BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2354| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED AB 2354 Page 2 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 CONTINUED AB 2354 Page 3 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 CONTINUED AB 2354 Page 4 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) CONTINUED AB 2354 Page 5 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 **** END **** CONTINUED