BILL NUMBER: SB 476 CHAPTERED
BILL TEXT
CHAPTER 347
FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2013
APPROVED BY GOVERNOR SEPTEMBER 24, 2013
PASSED THE SENATE SEPTEMBER 6, 2013
PASSED THE ASSEMBLY SEPTEMBER 4, 2013
AMENDED IN ASSEMBLY JULY 2, 2013
AMENDED IN ASSEMBLY JUNE 18, 2013
AMENDED IN SENATE APRIL 17, 2013
AMENDED IN SENATE APRIL 8, 2013
INTRODUCED BY Senator Steinberg
FEBRUARY 21, 2013
An act to repeal and add Sections 1872.81, 1874.8, and 10127.17
of, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 476, Steinberg. Insurance: special assessments.
(1) Existing law, until January 1, 2015, imposes on an insurer a
$0.30 special purpose assessment on each vehicle insured under an
insurance policy issued in this state by the insurer. Existing law
specifies that $0.20 of each $0.30 special purpose assessment shall
be used to fund specified consumer service functions of the
Department of Insurance relating to motor vehicle insurance. Existing
law further specifies that the remaining $0.10 of each $0.30 special
purpose assessment shall be used to fund the improvement of certain
consumer functions of the department.
This bill would revise and recast those provisions, delete the
date of repeal, and require a special purpose assessment of $0.25,
commencing July 1, 2014, and until January 1, 2016, and not exceeding
$0.25 thereafter, on each vehicle insured under an insurance policy
issued in this state by the insurer. The bill would also specify
that, upon appropriation, 2/3 of the special purpose assessment be
used for the purpose of funding the consumer service functions of the
department related to regulating automobile insurers, as provided,
and 1/3 of the special purpose assessment be used for the purpose of
improving consumer functions of the department, related to regulating
automobile insurers, as specified.
The bill would authorize the department, upon appropriation by the
Legislature, to use up to $0.05 of the $0.25 special purpose
assessment revenues collected to notify insurers and other members of
the public about the existence of any low-cost automobile insurance
program.
(2) Existing law provides that each insurer doing business in this
state shall pay an annual special purpose assessment to be
determined by the Insurance Commissioner, but not to exceed $0.50
annually for each vehicle insured under an insurance policy the
insurer issues in this state, in order to fund the Fraud Division and
the Organized Automobile Fraud Activity Interdiction Program. Under
existing law, of the funds collected, 42.5% are required to be
distributed to district attorneys, 42.5% are required to be
distributed to the department's Fraud Division, and 15% are required
to be distributed to the Department of the California Highway Patrol,
to be used as provided. Existing law provides that this assessment
be repealed on January 1, 2015.
This bill would revise and recast those provisions, delete the
date of repeal, and make the distribution of funds by the
commissioner upon appropriation by the Legislature.
(3) Existing law creates the Life and Annuity Consumer Protection
Fund as a special account within the Insurance Fund, and, until
January 1, 2015, requires each insurer admitted to transact insurance
in this state to pay a fee determined by the commissioner, not to
exceed $1, for each individual life insurance policy and each
individual annuity product that it issues to a resident of this state
with a value of $15,000 or more. If an insurer elects to charge the
purchaser of a life insurance policy or annuity product this fee, the
fee is required to be set forth as a separate charge in the contract
schedule or premium notice. The moneys in the Life and Annuity
Consumer Protection Fund are to be distributed, as provided, and are
required to be used exclusively for the purpose of protecting
consumers of life insurance and annuity products in this state.
Existing law requires that 50% of the moneys in the fund be
distributed within the department for functions related to individual
life insurance and annuity products, including, but not limited to,
educating consumers in all aspects of life insurance and annuity
products, consumer protection, purchasing and using insurance and
annuity products, claim filing, benefit delivery, and dispute
resolution.
This bill would revise and recast those provisions, delete the
date of repeal, and require that the moneys distributed by the
commissioner, upon appropriation by the Legislature, fund the
reasonable costs incurred in regulating entities transacting life
insurance and annuity products in this state. The bill would delete
the requirement that each individual life insurance policy and each
individual annuity product have a value of $15,000 or more in order
for the special assessment to apply. The bill would also require that
instead of consumer education, the moneys in the fund distributed
within the department for functions related to individual life
insurance and annuity products be used to disseminate information to
insurers, insureds, and others regarding the applicable regulation of
life insurance and annuity products, including consumer protection,
purchasing and using insurance and annuity products, claim filing,
benefit delivery, and dispute resolution.
