BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                                 THIRD READING


          Bill No:  AB 2782
          Author:   Assembly Insurance Committee
          Amended:  8/17/10 in Senate
          Vote:     21

           
           SENATE BANKING, FINANCE, AND INS. COMMITTEE  :  9-0, 6/16/10
          AYES:  Calderon, Cogdill, Florez, Kehoe, Liu, Lowenthal,  
            Padilla, Price, Runner
          NO VOTE RECORDED:  Correa, Cox

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8 

           ASSEMBLY FLOOR  :  76-0, 5/13/10 - See last page for vote


           SUBJECT  :    Insurance omnibus

           SOURCE  :     Department of Insurance


           DIGEST  :    This bill makes various changes, including  
          technical revisions to investment law and licensing-related  
          changes, including changes to conform California law with  
          the National Association of Insurance Commissioners  
          Producer Licensing Model Act, and permits the Insurance  
          Commissioner to modify the frequency and due date of  
          certain reports under current law and would eliminate one  
          annual report to the Governor and the Legislature.
          
           Senate Floor Amendments  of 8/17/10 add the contents of AB  
          2780 (Insurance Committee) as introduced, into this bill  
          and make technical clarifications regarding GAP insurance.
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           ANALYSIS  :    Existing law:

          1. Imposes a limit on the amount of foreign investments  
             that domestic insurers may make of 20 percent and sets  
             forth requirements related to mutual funds that invest  
             in foreign securities.

          2. Prevents fire and casualty broker-agents from  
             transacting life insurance, but permits these agents to  
             transact disability insurance. 

          3. Provides that the combined fire and casualty  
             broker-agent license requires a pre-licensing education  
             requirement of 40 hour, and 25 hours of continued  
             education annually for the first four years of licensure  
             and 24 hours every two years thereafter as a condition  
             for license renewal.

          4. Requires insurance licensees to immediately notify the  
             Insurance Commissioner of changes to their mailing  
             address. 

          5. Requires an administrative hearing to be conducted to  
             consider a business entity license application when one  
             of its officers or controlling persons holds a  
             restricted license.

          6. Provides that the insurance that may be sold in  
             connection with the sale of, or incidental to a loan  
             for, real property may include, under specified  
             conditions, credit life, credit disability, credit  
             involuntary unemployment or credit loss of income, and  
             credit property insurance.

          7. Specifies that bail licenses are for a one year term  
             expiring on June 30 and insurance adjusters licenses are  
             for a two-year term expiring on May 31 of even-numbered  
             years.  

          8. Specifies the continuing education for bail agent and  
             solicitor license renewal is six hours.

          9. Authorizes the Department of Insurance (DOI) to  

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             summarily revoke a license, including a bail license, if  
             the licensee is convicted of a felony.  However,  
             Insurance Code Section 1807.5 specifies that a hearing  
             is required prior to the suspension of a bail agent  
             license. 

          10.   Requires independent and public insurance adjusters  
             to complete 24 hours of continued education as a  
             condition of license renewal, but does not specify the  
             number of hours that must involve ethics training.  

          11.   Authorizes DOI to intervene in "qui tam" cases, but  
             sunsets those provisions on December 31, 2010. 

          This bill:

          1. Makes technical changes in current law to enable  
             insurers to invest in mutual funds that make investments  
             in foreign securities without the requirement that such  
             a fund must have arrangements to hold all assets in the  
             United States.

          2. Requires a person to be licensed as an accident and  
             health agent in order to transact disability insurance.

          3. Separates current fire and casualty broker-agent  
             licenses into two separate licenses:  property  
             broker-agent license and casualty broker-agent license.   
             Also adjusts the pre-licensing education requirement to  
             20 hours for each respective license so there is no net  
             change resulting from the bifurcation, and would modify  
             the continuing education requirement for individuals  
             licensed less than four years to 24 hours every two  
             years.

          4. Clarifies that the obligation under current law for an  
             insurance licensee to immediately notify the Insurance  
             Commissioner of their change of address includes changes  
             of address to either their residence or their principal  
             business.  

          5. Provides to DOI authority to summarily issue a  
             restricted license to a business entity when an officer  
             or controlling person of the entity holds a restricted  

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             individual license, but maintains the business entity's  
             right to request DOI to reconsider the restricted  
             license decision.

          6. Aligns the definition of "Credit Insurance Agent" in the  
             Insurance Code with the definition used in the National  
             Association of Insurance Companies (NAIC) Producer  
             Licensing Model Act (PLMA).  The PLMA definition permits  
             these credit insurance agents to transact Guaranteed  
             Automobile Protection (GAP) insurance (GAP insurance is  
             insurance which protects a car buyer/lessee with a  
             promise to indemnify the purchaser or lessee for any of  
             the difference between the actual cash value of the  
             insured's vehicle at the time of an unrecovered theft or  
             total loss and the amount owed on the vehicle pursuant  
             to the terms of a loan, lease agreement, or installment  
             sales contract used to purchase or lease the vehicle).

