BILL ANALYSIS �
SB 476
Page 1
Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 476 (Steinberg) - As Amended: July 2, 2013
Policy Committee: InsuranceVote:11 -
0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill repeals the sunset date on three special assessments,
reduces one of the assessments, and revises and 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 California Department of
Insurance (CDI) activities. The three assessments support:
a) The CDI's Fraud Division and Organized Automobile Fraud
Activity Interdiction Program.
b) The CDI'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 to further reduce the assessment if
it is generating more funds than needed to fund its statutory
purposes.
3)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.
FISCAL EFFECT
CDI estimates this bill will result in a net revenue increase of
$426,000 in 2013-14 and a net decrease of $704,000 each year
SB 476
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thereafter.
1)Auto Consumer Assessment:
This bill eliminates the January 1, 2015, sunset and reduces
the 30-cent assessment to 25 cents effective July 1, 2014, and
locks in the 25-cent assessment until January 1, 2016.
Effective January 1, 2016, the bill provides the Insurance
Commissioner the authority to annually adjust the assessment,
up to a 25-cent cap.
Current annual revenues are $8.8 million and expenditures are
$7.5 million. This bill will result in no fiscal change in
2013-14 and a revenue decrease of $1.5 million in 2014-15 and
each year thereafter.
2)Life and Annuity Consumer Protection (LACP) Assessment:
This bill eliminates the January 1, 2015 sunset and requires
policies and annuities under $15,000 to be included in the
assessment.
Current annual revenues are $861,000 and expenditures are
$3.675 million. This bill would result in a revenue increase
of $426,000 in 2013-14 and $852,000 each year thereafter. The
$1.00 assessment will not fully fund the LACP Program, but it
will increase the funding available for program investigators.
COMMENTS
Purpose . This bill, sponsored by CDI, 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. The author argues that these local
assistance funds are most effectively used when the recipients
can rely on ongoing, reliable funding, because they can retain
experienced staff, among other benefits.
The current assessment of $0.30 for each automobile insured
under an insurance policy issued in this state was established
in part to address a significant backlog at CDI. This bill
reduces the assessment to $0.25 for the first year now that the
backlog has been addressed, and allows the commissioner to
establish the fee for ongoing years of up to $0.25.
SB 476
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Increasing the pool of life insurance and annuity policies that
will be subject to the $1 Life and Annuity Consumer Protection
Assessment is necessary, CDI argues, to partially address an
existing imbalance where revenues have not been sufficient to
fund regulatory activities in this area. According to the
department, annuities with a value under $15,000 account for
over 76% of all annuities issued. Although initial projections
when this assessment was first imposed estimated revenue at
approximately $1.5 million to $2 million annually, CDI has
collected an average of $861,000 for fiscal years 2009-10
through 2011-12. However, during this same time period,
expenditures have grown 144% in part to accommodate the
increased number of products on the market.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081