BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 53 (Solorio) - Insurance Amended: July 5, 2012 Policy Vote: Ins 6-3 Urgency: No Mandate: No Hearing Date: August 6, 2012 Consultant: Maureen Ortiz This bill does not meet the criteria for referral to the Suspense File. Bill Summary: AB 53 requires each admitted insurer, with California premiums of $100 million or more, to submit a report to the Insurance Commissioner on its minority, women, and disabled veteran-owned business procurement efforts. The report is due July 1, 2013, and must be updated biennially beginning July 1, 2015. Fiscal Impact: The Department of Insurance indicates staffing costs of $99,763 annually through FY 2017/18 to process and post the annual reports and collect the required data every two years. (Special) It is anticipated that about 200 California admitted insurers will file the report. Background: 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 (DVBEs). 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 to women, minority and DVBEs. The PUC is responsible for verifying the status of applicants, reporting the results of the program, and making recommendations to achieve maximum results in implementing the legislative policy. Proposed Law: AB 53 requires each admitted insurer with California premiums in excess of $100 million to report to the Insurance Commissioner on its minority, women, and disabled veteran-owned business procurement efforts. Insurers that do AB 53 (Solorio) Page 1 not enter into contracts to procure goods or services in California may file a statement attesting to that fact and will be exempt from the reporting requirement. Insurers that are required to report must include the following: a) The insurer's supplier diversity policy statement, b) The insurer's outreach and communications to minority, women, and disabled veteran business enterprises, as specified, and c) 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. AB 53 specifically provides that its provisions will not be construed to require quotas, set-asides, or preferences in an admitted insurer's procurement of goods or services. The provisions do not apply to insurer producer or licensee contracts. Additionally, admitted insurers that belong to a holding company may comply with the reporting requirement through a single filing on behalf of the entire group of affiliated companies. Any insurer that is required to report but fails to do so will be subject to civil penalties of up to $5,000, or up to $10,000 if the act or practice was willful. However, AB 53 authorizes the commissioner to grant a 30 day extension to file the report if needed due to unintended delays. The first report is due by July 1, 2013, with biennially updates beginning July 1, 2015. The provisions of AB 53 are repealed on January 1, 2019. AB 53 authorizes the Commissioner to establish and maintain a link on the department's Internet Website that provides public access to the reported information, but must include a statement that the information is for informational purposes only. Staff Comments: "Minority business enterprise" is defined as a business enterprise, physically located in the United States or its trust territories, that is at least 51 percent owned by a minority group or groups, or, in the case of any publicly owned AB 53 (Solorio) Page 2 business, at least 51 percent of the stock of which is owned by one or more minority groups, and whose management and daily business operations are controlled by one or more minority groups, and whose management and daily business operations are controlled by one or more of those individuals. "Minority" includes African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans who provide proof of United States citizenship or legal resident alien status. "Women business enterprise" is defined as a business enterprise physically located in the United States or its trust territories, that is at least 51 percent owned by a woman or women, or, in the case of any publicly owned business at least 51 percent of the stock of which is owned by one or more women, and whose management and daily business operations are controlled by one or more of those individuals, who provide proof of United States citizenship or legal resident alien status. Disabled veteran business enterprise certification eligibility requirements shall be consistent with those imposed by the Department of General Services. Staff Recommended Amendments: In order to clarify that the civil penalty provisions will be enforced by the Insurance Commissioner and to alleviate a concern brought forward from the Judicial Council, staff recommends the following amendment: On page 5, line 13, after "section" insert "shall be enforced by the commissioner and"