BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2056|
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THIRD READING
Bill No: AB 2056
Author: Dababneh (D)
Amended: 8/6/14 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 10-0, 6/11/14
AYES: Monning, Gaines, Corbett, Correa, DeSaulnier, Mitchell,
Nielsen, Roth, Torres, Vidak
NO VOTE RECORDED: Lieu
SENATE APPROPRIATIONS COMMITTEE : 7-0, 6/23/14
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 78-0, 5/15/14 (Consent) - See last page for
vote
SUBJECT : Insurance: pet insurance
SOURCE : Department of Insurance
DIGEST : This bill defines pet insurance and other terms
frequently used in pet insurance policies; requires an insurer
offering pet insurance to provide disclosure and a summary of
exclusions from and limitations on coverage and benefits;
imposes a 30-day "free look" period; and specifies procedures
and penalties relating to violations of these requirements.
Senate Floor Amendments of 8/6/14 clarify that the provisions of
this bill apply to any policy issued to a California resident
and provide additional guidance that the definitions for
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"limitations" and "exclusions" must be used only if the policy
contains limitations and exclusions.
ANALYSIS :
Existing law:
1. Prohibits the transaction of any class insurance in this
state without first begin admitted for that class.
2. Grants the Insurance Commissioner (IC) oversight authority
and specified powers to enforce violations of most of
California insurance laws.
3. Categorizes any insurance not already classified in a
category listed in the Insurance Code (INS) as "miscellaneous
insurance" and regulates it as a form of property and
casualty insurance.
A. Requires a property and casualty broker-agent license
to transact that type of insurance.
B. Requires insurance policy rates to be reviewed and
approved by the IC.
C. Prohibits rates from being excessive, inadequate, or
unfairly discriminatory.
This bill:
1. Defines "pet insurance" as an individual or group insurance
policy that provides coverage for veterinary expenses.
2. 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.
3. Defines various terms, requires the use of those terms in
the policy, and requires the insurer to post definitions of
those terms on its Web site.
4. Specifies that its provisions apply to policies issued by
companies both in and outside California to California
residents.
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5. Requires the insurer to provide a summary description of the
basis or formula used to determine claims payments in the
policy and post that description on its Web site.
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 Web site.
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.
9. Permits the IC to impose civil penalties of up to $5,000 for
each violation and up to $10,000 for each willful violation.
10.Requires the IC to hold hearings in compliance with the
Administrative Procedure Act except that a hearing may be
held by the Department of Insurance's (CDI) administrative
law bureau when the matter involves a common question of law
or fact with another proceeding arising under other INS
provisions.
11.Grants the IC the power to adopt reasonable rules and
regulations necessary to administer this part.
12.Delays implementation of this bill until on or after July 1,
2015.
Background
Pet insurance covers veterinary and other pet-related medical
expenses. It is statutorily defined as "miscellaneous
insurance" under the Insurance Code and regulated as a form of
property and casualty insurance. However, according to the CDI,
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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.
The Senate Insurance Committee received a letter from one
consumer that offers an example of the potential confusion that
may be alleviated by this bill. Based on marketing information,
it appeared to the consumer that the policy would cover 90% of
typical medical bills. However, according to the consumer, the
insurer only approved 90% of the benefit schedule allowance
based on the policy restrictions which only amounted to about
35% of the actual expenses. (After the consumer pressed the
issue, the insurer later approved coverage for the full amount.)
To address confusion regarding benefit terms, this bill
requires the insurer to provide with the policy and post on its
Web site an "Insurer Disclosure of Important Policy Provisions"
that includes a summary of benefit payment provisions.
As with any legal document or contract, insurance policy
language of any kind can be highly complex and confusing, even
to a sophisticated consumer. While existing law already
prohibits an insurer from misrepresenting the terms or benefits
of a policy, this bill further requires an insurer to highlight
the areas of probable confusion identified in the bill and
provides the consumer with a 30 day "free look" period to
reconsider the purchase.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, administration
and enforcement costs of less than $50,000 annually (Special
Fund).
SUPPORT : (Verified 8/7/14)
Department of Insurance (source)
Actors and Others for Animals
American Society for the Prevention of Cruelty to Animals
Consumer Action
Consumer Federation of California
Humane Society of the United States
Pet Industry Joint Advisory Council
Social Compassion in Legislation
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ARGUMENTS IN SUPPORT : According to the author's office, pet
insurance policies are often difficult for consumers to navigate
and understand. Typically there are several types of policies
that itemize covered treatments, deductibles, and lifetime/per
illness maximums. Additionally, the costs of different policies
can vary based on the amount of coverage, the type of coverage,
as well as the species, age, and breed of the pet. This bill
requires pet insurers to disclose this information regarding
their policies so that consumers can more easily determine the
most appropriate policy to fit their needs.
By allowing consumers to better ascertain the constrictions and
limitations of pet insurance policies, they will limit their
financial risk, be more likely to purchase a product that fits
their needs, and be less likely to complain when utilizing their
pet insurance coverage.
ASSEMBLY FLOOR : 78-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Vacancy
AL:k 8/7/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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