BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 2056 (Dababneh) - Pet Insurance
          
          Amended: May 22, 2014           Policy Vote: Ins:  10-0
          Urgency: No                     Mandate: No
          Hearing Date: June 23, 2014                             
          Consultant: Maureen Ortiz       
          
          This bill does not meet the criteria for referral to the  
          Suspense File.
          
          
          Bill Summary:  AB 2056 implements, effective July 1, 2015,  
          consumer disclosures on insurers that offer per insurance  
          products, and establishes procedures and penalties for  
          violations of these requirements.

          Fiscal Impact: 
          
              Administration and enforcement costs of less than $50,000  
              annually (Special Fund).

          Background:   Existing law prohibits the transaction of any  
          class of insurance in this state without first being admitted  
          for that class.  The Insurance Commissioner is granted with  
          oversight authority and specified powers to enforce violations  
          of most of California insurance laws.


          Any insurance not already classified in a category listed in Chapter  
          1 of Part 1 of Division 1 of the Insurance Code is categorized as  
          "miscellaneous insurance" and is regulated as a form of property and  
          casualty insurance.
          
          Pet insurance covers veterinary and other pet-related medical  
          expenses.  It is statutorily defined as "miscellaneous  
          insurance" under Insurance Code Section 120 and regulated as a  
          form of property and casualty insurance.  However, according to  
          the Department of Insurance, pet insurance is marketed like  
          health insurance.  The American Pet Products Association  
          estimates that U.S. consumers spent about $14.37 billion dollars  
          on veterinary care in 2013.









          AB 2056 (Dababneh)
          Page 1



          Proposed Law:  AB 2056 does the following:


           1.  Defines "pet insurance" as an individual or group insurance  
              policy that provides coverage for veterinary expenses.


           2.  Applies to policies that are marketed, issued, amended,  
              renewed, or delivered on or after July 1, 2015.


           3.  Requires disclosure of specified categories of exclusions,  
              coverage limits, and whether the insurer reduces coverage or  
              increases premiums based on the insured's claim history.


           4.  Defines various terms, requires the use of those terms in  
              the policy, and requires the insurer to post definitions of  
              those terms on its website.


           5.  Requires the insurer to provide a summary description of  
              the basis or formula used to determine claims payments in  
              the policy and to post that description on its website.


           6.  Requires the insurer to disclose in the policy, when  
              applicable, the terms of benefits schedules or limitations  
              based on usual and customary fees and post that information  
              on its website.


           7.  Requires the insurer to provide the consumer with a notice  
              that the policy may be canceled by returning it to the  
              insurer within a period of no less than 30 days ("free look  
              period").


           8.  Provides that returning the policy within the free look  
              period voids the policy from the beginning with all premiums  
              refunded, so long as no claims have been paid or that the  
              insurer has not notified the insured that a claim will be  
              paid.








          AB 2056 (Dababneh)
          Page 2





           9.  Permits the Insurance Commissioner to impose civil  
              penalties of up to $5,000 for each violation and up to  
              $10,000 for each willful violation.  


           10. Requires the Commissioner to hold hearings in compliance  
              with the Administrative Procedure Act except that a hearing  
              may be held by the Department of Insurance's administrative  
              law bureau when the matter involves a common question of law  
              or fact with another proceeding arising under other  
              Insurance Code provisions.


           11. Grants the Commissioner with the power to adopt reasonable  
              rules and regulations necessary to administer this part.