BILL ANALYSIS Ó
AB 499
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CONCURRENCE IN SENATE AMENDMENTS
AB
499 (Cooley)
As Amended June 9, 2016
Majority vote
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|ASSEMBLY: |78-0 |(May 04, 2015) |SENATE: |37-0 |(June 30, 2016) |
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Original Committee Reference: W., P., & W.
SUMMARY: Clarifies existing law governing mandatory notices
regarding earthquake insurance.
The Senate amendments remove the prior contents of the bill and
insert the current provisions that clarify the requirements for
providing notice to the policyholder when earthquake insurance
coverage is reduced upon renewal and add amendments to resolve
potential chaptering out conflicts with Assembly Bill 2591
(Dababneh) of the current legislative session.
EXISTING LAW:
1)Requires insurers providing homeowners' insurance coverage to
offer earthquake insurance to the homeowner when issuing a
policy and at least every other year thereafter.
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2)Requires insurers to provide specified notices regarding
earthquake insurance to homeowners when offering homeowners'
insurance policies.
3)Requires an insurer, upon renewal, reducing the coverage of an
earthquake policy to provide notice of the reduced coverage to
the policyholder.
4)Establishes the California Earthquake Authority (CEA) to
provide earthquake insurance to policyholders of its
participating insurers.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
1)Purpose. This bill clarifies existing requirements regarding
when specific notices regarding earthquake insurance are
required to be provided.
2)Prior Legislation. In 2014, AB 2064 (Cooley), Chapter 419,
substantially revised the law governing the mandatory offer of
earthquake insurance to make the notice more consumer friendly
and hopefully increase the number of homeowners with
earthquake insurance.
3)California Earthquake Authority. The CEA was formed through
legislation in 1995 and 1996 to address an
insurance-availability crisis that followed the 1994
Northridge earthquake. After that earthquake, many homeowners
found it difficult or impossible to find basic homeowner's
insurance. Many others were faced with the prospect of having
their homeowners' insurance non-renewed as insurance companies
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tried to shed their exposure to earthquake risk. Because
state law requires insurers to offer earthquake insurance to
their applicants and holders of residential policies, the
insurers' retreat from the California market resulted in an
availability crisis for both homeowners and earthquake
insurance. The California Department of Insurance reported in
the summer of 1996, at the height of the crisis, that 95% of
the homeowners' insurance market had either stopped, or
severely restricted, sales of new homeowners' policies.
After the CEA began operations in December 1996, the
California homeowners' insurance market recovered quickly. A
Department of Insurance report noted that at the peak of the
availability crisis, 82 insurers had restricted the sale of
new homeowners' insurance policies. By October 1997, only
three insurers were restricting the sale of new policies.
Since that time, the requirement to offer earthquake insurance
has not been a factor in restricting the availability of
homeowners' insurance.
Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0003664