BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2303|
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THIRD READING
Bill No: AB 2303
Author: Assembly Insurance Committee
Amended: 6/14/12 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 8-0, 6/13/12
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Wyland
NO VOTE RECORDED: Price
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 63-0, 4/23/12 - See last page for vote
SUBJECT : Insurance omnibus
SOURCE : Department of Insurance
DIGEST : This bill is the annual Assembly Insurance
Committee omnibus bill which conforms state law to federal
insurance law, makes technical changes to the state
insurance code, and makes specified licensing changes.
ANALYSIS :
Existing law:
1. Regulates mortgage insurance and defines it as including
guaranteeing of the payment of the principal, interest,
and other sums agreed to be paid under the terms of any
CONTINUED
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note or bond secured by mortgage, or other sums secured
under the terms of the mortgage, in its entirety, or of
any undivided or other partial interest in the mortgage,
or in a group of mortgages, and the guaranteeing or
insuring, directly or indirectly, against loss thereon.
2. Requires the Insurance Commissioner (Commissioner) to
publish notices of insurer liquidation in a newspaper of
general circulation, published in the county in which
the proceeding is pending, and in the Counties of
Alameda, Los Angeles, Sacramento, San Diego, San
Francisco, and Santa Clara, not less than once a week
for four successive weeks.
3. Authorizes the Commissioner to apply by verified
application for an order for the liquidation of a
domestic corporation in the insurance business.
4. Authorizes the Commissioner to grant authority to
transact variable contracts to a person, or a natural
person named on a license of an organization licensed,
as a life agent which is appointed by an admitted
insurer which is required to register itself or to
register a separate account or fund with the United
States Securities and Exchange Commission, or to
register its variable policies or contracts with the
Securities and Exchange Commission, and has complied
with that requirement.
5. Authorizes the Commissioner to issue to eligible persons
a certificate of convenience, a temporary permit issued
as a matter of convenience to allow the transaction of
insurance without a permanent license, to transact
certain kinds of insurance, including, but not limited
to, transacting industrial life and industrial
disability insurance, known as certificates of
convenience pending examination.
6. Requires every insurer to have an approved training
program on file with the Commissioner or have filed a
blanket authorization to certify enrollment in an
approved course of instruction before appointing any
certificate of convenience holder.
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7. Requires an applicant for a bail agent license, in order
to be eligible to take the examination, to have
completed not less than 12 hours of classroom education
in subjects pertinent to the duties and responsibilities
of a bail licensee.
8. Requires the Commissioner to appoint a curriculum board
consisting of representatives of insurance agents,
brokers, and life agents trade associations and
representatives of insurance companies and consumer
groups to develop the prelicensing and continuing
education curriculum for property broker-agents and
casualty broker-agents.
9. Requires any natural person applying for a license to
act as a surplus line broker to prove his/her competency
by showing he/she holds an existing license to act as a
property broker-agent and casualty broker-agent.
10.Requires that on or before May 1 of each year, insurers,
engaged in writing child care liability insurance
coverage, submit a report to the Commissioner of their
operations regarding child care liability claims
experience for the preceding calendar year ending on
December 31 on a form furnished by the Commissioner.
The Commissioner is required to annually report to the
Governor, Legislature, and to the Assembly and Senate
Insurance Committee regarding certain court actions,
such as medical malpractice, and child care liability
claims.
11.Requires insurance adjusters to be licensed by the
Department of Insurance (CDI). Any person who violates
any provision regarding the regulation of insurance
adjusters is guilty of a misdemeanor.
12.Requires the state to reimburse local agencies and
school districts for certain costs mandated by the
state. Statutory provisions establish procedures for
making that reimbursement.
This bill:
1. Prohibits mortgage insurance from being an insurance
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product that may be offered in this state.
2. Deletes the requirement of publication in certain cities
and counties for the required period of time, and
instead requires only publication in geographic areas
pertinent to the liquidation and that the publication
reference a source, either the liquidated company's or
the liquidator's Internet Web site, where ongoing
information for creditors will be provided.
3. Incorporates the federal Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 by authorizing the
Federal Deposit Insurance Corporation to stand in the
place of the Commissioner and file a verified
application in state court to place the insurer into
liquidation under the laws and requirements of the
state.
4. Clarifies that the Commissioner is authorized to grant
authority to transact variable contracts to a
nonresident, who is not a licensed life agent in
California, as long as the nonresident is licensed for
both life and variable contract authority in his/her
resident state.
5. Imposes a $64 fee on applications, renewals, or changes
for a nonresident variable contract authority license.
6. Declares the fee is reasonable and reflects the true
costs incurred by the agency in providing those
services.
7. Discontinues certificates of convenience pending
examination, deletes the training program and blanket
authorization to certify enrollment requirement, and
makes conforming changes.
8. Increases the bail agent license exam eligibility
qualification to a minimum of 20 hours.
9. Expands the curriculum board to include representatives
of bail agents and insurance adjusters and expands the
curriculum being developed to include courses of study
for bail agents and insurance adjusters.
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10.Allows a natural person, who is not a resident of
California, to prove his/her competency by showing that
he/she holds an existing license for property and
casualty in his/her resident state.
11.Deletes the requirement of that the insurer child care
liability claims experience report for the preceding
calendar year ending on December 31 be submitted to the
Commissioner on or before May 1 of each year, and
instead requires that the report for the preceding
calendar year be submitted at the request of the
Commissioner, but not more than annually, on a form
prescribed by the Commissioner.
