BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON INSURANCE
                             Senator Richard Roth, Chair
                                2015 - 2016  Regular 

          Bill No:              AB 933        Hearing Date:    June 24,  
          2015
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          |Author:    |Frazier                                              |
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          |Version:   |June 16, 2015    Amended                             |
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          |Urgency:   |No                     |Fiscal:    |No               |
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          |Consultant:|Erin Ryan                                            |
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                          Subject:  Vehicles: DMV records.



           SUMMARY    Provides that a person who provides his or her  
          driver's license number to an insurance agent or broker,  
          insurance licensee, employer or prospective employer for the  
          purpose of eligibility, underwriting, and rating of personal or  
          commercial insurance coverage or eligibility for employment or  
          continued employment involving the use of a motor vehicle, is  
          presumed to have consented to provide access to Department of  
          Motor Vehicle (DMV) records or information, as specified; allows  
          an insurance agent or broker to transmit a person's motor  
          vehicle record (MVR) for those purposes; and  provides that the  
          agent or broker is not responsible for the subsequent handling  
          of the record if the recipient is otherwise authorized to  
          receive the record by the DMV.  
          
           
          DIGEST

          Existing law
            
           1)  Provides certain information of a person's MVR held by the DMV,  
              including abstracts of convictions and accidents, is to be  
              available for public inspection, as specified.  (Vehicle Code  
              1808(a)

           2)  Prohibits the DMV from furnishing to any person information  
              from an MVR that would be in violation of disclosure  







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              requirements detailed in the federal Fair Credit Reporting Act.  
              (Vehicle Code 1806.5)

           3)  Allows for disclosure of MVR information to courts, law  
              enforcement agencies, and other governmental agencies, and  
              allows for limited disclosure to financial institutions,  
              insurance companies, attorneys, vehicle manufacturers, and  
              persons doing statistical research, as specified.

           4)  Requires any person or agent of a person who has access to  
              DMV-related confidential or restricted information to establish  
              procedures to protect the confidentiality of that information,  
              and prohibits using any confidential or restricted information  
              for any purpose other than the reason the information was  
              requested, as specified.

           5)  Provides that if anyone violates the confidentiality provisions  
              or distributes restricted or confidential information to any  
              non-authorized person is liable for civil penalties up to  
              $100,000 and revocation of privileges to receive MVR information  
              or suspension for up to 5 years.

           6)  Defines an insurance broker as a person who, for compensation  
              and on behalf of another person, transacts insurance, other than  
              life, disability or health insurance, but not on behalf of, an  
              insurer.

           7)  Defines an insurance agent as a person who transacts insurance,  
              other than life, disability or health insurance, on behalf of an  
              admitted insurance company. 

           8)  Requires automobile insurance rates and premiums to be  
              determined by the application of three mandatory factors in  
              decreasing order of importance:  the insured's driving safety  
              record, the number of miles driven annually, and the number of  
              years of driving experience
            

          This bill

            1)  Provides that a person who provides his or her driver's  
              license number to an insurance agent or broker, insurance  
              licensee, employer or prospective employer for the purpose  
              of eligibility, underwriting, and rating of personal or  








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              commercial insurance coverage or eligibility for employment  
              or continued employment involving the use of a motor  
              vehicle, is presumed to have consented to provide access to  
              DMV records or information, as specified.  

           2)  Allows an insurance agent or broker to transmit a MVR for  
              the purpose of eligibility, underwriting, and rating of  
              personal or commercial insurance coverage or eligibility for  
              employment or continued employment involving the use of a  
              motor vehicle.

           3)  Provides than an insurance agent or broker who has lawfully  
              transmitted a MVR to a recipient otherwise entitled to  
              receive the record is not responsible for the subsequent  
              handling of the record by the authorized recipient. 


           COMMENTS

          1.  Purpose of the bill    To resolve a dispute between DMV and  
              independent insurance agents and brokers and ensure that  
              independent insurance agents and brokers, if they sell  
              automobile insurance to individuals and businesses in  
              California, have quick access to motor vehicle records, and  
              be able to submit those records to the insurance companies  
              that actually underwrite the policies and pay claims.  


           2.  Background    Information collected by the DMV is generally  
              considered public information and is subject to inspection  
              by the public. Exceptions to this public disclosure  
              obligation include personal Information and confidential  
              Information. Personal information is defined as information  
              that identifies or describes an individual, including, but  
              not limited to, his or her name, social security number,  
              physical description, home address, home telephone number,  
              education, financial matters, and medical or employment  
              history. Confidential information includes, but may not be  
              limited to, an individual's home address, home telephone  
              number, physical/mental information, social security number,  
              and photograph.  The DMV allows businesses, for example  
              insurance agents/brokers to underwrite insurance, background  
              check/pre-employment companies, registration services,  
              dealers/manufacturers, etc. that rely on DMV records to  








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              apply for commercial requester accounts to access MVRs  
              directly from the DMV. DMV also has a separate "service  
              provider" account for persons or entities that provide  
              pass-through/reformat service to another approved requester,  
              or a person or entity that is authorized by another approved  
              end user to access, receive and use DMV record information.   
              For example, the Website DMV.org, not affiliated with the  
              DMV, offers to provide a non-certified MVR for $39.95 once  
              you provide name, address, driver's license number and date  
              of birth.