(4) Existing law requires the Insurance Commissioner to, on or
before the first day of August in each year, make a report to the
Governor, the Legislature, and to the committees of the Senate and
Assembly having jurisdiction over insurance containing specified
information, including the condition of the insurance business and
interests in this state.
This bill would additionally require the annual report to contain
information pertaining to consumer complaints, investigations,
administrative and regulatory cases pertaining to automobile
insurance, and revenue and expenditures relating to automobile
insurance policy assessments, as specified.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Automobile insurance rates are approved by the Insurance
Commissioner, who is required to ensure that automobile insurance is
fair, available, and affordable to all Californians. Several factors
guide the commissioner's ratesetting powers, including factors that
have a substantial relationship to the risk of loss. The California
Low-Cost Automobile Insurance Program makes automobile insurance
available to low-income drivers, thereby reducing the number of
uninsured motorists on California's roads. Since the program's
inception in 2005, 59 percent of those receiving insurance coverage
through the program were previously uninsured, and the program has
covered $7.56 million in property damage claims and $8.5 million in
bodily injury claims, directly protecting insurers and insureds from
the risk of loss associated with the full cost of injuries and
damages had those motorists remained uninsured.
(b) The Organized Automobile Fraud Activity Interdiction Program
merges the resources of the Department of Insurance, the Department
of the California Highway Patrol, and district attorneys to combat
automobile insurance fraud, which includes the staging of automobile
accidents and the filing of fraudulent automobile accidents or damage
claims. The program provides a direct benefit to insurers by
prioritizing the remediation of automobile insurance fraud, resulting
in reduced claims costs for insurers.
(c) The Department of Insurance is responsible for investigating
violations of the Insurance Code related to life insurance policies
and annuity products. The role of district attorneys in prioritizing
the prosecution of fraudulent activities involving insurance and
annuity products, including the economic abuse of consumers, enables
the department to take prompt and decisive action to restrict or
terminate the licenses of persons criminally convicted of financial
abuse crimes. The department's regulatory purposes of deterring
insurance and annuity fraud are also furthered by warning consumers,
particularly seniors, about unsavory sales practices and by helping
consumers understand the types of fraudulent activities being
perpetrated.
SEC. 2. Section 1872.81 of the Insurance Code is repealed.
SEC. 3. Section 1872.81 is added to the Insurance Code, to read:
1872.81. In addition to the special purpose assessment imposed
pursuant to Section 1872.8, effective July 1, 2014, an insurer doing
business in this state shall, until January 1, 2016, pay to the
commissioner an annual special purpose assessment of twenty-five
cents ($0.25), and thereafter pay to the commissioner an annual
special purpose assessment in an amount not to exceed twenty-five
cents ($0.25), as determined by the commissioner, for each vehicle
insured under an insurance policy it issues in this state, for
expenditure, upon appropriation by the Legislature, as follows:
(a) Two-thirds of the special purpose assessment shall be used for
the purpose of funding the consumer service functions of the
department that are related to regulating automobile insurers,
including those functions performed by the rating and underwriting
service bureau, the claims service bureau, the investigations bureau,
or any successor bureaus of the department that may assume the
consumer service functions of these bureaus, and legal services in
support of these bureaus.
(b) One-third of the special purpose assessment shall be used for
the purpose of improving consumer functions identified in subdivision
(a) of the department that are related to regulating automobile
insurers, including, for improving the ability of the department to
respond to consumer complaints and information requests through the
department's toll-free telephone number, and for improving the
ability of the department to offer information about automobile
insurance rates to the public.
(c) Upon appropriation by the Legislature, the Department of
Insurance may use up to five cents ($0.05) of the special purpose
assessment revenues collected pursuant to this section to notify
insurers and other members of the public about the existence of any
low-cost automobile insurance program established pursuant to Section
11629.7 or other statutes that establish a program of the type
identified in Section 11629.7. In requesting an appropriation for
this purpose under its proposed plan developed pursuant to Section
11629.85, the Department of Insurance shall explain, with as much
specificity as is reasonably possible, the objectives for the use of
the funds and the quantitative criteria by which the Legislature may
evaluate the effectiveness of the department's use of the funds.
(d) The commissioner shall include, in the annual report submitted
pursuant to Section 12922, all of the following information:
(1) The number of opened consumer complaints related to automobile
insurance.
(2) The number of opened investigations related to automobile
insurance.
(3) The number of investigations related to automobile insurance
referred to prosecuting agencies.
(4) The number of administrative or regulatory cases related to
automobile insurance referred to the department's legal division.
(5) The number of administrative or regulatory enforcement actions
taken in cases related to automobile insurance.
