BILL ANALYSIS
AB 328
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 328 (Charles Calderon)
As Amended July 2, 2009
Majority vote
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|ASSEMBLY: |72-0 |(May 14, 2009) |SENATE: |35-0 |(August 17, |
| | | | | |2009) |
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Original Committee Reference: INS.
SUMMARY : Authorizes insurance companies to send certain
insurance notices electronically, and authorizes insurance
companies to pay claims by electronic funds transfers.
The Senate amendments modify the Assembly version of the bill as
follows:
1)Specify that a valid electronic signature shall be sufficient
for any provision of law requiring a written signature.
2)Require insurance companies to maintain a system for
electronically confirming a policyholder's decision to opt in
to an agreement to conduct transactions electronically and a
system that will allow the policyholder to electronically opt
out of the agreement to conduct business electronically. The
insurer shall maintain the electronic records for the same
amount of time the insurer would be required to maintain those
records if they were in written form.
3)Require the insurance company to retain a copy of the
confirmation and electronic signature, when either is
required, with the policy information so that they are
retrievable upon request by the California Department of
Insurance (CDI) while the policy is in force and for five
years thereafter.
4)Allow a notice of a valid cancellation of a policy (e.g.,
nonpayment of premium) to be sent electronically to a
lienholder with the consent of that lienholder.
5)Allow a copy of the homeowner's insurance policy to be
provided electronically to the subsequent purchaser of the
mortgage if that party agrees to electronic service.
AB 328
Page 2
EXISTING LAW :
1)Establishes the Uniform Electronic Transactions Act (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:
a) A notice of cancellation of an automobile insurance
policy;
b) A written notice of nonrenewal of an automobile
insurance policy;
c) A notice of the offer of earthquake insurance; and,
d) A notice of the offer of residential property insurance.
AS PASSED BY THE ASSEMBLY , this bill:
1)Repealed the prohibition on sending six insurance notices
under 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;
AB 328
Page 3
2)Allowed that notices required to be sent by casualty insurance
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, anmd
county mutual fire insurance.
3)Specified 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)Authorized insurers to make an electronics funds transfer
payment to:
a) Auto repairers when agreed to by the repairer;
b) Licensed contractors who repair or conduct other
construction work on commercial, industrial, or residential
property, when agreed to by 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.
FISCAL EFFECT : None
COMMENTS : 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.
AB 328
Page 4
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.
This bill repeals the prohibition on six insurance notices from
being conducted electronically. 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 or coverage of an individual
health insurance policy. The bill also retains the provisions
of UETA that specify that cancellations and nonrenewals of
insurance are not authorized by electronic means.
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: 0001877