BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 53|
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THIRD READING
Bill No: AB 53
Author: Solorio (D), et al.
Amended: 8/13/12 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 6-3, 6/28/12
AYES: Calderon, Corbett, Correa, Lieu, Lowenthal, Price
NOES: Gaines, Anderson, Wyland
SENATE APPROPRIATIONS COMMITTEE : 6-1, 8/6/12
AYES: Kehoe, Alquist, Dutton, Lieu, Price, Steinberg
NOES: Walters
ASSEMBLY FLOOR : 50-25, 1/26/12 - See last page for vote
SUBJECT : Insurance: procurement contracts
SOURCE : Author
DIGEST : This bill, until January 1, 2019, requires major
California insurers to submit an annual report to the
Insurance Commissioner (Commissioner) regarding the
implementation of their efforts to increase procurement
from women, minority, and disabled veteran business
enterprises (WMDVBEs).
ANALYSIS : Existing law requires each admitted insurer to
provide information to the Commissioner on all of its
community development investments and community development
infrastructure investments in California.
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This bill:
1. Requires 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. Provides that the failure to file the report, by July 1,
2013, subjects the admitted insurer to civil penalties
to be fixed or enforced by the Commissioner, as
provided.
3. Requires, 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
later than July 1.
4. Requires 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.
5. Sunsets on January 1, 2019.
Background
Public Utilities Commission (PUC) 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 WMDVBEs. 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 PUC an annual verifiable plan for
increasing procurement from WMDVBEs. The PUC is
responsible for verifying the status of WMDVBE applicants,
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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 creates
similar reporting requirements for insurance companies that
write California premiums of $100 million dollars or more.
It requires 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 successful programs.
Currently, this bill allows insurers that do not enter into
contracts to procure goods or services in California to
file a statement to that effect. However, this bill is not
clear on how a report should be filed for insurers that
completely lack an outreach program
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.
This bill does not require or establish quotas, set-asides,
or preferences (and specifically provides against such a
construction). This 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. This 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.
Prior and Related Legislation
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AB 41 (Solorio, 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.
AB 1918 (Davis, Chapter 456, Statutes of 2010) required
each wireless telecommunications service provider with
annual revenues exceeding $25 million to submit annually to
the PUC a plan-consistent with those already submitted by
electrical, gas, water, and telephone corporations-to
increase procurement from WMDVBEs.
AB 2758 (Bradford, Chapter 475, Statutes of 2010) required
the PUC to include in their required report to the
Legislature, the renewable energy, wireless
telecommunications, broadband, smart grid and rail projects
as categories for which utilities should increase
procurement from WMDVBEs, as specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, 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.
SUPPORT : (Verified 8/10/12)
American Federation of State, County and Municipal
Employees
AnewAmerica Community Corporation
Asian Business Association
Bay Area Black United Fund, Inc.
Black Business Association
Black Economic Council
Brightline Defense Project
California Asian and Pacific Islander Chamber of Commerce
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California Black Chamber of Commerce
California Communities United Institute
Community Union, Inc.
Consumer Federation of California
Council of Asian American Business Associations
Department of Insurance
Domar Group, Inc.
Fresno Metro Black Chamber of Commerce
Greater Los Angeles African American Chamber of Commerce
Greenlining Institute
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 California
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
ARGUMENTS IN SUPPORT : 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.
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
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to compete for business. This bill will enable the
Department of Insurance to examine and help to develop the
industry's supplier diversity practices and replicate the
success of the PUC program in another critical market.
ASSEMBLY FLOOR : 50-25, 1/26/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani,
Gatto, Gordon, Hall, Hayashi, Roger Hernández, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma,
Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell,
Nestande, Nielsen, Norby, Olsen, Silva, Valadao, Wagner
NO VOTE RECORDED: Davis, Furutani, Gorell, Halderman,
Smyth
JJA:m 8/13/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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