BILL ANALYSIS Ó
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
AB 53 (Solorio) Hearing Date: June 27, 2012
As Amended: June 19, 2012
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor(01/26/12)50-25/Pass
Asm. Appr. (01/19/12)12-05/Pass
Asm. Ins. (05/04/11)07-04/Pass
SUMMARY: Requires major California insurers to submit an
annual report to the Insurance Commissioner regarding the
implementation of their efforts to increase procurement from
women, minority, and disabled veteran business enterprises
(WMDVBEs).
DIGEST
Existing law
1. Requires each admitted insurer to provide information to
the Insurance Commissioner on all of its community
development investments and community development
infrastructure investments in California.
This bill
1. Would require that each admitted insurer with premiums
written equal to or in excess of $100,000,000 to submit to
the commissioner, by July 1, 2013, a report on its
minority, women, and disabled veteran-owned business
procurement efforts, as specified;
2. Would provide that the failure to file the report, by
July 1, 2013, subjects the admitted insurer to civil
penalties to be fixed by the commissioner, as provided;
3. Would require, among other things, that commencing July
1, 2015, each eligible admitted insurer biennially update
its supplier diversity report and submit a new report,
containing additional elements, to the commissioner no
AB 53 (Solorio), Page 2
later than July 1;
4. Would require that, by July 31, 2013, the commissioner
establish and maintain a link on the department's Internet
Web site that provides public access to the contents of
each admitted insurer's report on minority, women, and
disabled veteran-owned business procurement efforts.
AB 53 (Solorio), Page 3
COMMENTS
1. Purpose of the bill . To create an online resource to help
facilitate supplier relationships between insurers and
minority, women, and disabled veteran-owned business
enterprises.
2. Background and Discussion
Public Utilities Commission Program. Beginning in 1986, the
Legislature enacted a series of statutes to encourage the
award of a fair proportion of all public utility contracts
for products and services to women, minority, and disabled
veteran business enterprises (WMDVBE). In 2010, renewable
energy, wireless telecommunications, broadband, smart grid
and rail projects were added as categories for which
utilities should increase procurement from women, minority
and disabled veteran business enterprises, as specified.
These existing laws require each utility with an annual
revenue exceeding $25 million to submit to the Public
Utilities Commission (PUC) an annual verifiable plan for
increasing procurement from WMDVBEs. The PUC is responsible
for verifying the status of WMDVBE applicants, reporting the
results of the program, and making recommendations to
achieve maximum results in implementing the legislative
policy.
Insurance Company Reporting Under AB 53. This bill would
create similar reporting requirements for insurance
companies that write California premiums of $100 million
dollars or more. It would require covered insurers to
report the basic elements of its diversity outreach
programs, such as a supplier diversity policy statement,
outreach and communications efforts, and contact information
for interested business enterprises.
The report would also include information about which
procurements are made from MWDVBEs (with at least a majority
of the enterprise's workforce in California). Insurers
report the data in aggregate by category in order to protect
against the disclosure of proprietary information. Insurers
may also report additional information and recognize
AB 53 (Solorio), Page 4
successful programs.
Currently, the bill allows insurers that do not enter into
contracts to procure goods or services in California to file
a statement to that effect. However, the bill is not clear
on how a report should be filed for insurers that completely
lack an outreach program. (Amendments suggested below
address that issue.)
The first report is due on July 1, 2013, and biennially
thereafter. Failure to file a report may result in a civil
penalty of $5,000 or, for a willful omission, $10,000.
However, the Insurance Commissioner may grant a 30-day
extension and any penalty may be appealed.
AB 53 does not require or establish quotas, set-asides, or
preferences (and specifically provides against such a
construction). The bill explicitly preserves the insurer's
authority to exercise its business judgment, a term that
recognizes the need for decision-makers to act in the best
interests of the business. The bill, in its structure and
legislative findings, is structured solely to collect
information and does not authorize any disciplinary actions
(other than those provided for failing to file the report)
or anything other than disclosure requirements.
3. Summary of Arguments in Support:
a. Multiple proponents of the bill point to the success
of the PUC program noting that, as a result of that
program, California's largest utility and
telecommunications companies have increased their diverse
procurement by more than 300% for WMDVBEs. Proponents
also explain that the most recent results show that seven
of the largest utilities and telecoms increased diverse
procurement by $348 million from 2008 to 2009 despite the
economic downturn. These successes came about without
the use of set-asides, preferences, or quotas.
b. The Consumer Federation of California states that
during this economic recession, it is critical that the
insurance market be cost-effective and that minority,
women, and disabled veterans enterprises receive an equal
opportunity to compete for business. This bill will
enable the Department to examine and help to develop the
AB 53 (Solorio), Page 5
industry's supplier diversity practices and replicate the
success of the PUC program in another critical market.