          7. Changes the bail agent and solicitor license from a  
             one-year term to a two-year term, and would modify the  
             continuing education requirement to 12 hours biennially  
             so there is a no net change from current requirements.  

          8. Specifies that the expiration date on new bail and  
             insurance adjuster licenses issued after December 31,  
             2010 is the last day of the month in which the original  
             license was issued.

          9. Clarifies the DOI's authority to summarily revoke a bail  
             license if the licensee is convicted of a felony. 

          10.Specifies that three of the 24 hours of continued  
             education that independent public insurance adjusters  
             must complete as a condition of license renewal must be  
             in ethics training.  

          11.Repeals the sunset date of December 31, 2010 for the law  
             authorizing the Insurance Commissioner to receive  
             attorney fees and costs as part of a judgment in "qui  
             tam" cases (suits brought in the state's name by private  
             parties) in which the department intervenes.  The cases  
             impacted by this provision involve insurance fraud and  
             the department's involvement in such cases serves as a  
             significant fraud deterrent. 

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          12.Makes other minor, conforming, and related changes and  
             deletes obsolete provisions.

          13.Provides that a report of insurers which write liability  
             insurance for long-term care facilities or other elderly  
             residential care facilities is to be filed by a date  
             specified by the Insurance Commissioner not more than  
             once each calendar year.

          14.Requires automobile insurers to report certain data  
             related to inspections of vehicles for which a property  
             damage claim was paid, and claims payment data, at the  
             request of the Insurance Commissioner, but not more than  
             annually. 

          15.Repeals a requirement that the Insurance Commissioner  
             report annually to the Governor and Legislature an  
             analysis relating to the relationship between uninsured  
             motorists and the affordability of automobile insurance.

           Background

           The business of insurance is principally regulated at the  
          state level.  Because certain issues of insurance law and  
          trends transcend state boundaries, insurance regulators  
          have a long history of collaboration on matters of common  
          concern, a process which is undertaken under the auspices  
          of NAIC.

          In the effort to promote commonality among the states so as  
          to support a seamless oversight system built on the  
          platform of 50 independently sovereign states, the NAIC has  
          undertaken various initiatives.  Some of these fit within  
          NAIC accreditation program where the ability of a state to  
          receive accreditation is dependent on its adoption of  
          statutes and regulations that bear a substantial similarity  
          to models promulgated by the NAIC.

          In other areas, commonality is advanced by the formulation  
          of suggested model laws which are intended to serve as a  
          resource and a framework to further important regulatory  
          ends as well as support the national system of state-based  
          regulation.

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          The NAIC's Producer Licensing Model Act is a suggested or  
          advisory model which has gained support among various  
          groups, including insurance agent groups, who believe it  
          supports achieving a modern, nationwide insurance producer  
          licensing system.

          Generally speaking, the PLMA Changes proposed by this act  
          are non-controversial as are the non-PLMA changes proposed  
          by the Department to facilitate improved management and  
          regulatory oversight.

          The one change that has drawn an objection is the change to  
          a two year licensing cycle for bail agents with expiration  
          dates tied to the month of issuance, rather than renewal  
          for all licensees based on a June 30th expiration date.   
          While this change is supported by the Department of  
          Insurance for purposes of improved workload management and  
          administration and two statewide associations of bail  
          agents, a continuing education provider for bail agents has  
          expressed opposition to this change as approved by the  
          Assembly for the added burden it may impose on continuing  
          education providers and their practices.

           Prior Legislation  
           
          AB 2203 (DeLeon) Chapter 129, Statutes of 2008, increased  
          the limit on the amount of foreign investments that  
          domestic insurers may make from 4 to 20 percent.  The bill  
          also clarified the requirements related to mutual funds  
          that invested in foreign securities but the issue of how a  
          mutual fund holds its assets relating to foreign  
          investments was inadvertently not addressed.

          AB 800 (Duvall) Chapter 254, Statutes of 2009, provided for  
          applicants and licensees to notify DOI of address changes  
          through an electronic means but did not specify that such  
          notification include changes to the licensees residence and  
          principal business.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  8/18/10)

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          Department of Insurance (source) 
          Association of California Insurance Companies
          California Bail Agents Association


           ASSEMBLY FLOOR  :  
          AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill  
            Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,  
            Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,  
            Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue,  
            Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava,  
            Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,  
            Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Torrico, Tran,  
            Villines, Yamada, John A. Perez
          NO VOTE RECORDED: Caballero, Norby, Skinner


          JA:nl  8/18/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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