BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 1416|
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                                 THIRD READING


          Bill No:  AB 1416
          Author:   Assembly Insurance Committee
          Amended:  8/24/11 in Senate
          Vote:     21

           
           SENATE INSURANCE COMMITTEE  :  9-0, 06/22/11
          AYES:  Calderon, Gaines, Anderson, Corbett, Correa, Lieu, 
            Lowenthal, Price, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  75-0, 05/26/11 (Consent) - See last page 
            for vote


           SUBJECT  :    Insurance omnibus

           SOURCE  :     Department of Insurance


           DIGEST  :    This bill is a Department of Insurance Code 
          Maintenance bill, which updates terminology to make the 
          code consistent, delete erroneous cross-references, and 
          perform other non-controversial code clean-up purposes.  

           Senate Floor Amendments  of 8/24/11 avoid a chaptering 
          conflict with AB 315 (Solorio), Chapter 83, Statutes of 
          2011, and carry forward "fire and casualty license" policy 
          of California Insurance Code Section 1765.3.

           ANALYSIS  :    Existing law:

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            1.  Defines a "fire and casualty licensee" as a person 
              authorized to act as an insurance agent, broker, or 
              solicitor, and provides that a license to act as a fire 
              and casualty broker-agent is of the following types:

             A.   Property, which entitles the licensee to transact 
               insurance coverage on the loss or damage to property;

             B.   Casualty, which entitles the licensee to transact 
               insurance coverage against legal liability, including 
               that for death, injury, disability, or damage to real 
               or personal property.  ŬSec. 33.5 and 1625 of Ins 
               Code]

            1.  Prohibits persons and firms from soliciting or 
              procuring liability insurance from a risk retention 
              group unless the person or firm is licensed as a fire 
              and casualty broker-agent.  ŬSec. 137 of Ins Code]

            2.  Provides that a producer cannot act in the capacity 
              of managing general agent for an insurer that holds a 
              certificate of authority unless the producer is 
              licensed as a fire and casualty broker-agent or as a 
              life agent.  ŬSec. 769.82 of Ins Code]

            3.  Requires that a copy of changes to filed documents in 
              connection with an insurer's certificate of authority 
              to transact business in California shall be filed with 
              the Insurance Commissioner.  ŬSec.713 of Ins Code]

            4.  Requires, in one provision of law, that a nonresident 
              applicant for an organizational license  name at least 
              one person from their home state who may exercise the 
              power and perform the duties under their license (among 
              the licenses are: a life-only agent, an accident and 
              health agent, a property broker-agent, a personal lines 
              licensee, and a credit insurance agent).  Additional 
              persons endorsed to that license may be residents of 
              another state, but may not be residents of California.  
              ŬSec. 1679 of Ins Code]  In another provision of law, 
              more recently amended, the additional persons endorsed 
              to that license may be residents of other states, 
              including California.  ŬSec. 1656 of Ins Code]








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            5.  Requires the bond of a fire and casualty broker-agent 
              to be in the amount of $10,000, as specified.  ŬSec. 
              1665 of Ins Code]

            6.  Requires, in one provision of law, a nonresident who 
              secures a license without examination through the 
              filing of a certificate attesting the person is 
              licensed in another state, and who subsequently seeks a 
              license as a resident, to take and pass the qualifying 
              examination for the license sought.  ŬSec. 1680 of Ins 
              Code]   In another provision of law, which was amended 
              more recently, such a licensee is not required to 
              complete an examination.  ŬSection 1675, subdivision 
              (f), of Ins Code]

            7.  Requires every fire and casualty broker-agent acting 
              in the capacity of an insurance solicitor to have filed 
              on his or her behalf with the Insurance Commissioner a 
              notice executed by an insurance agent or broker 
              appointing and agreeing to employ the solicitor as an 
              employee.  ŬSec. 1704 of Ins Code]

            8.  Requires every life agent who sells annuities to 
              satisfactorily complete four hours of training every 
              two years prior to license renewal.  ŬSec. 1749.8 of 
              Ins Code]

            9.  Establishes various fees, including a fee of 
              fifty-six dollars for filing for registration as a fire 
              casualty broker-agent. ŬSec. 1750 of Ins Code]

            10. Provides that any authority to transact variable 
              contracts in connection with certain pension funds is 
              effective only while a permanent underlying life 
              agent's license remains in full force and effect.  
              ŬSec. 1758.2 of Ins Code]

            11. Specifies that the Insurance Commissioner shall not 
              grant authority to transact variable contracts unless 
              the life agent or applicant furnishes proof that he or 
              she is registered to sell securities in accordance with 
              the rules of the U.S. Securities and Exchange 
              Commission (SEC) or the Financial Industry Regulatory 
              Authority (FINRA).  ŬSec. 1758.3 of Ins Code]







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            12. Requires that all insurer representatives serving on 
              the advisory committee to the California Automobile 
              Assigned Risk Plan (CAARP) be salaried employees.  
              ŬSec. 11623 of Ins Code]

            13. Requires insurers issuing workers' compensation 
              insurance to deposit specified assets including cash 
              instruments, approved interest-bearing securities, 
              approved stocks readily convertible into cash, 
              investment certificates, certain share accounts in 
              savings and loan associations, and certificates of 
              deposit or savings deposits in a bank licensed to do 
              business in this state.  ŬSec. 11691 of Ins Code]

            14. Requires the Insurance Commissioner, upon adopting a 
              report of an examination of unfair or deceptive 
              practices regarding an insurer, to transmit a copy of 
              that report by certified US mail to the examined 
              insurer's designated agent.  ŬSec. 12938 of Ins Code.]