4. Summary of Arguments in Opposition:
a. Most concerns expressed by the Association of
California Insurance Companies (ACIC) are addressed in
the most recent set of amendments. However, ACIC still
has concerns about the ability of insurers without
outreach programs to comply with reporting requirements.
5. Amendments
a. Amendments were previously adopted to give an
insurer the option to report that it does not contract
for goods and services in California. Based on
discussions with those stakeholders, it has been
determined that this language does not fully address the
issues involved. Committee staff recommends amending
Page 3, line 39, to page 4, line 25 to read:
(2) The report shall include all of the following
that apply:
(A) The insurer's supplier diversity policy
statement.
(B) The insurer's outreach and communications to
minority, women, and disabled veteran business
enterprises, including:
(i) How the insurer encourages and seeks out
minority, women, and disabled veteran owned business
enterprises to become potential suppliers.
(ii) How the insurer encourages its employees
involved in procurement to seek out minority, women, and
disabled veteran-owned business enterprises to become
potential suppliers.
(iii) How the insurer conducts outreach and
communication to
minority, women, and disabled veteran business
enterprises.
(iv) How the insurer supports organizations that
promote or certify minority, women, and disabled
veteran-owned business enterprises.
(v) Information regarding appropriate contacts at
the insurer for interested business enterprises.
AB 53 (Solorio), Page 6
(C) The report shall include information about which
procurements are made from minority, women, and disabled
veteran business enterprises with at least a majority of
the enterprise's workforce in California, to the extent
that information is readily accessible.
(3) An insurer that does not enter into contracts to
procure goods or services in California satisfies the
requirements of paragraph (2) by filing a statement with
the commissioner attesting that it does not enter into
procurement contracts in California.
(D) A statement that the insurer does not have a
diversity policy statement, outreach and communications
program, or procurement information listed in paragraphs
(2)(A), (B), and (C).
b. Reporting requirements typically have sunset dates.
(See AB 41 (Solorio).) The Committee may wish to
consider amendments that add a sunset date on January 1,
2019. This would allow for three reporting periods with
additional time to evaluate the last report and the
effectiveness of the program before a fourth report is
due.
1. Prior and Related Legislation:
a. AB 41 (Solorio) (enacted as Chapter 340, Statutes of
2010) extended the sunset on law reporting requirements
for community development investments by insurers,
revised methods of compliance with the reporting
requirement, and imposed modified duties on large
insurers.
b. AB 1918 (Davis) (enacted as Chapter 456, Statutes of
2010) required each wireless telecommunications service
provider with annual revenues exceeding $25 million to
submit annually to the California Public Utilities
Commission a plan-consistent with those already submitted
by electrical, gas, water, and telephone corporations-to
increase procurement from women, minority, and disabled
veteran business enterprises.
c. AB 2758 (Bradford) (enacted as Chapter 475, Statutes
of 2010) required the California Public Utilities
Commission to include in their required report to the
Legislature, the renewable energy, wireless
AB 53 (Solorio), Page 7
telecommunications, broadband, smart grid and rail
projects as categories for which utilities should
increase procurement from women, minority and disable
veteran business enterprises, as specified.
AB 53 (Solorio), Page 8
POSITIONS
Support
Greenlining Institute (Lead Proponent)
American Federation of State, County and Municipal Employees
(AFSCME)
AnewAmerica Community Corporation
California Department of Insurance
California Asian and Pacific Islander Chamber of Commerce
California Communities United Institute
Asian Business Association
Bay Area Black United Fund, Inc.
Black Business Association
Black Economic Council
Brightline Defense Project
California Black Chamber of Commerce
California Communities United Institute
Consumer Federation of California
Council of Asian American Business Associations
Community Union, Inc.
Domar Group, Inc.
Fresno Metro Black Chamber of Commerce
Greater Los Angeles African American Chamber of Commerce
HCI (Vocational School)
Hispanic Business, Education and Training, Inc.
Inland Empire Latino Coalition
KHEIR (Korean Health Education Information & Research) Center
Korea Center, Inc.
Korean Churches for Community Development
La Maestra Family Clinic, Inc.
Latino Business Chamber of Greater Los Angeles
National Asian American Coalition
National Federation of Filipino American Associations, Region 8,
Northern CA
Our Weekly (newspaper)
PEN Insurance Services
San Francisco African American Chamber of Commerce
TELACU Millennium
Vietnamese-American Chamber of Commerce of Orange County
Ward Economic Development Corporation
Opposition
Association of California Insurance Companies
AB 53 (Solorio), Page 9
Consultant: Hugh Slayden, (916) 651-4773