BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2354 (Solorio) - Travel Insurance
Amended: June 25, 2012 Policy Vote: Ins 8-0
Urgency: No Mandate: No
Hearing Date: July 2, 2012 Consultant: Maureen Ortiz
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 2354 replaces existing laws regulating limited
lines travel insurance agents with a new system of regulation
consistent with standards adopted by the National Association of
Insurance Commissioners (NAIC).
Fiscal Impact: Potential revenue loss of approximately $62,000
annually (Special Fund) resulting from a loss of about 1,950
licensees. AB 2354 requires each licensee to submit a license
and/or renewal fee in an amount determined the commissioner as
sufficient to defray the increased reasonable costs incurred by
the Department of Insurance from implementing this bill.
Currently, the fee for a one-year travel agent license is $22
which will need to be increased to approximately $3,100 for a
two-year license in order to sufficiently replace the loss in
revenue.
Background: The National Association of Insurance Commissioners
(NAIC) has adopted licensing standards relating to the sale of
travel insurance to establish nationally consistent licensing
requirements for travel insurance agents while ensuring consumer
protection.
Travel insurance is offered through travel retailers who retain
the responsibility for regulatory compliance and license fees,
even though travel retailers are not agents of travel insurance
companies. The insurance company is the provider of the
insurance policy.
Proposed Law: AB 2354 will shift the licensing requirements
from travel agents and employees of common carriers to a limited
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lines travel insurance agent appointed by an insurance company
and licensed by the department. The limited lines travel
insurance agent could then authorize a travel retailer to
transact travel insurance on its behalf, but the agent remains
responsible for complying with regulations.
AB 2354 will update the definition of "travel insurance" and
shift the licensing and regulatory compliance responsibilities
from travel retailers to limited lines travel insurance agents.
Specifically, the bill contains the following provisions:
- Changes the definition of "travel insurance" to delete
references to transportation ticket policies in disability
insurance policies and include interruption or cancellation of a
trip or event, loss of baggage or personal effects, damages to
accommodations or rental vehicles, and sickness, accident,
disability or death occurring during travel.
- Authorizes the Insurance Commissioner to issue a limited
lines travel insurance agent license to any organization engaged
in transacting travel insurance through travel retailers.
- Creates disclosure requirements for licensed limited lines
travel insurance agents and travel retailers.
- Deletes provisions requiring a limited license as provided
for a licensee to act as a property or casualty broker-agent and
instead, requires an applicant for a limited lines travel
insurance agent license to file with the Insurance Commissioner
a written application for licensure, as specified.
- Authorizes the commissioner to take disciplinary action
against a limited lines travel insurance agent for violations of
the Insurance Code by a travel retailer or a travel retailer's
employee. Costs for enforcement actions will be paid by the
licensee.
If a limited lines travel insurance agent authorizes a travel
retailer to transact travel insurance on behalf of and under its
authority, the following conditions will apply:
a) The limited lines travel insurance agency must be clearly
identified on marketing materials and fulfillment packages
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distributed by the travel retailer.
b) The agent must maintain a register noting each travel
retailer that transacts insurance on the licensee's behalf.
c) The agent must designate an employee to be responsible for
compliance with laws, rules and regulations of the state. The
employee must undergo a background check.
d) The agent must disclose to the consumer all limitations of
the insurance, as specified, and must provide numerous other
consumer protection disclosures to the purchaser.
AB 2354 will conform California's licensing regulations over
travel insurance agents so that they are consistent to the NAIC
model.