            15. Allows the examined insurer 10 business days after 
              the transmittal of the above report to submit comments 
              to the Insurance Commissioner.  ŬSec. 12938 of Ins. 
              Code]

            16. Requires the Insurance Commissioner to publish the 
              adopted report on the department's website 10 business 
              days after the transmittal of the report.  ŬSec. 12938 
              of Ins. Code]

          This bill:

            1.  Revises current law throughout the Insurance Code to 
              update references from "fire and casualty broker agent" 
              to "property broker-agent" and "casualty broker-agent."

            2.  Requires that a copy of changes to filed documents in 
              connection with a domestic insurer's certificate of 
              authority to transact business in California shall be 
              filed with the Insurance Commissioner.  

            3.  Provides that, upon request, an out-of-state or 
              foreign country insurer shall file any change on its 







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              documents including its articles of incorporation.

            4.  Requires a nonresident applicant for an 
              organizational license to name at least one person from 
              a state other than California who may exercise the 
              power and perform the duties under their license.  
              Additional persons endorsed to that license may be 
              residents of other states, including California.

            5.  Revises current law to clarify that individuals and 
              organizations licensed for both property and casualty 
              are only required to obtain one $10,000 bond to act as 
              a broker. 

            6.  Repeals the section of law that requires a 
              nonresident who secures a license without examination 
              through the filing of a certificate attesting the 
              person is licensed in another state, and who 
              subsequently seeks a license as a resident, to take and 
              pass the qualifying examination for the license sought. 
                Another provision of law, which is retained, 
              specifies that such a licensee is not required to 
              complete an examination.

            7.  Authorizes personal lines broker-agents and limited 
              lines automobile insurance agents to be appointed as 
              insurance solicitors, and requires organizational 
              licensees to notify the Insurance Commissioner when 
              personal lines broker-agents and limited lines 
              automobile insurance agents are given authority to 
              transact under the organizational license.

            8.  Requires every life agent who sells annuities to 
              satisfactorily complete four hours of training prior to 
              each license renewal.

            9.  Conforms the authorized fee for the casualty 
              broker-agent, and property broker-agent as that 
              nomenclature is revised by this bill to that of the 
              current fire casualty broker-agent ($56.00 dollars) and 
              authorizes the same fee ($56.00 dollars) when a single 
              application is tendered for a joint property and 
              casualty broker-agent application.








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            10. Provides that any authority to transact variable 
              contracts in connection with certain pension funds is 
              effective only while a permanent underlying life 
              agent's license and registration in accordance with the 
              rules of SEC or the FINRA remains in full force and 
              effect. 

            11. Specifies that any authority granted to a life agent 
              to transact variable contracts shall immediately 
              terminate upon the life agent no longer being 
              registered to sell securities in accordance with the 
              rules of the SEC or FINRA.

            12. Authorizes the insurer representative serving on the 
              advisory committee to CAARP to be an employee of one 
              subsidiary and represent another subsidiary.  
              Specifically, an insurer representative must be:  (a) a 
              salaried employee or officer of the named insurer, (b) 
              a salaried employee or officer of another insurer from 
              a group of insurance companies under the same 
              management as the named insurer, or (c) a salaried 
              employee or officer of the overall holding company.

            13. Requires insurers issuing workers' compensation 
              insurance to deposit specified assets including cash 
              instruments, approved interest-bearing securities, 
              approved stocks readily convertible into cash, 
              investment certificates, certain share accounts in 
              savings and loan associations, and certificates of 
              deposit or savings deposits in a bank licensed to do 
              business in this state, or is either domiciled in and 
              has a principal place of business in this state, or is 
              a national bank association with a trust office located 
              in this state.

            14. Requires the Insurance Commissioner, upon adopting a 
              report of an examination of unfair or deceptive 
              practices regarding an insurer, to transmit a copy of 
              that report electronically or by certified US mail to 
              the examined insurer's designated agent. 

            15. Allows the examined insurer 20 business days after 
              the transmittal of the above report to submit comments 
              to the Insurance Commissioner. 







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            16. Requires the Insurance Commissioner to publish the 
              adopted report on the department's Internet website 20 
              business days after the transmittal of the report.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

           SUPPORT  :   (Verified  8/24/11)

          Department of Insurance (source) 

           ARGUMENTS IN SUPPORT  :    According to the author's office, 
          this bill repeals Insurance Code provisions that are 
          inconsistent with more recent legislation, makes technical 
          corrections, and updates the codes governing insurance.  
          Existing law contains a series of conflicting code sections 
          governing the business of insurance, and that require 
          technical amendments in order for the Insurance Code to 
          become consistent on a policy basis.

          Each year the Assembly Insurance Committee introduces a set 
          of committee bills, authored by a majority of the Committee 
          Members, to address non-controversial insurance issues.  
          This bill is recommended by the Insurance Commissioner and 
          the Department of Insurance to remove inconsistencies 
          within existing law governing the business of insurance, 
          and to clarify and clean-up several Insurance Code 
          sections.


           ASSEMBLY FLOOR  :  75-0, 05/26/11 (Consent) 
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Carter, 
            Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer, 
            Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, 
            Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall, 
            Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, 
            Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal, 
            Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, 
            Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel 
            Pérez, Portantino, Silva, Skinner, Smyth, Solorio, 
            Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, 







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            Yamada, John A. Pérez
          NO VOTE RECORDED:  Campos, Cedillo, Davis, Gorell, Jones


          JJA:nl  8/25/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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