BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 387 (McCarty) - Insurance: life and disability policies
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|Version: June 29, 2015 |Policy Vote: INS. 8 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 17, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 387 would extend the time allowed for the Insurance
Commissioner to review disability insurance policies from 30
days to 120 days. The bill would require the Insurance
Commissioner to commission a report that compares California
insurance standards with those developed by the Interstate
Insurance Product Regulation Commission.
Fiscal
Impact:
One-time costs of about $400,000 to develop procedures for
reviewing disability insurance policies and developing and
publishing procedural requirements and guidelines for use by
insurance companies when making filings by the Department of
Insurance (Insurance Fund).
Ongoing costs of about $270,000 per year to review disability
insurance policies by the Department of Insurance (Insurance
Fund). Under current practice, the Department of Insurance has
not reviewed and approved every disability insurance policy
AB 387 (McCarty) Page 1 of
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that has been filed with the Department. Rather the Department
used its discretion to review policies and respond to the
filing insurer, as needed. A recent court case found that the
Department is required to review each disability insurance
policy. Therefore, the Department indicates that it will need
additional staff resources to review all filings.
Unknown costs to prepare a report comparing California
insurance standards to those developed by the Interstate
Insurance Product Regulation Commission (private funds). The
cost of preparing the report is unknown at this time. The bill
specifically prohibits the use of General Fund or Insurance
Fund monies for implementation of that section of the bill
(which would indicate that donated funds would also be used
for any significant internal costs associated with the report
incurred by the Department).
Background: Under current law, the Department of Insurance regulates the
sale of several types of insurance in the state, including
disability insurance policies. Current law provides that a
disability insurance policy shall not be sold in the state until
the policy is filed with the Insurance Commissioner and either
30 days expire or the Insurance Commissioner approves the filing
earlier. In practice, the Department of Insurance has
interpreted current law to allow it discretion in whether to
actively review disability insurance policy filings. If 30 days
elapse without action by the Department, the Department
interpreted the law as allowing the policy to be sold. A recent
court case found that the Department is required to review every
disability insurance policy filing.
The Interstate Insurance Compact is an inter-jurisdictional
agreement between states that establishes uniform standards for
insurance products, to allow insurance companies to sell
standard products in multiple states. While 44 states are
members of the compact, California is not.
Proposed Law:
AB 387 would extend the time allowed for the Insurance
Commissioner to review disability insurance policies from 30
days to 120 days. The bill would authorize the Commissioner to
AB 387 (McCarty) Page 2 of
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develop and post information on the filing and approval process
and other information that can be of assistance to insurers that
are required to file with the Commissioner.
The bill would require the Insurance Commissioner to commission
a report that compares California insurance standards with those
developed by the Interstate Insurance Product Regulation
Commission. The bill would require the report to be submitted to
the appropriate policy committees of the Legislature. The bill
would prohibit the use of General Fund or Insurance Fund monies
for the implementation of that section of the bill.
Staff
Comments: Given the new responsibility to review all disability
insurance policy filings that was imposed by the court, the
Department indicates that it will need both additional staff
resources and additional time to review those filings.
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