BILL ANALYSIS Ó
SB 596
Page 1
Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 596 (Price) - As Amended: June 28, 2011
SENATE VOTE : 38-0
SUBJECT : Insurance disclosures
SUMMARY : Permits homeowner's insurers to combine two required
disclosures in the same document, and reduces the print size of
a copy of a law sent to claimants. Specifically, this bill :
1)Permits insurers selling homeowner's insurance to disclose to
applicants, in the same document that offers earthquake
coverage, all discounts or surcharges for homeowner's
insurance and related earthquake insurance.
2)Reduces from 12-point type to 10-point type the size of the
reproduction of the insurance law, provided by insurers to
claimants, that identifies the unfair practices in the
business of insurance.
3)Repeals the requirement that insurers, upon receipt of a
claim, provide the insured person with a reproduction of the
insurance law that identifies the following prohibited acts in
the business of insurance:
a) Making a statement that misrepresents the terms of a
policy,
b) Making a statement in advertising insurance that is
untrue or misleading,
c) Entering into an agreement to boycott or intimidate
another person to unreasonably restrain an insurance
business,
d) Filing with a public official a false statement of
financial condition of an insurer with intent to deceive,
e) Making a false entry in a book or statement of an
insurer with the intent to deceive an agent or
governmental examiner,
f) Permitting unfair discrimination between individuals
of the same class and equal expectations of life in the
rates charged for life insurance, and
g) Disseminating in an advertising a statement that a
SB 596
Page 2
named insurer is insured against insolvency.
EXISTING LAW :
1)Requires insurers selling homeowner's insurance to disclose,
in a written freestanding document, to applicants all
discounts or surcharges for that insurance and related
earthquake insurance.
2)Requires the insurer to provide and disclose in writing any
discounts or surcharges for hazard reductions including
retrofitting the residential dwelling by specific means.
3)Requires each insurer, within 15 days of receiving notice of a
claim, to provide the insured person with a legible
reproduction of the insurance law, in at least 12-pint type,
that identifies a series of prohibited acts in the business of
insurance (known as "unfair practices").
4)Requires each of these insurers to provide to the insured
person a written notice that:
a) Specifies that the Fair Claims Settlement Practices
Regulations govern how insurance claims are processed,
that these regulations are available at the Department of
Insurance Internet website, www.insurance.ca.gov , and
that the insured person may obtain a copy of these
regulations free of charge from the insurer.
b) Specifies that each insurer shall provide, upon
request of an insured person, a copy of the Fair Claims
Settlement Practices Regulations within 15 calendar days
of the request.
FISCAL EFFECT : None.
COMMENTS :
1)Purpose . According to the author, the purpose of this bill is
to permit the consolidated mailing of related notices to
consumers, in order to increase the efficiency of mailings and
reduce confusion by consumers.
2)Background . Existing law requires insurers selling
homeowner's insurance to disclose, in a written freestanding
SB 596
Page 3
document, to applicants all discounts or surcharges for that
insurance and related earthquake insurance. Also, under
existing law, insurers must provide and disclose in writing
any discounts or surcharges for hazard reductions including
retrofitting of the residential dwelling. This bill would
allow homeowner's insurers to combine these notices into one
document, or to continue to print and provide these disclosure
notices as separate documents.
Under existing law, each insurer is required to provide the
claimant with a legible reproduction of the insurance law, in
at least 12-pint type, that identifies a series of prohibited
acts in the business of insurance (known as "unfair
practices"). The bill will eliminate the requirement to
reproduce some provisions of the insurance law (see Existing
Law section of this analysis). The bill would continue to
require insurers to send to claimants the following provisions
of the insurance law:
a) Knowingly committing or performing with such
frequency as to indicate a general business practice any
of the following unfair claims settlement practices:
i. Misrepresenting pertinent facts or policy
provisions,
ii. Failing to act reasonably promptly upon
communications,
iii. Failing to adopt reasonable standards for
the prompt investigation of claims,
iv. Failing to affirm or deny coverage of
claims within a reasonable time,
v. Not attempting in good faith to
effectuate fair and equitable settlements,
vi. Compelling insureds to institute
litigation to recover policy amounts under specified
circumstances.
vii. Attempting to settle a claim for less
than a reasonable person would have believed under
specified circumstances,
viii. Failing to inform insureds of the
coverage under which payment has been made,
ix. Informing claimants that insurer appeals
arbitration awards,
x. Delaying the payment of claims in which
the same losses must be reported more than once,
SB 596
Page 4
xi. Failing to settle claims promptly where
liability has become apparent,
xii. Failing to provide promptly a reasonable
explanation for the basis of denying a claim,
xiii. Advising a claimant not to obtain the
services of an attorney,
xiv. Misleading a claimant as to the
applicable statute of limitations, and
xv. Denying the payment of hospital, medical,
or surgical benefits for services for AIDs-related
complex under specified circumstances.
b) Canceling or refusing to renew a policy in violation
of law.
3)Support . According to the Association of California Insurance
Companies (ACIC), the bill's sponsor, this bill will improve
overall efficiency, reduce confusion by consumers, and save
precious natural resources by consolidating disclosure notices
into a single mailing.
ACIC notes that current law requires that after an insured
person files a claim, an insurance carrier must send the
insured a full copy of the "Unfair Claims Practices Act,"
contained in Section 790.03 of the Insurance Code. This bill
changes that requirement to only subdivisions (h) and (i) of
that Act. According to ACIC, the other sections, whose
inclusion can make the disclosure up to five (5) pages long,
have nothing to do with the insured, or with any interaction
they may have with the company. According to ACIC, those
other provisions are totally unneeded.
The bill changes the size type on the copy of the Unfair Claims
Practices Act to 10-point type. The ACIC states that this
change will allow the notice to fit on one (1) page. 10-point
type is the same size as required under existing law for the
California Residential Property Insurance Bill of Rights.
4)Technical amendments . The following technical amendments are
recommended:
a) Notice to claimants regarding unfair practices law .
The bill would require notification to policyholders
that, upon request, the key parts of the insurance law
that identify the prohibited unfair insurance practices
SB 596
Page 5
would be sent to them. The Department of Insurance
recommends that policyholders be notified that they can
request the entire section of law identifying these
prohibited practices. The author agrees with this
suggestion and, thus, on page 2, line 13, of the bill,
the following words "subdivisions (h) and (i) of" should
be stricken.
b) Requirement on insurers to provide unfair practices
law . The bill would require that insurers provide to
policyholders, upon request, the key parts of the
insurance law that identify the prohibited unfair
insurance practices. The Department of Insurance
recommends that the entire section of law identifying
these prohibited practices be sent to policyholders upon
request. The author agrees with this suggestion and,
thus, on page 2, lines 20 - 27, of the bill, should be
re-written to read:
"(2) Every insurer shall provide, when requested orally or
in writing by an insured, a legible reproduction of
Section 790.03 of the Insurance Code and copies of
Sections 2695.5, 2695.7, 2695.8, and 2695.9 of Subchapter
7.5 of Chapter 5 of Title 10 of the California Code of
Regulations, unless the regulations are inapplicable to
that class of insurer."
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Insurance Companies (ACIC)
Personal Insurance Federation of California (PIFC)
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086