BILL ANALYSIS �
SB 251
Page 1
SENATE THIRD READING
SB 251 (Ron Calderon)
As Amended September 3, 2013
Majority vote
SENATE VOTE :35-0
INSURANCE 12-0 JUDICIARY 7-0
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|Ayes:|Perea, Hagman, Bonilla, | |Wagner, Alejo, Garcia, |
| |Bradford, Ian Calderon, | |Gorell, Maienschein, |
| |Cooley, Frazier, | |Muratsuchi, Stone |
| |Beth Gaines, Gonzalez, | | |
| |Mitchell, Olsen, | | |
| |Wieckowski | | |
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APPROPRIATIONS 17-0
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|Ayes:|Gatto, Harkey, Bigelow, | | |
| |Bocanegra, Bradford, Ian | | |
| |Calderon, Campos, | | |
| |Donnelly, Eggman, Gomez, | | |
| |Hall, Holden, Linder, | | |
| |Pan, Quirk, Wagner, Weber | | |
| | | | |
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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 to 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;
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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 Web site 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.
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five years after the policy is no longer in force.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)Requires messages that direct the insured to a secure Web site
to access their notice include clear directions about the type
of notice that is available and how to access that document on
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the secure Web site.
9)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.
10)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.
11)Requires the Commissioner to assess the impact and
implementation of the bill, including feedback from insurers,
consumers and consumer organizations, and report to the
results to the Governor and the Legislature by January 1,
2018.
12)Makes a number of technical changes to existing law relating
to electronic transactions.
13)Sunsets the bill on January 1, 2019.
14)Resolves chaptering out conflicts with SB 752 (Roth) of the
current legislative session.
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;
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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 : According to the Assembly Appropriations
Committee, this legislation could result in an increase in
consumer complaints to the department related to renewals and
coverage issues due to electronic renewal notices not being
received. The department believes that if there are
approximately 2,500 inquiries and complaints per year the
workload costs for investigating those problems and complaints
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could reach several hundred thousand dollars per year (Insurance
Fund).
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.
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
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expiration of the policy.
e) Contact the insured within two 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 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
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)Technology Neutral . The bill is purposefully neutral
regarding the technology used to send the affected notices and
disclosures. The discussion among members of the Insurance
Committee while deliberating on this bill focused on the need
to keep the bill technology neutral to account for the rapid
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rate of change in communications technologies. A number of
different technologies are already used in other interactions
with insurance companies and financial services companies that
would be allowed by this bill, including:
a) Email messages with the notice or disclosure document
attached.
b) Email messages with the notice or disclosure in the body
of the message.
c) Email or text messages directing the consumer to a
secure Web site to view the notice or disclosure document.
d) Smartphone applications that both notify the recipient
and contain the electronic notice or disclosure document.
Email or text messages directing the consumer to a secure Web
site is commonly used in the financial services industry
because it provides a more secure method to share sensitive
person information than including or attaching sensitive
personal information to an email or text message.
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
FN: 0002359