BILL ANALYSIS Ó
AB 387
Page 1
Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 387
(McCarty) - As Amended April 30, 2015
SUBJECT: Insurance: disability policies: commissioner
approval
SUMMARY: Extends the period of time allowed for the Insurance
Commissioner (commissioner) to review disability insurance
policies from 30 to 120 days.
EXISTING LAW:
1)Requires an insurer to file a disability insurance policy with
commissioner prior to selling the policy.
2)Permits the policy to be sold either when the policy is
approved by the commissioner or when 30 days have elapsed
since the policy was filed, whichever is sooner.
3)Requires the commissioner to reject a disability policy that
contains a provision that is vague or misleading.
4)Provides that the commissioner must require insurers to fully
AB 387
Page 2
comply with the Insurance Code.
FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . This bill was introduced at the request of the
Department of Insurance (department) to address the
consequences of a 2014 decision by the First District of the
California Court of Appeal. In this case (Ellena v.
Department of Insurance), the department argued that the
Insurance Code (code) did not impose a mandatory duty on the
commissioner to review each policy filed. Rather, the
department argued that the code provided the commissioner with
the discretionary authority to review each policy filed, and
that insurers were free to market a policy if the commissioner
did not act on a policy within 30 days of filing. However,
the court found that the commissioner has a mandatory duty to
review each disability insurance policy. This decision
creates substantial new workload in the department's policy
review process. Extending the timeline for the commissioner's
review will help the department adjust to the court's
decision.
While the commissioner has devoted significant energy to
speeding up the policy review process, there is wide agreement
in the insurance industry that the policy approval process
remains burdensome and slow. It is worth noting that there
are ongoing discussions between insurers and the department on
changes to the policy review process to streamline the review
of new policies, and those discussions may produce additional
statutory reforms to the process.
AB 387
Page 3
REGISTERED SUPPORT / OPPOSITION:
Support
Department of Insurance (sponsor)
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086
AB 387
Page 4