BILL ANALYSIS                                                                                                                                                                                                    



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 2056 (Dababneh)
          As Amended  August 6, 2014
          Majority vote
           
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          |ASSEMBLY:  |78-0 |(May 15, 2014)  |SENATE: |36-0 |(August 11,    |
          |           |     |                |        |     |2014)          |
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           Original Committee Reference:    INS.  

           SUMMARY  :  Increases disclosure of exclusions and payment  
          provisions in pet insurance policies and establishes uniform  
          definitions for exclusions commonly used in pet insurance  
          policies. 

           The Senate amendments  :

          1)Expand the definition of "pre-existing condition" to include  
            conditions that arise during a waiting period.

          2)Provide pet insurers with the ability to use the standard  
            definitions in whole or in part.

          3)Make technical and clarifying changes.

           EXISTING LAW  : 

          1)Classifies pet insurance as property/casualty insurance.

          2)Requires those selling pet insurance to be licensed as a  
            property/casualty broker-agent.

          3)Requires property/casualty insurance policy rates to be  
            reviewed and approved by the commissioner.

          4)Prohibits property/casualty insurance rates from being  
            excessive, inadequate, or unfairly discriminatory.
           
          AS PASSED BY THE ASSEMBLY  , this bill:

          1)Required pet insurance policies to use standard definitions  
            for a number of terms including the following:









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             a)   "Veterinary expenses" are the costs associated with  
               medical advice, diagnosis, care or treatment by a licensed  
               veterinarian.

             b)   "Pre-existing condition" is a condition for which a  
               veterinarian has provided advice or treatment or a  
               condition for which the pet exhibited signs or symptoms  
               before the effective date of the insurance policy.

             c)   "Waiting period" is the period of time from when the  
               policy is effective and when some or all of the coverage  
               begins.

             d)   "Hereditary disorder" is a genetically transmitted  
               abnormality that causes illness or disease.

             e)   "Congenital disorder" is a condition present from birth  
               which causes or contributes to an illness or disease.

             f)   "Chronic condition" is one that can be treated or  
               managed but not cured.

          2)Required pet insurers to disclose whether the policy excludes  
            coverage for any of the following:

             a)   Pre-existing condition.

             b)   Hereditary disorder.

             c)   Congenital disorder.

             d)   Chronic condition.

             e)   Waiting period.

          3)Required pet insurers to disclose if any other exclusions are  
            included in the policy and direct the consumer to the policy  
            for details regarding those exclusions.

          4)Required pet insurers to provide consumers with a summary  
            description of the method used to determine claim payments.

          5)Required pet insurers to allow anyone who purchases pet  
            insurance to return the policy within 30 days with a full  
            refund of any premium paid unless the insurer has paid a claim  








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            under the policy.  If a claim has been paid, the option to  
            return the policy is not available, and the cancellation  
            provisions in the policy will apply.

          6)Permitted the Insurance Commissioner (commissioner) to impost  
            civil penalties of up to $5,000 for each violation and up to  
            $10,000 for each willful violation.  

          7)Required the commissioner to hold a hearing regarding any  
            violations and that the hearing is subject to the provisions  
            of the Administrative Procedures Act.

          8)Provided the commissioner with the authority to adopt  
            regulations necessary to administer the provisions of this  
            bill.  

          9)Deferred implementation of the bill until July 1, 2015.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

          1)Purpose.  According to the sponsor, 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  
            would require 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.

          2)Cost of veterinary care.  According to the American Pet  
            Products Association, the total United States pet industry  
            expenditures in 2012 were an estimated $53.33 billion, $27.4  
            billion of which was spent on veterinary care and over the  
            counter medicine.  In 2011, total pet insurance expenditures  
            accounted for $450 million and it is expected to grow rapidly  
            to an estimated $750 million by 2015.








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          3)Previous legislation.  AB 2411 (Jones) of 2010, passed the  
            Legislature but was vetoed by the Governor.  This bill is more  
            expansive than AB 2411 in terms of the definitions, disclosure  
            requirements, and enforcement mechanisms relating to pet  
            insurance.


           Analysis Prepared by  :    Paul Riches / INS. / (916) 319-2086


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