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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|COMMITTEE VOTE: |12-0 |(August 25, |RECOMMENDATION: |concur |
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Ins.
Original Committee Reference: INS.
SUMMARY: Clarifies existing law governing mandatory notices
regarding earthquake insurance.
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The Senate amendments removed the prior contents of the bill and
inserted 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.
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
COMMENTS:
1)Purpose. This bill clarifies existing requirements regarding
when specific notices regarding earthquake insurance are
required to be provided.
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2)Prior Legislation. In 2014, Assembly Bill 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
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:
0004950
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