BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 2354|
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                                 THIRD READING


          Bill No:  AB 2354
          Author:   Solorio (D)
          Amended:  7/6/12 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  :  7-0, 7/2/12
          AYES:  Kehoe, Walters, Alquist, Dutton, Lieu, Price, 
            Steinberg
           
          ASSEMBLY FLOOR  :  75-0, 5/17/12 (Consent) - See last page 
            for vote


           SUBJECT  :    Travel insurance

           SOURCE  :     Author


           DIGEST  :    This bill updates the definition of travel 
          insurance and shifts the licensing and regulatory 
          compliance responsibilities from travel retailers to 
          limited lines travel insurance agents. 

           Senate Floor Amendments  of 7/6/12 clarify that an applicant 
          for initial licensure or renewal as a limited travel lines 
          insurance agent must pay a fee calculated according to the 
          applicant's share of the total reasonable costs incurred by 
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          the Department of Insurance related to the implementation 
          of the provisions of this bill.
          
           ANALYSIS  :    

          Existing law:

          1. Authorizes the issuance of limited licenses as travel 
             insurance agents for employees of railroads, steamships, 
             airlines, and other organizations engaged in 
             transporting persons as common carriers and to 
             individuals or employees of persons engaged in selling 
             transportation on those common carriers.

          2. Requires that a limited license to sell travel insurance 
             be applied for and renewed in the same manner as is 
             provided for a licensee to act as a property 
             broker-agent or a casualty broker-agent, and that an 
             applicant pay a filing fee, except that an applicant for 
             a limited license as a travel insurance agent need not 
             pass a qualifying examination.

          This bill:

          1. Revise and recasts the provisions related to travel 
             insurance by, among other things, changing 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.

          2. Authorizes the Insurance Commissioner to issue a limited 
             lines travel insurance agent license to any organization 
             engaged in transacting travel insurance, through travel 
             retailers, as those terms are defined, and defines a 
             limited lines travel insurance agent to mean an insurer 
             designee that is licensed to transact travel insurance.

          3. Requires the licensed limited lines travel insurance 
             agent and a travel retailer to follow administrative and 
             disclosure requirements such as including the agent's 

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             identification information on and making certain 
             disclosures to the consumer in the marketing materials 
             and fulfillment packages, and requiring the agent to 
             establish and maintain a register noting each travel 
             retailer that transacts travel insurance.

          4. Deletes provisions requiring a limited license as 
             provided for a licensee to act as a property or casualty 
             broker-agent and incidental regulations, and instead 
             requires that the applicant for a limited lines travel 
             insurance agent license file with the Insurance 
             Commissioner a written application for licensure, signed 
             by the applicant or an officer of the applicant, in the 
             form prescribed by the Commissioner, a certificate by 
             the insurer on a form prescribed by the Commissioner 
             stating, among other things, that the insurer has 
             satisfied itself that the applicant is trustworthy and 
             competent to act as its limited lines travel insurance 
             agent, and an application fee and a renewal fee in an 
             amount determined by the commissioner as sufficient to 
             defray the reasonable costs incurred by the Department 
             of Insurance to implement the provisions of this bill.

          5. Authorizes the Commissioner to take disciplinary action 
             against a limited lines travel insurance agent for a 
             violation of the bill by a travel retailer or a travel 
             retailer's employee.

          6. Makes conforming changes and deletes obsolete 
             provisions.

           Background   
          
           Travel insurance  .  Travel insurance protects against 
          interruption or cancellation of a trip; loss of baggage or 
          personal effects; damage to accommodations or rental 
          vehicles (not including damage waiver contracts); and 
          sickness, accident, disability, or death occurring during 
          travel.  Frequently, travel insurance is offered through 
          travel retailers.

          Existing law provides that limited licenses to sell travel 
          insurance may be issued to employees of common carriers and 
          to individuals or employees of persons engaged in selling 

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          transportation on such common carriers (a travel retailer). 
           This allows a travel retailer to transact travel insurance 
          to their customers, although travel retailers are not 
          agents of travel insurance companies.  The travel retailer 
          retains the responsibility for regulatory compliance, 
          license fees, etc. that comes with the limited license.

          The following summarizes how the American Association of 
          Travel Agents (ASTA) describes the typical travel insurance 
          transaction:

            The agent informs a client during the reservation and 
            booking process that travel insurance is available for 
            purchase and calls attention to the possibility that the 
            client may become ill or experience some other event 
            after the booking and before or during travel.  The agent 
            tenders a brochure, or links to online information, that 
            is provided by the actual insurer.  The client then 
            decides whether he or she wants to pay the fee, and if 
            so, pays the insurance vendor directly.  In some cases, 
            the travel agency might accept the payment and forward it 
            to the insurance company.  In either case the insurance 
            company is the provider of the insurance policy and is 
            the source of any binding explanation of the coverages, 
            amounts, etc. 
            
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee, potential 
          revenue loss of approximately $62,000 annually (Special 
          Fund) resulting from a loss of about 1,950 licensees.  This 
          bill 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. 
          
           SUPPORT  :   (Verified  8/6/12)

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          American Society of Travel Agents 
          Away To Travel
          California Coalition of Travel Organizations 
          California Department of Insurance
          California Travel Association
          Jason Coleman, Inc.
          Plaza Travel
          Surf City Cruise and Travel
          Travelex Insurance Services
          US Travel Insurance Association, Inc.
          Your Travel Center


           ASSEMBLY FLOOR  :  75-0, 5/17/12
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth 
            Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, 
            Hagman, Halderman, Hall, Harkey, Hayashi, Roger 
            Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, 
            Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller, 
            Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, 
            Olsen, Pan, V. Manuel Pérez, Portantino, Silva, Smyth, 
            Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, 
            Williams, John A. Pérez
          NO VOTE RECORDED:  Fletcher, Bonnie Lowenthal, Perea, 
            Skinner, Yamada


          JJA:m  8/6/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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