BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2404
                                                                  Page  1

          Date of Hearing:   May 12, 2010

                                Felipe Fuentes, Chair

                    AB 2404 (Hill) - As Amended:  April 27, 2010 

          Policy Committee:                              Insurance  

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              


          This bill addresses refunds of insurance premiums and modifies  
          the cycle of California Department of Insurance (CDI) review of  
          insurance companies under specified circumstances. Specifically,  
          this bill: 

          1)Requires premium refunds provided, other than on a pro rata  
            basis, to include a written disclosure notice and specifies  
            delivery and content of notification. 

          2)Authorizes CDI to postpone an insurer market conduct  
            examination for up to three years under specified  

           FISCAL EFFECT  

          Minor absorbable workload to the California Department of  
          Insurance to continue oversight of California insurers with  
          regard to premium refunds and market conduct examinations. 


           1)Rationale  .  This bill is sponsored by the California  
            Department of Insurance to address premium refund issues and  
            the frequency of insurer market conduct examinations. 

           2)Background  . Under current law, unless an insurance contract  
            specifies otherwise, consumers are entitled to a refund of  
            insurance premiums if a policy is cancelled, rejected,  
            surrendered or rescinded. This bill requires insurers to  
            provide consumers notice about refunds. 


                                                                  AB 2404
                                                                  Page  2

          The CDI conducts examinations of insurance companies to confirm  
            compliance with state laws and regulations with respect to  
            rating, underwriting and claim practices. These are called  
            market conduct examinations. Exams are scheduled based on  
            consumer complaint activity, special requests, or at regular  
            intervals. Under current law, CDI has the authority to  
            determine how frequently within a five-year period an insurer  
            is evaluated. This bill allows CDI to postpone a market  
            conduct examination for up to three years under specified  

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081