BILL ANALYSIS
AB 328
Page 1
ASSEMBLY THIRD READING
AB 328 (Charles Calderon)
As Amended May 12, 2009
Majority vote
INSURANCE 10-0 JUDICIARY 10-0
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|Ayes:|Coto, Garrick, Blakeslee, |Ayes:|Feuer, Tran, Brownley, |
| |Charles Calderon, Carter, | |Skinner, Jones, Knight, |
| |Feuer, Hayashi, Nava, | |Krekorian, Lieu, Monning, |
| |Niello, Torres | |Nielsen |
| | | | |
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SUMMARY : Authorizes insurance companies to send certain
insurance notices electronically, and authorizes insurance
companies to pay claims by electronic funds transfers.
Specifically, this bill :
1)Repeals the prohibition on sending six insurance notices under
the existing Uniform Electronic Transactions Act (UETA). By
repealing this prohibition, insurance companies would be
authorized, subject to other laws, to send an electronic
message to consumers instead of mailing or personally
delivering a notice when:
a) Denying automobile insurance after the individual
applied to purchase a good driver discount;
b) Specifying a reason for canceling insurance;
c) Sending the notice of the offer of earthquake insurance;
d) Sending the notice of reduced earthquake insurance
coverage at the time of renewal;
e) Demonstrating proof that an offer of earthquake
insurance was made; and,
f) Sending the residential property insurance disclosure
statement;
2)Allows that notices required to be sent by casualty insurance
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companies, generally, be provided by electronic transmission
if each party has agreed to this means. This would include
automobile insurance, homeowner's insurance, liability
insurance, and commercial insurance. The following lines of
insurance, however, would not be authorized to send electronic
notices instead of being delivered or mailed: reinsurance,
marine insurance, title insurance, disability insurance,
workers' compensation insurance, mortgage insurance, and
county mutual fire insurance.
3)Specifies that, in connection with notices sent by insurance
companies, the affidavit of the person who initiated the
electronic transmission, stating the facts of that
transmission, shall be prima facie evidence that the notice
was transmitted.
4)Authorizes insurers to make an electronics funds transfer
payment to:
a) Auto repairers when agreed to by the insured person and
the repairer;
b) Licensed contractors who repair or conduct other
construction work on commercial, industrial, or residential
property, when agreed to by the insured person and the
contractor;
c) Pay claims on any loss, when agreed to by the insured
person; and,
d) Settle claims in which an "administrator" (the person
who collects claims in connection with life or health
insurance coverage) has collected funds from an insurer.
EXISTING LAW :
1)Establishes UETA which authorizes the transaction of business,
commerce, contracts, and governmental affairs by electronic
means.
2)Specifies that certain transactions are not authorized to be
conducted by electronic means. Transactions that are not
subject to being conducted electronically include:
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a) The written statement from an automobile insurer to the
applicant denying insurance coverage when the individual
applied to purchase a good driver discount policy;
b) A notice of cancellation of an automobile insurance
policy;
c) A written notice of nonrenewal of an automobile
insurance policy; and,
d) Proof of mailing of a notice of cancellation or of
intention to not renew insurance.
FISCAL EFFECT : None.
COMMENTS :
1)According to the author, this bill will allow for more
insurance transactions to be conducted electronically while
still providing two important consumer protections: a
consumer must agree to have the transaction conducted
electronically and cannot be compelled by the insurer to
accept the notices by electronic means.
2)In 1999, the Legislature approved SB 820 to enact UETA which
establishes uniform standards for conducting business
electronically. UETA specifies that it applies only to
transactions between parties that have agreed to transact
business by electronic means. UETA provides that a party that
agrees to conduct a transaction by electronic means may refuse
to conduct other transactions by electronic means. UETA
generally authorized the transaction of business by electronic
means but set forth a series of transactions that could not be
conducted by electronic means including certain
insurance-related transactions that are affected by AB 328.
3)This bill repeals the prohibition on six insurance notices
from being conducted electronically. (See the bill
description section of this analysis.) The bill retains the
existing law, enacted by UETA, that prohibits the electronic
transmission of disability insurance and life insurance for
individuals who are 65 years or older, or a notice of a
premium increase in connection with an individual life
insurance policy, or a notice of a change in the premium rate
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or coverage of an individual health insurance policy. The
bill also retains the provisions of UETA that cancellations
and nonrenewals of insurance are not authorized by electronic
means.
4)The author and the sponsor, the Association of California
Insurance Companies (ACIC), state that since 1999 more than 40
states have adopted laws similar to California to facilitate
"E-commerce." The author and sponsor point out that since
1999, consumers have grown more and more comfortable
conducting business on the Internet and through e-mail. Also,
when the initial legislation was passed, the legislation
prohibited several insurance transactions from being conducted
on the Internet or e-mail. With consumers able to shop for
and purchase insurance on the Internet, it is time to review
the prohibitions imposed 10 years ago.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN:
0000733