BILL NUMBER: AB 2404	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 18, 2010
	AMENDED IN SENATE  JULY 15, 2010
	AMENDED IN ASSEMBLY  APRIL 27, 2010
	AMENDED IN ASSEMBLY  APRIL 14, 2010

INTRODUCED BY   Assembly Member Hill
   (Coauthors: Senators Calderon and Correa)

                        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rescinded, as provided.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, disclose that fact in
writing, including the actual or maximum fees or penalties applied,
which would be permitted to be stated in the form of percentages of
the premium. The disclosure would be required to be made prior to, or
concurrent with, the application and prior to each renewal, as
provided. The disclosure would not be required if the policy
provision permits, but does not require, the insurer to refund a
premium other than on a pro rata basis, and the insurer refunds the
premium on a pro rata basis. If an application is made by telephone,
the disclosure would be required to be mailed to the applicant or
insured within 5 business days. The disclosure requirements would
apply prospectively and only to policies issued  , amended,
 or renewed on or after January 1, 2012. This bill would not
require any additional disclosure of a fee or penalty for early
cancellation if that disclosure is required by any other provision of
law.
   (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 postpone a market
conduct examination, otherwise required, for up to 3 years if
information derived from a market analysis 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 or her 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 disclose that fact in writing, including the
actual or maximum fees or penalties to be applied, which may be
stated in the form of percentages of the premium. The disclosure
shall be provided prior to, or concurrent with, the application and
prior to each renewal to which the policy provision applies.
Disclosure shall not be required if the policy provision permits 
,  but does not require  ,  the insurer to refund
premium other than on a pro rata basis, and the insurer refunds
premium on a pro rata basis.
   (2) If an application is made by telephone, the disclosure shall
be mailed to the applicant or insured within five 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.
   (e) The disclosure requirements of subdivision (c) shall be
prospective and shall apply only to policies issued  ,
amended,  or renewed on or after January 1, 2012.
   (f) Nothing in this section shall require any additional
disclosure of a fee or penalty for early cancellation if that
disclosure is required by any other provision of law.
  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 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.