BILL ANALYSIS Ó AB 499 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 499 (Cooley) As Amended June 9, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |78-0 |(May 04, 2015) |SENATE: |37-0 |(June 30, 2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- ---------------------------------------------------------------------- | | | | | | | | | | | | |COMMITTEE VOTE: |12-0 |(August 25, |RECOMMENDATION: |concur | | | |2016) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ---------------------------------------------------------------------- Ins. Original Committee Reference: INS. SUMMARY: Clarifies existing law governing mandatory notices regarding earthquake insurance. AB 499 Page 2 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. AB 499 Page 3 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 AB 499 Page 4