BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 251|
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UNFINISHED BUSINESS
Bill No: SB 251
Author: Calderon (D), et al.
Amended: 9/3/13
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 4/24/13
AYES: Calderon, Gaines, Corbett, Correa, Knight, Lieu, Nielsen,
Price, Roth
SENATE FLOOR : 35-0, 5/9/13
AYES: Anderson, Beall, Block, Calderon, Cannella, Corbett,
Correa, De León, DeSaulnier, Emmerson, Evans, Fuller, Gaines,
Galgiani, Hancock, Hernandez, Hill, Hueso, Huff, Jackson,
Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen, Padilla,
Roth, Steinberg, Walters, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Berryhill, Pavley, Price, Vacancy, Vacancy
ASSEMBLY FLOOR : 76-0, 9/9/13 - See last page for vote
SUBJECT : Insurance: notice: electronic transmission
SOURCE : Association of California Insurance Companies
DIGEST : This bill authorizes, until January 1, 2019, an
insurer, with the consent of the policyholder, to transmit
electronically, in lieu of mail, certain notices pertaining to
workers' compensation insurance, the offer of renewal required
for personal auto, real and personal property, and liability
insurance policies; the notice of conditional renewal for
commercial insurance policies, and the offer of renewal and
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certain disclosures related to earthquake insurance so long as
the insurer complies with the specified provisions of the
Uniform Electronic Transactions Act (UETA) and additional
procedures and standards. This bill requires the Insurance
Commissioner to submit a report, on or before January 1, 2018,
to the Governor and specified committees of the Senate and
Assembly regarding the impact and implementation of the
authorization of the electronic transmission of certain
insurance renewal offers, notices, or disclosures, as specified.
Assembly Amendments authorize specified notices regarding
workers' compensation to be provided by electronic transmission,
clarify provisions related to methods of electronic transmission
and confirmation, add reporting requirements to the Governor and
Legislature, add coauthors and sunset the bill on January 1,
2019.
ANALYSIS :
Existing law:
1.Authorizes any written notice required to be given or mailed
to any person by an insurer relating to any insurance on risks
or on operations in this state, unless excepted by Civil Code
Sec. 1633.3, to be provided by electronic transmission if each
party has agreed to conduct the transaction by electronic
means, as provided.
2.Excepts from its provisions authorizing electronic delivery
the offer of renewal required by Insurance Code Sec. 663 for
personal automobile insurance and Insurance Code Sec. 678 for
personal liability and property insurance; the notice of
conditional renewal of certain types of commercial insurance
required by Insurance Code Sec. 678.1; and the offer of
coverage or renewal for earthquake insurance or any related
disclosure required by Insurance Code Sec. 10086.
3.Prohibits residential property insurer's insurers from issuing
or delivering property insurance without offering earthquake
coverage prior to, concurrent with, or within 60 days
following the issuance or renewal of a residential property
insurance policy.
4.Authorizes an earthquake insurer, at any renewal, to modify
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the terms and conditions of an existing policy, rider, or
endorsement, and that if the insurer modifies the terms and
conditions of an existing policy, rider, or endorsement, the
insurer is required to provide the insured with the renewal
notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing
policy, rider, or endorsement.
5.Requires that before expiration of personal automobile
insurance policy, an insurer shall deliver to or mail to the
named insured, at the address shown on the policy, either a
written or verbal offer of renewal of the policy at least 20
days before expiration or a written notice of nonrenewal of
the policy at least 30 days before expiration.
6.Requires that at least 45 days prior to policy expiration of
insurance covering loss or damage to specified real or
personal property or covering personal legal liability, an
insurer shall deliver to the named insured or mail to the
named insured at the address shown in the policy, either of
the following an offer of renewal of the policy stating any
reduction of limits or elimination of coverage or a notice of
nonrenewal of the policy.
7.Provides that in the event an insurer fails to give the named
insured either an offer of renewal or notice of nonrenewal:
A. The existing policy, with no change in its terms and
conditions, shall remain in effect for 45 days from the
date that either the offer to renew or the notice of
nonrenewal is delivered or mailed to the named insured.
B. A notice to that effect shall be provided by the insurer
to the named insured with the policy or the notice of
renewal or nonrenewal.
1.Requires that if an insurer fails to give timely notice of the
nonrenewal or conditional renewal, the policy of insurance
shall be continued, with no change in its terms or conditions,
for a period of 60 days after the insurer gives the notice.
This bill:
1. Authorizes an insurer, until January 1, 2019, to send
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electronically certain notices pertaining to worker's
compensation, offers of renewal, and conditional renewal
for automobile and specified property insurance, if the
insurer complies with specified requirements, including but
not limited to:
A. Confirming an insured's verbal consent to an offer or
renewal in writing or electronically.
B. Disclosing to the insured that disclosure by electronic
transmission is voluntary.
C. Disclosing that the insured can opt out of disclosure by
electronic transmission at any time.
D. Maintaining a process or system that can demonstrate
that the offer, notice or disclosure provided by electronic
transmission was both sent and received. The information
retained is to be retrievable (for the life of the policy,
plus five years) upon request by the Department of
Insurance (DOI).
E. Following one of three specified protocols when
information is received that an offer, notice or disclosure
sent by electronic transmission was not received by the
insured.
