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.