BILL NUMBER: AB 2404 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 27, 2010
AMENDED IN ASSEMBLY APRIL 14, 2010
INTRODUCED BY Assembly Member Hill
FEBRUARY 19, 2010
An act to amend Sections 481 and 730 of the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2404, as amended, Hill. Insurance.
(1) Existing law requires that unless the insurance contract
provides otherwise, an insured person is entitled to a return of his
or her premium if the policy is canceled, rejected, surrendered, or
rescinded, as provided.
This bill would require that any insurance policy that includes a
provision to refund a premium other than on a pro rata basis,
including the assessment of cancellation fees, separately disclose
that fact in writing, including a description of the cancellation
process and the actual fees or penalties applied. The disclosure
would be required to be made prior to, or concurrent with, the
application and prior to each renewal, as provided. If an application
is made by telephone, the disclosure would be required to be mailed
to the applicant or insured within 3 business days.
(2) Existing law requires the Insurance Commissioner to conduct an
examination of the business and affairs of insurers admitted in this
state at least once every 5 years. In scheduling and determining the
nature, scope, and frequency of the examinations, the commissioner
is required to consider the results of financial statement analyses
and ratios, changes in management or ownership, actuarial opinions,
reports of independent certified public accountants, market analysis
results, including consumer complaint analysis, evaluation of ongoing
regulatory activities, analysis of data derived from industry
surveys or interrogatories, and other criteria as set forth in the
Examiner's Handbook or in the Market Regulation Handbook adopted by
the National Association of Insurance Commissioners (NAIC) that are
in effect at the time of the examination.
This bill would authorize the commissioner to forgo
postpone a market conduct examination, otherwise
required, for up to an additional 5 3
years if information derived from a market analysis process
that considers criteria, such as prior examination results, consumer
complaint data, market share, actions taken by other states, and
information from other sources, does not indicate that an examination
is warranted indicates that the prior examination of
the insurer resulted in no significant negative findings, the number
of consumer complaints received by the insurer is in the lowest
quartile of complaints, on a ratio basis, for insurers in that line
of business, and the market analysis identifies no other
issues of significant concern .
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 481 of the Insurance Code is amended to read:
481. (a) Unless the insurance contract otherwise provides, a
person insured is entitled to a return of his or her premium if the
policy is canceled, rejected, surrendered, or rescinded, as follows:
(1) To the whole premium, if the insurer has not been exposed to
any risk of loss.
(2) Where the insurance is made for a definite period of time and
the insured surrenders his policy, to such proportion of the premium
as corresponds with the unexpired time, after deducting from the
whole premium any claim for loss or damage under the policy which has
previously accrued. The provisions of Section 482 apply only to the
expired time.
(b) No contract for individual motor vehicle liability or
homeowners' multiple-peril insurance may contain a provision which
mandates that the premium for the policy shall be fully earned upon
the happening of any contingency except the expiration of the policy
itself. This subdivision shall not apply to policy fees or membership
fees.
(c) (1) Any insurance policy that includes a provision to refund
premium other than on a pro rata basis, including the assessment of
cancellation fees, shall separately disclose that fact in writing,
including a description of the cancellation process and the actual
fees or penalties to be applied. The disclosure shall be provided
prior to, or concurrent with, the application and prior to each
renewal.
(2) If an application is made by telephone, the disclosure shall
be mailed to the applicant or insured within three business days.
(3) The disclosure may be made electronically pursuant to Section
38.5 in lieu of being mailed .
(4) This section does not apply to cancellations that are
calculated subject to paragraph (2) of subdivision (g) of Section
673.
(d) This section shall not apply to policies of ocean marine
insurance. For purposes of this section, "ocean marine insurance"
means insurance of vessels or crafts, their cargos, marine builders'
risks, marine protection and indemnity, or other risks commonly
insured under marine insurance governed by the provisions of Chapter
1 (commencing with Section 1880) of Part 1 of Division 2, and as
distinguished from inland marine insurance policies.
SEC. 2. Section 730 of the Insurance Code is amended to read:
730. (a) The commissioner, whenever he or she deems necessary or
whenever he or she is requested by verified petition, signed by 25
persons interested as shareholders, policyholders, or creditors of
any admitted insurer showing that the insurer is insolvent under this
code, or upon information that any insurer has violated any
provision of Article 7 (commencing with Section 800), shall examine
the business and affairs of the insurer. The commissioner shall so
examine every domestic insurer before issuing to it a certificate of
authority other than a renewal.
(b) The commissioner may conduct an examination under this article
of any company as often as the commissioner in his or her discretion
deems appropriate but shall, at a minimum, conduct an examination of
every insurer admitted in this state not less frequently than once
every five years. In scheduling and determining the nature, scope,
and frequency of the examinations, the commissioner shall consider
the results of financial statement analyses and ratios, changes in
management or ownership, actuarial opinions, reports of independent
certified public accountants, market analysis results, including
consumer complaint analysis, evaluation of ongoing regulatory
activities, analysis of data derived from industry surveys or
interrogatories, and other criteria as set forth in the Examiner's
Handbook or in the Market Regulation Handbook adopted by the National
Association of Insurance Commissioners that are in effect when the
commissioner exercises discretion under this section.
(c) For purposes of completing an examination of any company under
this article, the commissioner may examine or investigate any
person, or the business of any person, insofar as the examination or
investigation is, in the discretion of the commissioner, necessary or
material to the examination of the company.
(d) In lieu of an examination under this article of any foreign or
alien insurer admitted in this state, the commissioner may accept an
examination report on the company as prepared by the insurance
department of the company's state of domicile or port-of-entry state
until January 1, 1994. Thereafter, these reports may only be accepted
if (1) the insurance department was at the time of the examination
accredited under the National Association of Insurance Commissioner's
Financial Regulation Standards and Accreditation Program, or (2) the
examination is performed under the supervision of an accredited
insurance department or with the participation of one or more
examiners who are employed by an accredited state insurance
department and who, after a review of the examination work papers and
report, state under oath that the examination was performed in a
manner consistent with the standards and procedures required by their
insurance department.
(e) The commissioner may forgo a market conduct examination,
otherwise required by this article, for up to an additional five
years if information derived from a market analysis process that
considers criteria, such as prior examination results, consumer
complaint data, market share, actions taken by other states, and
information from other sources, does not indicate that an examination
is warranted.
(e) The commissioner may postpone a market conduct examination,
otherwise required by this article, for a period of up to three years
if information derived from a market analysis indicates all of the
following:
(1) The prior examination of the insurer resulted in no
significant negative findings.
(2) The number of consumer complaints received by the insurer is
in the lowest quartile of complaints, on a ratio basis, for insurers
in that line of business.
(3) The market analysis identifies no other issues of significant
concern.