1. Authorizes the DOI to suspend an insurer from providing
offers, notices, or disclosures by electronic transmission
if there is a pattern or practices that demonstrate the
insurer has failed to comply with the requirements of this
bill. An insurer may appeal the suspension and resume its
electronic transmission of offers, notices, or disclosures
upon communication from the DOI that the changes the
insurer made to its process or system to comply with the
requirements of this bill are satisfactory.
2.Authorizes an insurer to send the renewal notice required to
be made every other year and certain disclosures related
earthquake insurance to be sent electronically, so long as the
insurer complies with certain requirements in addition to
those specified in UETA.
3.Requires the Insurance Commissioner to submit a report, on or
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before January 1, 2018, to the Governor and to the committees
of the Senate and Assembly having jurisdiction over insurance
and the judiciary, regarding the impact and implementation of
the authorization of the electronic transmission of certain
insurance renewal offers, notices, or disclosures, as
specified.
4.Deletes obsolete cross-references and makes conforming
changes.
5.Contains double-jointing language to prevent chaptering out
issues with SB 752 (Roth).
Background
The National Conference of Commissioners on Uniform State Laws
adopted the UETA Model Act in 1999 establishing a consistent
interstate policy for electronic transactions. California
enacted UETA that same year.
In 2000, President Bill Clinton signed the Electronic Signatures
in Global and National Commerce Act (ESIGN) (15 U.S.C. 7001 et
seq.). Congress drafted ESIGN to apply to insurance and
preempts any state law not substantially similar to the UETA
Model Act. Forty-seven states have adopted some version of
UETA.
Generally speaking, UETA provides that any transaction not
otherwise exempted from UETA may be conducted electronically
subject to specific rules and standard. The major principles
governing UETA are detailed in the Senate Insurance Committee
analysis.
The drafters of UETA and ESIGN designed the language to
accommodate different types of existing and potential
technology. ESIGN specifically preempts state laws that
specifies alternative procedures or requirements of electronic
records that accord "greater legal effect to, the implementation
or application of specific technology or technical specification
for performing the functions of creating, storing, generating,
receiving, communicating, or authenticating electronic records
or electronic signatures." (15 U.S.C. 7002(a)(1)(2)(A)(ii))
Insurers may use any number of currently existing technologies,
including email, facsimile, text messaging, or smartphone or
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tablet application. Smartphone or tablet applications are a
potentially powerful and growing means that an insurer could
communicate with consumers. AB 1708 (Gatto, Chapter 236,
Statutes of 2012) provided that a motorist may present digital
proof of insurance to police during a traffic stop. In order to
provide this service, a growing number of insurers have
developed mobile applications that provide access to the digital
proof of insurance, send the consumer notifications, offer
access to coverage terms, assists in filing claims, etc.
Although it is not clear if insurers have used mobile
applications to provide mandatory notices pursuant to UETA yet,
mobile apps function as a powerful tool for effective and
confirmed delivery of these notices.
Prior Legislation
SB 1212 (R. Calderon, 2011-12) which died in Assembly Judiciary
Committee, would have authorized an insurer to transmit
electronically specified offers of renewal for automobile,
property, or commercial insurance, as well as certain liability
insurance, and notices related to earthquake coverage.
AB 328 (C. Calderon, Chapter 433, Statutes 2009) authorized
electronic transmission of certain notices that otherwise would
require a mailing, upon agreement by the policyholder to receive
the electronic communication, including notice of reasons for
refusal to issue a good driver policy pursuant to Proposition
103, notice of the reasons for cancelling an automobile
insurance policy, notice of the right of a homeowner to purchase
earthquake coverage from or as arranged by the homeowner's
insurer, or the proof of mailing this notice, and the standard
residential property insurance disclosure that sets forth the
various types of homeowners' insurance policies.
SB 820 (Sher, Chapter 428, Statutes of 1999) enacted
California's Uniform Electronic Transactions Act.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 9/6/13)
Association of California Insurance Companies (source)
American Insurance Association
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Californians Against Waste
Independent Insurance Agents and Brokers of California
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
State Farm Insurance Company
OPPOSITION : (Verified 9/6/13)
Consumer Federation
United Policyholders
ARGUMENTS IN SUPPORT : The bill's sponsor, the Association of
California Insurance Companies (ACIC), explains that SB 251 is a
necessary public policy step as California and the rest of the
nation continue to move towards electronic or paperless
transactions. ACIC cites the 2012 U.S. Auto Insurance Study by
J.D. Powers and Associates that states:
Among customers who utilize multiple contact channels to
resolve an issue, 40% of Gen Y customers begin online,
further underscoring their preference to seek answers to
their questions via this channel. In contracts, the most
frequent starting point for Boomers (born from 1946-1964),
who have used multiple channels to resolve an issue, is
their agent (40%).
ACIC argues that California's current law is outdated to
accommodate the Gen Y customer demand cited in that study. SB
251 gives Gen Y consumers the choice to "opt-in." ACIC also
points out that California is only one of three states in the
nation that continues to have a statute that expressly disallows
insurers form providing notice or documents related to policy
renewal or conditional renewal by electronic transmission.
ARGUMENTS IN OPPOSITION : United Policyholders writes, "There
remain myriad technological reasons why people don't receive
emails that get sent to them; spam blockers, junk mail filters,
connection and server problems. This bill creates a significant
risk that people will fail to receive notices related to
financial protection for their biggest asset: their home.
ASSEMBLY FLOOR : 76-0, 9/9/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
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Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dahle, Daly, 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,
Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Stone,
Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Dickinson, Skinner, Vacancy, Vacancy
AL:ej 9/9/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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