BILL ANALYSIS �
SB 476
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Date of Hearing: June 26, 2013
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
SB 476 (Steinberg) - As Amended: June 18, 2013
SENATE VOTE : 38-1
SUBJECT : Department of Insurance: Special assessments
SUMMARY : Repeals the sunset date on three special assessments,
reduces one of the assessments, and revises recasts the
distribution of those funds collected. Specifically, this bill :
1)Eliminates the January 1, 2015 sunset clause on three special
assessments that fund specific Department of Insurance (DOI)
activities. The three assessments support:
a) The DOI's Fraud Division and Organized Automobile Fraud
Activity Interdiction Program.
b) The DOI's automobile insurance consumer protection
program.
c) The Life and Annuity Consumer Protection Program.
2)Reduces the per vehicle assessment for automobile insurance
consumer protection activities from $0.30 per vehicle to $0.25
per vehicle until January 1, 2015, and thereafter authorizes
the Insurance Commissioner (commissioner) to further reduce
the assessment if it is generating more funds than needed to
fund its statutory purposes.
3)Provides a 6-month delayed implementation date for the reduced
assessment to allow insurers time to modify their automated
payment programs.
4)Recasts the specified purposes to which the assessment funds
may be used.
5)Eliminates an exclusion from the assessment for the Life and
Annuity Consumer Protection Program for life insurance
policies with face values of $15,000 or less.
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6)Requires the commissioner to include, in an annual report on
the use of the assessment funds, specified additional data
that would allow the Legislature and stakeholders to better
evaluate how well the programs are operating.
7)Contains legislative findings and declarations in support of
the bill's purposes.
EXISTING LAW :
1)Requires insurers that sell automobile insurance to pay a
special purpose assessment of $0.30 per insured vehicle, and
specifies how the funds are to be distributed and spent.
2)Requires insurers that sell automobile insurance to pay an
additional special purposes assessment of up to $0.50, as
determined by the commissioner, per insured vehicle, and
specifies how the funds are to be distributed and spent.
3)Establishes the Life and Annuity Consumer Protection Fund, and
requires life insurers to pay up to $1.00, as determined by
the commissioner, for each individual life or annuity policy
sold, and specifies how the finds are to be distributed and
spent.
4)Establishes a sunset clause on each of these fees of January
1, 2015.
FISCAL EFFECT : According to the Senate Appropriations
Committee, the reduction of the vehicle assessment from $0.30 to
$0.25 would result in a decrease in revenue of $778,000, and the
elimination of the exclusion for life insurance policies under
$15,000 would result in an increase $426,000 to the Life and
Annuity Consumer Protection Fund.
COMMENTS :
1)Purpose . According to the author, the bill is intended to
ensure a continuous and reliable source of funding for the
various consumer protection programs funded by the
assessments, especially for the local district attorneys who
obtain grants from these programs. These local assistance
funds are most effectively used when the recipients can rely
on ongoing funding, because they can retain experienced staff,
among other benefits.
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2)Background . The DOI is funded through the Insurance Fund, a
Special Fund that includes a number of subaccounts. Unlike
some special funded agencies that have a primary revenue
source, and flexibility on how its funds are expended, the
Insurance Fund contains a broad range of revenue sources, many
of which have specific statutory restrictions on how the funds
can be used. These restrictions include direction on how the
DOI can use the funds, as well as specific divisions of the
funds for various local assistance purposes, frequently local
assistance to county district attorneys for prosecution of
insurance-related crimes. The DOI has in the past, as it is
doing in this bill, come to the Legislature asking to reduce
certain fees when it becomes clear that the available funds
exceed what can be reasonably spent on the specified purposes.
3)Sunset clauses . Proponents, including DOI and local district
attorneys, argue that repeal of the sunset clauses is
appropriate because each of these programs has been in
existence for a number of years, and each time a sunset has
approached, the Legislature has extended it. In light of the
needs for reliability of funding, especially for local
district attorneys, they argue that the repeal is appropriate.
In addition, recent amendments to the bill have increased the
reporting requirements, so that the Legislature and
stakeholders will have better information to evaluate how
funds are being used.
4)Additional amendment . The DOI and insurers have been working
on ways to enhance reporting and accountability with respect
to the funds impacted by the bill. Most of this is reflected
in the recent amendments to the bill. However, one additional
provision was negotiated after the language was submitted to
Legislative Counsel. The parties have agreed to add an
additional element to the report that the commissioner must
file, as follows: page 5, between lines 39 and 40, add "(6)
Total aggregate annual assessment revenue and expenditures
pursuant to the assessment."
REGISTERED SUPPORT / OPPOSITION :
Support
California Department of Insurance (sponsor)
SB 476
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Los Angeles County District Attorney's Office (co-sponsor)
California Advocates for Nursing Home Reform (CANHR)
California Association of Health Underwriters (CAHU)
California District Attorneys Association (CDAA)
Congress of California Seniors
National Association of Insurance and Financial Advisors of
California (NAIFA-California)
United Policyholder
San Diego County District Attorney
Opposition
None reported.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086