BILL ANALYSIS Ó
AB 2354
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Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2354 (Solorio) - As Amended: April 11, 2012
SUBJECT : Limited Lines Travel Insurance Agents
SUMMARY : Repeals existing laws regulating limited lines travel
insurance agents and replaces it with a new system of regulation
consistent with standards adopted by the National Association of
Insurance Commissioners (NAIC). Specifically, this bill :
1)Repeals existing law requiring travel agents and employees of
common carriers to be licensed as limited lines travel
insurance agents (travel insurance agents) to transact
transportation ticket and baggage insurance policies.
2)Repeals the law limiting travel insurance agents to the sale
of transportation ticket and baggage loss policies.
3)Repeals the definition of a transportation ticket policy.
4)Permits a travel insurance agent license to be issued to an
organization transacting travel insurance that is a designee
of an insurer that is authorized to offer travel insurance.
5)Defines travel insurance as insurance coverage for personal
risks associated with travel including, but not limited to:
a) Interruption or cancellation of travel
b) Loss of baggage or personal effects
c) Damages to accommodations or rental vehicles
d) Sickness, accident, disability or death occurring
during travel.
6)Specifies that major medical policies providing comprehensive
medical protection on trips lasting more than six months are
not travel insurance.
7)Defines a "travel retailer" as a business organization engaged
in transacting travel insurance on behalf of a travel
insurance agent.
8)Permits an unlicensed "travel retailer" to transact travel
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insurance on behalf of a travel insurance agent if the travel
insurance agent:
a) Includes its identifying information (name, license
number, and contact information) clearly in marketing
materials and fulfillment packages provided to customers.
b) Maintains a register of all travel retailers that
transacts travel insurance on its behalf.
c) Designates one employee licensed as a fire and
casualty agent, life only agent, and accident and health
agent to be responsible for ensuring compliance.
d) Provides fingerprints to the Department of Insurance
of the designated employee and the officers and employees
who direct or control the operations of the travel
insurance agent to perform a criminal background check.
e) Pays the required licensing fees.
f) Provides training to the travel retailer's employees
transacting travel insurance regarding the types of
insurance offered, ethical sales practices, and
disclosures to prospective customers.
9)Permits a travel insurance agent to compensate the travel
retailer and its employees if the compensation is not
primarily based on the number of policies sold.
10)Specifies that the conduct of employees of the travel
retailer transacting travel insurance is deemed to be the
conduct of the travel insurance agent.
11)Requires applicants for a license to act as a travel
insurance agent to submit the following:
a) Written application form signed by the applicant.
b) A certificate from an insurer appointing the
applicant as its agent and attesting to the applicant's
competence.
c) Payment of the application fee.
12)Applies existing processes for administrative review of
applications to the applications for a travel insurance agent
license.
13)Requires that the cost of any investigation or enforcement
action be paid for by the travel insurance agent.
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14)Authorizes the Insurance Commissioner to adopt regulations
needed to implement the bill.
EXISTING LAW
1)Permits travel agents and employees of railroads, airlines and
other common carriers to become licensed as travel insurance
agents.
2)Restricts travel insurance agents to the sale of
transportation ticket or baggage insurance policies.
3)Defines a transportation ticket policy as disability insurance
sold to protect a traveler from transportation hazards.
4)Requires specific written notice be provided to applicants for
a travel ticket policy regarding the possibility the policy
may duplicate other health insurance coverage.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Purpose. According to the author, this bill revises
California law relating to the sale of travel insurance to
comply with the licensing standards adopted by NAIC. These
standards were developed to establish nationally consistent
licensing requirements for travel insurance agents while
ensuring consumer protection. Implementing an approach
consistent with the NAIC model will reduce the burden of
regulation on travel retailers while focusing regulatory
scrutiny on those most responsible for the insurance product.
2)NAIC Model. This bill is modeled on uniform licensing
standards for travel insurance agents adopted by the National
Association of Insurance Commissioners in 2010. These
standards shift the licensing requirements from individual
travel agents and employees of common carriers (airlines,
railroads, bus lines, etc.) to an intermediary (such as a
managing general agent) who is responsible for training and
overseeing the sale of travel insurance by travel retailers.
The intermediary (limited lines travel insurance agent) would
be appointed by an insurance company and licensed by the
department.
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3)Revenue. The bill will drastically reduce the number of
licenses issued by the department. The Department currently
has over 2,000 travel insurance agent licenses, and the
sponsors estimate that the bill would reduce that number to
approximately 50. Without a substantial increase in the
amount of the license issuance and renewal fees charged, the
Department of Insurance will lose a substantial amount of
revenue. The sponsors have indicated a willingness to support
an increase and have been working with the Department of
Insurance to determine the appropriate fee.
4)Portable Electronics Insurance. Last year, Assembly Bill 690
(Stats. 2011, ch. 165) enacted a similar model for portable
electronics insurance agents where a parent organization
(e.g., cell phone company, electronics retailer) is licensed
to transact insurance on portable electronic devices (e.g.,
cell phones, laptops, etc.) through its individual employees
and authorized representatives.
REGISTERED SUPPORT / OPPOSITION :
Support
U.S. Travel Insurance Association (sponsor)
American International Group (AIG)
American Society of Travel Agents
Away to Travel
California Coalition of Travel Organizations
California Travel Association (if amended)
Jason Coleman, Inc.
Numerous Individual Travel Professionals
Plaza Travel
Surf City Cruise and Travel
Travelex Insurance Services
Your Travel Center
Opposition
None Received
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
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