BILL ANALYSIS                                                                                                                                                                                                    






                        SENATE COMMITTEE ON BANKING, FINANCE,
                                    AND INSURANCE
                           Senator Ronald Calderon, Chair


          AB 2411 (Jones)                    Hearing Date:  June 30, 2010   


          As Amended:              April 15, 2010   
          Fiscal:             Yes
          Urgency:       No

          VOTES:              Asm. Floor(06/01/10)52-22/Pass
                         Asm. Appr.          (05/28/10)12-05/Pass
                         Asm. Ins.                (04/07/10)08-02/Pass


           SUMMARY    Would define pet insurance as a separate line within  
          the Insurance Code distinct from other Miscellaneous lines,  
          would establish required policy terms for all pet insurance  
          policies serving California residents, regardless of situs of  
          the contract, and would increase clarity for consumers on what  
          their policy covers.

           
          DIGEST
            
          Existing law
            
          1.Specifies 23 different lines of insurance, including a broad  
            category termed "miscellaneous."  Currently, pet insurance is  
            within the Miscellaneous line.

          2.Provides for a comprehensive rate regulation system for  
            property-casualty insurance, which includes the Miscellaneous  
            line of insurance.
           

          This bill

           Defines pet insurance as a separate line of Insurance, and  
          establishes new regulatory requirements for the sale of pet  
          insurance products.  Specifically,  this bill  :  

          1.Would establish pet insurance as a separate line of insurance,  
            and define it as an individual or group policy of insurance  




                                               AB  2411 (Jones), Page 2




            that covers veterinarian expenses.

          2.Would provide any pet insurance policy issued, delivered, or  
            amended after July 1, 2011, is subject to California law,  
            regardless of the contract situs, so that a group policy  
            issued to a group policyholder in another state, but whose  
            coverage extends to a California resident, will be covered by  
            California law even though the actual policy would otherwise  
            be subject to the law of the state where the group  
            policyholder resides.

          3.Would require pet insurers to disclose, in the policy and on  
            the main page of its website, whether their policy excludes  
            coverage due to pre-existing conditions, hereditary disorders,  
            or congenital anomalies or disorders. 

          4.Would require a pet insurer to reasonably disclose any policy  
            provision that limits coverage through a deductible, a waiting  
            period, coinsurance, or annual or lifetime policy limits.

          5.Would require a pet insurer to reasonably disclose whether it  
            varies coverage or premiums based on claims experience during  
            the preceding policy period.

          6.Would require a pet insurer that uses a benefit schedule to  
            determine claim payments to include the applicable schedule in  
            each policy, and to disclose all schedules it uses via a link  
            on the main page of its website.

          7.Would require a pet insurer that determines claim payments on  
            any basis to clearly disclose the basis in the policy, and via  
            a link on the main page of its website.

          8.Would require a pet insurer that bases claim payments on usual  
            and customary fees or other limitations based on prevailing  
            veterinary service provider charges to include a provision in  
            the policy that clearly explains how the claim will be  
            calculated, and disclose this information via a link on the  
            main page of its website.

          9.Would specify that the disclosures required by the bill are in  
            addition to any other disclosures required by law.

          10.   Would makes conforming changes to several related  
            Insurance Code provisions.





                                               AB  2411 (Jones), Page 3





           COMMENTS

           1.Purpose of the bill To define pet insurance more specifically  
            in the Insurance Code and increase clarity for consumers what  
            is covered by their policies.

           2.Background   The Department of Insurance indicates concern for  
            the fiscal effect of this bill, noting that creating pet  
            insurance as a new line of insurance will:

               a.     Require companies currently writing pet insurance  
                 and reporting as miscellaneous line to amend their  
                 certificates of authority to add this new line;
               b.     Require the Department to review these applications  
                 to add this new line; 
               c.        Require the Department to revise a number of  
                 forms and applications to reflect this new class; and 
               d.     Require companies to revise their financial  
                 reporting forms to reflect this new class.

            Based on this array of changes, the Department (Legal and FAD)  
            estimates it will incur additional costs of processing these  
            applications and need additional staff.
           
          3.Support  .  According to the Author, between 2000 and 2005,  
            veterinary service costs rose over 70% to more than $19  
            billion a year in the U.S.  In response, more pet owners are  
            considering pet insurance to ensure that they will be able to  
            cover veterinary care as it becomes more advanced and more  
            expensive.

          4.Pet health policies are similar to other insurance policies;  
            typically they have premiums, deductibles, co-pays, coverage  
            limits and benefit schedules. The author indicates, however,  
            that policyholders have difficulty ascertaining the coverage  
            limits, benefit schedules, preexisting conditions and other  
            limitations of pet insurance policies, and can receive less  
            for their claims than they expect.

          5.As a solution, the author believes AB 2411 will help pet  
            owners choose the most appropriate pet insurance by requiring  
            pet insurance companies to increase the information disclosed  
            during the transaction. The author believes the bill also  
            protects policyholders by requiring insurance companies to  
            improve disclosure of benefit limitations and exclusions,  




                                               AB  2411 (Jones), Page 4




            while requiring a clear explanation of reimbursement rates.

           6.Opposition    None

           7.Questions   None

           8.Suggested Amendments  . None

           9.Prior and Related Legislation   None  


          POSITIONS
          
          Support
           
          Humane Society of the United States (HSUS)
          Humane Society Veterinary Medical association
          California Veterinary Medical Board
          PAW - PAC
          Gary Lucks, Esq.
           
          Oppose
               
          None

          Consultant:   Kenneth Cooley (916) 651-4102