BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 690
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 690 (Solorio)
          As Amended  May 27, 2011
          Majority vote
           
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          |ASSEMBLY:  |70-0 |(May 12, 2011)  |SENATE: |37-0 |(July 11,      |
          |           |     |                |        |     |2011)          |
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           Original Committee Reference:    INS.

          SUMMARY  :  Updates the laws governing the sale of insurance in 
          connection with portable electronic devices and their 
          accessories and associated services.  

           The Senate amendments  :

          1)Require the endorsee of a portable electronics vendor to be 18 
            years of age or older.

          2)Replace the phrase "fire and casualty broker-agents" with the 
            phrase "property and casualty broker-agents" in the sections 
            of law that govern the advertising restrictions on portable 
            electronics insurance agents and endorsees, and the training 
            requirements of endorsees.

          3)Specify that not less than 60 days before a permanent license 
            will expire, the Insurance Commissioner (IC) may use an 
            electronic delivery method, including email or other similar 
            electronic method of delivery, to deliver or email, or to 
            mail, an application to the licensee to renew the portable 
            electronics insurance agent license.

           EXISTING LAW  :

          1)Authorizes the IC to issue a communications equipment 
            insurance agent license that authorizes the licensee to sell 
            insurance in connection with, and incidental to, the sale of 
            communications equipment or the sale or provision of service 
            for communication equipment by a retail vendor. 

          2)Defines "communications equipment" as handsets, pagers, 
            personal digital assistants, portable computers, cellular 
            telephones, batteries, and other devices or their accessories 








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            used to originate or receive communications signals or 
            service. 

          3)Authorizes the charging of application and renewal fees 
            sufficient to defray the Department of Insurance's (DOI's) 
            actual costs of processing the applications and renewals for 
            licensure.

          4)Specifies the requirements that must be met by an employee or 
            franchisee of a communications equipment vendor in order to be 
            an endorsee authorized to offer insurance products as a 
            communications equipment insurance agent.  These requirements 
            include:

               a)     The employee is 18 years of age or older;

               b)     The communications equipment vender, at the time it 
                 submits its communications equipment agent's license 
                 application, shall establish a list of the names of 
                 endorsees to its communications equipment agent license.  
                 The list must be updated annually, retained for three 
                 years, and made available to the IC for review and 
                 inspection; and, 

               c)     The communications equipment vendor submits to the 
                 IC with its initial license application and annually 
                 thereafter a certification providing specified 
                 information.

          5)Requires that the retraining of "endorsees" (i.e., unlicensed 
            employees of a communications equipment insurance agent) shall 
            be conducted whenever there is a material change in the 
            insurance products sold that requires modification of the 
            training materials, but in no event less frequently than every 
            two years.  

          6)Authorizes the IC to impose fines and suspend or revoke the 
            license of a communications equipment insurance agent.

          7)Prohibits a communications equipment insurance agent from 
            paying any endorsee any compensation, fee, or commission 
            dependent on the placement of insurance under the agent's 
            license.  However, the law does not prohibit the payment of a 
            "performance-related incentive" which is defined as money or 
            other tangible or intangible items of value paid or given to 








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            any endorsee of the licensee which is not based solely on the 
            offering or selling of the insurance products issued to cover 
            the loss, theft, mechanical failure, or malfunction of or 
            damage to communications equipment.  
           
           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Authorized the IC to issue a portable electronics insurance 
            agent license that authorizes the licensee and its endorsees 
            to sell insurance in connection with, and incidental to, the 
            sale of "portable electronics" or the sale or provision of 
            accessories or services related to the use of portable 
            electronics.

          2)Defined "endorsee" as an unlicensed employee or authorized 
            representative of a portable electronics vendor.

          3)Defined "portable electronics" as specified electronic devices 
            that are portable in nature, and their accessories and 
            services related to the use of the device.

