BILL ANALYSIS Ó
AB 1804
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ASSEMBLY THIRD READING
AB 1804 (Perea)
As Amended May 28, 2014
Majority vote
INSURANCE 9-2
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|Ayes:|Perea, Bradford, Ian | | |
| |Calderon, Cooley, | | |
| |Dababneh, Frazier, | | |
| |Gonzalez, V. Manuel | | |
| |Pérez, Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Allen, Beth Gaines | | |
| | | | |
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SUMMARY : Provides that policyholders of private passenger
automobile, owner-occupied homeowners', and individual
disability income insurance policies are entitled to designate a
third-party who will be sent a notice if the policy is about to
lapse for nonpayment of premium. Specifically, this bill :
1)Provides that an insurer must maintain a process by which it
will comply with the bill's requirements, or, within 30 days
after the inception date of an insurance policy covered by the
bill, notify the policyholder of the right to designate one
third-party to receive notices that the policy may lapse,
unless the applicant has already been given notice of the
right to designate one person, in addition to the applicant,
to receive a notice of lapse, termination, expiration,
cancellation or nonrenewal of the policy for nonpayment of
premium.
2)Provides that an applicant has 30 days after the insurer sends
the notice to submit to the insurer the name, address and
phone number of the person designated by the applicant, or to
submit a signed form waiving the right.
3)Provides that the insurer may conclusively presume that the
policyholder has waived the right to designate a third party
if no response is received within 30 days after the notice was
sent.
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4)Requires insurers to maintain records of the designee
information for the life of the policy, and allow the
policyholder to update the information upon the policyholder's
request.
5)Provides that insurers shall notify the policyholder every two
years of the right to either update designee information, or
the right to make a designation, as the case may be.
6)Provides that no policy subject to the bill's requirements can
be cancelled for nonpayment of premium, unless the designated
third party has been notified at least 10 days prior to the
cancellation date.
7)Provides that the bill's requirements apply to:
a) Policies covering owner-occupied homes;
b) Private passenger automobile insurance policies; and
c) Individual disability income policies.
8)Specifies that a person designated to receive notices pursuant
to the bill does not acquire any substantive rights under the
policy.
9)Provides that the bill does not apply to policies that take
effect prior to January 1, 2016.
EXISTING LAW :
1)Establishes, with various time frames depending on the type of
insurance policy, that a policy cannot be cancelled for
nonpayment of premium unless the named insured is provided a
notice that the policy will be cancelled on a date certain.
2)Provides that an individual life insurance policy shall not be
issued or delivered in California unless the policyholder has
been afforded the right to designate at least one person in
addition to the policyholder to receive a notice that the
policy is going to lapse for nonpayment of premium.
3)Provides that no individual policy or certificate under a
group policy of long-term-care insurance shall be issued in
California unless the policyholder has been afforded the right
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to designate at least one person in addition to the
policyholder to receive a notice that the policy is going to
lapse for nonpayment of premium.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)Purpose. According to the sponsor, the California Department
of Insurance (DOI), the bill is an important consumer benefit
for people who have difficulty managing their insurance
responsibilities either due to health or residency issues.
DOI notes that policyholders of all ages can find themselves
in situations that might cause important insurance protections
to lapse due to a failure to pay the premium. In addition to
older policyholders who might want a relative or close family
friend to keep an eye on their insurance protections, others
who might have prolonged separations from their primary
residence, such as college students, members of the military,
or people who work for extended periods away from home will
find the bill's proposal a great benefit.
2)Opt-in. The bill is a consumer opt-in proposal. Insurers
would be required to make the policyholders aware of the right
to designate a third party, and the policyholders would have
the right to accept or waive the right.
3)Military personnel. United Services Automobile Association
(USAA), an insurer that covers active and retired military and
their families, and other veterans organizations, believe that
the bill has possible benefits for the military personnel who
are forced to leave their homes with very short notice in
order to be deployed for long periods of time. The
opportunity to plan ahead with an opt-in provision provides
the clarity needed when putting personal business in order,
and allows our military to have faith that a policy that is
critical to their family well-being is responsibly handled.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0003571
AB 1804
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