SIUs must make records available to CDI investigators upon request.
They must respond promptly to CDI inquiries, provide access to claims files, and share evidence.
Full cooperation is also required with district attorneys, law enforcement agencies, and other regulatory bodies pursuing insurance fraud cases.

Additional SIU obligations

Anti-fraud plan: Each insurer must submit an annual anti-fraud plan to the CDI describing its SIU operations, staff qualifications, and fraud detection measures (§2698.40).
Accessibility: SIU contact information must be clearly available to CDI and law enforcement.
Proportionality: Insurers may contract with an outside SIU vendor if they don’t have sufficient resources to maintain an in-house unit.
Exemptions: Smaller insurers may be exempt from maintaining a full SIU if they write below certain premium thresholds, but they still must comply with fraud reporting obligations.

Detect, investigate, and document suspected fraud

Systems to identify fraudulent claims/applications
Investigate flagged cases; document evidence and analysis
Records must show recognition of fraud indicators and procedures followed

Refer suspected fraud cases to the fraud division

File Suspected Fraudulent Claim (SFC) reports with CDI Fraud Division
Timely referrals with all supporting documentation
Failure to report can result in regulatory penalties

Maintain detailed records of training and investigation outcomes

Train staff to recognize fraud indicators; document training (dates, topics, attendees)
Keep records of investigations and outcomes (referred, closed, confirmed fraud)
Records must be available for CDI audits and review

Cooperate fully with law enforcement and CDI

Provide records and claims files to CDI investigators on request
Respond promptly to CDI and law enforcement inquiries
Share evidence and cooperate with regulatory and law enforcement agencies

Additional SIU obligations

Annual anti-fraud plan submission to CDI (§2698.40)
SIU contact info accessible to CDI and law enforcement
May contract with outside SIU if lacking resources
Exemptions for small insurers below premium thresholds, but must still report suspected fraud

Special Investigation Unit (SIU) requirements

Core requirements for SIUs

Detect, investigate, and document suspected fraud

SIUs must have systems in place to identify potentially fraudulent claims or applications.
They must investigate cases that are flagged by fraud indicators and document what they find, including supporting evidence and analysis.
Documentation should be detailed enough to show that the insurer recognized the fraud indicators and followed its investigation procedures.

Refer suspected fraud cases to the fraud division

When fraud is reasonably suspected, the SIU must file a Suspected Fraudulent Claim (SFC) report with the CDI’s Fraud Division.
Referrals must be timely and include all relevant documentation (e.g., claim forms, statements, medical reports, investigative findings).
Failure to report suspected fraud can subject the insurer to regulatory penalties.

Maintain detailed records of training and investigation outcomes

Insurers must train claims adjusters, SIU staff, and other relevant personnel to recognize fraud indicators.
Training must be documented (dates, topics, attendees, materials).
SIUs must also keep detailed records of investigations and their outcomes, including whether a case was referred, closed, or confirmed fraudulent.
These records must be available for CDI audits and regulatory review.

Cooperate fully with law enforcement and CDI

SIUs must make records available to CDI investigators upon request.
They must respond promptly to CDI inquiries, provide access to claims files, and share evidence.
Full cooperation is also required with district attorneys, law enforcement agencies, and other regulatory bodies pursuing insurance fraud cases.

Additional SIU obligations

Anti-fraud plan: Each insurer must submit an annual anti-fraud plan to the CDI describing its SIU operations, staff qualifications, and fraud detection measures (§2698.40).
Accessibility: SIU contact information must be clearly available to CDI and law enforcement.
Proportionality: Insurers may contract with an outside SIU vendor if they don’t have sufficient resources to maintain an in-house unit.
Exemptions: Smaller insurers may be exempt from maintaining a full SIU if they write below certain premium thresholds, but they still must comply with fraud reporting obligations.