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.