12.Deletes the Commissioner's reports to the Governor,
Legislature, and to the Assembly and Senate Committees
on Insurance described above.
13.Establishes a category of insurance adjuster license to
be known as the crop insurance adjuster license, subject
to the same rules and regulations as an insurance
adjuster, except where otherwise specified. A person is
prohibited from acting as a crop insurance adjuster
license is subject to the same requirements as
applicable to obtaining an insurance adjuster license,
except the examination, and will be required to provide
evidence that he/she has satisfactorily completed the
loss adjustment training curriculum and competency
testing required by the Federal Crop Insurance
Corporation Standard Reinsurance Agreement.
14.Makes technical, conforming, and related changes and
delete obsolete provisions.
Background
This insurance omnibus bills addresses various and diverse
matters that touch on the insurance code. Specifically,
the substantive portions of this bill address the following
issues.
Obsolete Mortgage Insurance Statutes. In 1961, private
mortgage insurance replaced mortgage insurance and a new
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set of statutes was enacted. This bill repeals the
statutes regulating mortgage insurance.
Liquidation Notices . This bill requires a liquidation
notice to be published once in newspapers of general
circulation in areas pertinent to the liquidation. The
notice must include either an address to the liquidated
company's or the liquidator's Web site where claimants can
receive ongoing information.
Appointment as Receiver of Systemically Important Insurer
under Dodd-Frank . The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 which, among other things,
creates a process for the conservation and/or liquidation
of "systemically important" financial companies by the
Federal Deposit Insurance Corporation. Dodd-Frank contains
a provision that requires systemically important insurance
companies (or their affiliates) to be conserved or
liquidated under state law. Under California law, this
conservation/liquidation process is performed by the
Insurance Commissioner through the Conservation and
Liquidation Office. This bill permits a superior court to
appoint the Insurance Commissioner as a receiver of a
systemically important insurer based on a determination by
the U.S. Secretary of the Treasury and requires a ruling
within 24 hours or the application will be deemed granted.
Variable Contracts . This bill conforms California
standards to those of the National Association of Insurance
Commissioners (NAIC) by clarifying that nonresidents must
hold a life license in their resident state prior to being
issued variable contract authority.
Repeals Obsolete or Outdated Insurance Code Section .
Repeals Insurance Code sections related to
Certificates of Convenience . Certificates of convenience
are temporary licenses. This bill limits the available
certificates to estate or military service certificates
of convenience.
Exemption for Notice of Cancellation for Auto Policies in
Effect 60 Days or Less . According to CDI, this bill
conforms the Insurance Code to the CalFarm and Macky
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court decisions, which state that the 60-day underwriting
period specified in the Insurance Code section 661 no
longer exists per Insurance Code section 1861.03,
subdivision (c)(1), added as part of Proposition 103 in
1998.
Specific Tort Actions Reporting . This report includes
information regarding court judgments and settlement in
tort cases. According to CDI, the initial purpose of the
report was to assist in rate-making, but the generic
nature of the data does not provide enough insurer
specific information to use in setting rates for
individual insurers today.
Bail Agent Licenses Pre-licensing Requirements . This bill
increases the pre-licensing education hours for bail agents
from 12 to 20 hours based on the recommendation of an ad
hoc advisory committee made up of representative of the
bail industry and CDI. According to the CDI, this bill
aligns the pre-licensing hours for a bail agent license
with all other insurance producer licenses.
CDI Curriculum Board . This bill expands the authority of
the CDI Curriculum Board to develop pre-licensing and
continuing education requirements for agent/broker licenses
to include bail agents and insurance adjusters as well.
Surplus Lines Brokers . This bill conforms California
standards to those of the NAIC by specifying that
nonresident surplus lines applicants may demonstrate
competency by showing that they hold a property license in
their resident state.
Child Care Liability Reporting Requirement . Current law
requires that the CDI report to the Legislature on issues
relating to child care liability. According to CDI, the
availability and affordability of child care insurance is
no longer a problem. This bill eliminates the annual
requirement but maintains the Commissioner's authority to
run a data call if necessary.
Crop Insurance . This bill establishes a limited lines crop
insurance adjuster license. Federal crop insurance
requirements were recently changed requiring crop insurance
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adjusters to have specific knowledge of the crops at issue
in a claim. If a state does not offer a license based on a
crop specific test, then adjusters certified by the NCIS
may adjust claims in the state without a license. This
bill establishes state licensure based on the NCIS
certification process to comply with the federal
requirements.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 6/25/12)
Department of Insurances (source)
California Bail Agents Association
Golden State Bail Agents Association
ASSEMBLY FLOOR : 63-0, 4/23/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Buchanan, Butler, Campos, Carter, Chesbro, Conway,
Dickinson, Eng, Feuer, Fong, Fuentes, Beth Gaines,
Galgiani, Gatto, Gordon, Gorell, Grove, Hagman,
Halderman, Harkey, Hayashi, Roger Hernández, Hill, Huber,
Hueso, Huffman, Jeffries, Jones, Lara, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Mitchell, Monning,
Morrell, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
Pérez, Portantino, Skinner, Solorio, Swanson, Torres,
Valadao, Wieckowski, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Atkins, Brownley, Charles Calderon,
Cedillo, Cook, Davis, Donnelly, Fletcher, Furutani,
Garrick, Hall, Knight, Mansoor, Nestande, Silva, Smyth,
Wagner
JJA:do 6/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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