(6) Total aggregate annual assessment revenue and expenditures
pursuant to the assessment.
SEC. 4. Section 1874.8 of the Insurance Code is repealed.
SEC. 5. Section 1874.8 is added to the Insurance Code, to read:
1874.8. (a) Each insurer doing business in this state shall pay
an annual special purpose assessment to be determined by the
commissioner in an amount not to exceed fifty cents ($0.50) for each
vehicle insured under an insurance policy it issues in this state, in
order to fund the Fraud Division and the Organized Automobile Fraud
Activity Interdiction Program.
(b) (1) From the funds to be distributed to district attorneys
under this section, the commissioner shall fund between three and 10
grants at any one time for a coordinated program targeted at the
successful prosecution and elimination of organized automobile fraud
activity. These grants may be awarded only to district attorneys.
(2) In determining whether to award a district attorney a grant
pursuant to this subdivision, the commissioner shall consider factors
indicating organized automobile fraud activity in the district
attorney's county, including, but not limited to, the county's level
of general criminal activity, population density, automobile
insurance claims frequency, number of suspected fraudulent claims,
and prior and current evidence of organized automobile fraud
activity. Funding priority shall be given to those grant applications
with the potential to have the greatest impact on reducing organized
automobile insurance fraud activity committed by an insurer's
employees or agents, brokers, insureds, and others, and lessening the
economic losses realized by insurers from that fraud.
(3) All participants of a grant under this subdivision shall
coordinate their efforts and work in conjunction with the Fraud
Division, other participating agencies, and all interested insurers
in this regard.
(c) Of the funds collected pursuant to this section, upon
appropriation by the Legislature, 42.5 percent shall be distributed
to district attorneys, 42.5 percent shall be distributed to the Fraud
Division, and 15 percent shall be distributed to the Department of
the California Highway Patrol. Funds distributed pursuant to this
section to the Fraud Division and to the Department of the California
Highway Patrol shall be used to fund Fraud Division and Department
of the California Highway Patrol investigators to work in conjunction
with district attorneys who are awarded grants. Each grantee shall
be notified by the Fraud Division of the identity of the
investigators assigned to work with the grantee. In accordance with
the terms and conditions of the applicable grant, each grantee shall
provide the Fraud Division with information resulting from the
investigations the grantee conducts pursuant to this section. This
section does not prohibit the referral of any cases developed by the
Fraud Division to any appropriate prosecutorial entity.
(d) A grant under this section shall be awarded on the basis of a
single application for a period of three years and shall be subject
where applicable to the requirements of subdivision (b) of Section
1872.8, except for the requirement that grants be awarded according
to population. Continued funding of a grant shall be contingent upon
a grantee's successful performance, as determined by an annual review
by the commissioner. Any redirection of grant funds under this
section shall be made only for good cause. The Department of the
California Highway Patrol shall submit to the commissioner, for
informational purposes only, an annual report on its expenditure of
funds under this section in the same format as is required of
grantees under this section.
(e) Two or more district attorneys may submit a joint application
for a grant award under this section.
(f) The Fraud Division shall report to the Governor, the
Legislature, and to the committees of the Senate and Assembly having
jurisdiction over insurance on the results of the grant program
established by this section, including funding distributed to the
Department of the California Highway Patrol in the annual report
submitted pursuant to Section 12922.
(g) For purposes of this section, "organized automobile fraud
activity" means two or more persons who conspire, aid and abet, or in
any other manner act together, to engage in economic automobile
theft as defined in subdivision (f) of Section 1872.8, or to violate
any of the following sections in a manner that involved an automobile
insurance claim:
(1) Section 650 or 6152 of the Business and Professions Code.
(2) Section 750.
(3) Section 549, 550, or 551 of the Penal Code.
SEC. 6. Section 10127.17 of the Insurance Code is repealed.
SEC. 7. Section 10127.17 is added to the Insurance Code, to read:
10127.17. (a) The Life and Annuity Consumer Protection Fund is
hereby created as a special account within the Insurance Fund. Each
insurer admitted to transact insurance in this state shall pay a fee
to be determined by the commissioner, not to exceed one dollar ($1),
for each individual life insurance policy and each individual annuity
product that it issues to a resident of this state. If an insurer
elects to charge the purchaser of a life insurance policy or annuity
product this fee, the fee shall be set forth as a separate charge in
the contract schedule or premium notice. Life insurance or annuity
forms are not required to be filed again for review as a consequence
of this provision. The revenue from this fee shall be deposited into
the Life and Annuity Consumer Protection Fund.
