BILL ANALYSIS �
SB 251
Page 1
Date of Hearing: June 26, 2013
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
SB 251 (Calderon) - As Amended: June 17, 2013
SENATE VOTE : 35-0
SUBJECT : Insurance: Electronic Renewal Notices
SUMMARY : Provides consumers the option to receive insurance
renewal notices and other specified insurance notices and
disclosures electronically. Specifically, this bill :
1)Permits consumers, who choose avail themselves of the option,
to receive electronic renewal notices for the following types
of insurance policies:
a) Automobile
b) Property
c) Liability
d) Commercial liability
e) Workers' Compensation
2)Requires the insurer to obtain consent from the insured before
sending electronic renewal notices.
3)Requires the insurer to make the following disclosures to the
consumer before sending electronic renewal notices and
disclosures:
a) That the insured must opt-in to receiving these
electronic documents.
b) That the insured may opt-out of electronic receipt
at any time.
c) How the insured can change the email address used by
the insurer.
d) Provide the insured the insurer's contact
information (including toll free phone number and website
address).
4)Permits an insurer, after obtaining consent from the insured,
to send offers of earthquake insurance and renewal notices for
earthquake insurance policies electronically.
SB 251
Page 2
5)Requires the insurer to provide the consumer, upon request, a
printed copy of the electronic documents to the insured.
6)Requires the insurer to retain information demonstrating the
sending and receipt of these electronic documents for at least
five years after the policy is no longer in force.
7)Requires the insurer to do one of the following within two
business days if the electronic transmission fails:
a) Contact the insured to confirm the email address and
resend the document electronically.
b) Resend the documents by regular mail to the
insured's address.
8)Permits the Department of Insurance (department) to suspend an
insurer's authorization to send electronic documents if the
insurer has a pattern or practice that demonstrate a failure
to comply with the bill's requirements.
9)Allows an insurer to appeal this suspension and, when the
department determines the insurer has complied with the
requirements of the bill, resume electronic transmission of
these documents.
10)Makes a number of technical changes to existing law relating
to electronic transactions.
EXISTING LAW :
1)Establishes the Uniform Electronic Transactions Act (UETA)
that governs the conduct of electronic transactions and
requires that both parties consent to conducting transactions
electronically.
2)Prohibits the use of electronic transactions for renewing many
types of insurance policies.
3)Requires insurance policy renewal notices be sent via
conventional mail.
4)Specifies the following timelines for the mailing of renewal
notices:
a) Automobile - 20 days prior to expiration
SB 251
Page 3
b) Property - 45 days prior to expiration
c) Liability - 45 days prior to expiration
d) Commercial liability - 60 days prior to
expiration
e) Earthquake - within the 60 days following
renewal of a homeowner's policy
5)Provides that a signed affidavit by the person who mails a
renewal notice is prima facie evidence of the appropriate
mailing of the notice.
6)Requires that earthquake insurance be offered within 60 days
of the issuance or renewal of a homeowner's insurance policy.
7)Requires, as a matter of federal law, that no signature or
document can be denied legal effect because it was generated
or transmitted electronically.
8)Permits the following insurance notices to be sent
electronically on an opt-in basis:
a) notice of reasons for refusal to issue a good
driver policy;
b) notice of the reasons for cancelling an
automobile insurance policy;
c) notice of the right of a homeowner to purchase
earthquake coverage from or as arranged by the
homeowner's insurer; and
d) standard residential property insurance
disclosure that sets forth the various types of
homeowners' insurance policies.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose . According to the author, SB 251 grants consumers the
option to choose whether to receive specified insurance
renewal notices electronically or by mail. Although
California was the first state to adopt the UETA (in 1999) and
provide for the electronic transmission of some documents in
lieu of postal service delivery, it excluded insurance renewal
notices because email was still considered somewhat
experimental. But California has fallen behind, and most
states now allow these documents to be sent electronically.
SB 251
Page 4
Digital delivery has expanded to nearly every other aspect of
a consumer's life; banking notices, utility bills, and other
important business documents are regularly delivered
electronically.
Many consumers rely on the Internet, email or smart phones to
manage their personal business and accounts. For some, postal
mail is the exception and frequently impractical. Requiring
documents to be mailed may unintentionally harm those
consumers, especially ones that travel or change addresses
frequently, or who live in areas with scarce postal services.
SB 251 gives consumers greater access to the portability and
convenience of electronic documents and the power to better
manage their personal lives, and eliminates unnecessary paper
consumption.
2)Higher Standards . The bill imposes significantly higher
standards on the electronic delivery of renewal notices than
are imposed on renewals sent by conventional mail. These
enhanced standards require the insurer to do the following:
a) Obtain consent from the insured to receive
electronic renewal notices.
b) Discontinue sending electronic renewal notices upon
request of the insured.
c) Document that an electronic renewal notice was
received.
d) Retain that documentation for five years after the
expiration of the policy.
e) Contact the insured within 2 business days if the
message was not received to confirm the insured's contact
information, and resend the message by either electronic
or conventional mail.
The bill also allows the Department of Insurance to suspend
the use of electronic renewal notices by any insurer failing
to comply with the requirements in the bill.
3)Advantages of Electronic Renewals . Electronic renewal notices
have a number of significant advantages including:
a) Consumer Choice. Many consumers prefer to interact
with their financial services companies electronically
and current law denies these consumers that option.
b) Faster Delivery. First class mail is typically
SB 251
Page 5
delivered within a few days whereas electronic mail is
essentially instantaneous.
c) Cheaper. Electronic delivery will reduce
administrative costs for insurers.
d) Greener. Electronic delivery eliminates the
consumption of energy, paper, and other consumables
associated with delivering conventional mail.
e) Disaster Recovery. Natural disasters frequently
disrupt mail delivery. Electronic delivery of these
notices greatly reduces the potential for disruptions
related to natural disasters.
f) Portability. For the many consumers who do not
receive their mail at their primary residence or who
change their primary residence frequently, electronic
delivery provides a more timely notice.
4)Federal Legislation . In 2000 the Electronic Signatures in
Global and National Commerce Act (eSIGN) was enacted to
establish federal law governing electronic transactions.
Congress drafted eSIGN to apply to insurance and preempts any
state law not substantially similar to the UETA Model Act.
Generally speaking, UETA provides that the law should be
construed to facilitate electronic transmissions and that any
transaction not specifically exempted from UETA may be
conducted electronically, subject to specific rules including:
All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any
time.
A record or signature cannot be denied legal effect
because it is in electronic form.
If a law requires a person to provide information in
writing to another, that requirement is satisfied if the
information is provided in an electronic record that the
recipient can preserve and access for future reference.
1)State Laws . In 1999, the National Conference of Commissioners
on Uniform State Laws adopted the UETA Model Act establishing
a consistent interstate policy for electronic transactions.
California enacted UETA that same year, and 46 other states
have adopted some version of UETA since then. Many states
allow insurance renewal notices, and some allow additional
insurance notices and disclosures, to be transmitted
electronically.
SB 251
Page 6
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Insurance Companies (sponsor)
Independent Insurance Agents and Brokers of California
National Association of Mutual Insurance Companies (NAMIC)
Pacific Association of Domestic Insurance Companies (PADIC)
Personal Insurance Federation
American Insurance Association
Opposition
None received
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086