BILL ANALYSIS Ó
AB 387
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CONCURRENCE IN SENATE AMENDMENTS
AB
387 (McCarty)
As Amended September 2, 2015
Majority vote
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|ASSEMBLY: | 78-0 |(May 14, 2015) |SENATE: |40-0 |(September 8, |
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Original Committee Reference: INS.
SUMMARY: Extends the period of time allowed for the Insurance
Commissioner (commissioner) to review disability insurance
policies from 30 to 120 days, requires the commissioner to take
steps to facilitate the filing and approval of life and
disability insurance products, and requires the commissioner to
request a study of model laws for life insurance products.
The Senate amendments:
1)Require the commissioner to publish guidance regarding the
submission of life and disability policies by insurers.
2)Requires the commissioner to request that a multi-state
regulatory support organization conduct a study to assess the
differences between California law governing annuity, life,
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disability income, and long-term care insurance products and
model laws related to those products adopted by the Interstate
Insurance Product Regulation Commission.
EXISTING LAW:
3)Requires an insurer to file a disability insurance policy with
commissioner prior to selling the policy.
4)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.
5)Requires the commissioner to reject a disability policy that
contains a provision that is vague or misleading.
6)Provides that the commissioner must require insurers to fully
comply with the Insurance Code.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)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 CDI (Insurance
Fund).
2)Unknown costs to prepare a report comparing California
insurance standards to those developed by the IIPRC (private
funds). This bill requires the report to be commissioned and
paid for by a non-state entity and 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
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by CDI).
COMMENTS: 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.
Analysis Prepared by: Paul Riches / INS. / (916)
319-2086 FN: 0002218
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