BILL ANALYSIS Ó
AB 736
Page 1
Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 736 (Charles Calderon) - As Amended: April 4, 2011
SUBJECT : Insurance licensees and fraud prevention
SUMMARY : Authorizes a person licensed to transact accident and
health insurance to be an agent, a broker, or both.
Specifically, this bill :
1)Removes the prohibition on an "insurance broker" from
transacting disability and health insurance. An insurance
broker would continue to be prohibited from transacting life
insurance.
2)Defines a "life licensee" as a person authorized to act in one
or more of the following capacities: (a) life-only, (b)
accident and health.
3)Specifies that a life licensee authorized to transact accident
and health insurance may be an agent, or a broker, or both.
4)Specifies that an organization may hold a license to act as an
accident and health broker.
5)Allows an accident and health broker license to be issued to a
nonresident if that person possesses a resident license in
another state, territory of the United States, or province of
Canada to transact life insurance or disability insurance.
6)Requires the Insurance Commissioner (IC), whenever declaring
any region of the state an auto insurance fraud crisis area,
to provide a copy of that declaration to the respective chairs
of the Senate and Assembly committees on insurance.
EXISTING LAW :
1)Provides that an "insurance broker" as a person who, for
compensation and on behalf of another person, transacts
insurance other than life, disability, or health insurance
with, but not on behalf of, and admitted insurer.
2)Defines a "life licensee" as a person authorized to act as a
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life agent, and who shall be of the following types: (a)
life-only, (b) accident and health.
3)Allows a life-only agent or an accident and health agent
license to be issued to a nonresident if that person possesses
a resident license in another state, territory of the United
States, or province of Canada to transact life insurance or
disability insurance.
4)Authorizes the Insurance Commissioner (IC) to declare any
region of the state as an auto insurance fraud crisis area
upon making a finding that auto insurance fraud is endemic to
the area.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose. The purpose of this bill is to create an accident
and health broker-agent license.
2)Background. Until recently, insurance salespersons were
licensed in California as property and casualty broker-agent,
life agent, and accident and health agent. Prior to January
1, 2011, property and casualty broker-agents were authorized
under their license to sell health insurance. On January 1,
2011, AB 2782 (Chapter 400, Statutes of 2010) went into effect
making several changes in California's insurance licensing
laws primarily to align this state with the National
Association of Insurance Commissioner's (NAIC) Producer
Licensing Model Act.
A key change enacted by AB 2782 is that property and casualty
broker-agents may no longer sell health insurance without
obtaining an accident and health insurance agent license.
This change affects both individual licensees and
organizational licensees such as local insurance agencies or
brokerages. Insurance agents and brokers have begun to
question why they are not authorized to offer health insurance
products as either a broker or an agent, as is currently
authorized for property and casualty insurance products and
workers' compensation.
An "insurance broker" is defined as a person who, for
compensation and on behalf of another person (the consumer)
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transacts insurance, but not on behalf of an insurance
company. In this circumstance, the consumer is typically a
business purchasing a group health insurance policy for its
employees. An "insurance agent" is defined as a person who
transacts insurance on behalf of an admitted insurance
company. The primary difference between these two licenses is
that the insurance agent represents the insurer and can only
place insurance coverage with an insurer that has appointed
him or her as their agent. An insurance broker represents the
consumer as his or her client, and may place insurance with
any insurer willing to accept business from the broker.
3)Support. The Insurance Brokers and Agents of the West (IBA
West) state that the historical definitions of "agent" and
"broker" do not reflect the modern commercial reality.
Insurance agents and brokers are intermediaries who must
balance the occasionally competing needs of the insurance
consumer and the insurance company or underwriter. Insurance
professionals assist their customers in choosing from both
traditional insurance products, and health care service plans
regulated by the Department of Managed Health Care. The
author states that there is no licensing requirement for an
insurance professional to sell health care service plan
products offered by health maintenance organizations (HMOs).
IBA West also states that medical loss ratio restrictions on
insurers and health plans unduly limit the consumers' ability
to pay for and reward service. An 80 to 85 percent loss ratio
leaves little for a health care provider to pay for operating
expenses, marketing, taxes, profit, and agent commissions or
fees. An insurance professional should have the flexibility
to offer the consumer a higher level of service and charge a
fee with the consumer's approval. In the commercial insurance
setting it would not be atypical for insurance professionals
to be offering the business customer a package of products
consisting of commercial liability insurance, workers'
compensation, and health coverage if a health insurance broker
designation is enacted.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Health Underwriters
Insurance Brokers and Agents of the West
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National Association of Insurance and Financial
Advisors-California
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086