BILL ANALYSIS Ó AB 690 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 690 (Solorio) As Amended May 27, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |70-0 |(May 12, 2011) |SENATE: |37-0 |(July 11, | | | | | | |2011) | ----------------------------------------------------------------- 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 AB 690 Page 2 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 AB 690 Page 3 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 AB 690 Page 4 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 : AB 690 Page 5 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 FN: 0001623