BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 476
                                                                  Page  1

          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)








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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