(b) Moneys in the Life and Annuity Consumer Protection Fund shall
be distributed by the commissioner, upon appropriation by the
Legislature, to fund the reasonable costs incurred in regulating
entities transacting life insurance and annuity products in this
state. Moneys in the fund shall not be used for any other purpose.
(c) Fifty percent of these funds shall be distributed within the
department for functions related to individual life insurance and
annuity products, including, but not limited to:
(1) Investigating and prosecuting financial abuse by insurance
licensees, or persons holding themselves out to be insurance
licensees, or any person purporting to be engaged in the business of
insurance.
(2) Responding to consumer inquiries and complaints related to
life insurance or annuity products.
(3) Disseminating information to insurers, insureds, and others
regarding the applicable regulation of life insurance and annuity
products, including consumer protection, purchasing and using
insurance and annuity products, claim filing, benefit delivery, and
dispute resolution.
(4) Regulating and overseeing life insurance and annuity products
and advertising for these products directed toward consumers.
(d) Fifty percent of the funds shall be distributed to district
attorneys for investigating and prosecuting individual life insurance
and annuity product financial abuse cases involving insurance
licensees, or persons holding themselves out to be insurance
licensees, or any person purporting to be engaged in the business of
insurance, and for other projects beneficial to insurance consumers.
(1) The commissioner shall distribute funds to district attorneys
who are able to show a likely positive outcome that will benefit
consumers in the local jurisdiction based on specific criteria
promulgated by the commissioner. Each local district attorney
desiring a portion of those funds shall submit to the commissioner an
application, including, at a minimum all of the following:
(A) The proposed use of the moneys and the anticipated outcome.
(B) A list of all prior relevant cases or projects and a copy of
the final accounting for each. If cases or projects are ongoing, the
most recent accounting shall be provided.
(C) A detailed budget, including salaries and general expenses,
and specifically identifying the cost of purchase or rental of
equipment or supplies.
(2) Each district attorney that receives funds pursuant to this
section shall submit a final detailed accounting at the conclusion or
closure of each case or project. For cases or projects that continue
longer than six months, interim accountings shall be submitted every
six months, or as otherwise directed by the commissioner.
(3) Each district attorney that receives funds pursuant to this
section shall submit a final report to the commissioner, which may be
made public, as to the success of the case or project conducted. The
report shall provide information and statistics on the number of
active investigations, arrests, indictments, and convictions. The
applications for moneys, the distribution of moneys, and the annual
reports shall be public documents.
(4) Notwithstanding any other provision of this section,
information submitted to the commissioner pursuant to this section
concerning criminal investigations, whether active or inactive, shall
be confidential.
(5) The commissioner may conduct a fiscal audit of the programs
administered under this subdivision. This fiscal audit shall be
conducted by an internal audit unit of the department. The cost of
any fiscal audits shall be paid for from the Life and Annuity
Consumer Protection Fund established by this section.
(6) If the commissioner determines that a district attorney is
unable or unwilling to investigate or prosecute a relevant financial
abuse case, the commissioner may discontinue distribution of funds
allocated for that matter and may redistribute those funds to other
eligible district attorneys.
(e) If, as of June 30 of any calendar year, the total amount in
the Life and Annuity Consumer Protection Fund exceeds five million
dollars ($5,000,000), the commissioner shall reduce the amount of the
assessment accordingly for the following year to eliminate that
excess. An insurer, upon receipt of an invoice, shall transmit
payment to the department for deposit in the Life and Annuity
Consumer Protection Fund. Any balance remaining in the Life and
Annuity Consumer Protection Fund at the end of the fiscal year shall
be retained in the account, to be available in the next fiscal year.
(f) The commissioner may develop guidelines for implementing or
clarifying these provisions, including guidelines for the allocation,
distribution, and potential return of unused funds. The commissioner
may, from time to time, issue regulations for implementing or
clarifying these provisions.
(g) The commissioner shall provide a consolidated report annually
on the department's Internet Web site, which shall include, but is
not limited to, the following information:
(1) The number of opened consumer complaints related to life
insurance or annuity products.
(2) The number of opened investigations related to life insurance
or annuity products.
(3) The number of investigations related to life insurance or
annuity products referred to and reported by prosecuting agencies.
(4) The number of administrative or regulatory cases related to
life insurance or annuity products referred to the department's legal
division.
(5) The number of administrative or regulatory enforcement actions
taken in cases related to life insurance or annuity products.
(6) Descriptions of efforts by the department to disseminate
information to insurers and others regarding the applicable
regulation of life insurance and annuity products, including consumer
protection, purchasing and using insurance and annuity products,
claim filing, benefit delivery, and dispute resolution.