Health Net Inc, which was penalized by the California Department of Insurance, has agreed to reinstate healthcare coverage of 926 people, whose individual and family policies were annulled. The company, which is one of the five major California health insurers, had cancelled the policies of these people after they got sick.

The insurance company, which is being investigated for improper rescissions of coverage, has agreed to make significant changes to its application form, underwriting process, agent training and consumer notifications.

The company will have to pay $3.6 million in penalties and about $14 million in reimbursement for medical charges. California Department of Insurance has warned that the company could face an additional fine of $ 3.6 million if it failed to provide relief to the effected people.

 “During the settlement negotiations, Health Net was highly cooperative, and I believe their broad-based changes to underwriting and rescission practices will serve as a model and example to other health insurers,” state Insurance Commissioner Steve Poizner said in a news release.“I also commend the state Department of Managed Health Care for helping bring Health Net to the bargaining table.”

The company has faced a set back as its shares were down 16 cents at $26.33 on the New York Stock Exchange.