          4)Defined "portable electronics insurance" as insurance 
            providing coverage for the repair or replacement of portable 
            electronics that may cover portable electronics against loss, 
            theft, mechanical failure, malfunction, damage, or other 
            applicable perils.  This insurance would not cover certain 
            service contracts, an insurance policy covering a seller's or 
            manufacturer's obligations under a warranty, or a homeowner's, 
            renter's, automobile, commercial multiperil, or similar 
            insurance.   

          5)Modified the requirements for an endorsee of a portable 
            electronics vendor, issued a portable electronics insurance 
            agent license, to sell portable electronics insurance, as 
            follows:

               a)     Eliminated the requirement that the employee be 18 
                 years of age or older;

               b)     The portable electronics vendor, at the time it 
                 submits its license application, shall establish a list 
                 of all locations in California at which it offers 
                 portable electronics insurance;

               c)     Removed the requirement of this vendor to update the 








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                 above list annually, but the vendor would be required to 
                 maintain the list and make it available to the IC for 
                 review and inspection upon request; and, 

               d)     The portable electronics vendor, at the time it 
                 submits its license application, would be required to 
                 state the number of locations at which the vendor offers 
                 insurance products under the portable electronics 
                 insurance agent license.

          6)Required that the retraining of endorsees shall be conducted 
            whenever there is a material change in the insurance products 
            sold that requires modification of the training materials, but 
            in no event less frequently than every three years.  

          7)Eliminated the requirement that the manager at each location 
            of a communications equipment vendor or franchisee be 
            responsible for the supervision of each additional endorsee at 
            that location.

          8)Required, in connection with the sale of portable electronics 
            insurance by telephone, that if the insurance cost is included 
            in the purchase or lease of the portable electronics or 
            related services, the vendor shall clearly disclose to the 
            customer that the coverage is included with the purchase of 
            the portable electronics or related services.  
           
          9)Specified that charges for portable electronics insurance may 
            be billed and collected by a portable electronics insurance 
            agent licensee, and that licensees may receive compensation 
            for billing and collection services.  
           
          10)       Prohibited a portable electronics insurance agent from 
            paying an endorsee any compensation based primarily on the 
            number of customers electing coverage under the portable 
            electronics insurance agent's license.  However, there would 
            be no prohibition on the payment of compensation to an 
            endorsee of a portable electronics agent for activities under 
            the agent's license that is incidental to their overall 
            compensation and does not exceed $15 per customer.
           FISCAL EFFECT  :  According to the Senate Appropriations 
          Committee, cost for the Department of Insurance would be minor 
          and absorbable within existing resources.

           COMMENTS  :








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          1)In 2002, the California Legislature enacted AB 2856 (Chavez), 
            Chapter 437, Statutes of 2002, which created a regulatory 
            framework for the sale of communications equipment insurance 
            in California.  As enacted, this law provides the Insurance 
            Commissioner with the authority to issue to retail vendors 
            selling communications equipment the limited authority to sell 
            insurance covering communications equipment to its customers.

          2)According to the author, since the enactment of existing law, 
            the wireless industry has changed significantly.  There has 
            been an increase in the types and functionality of the 
            devices, they are more technologically advanced, and they have 
            increased in value.  This has led to more consumers demanding 
            insurance options to protect their investment and remain 
            electronically connected.  Thus, it is important that the 
            state laws be updated to provide consumers with adequate 
            access to insurance products so that their investments are 
            appropriately protected.

          This bill would update the existing law to allow new devices to 
            be insured by replacing the term "communication equipment" 
            with "portable electronics," would specify that employees and 
            authorized representatives of a licensed vendor of portable 
            electronics may offer portable electronics insurance, would 
            specify that portable electronics insurance may be sold at 
            times other than when purchasing a portable electronics device 
            or enrolling in a wireless service plan, and would provide 
            specified consumer disclosures.  


          Analysis Prepared by  :    Manny Hernandez / INS. / (916) 319-2086


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