              Proposition 103, approved by the voters in 1988, requires  
              insurers to file and adhere to underwriting rules and rates  
              that are approved by the Department of Insurance.  Under  
              Prop 103, automobile insurance rates and premiums are to be  
              determined by the application of three mandatory factors in  
              decreasing order of importance:  the insured's driving  
              safety record, the number of miles driven annually, and the  
              number of years of driving experience.  As a result, a  
              person's MVR is critical to determining eligibility and  
              pricing of automobile insurance. The type of MVR used for  
              this purpose does not include personal information, but only  
              the following information relative to the applicant's  
              driving history:

                 a.       Suspensions, revocations, and cancellations of a  
                   driver's license;
                 b.       Driver's license class;
                 c.       Special driver's license endorsements;
                 d.       Any driver's license restrictions;
                 e.       Traffic citations;
                 f.       Vehicular crimes;
                 g.       Accident reports;
                 h.       Driving record points; and
                 i.       DUI convictions.
               
               Some insurers access MVRs directly. These companies as a  
              general rule do not do business with independent brokers,  
              and may employ agents who work exclusively for them. When  
              one of these insurers needs a MVR for underwriting a policy,  
              the driving record is sent directly to the insurer by the  
              DMV.  Independent agents and brokers typically represent a  
              number of insurance companies, and sell insurance products  
              that most appropriately meet the needs of their clients.  








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              Commercial insurance is frequently purchased through  
              independent agents and brokers. In order to obtain quotes  
              and sell a personal or commercial auto insurance policy, an  
              independent insurance agent or broker will obtain a copy of  
              the client's MVR and provide it to an insurance company, or  
              multiple companies for the purpose of getting a quote or  
              placing insurance.  This information is essential to the  
              underwriting process, and is required under Proposition 103  
              to procure an insurance policy covering the driver.  

              The DMV has historically provided this information to both  
              insurance companies and independent agents and brokers. Last  
              year, however, the DMV concluded that while licensed  
              independent agents and brokers had the authority to obtain  
              an applicant's MVR, they did not have authority to then  
              submit the MVR to insurers or insurance underwriters under  
              the applicant's original implied consent. Generally  
              speaking, an insurance agent or broker cannot obtain a quote  
              or place insurance without access to, and ability to  
              transmit, this information.  

              A person's MVR is a public record.  When a person has  
              voluntarily provided his or her driver's license number to  
              an insurance company, an insurance agent or broker or their  
              employer so that insurance can be obtained, consent to  
              obtain a MVR has been implied, without a requirement for a  
              written consent.  Generally speaking, a commercial employer  
              has authorized the MVR to be pulled for each driver seeking  
              employment.  An independent agent or broker in many cases  
              never has any interaction or relationship with individual  
              drivers on a commercial policy-because the "client" is the  
              commercial employer.  

              Last October, the DMV issued an addendum to the Commercial  
              Requester Account Agreement that imposed new conditions on  
              independent agents and brokers. The requirements in the  
              addendum include:

                 a.       The agent or broker must obtain the written  
                   consent of the client specifically allowing the sharing  
                   of the MVR with insurers.  A written consent would be  
                   required for each person to be covered by the policy,  
                   for example in a multi-driver household, or on a  
                   commercial employer policy.  








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                 b.       The agent or broker must maintain a log for at  
                   least two years identifying the date, purpose and each  
                   insurance company to which DMV information was  
                   disclosed.
                 c.       The agent or broker must notify each insurance  
                   company that the MVR information provided may only be  
                   used for the purposes of providing insurance services  
                   to the agent or broker's client, and use of the  
                   information must be in accordance with state and  
                   federal law.
                 d.       Holds the agent or broker responsible for the  
                   negligent, improper, or unauthorized use or  
                   dissemination of DMV information by any party to whom  
                   it has disclosed the information.
                 e.       The agent or broker must provide notice to, and  
                   bear all costs of, California residents potentially  
                   affected by a breach of the security system, database  
                   or files of any party to whom the agent or broker has  
                   disclosed the DMV information.

              According to the independent agents and brokers, the DMV has  
              now threatened them, but not insurers or agents working for  
              an insurance company, with revocation of their authority to  
              obtain MVRs if they do not now comply with the requirements  
              of the new addendum, including obtaining express written  
              client consent for forwarding the information to insurers  
              for purposes of underwriting a policy.

              In addition, as a result of DMV's stated concerns about  
              confidentiality of the information and responsibility for  
              data breaches, the addendum now holds independent agent and  
              brokers responsible for how the insurer uses the  
              information, even if the insurer has its own authorization  
              to obtain records from the DMV (and has agreed to DMV's  
              confidentiality requirements). The agent or broker could now  
              be found liable if the insurer illegally disclosed  
              information in an MVR. The agent/broker would also be held  
              liable for data breach notifications, even though they have  
              no control over the insurer's information security systems  
              and would have no access to the details of the breach.

              This bill aims to recognize the commercial realities of how  
              agents and brokers operate by ensuring an independent  
              insurance agent or broker seeking personal or commercial  








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              insurance on behalf of a client has the ability to provide  
              the applicant client's MVR to insurance companies for  
              underwriting purposes.


           1.  Support   According to the author, AB 933 is intended to  
              respond to the recent shift in DMV policy that places  
              independent insurance and brokers, as well as the insurance  
              companies with whom they do business and the consumers they  
              serve, at a competitive disadvantage because it singles them  
              out, in practical effect, for discriminatory treatment.  
              Because other types of insurance companies receive MVRs  
              directly, they are not impacted by DMV's action. Only  
              independent agents and brokers, who have already been  
              saddled with the contractual obligation to obtain these  
              records and forward them to their insurers, are impacted.

              The Independent Insurance Agents & Brokers sponsored AB 933  
              because it codifies the expectation of every person who  
              supplies a driver's license number to an agent or broker to  
              receive an insurance quote or to an employer when applying  
              for a position that involves operation of a motor vehicle.   
              Most commercial auto insurance in California is sold through  
              independent agents and brokers, who have the contractual  
              freedom and expertise to sell insurance through a multitude  
              of competing companies, and are thus better able to "shop  
              the market" and find the most suitable combination of  
              coverage and price for their customers. With only a few  
              exceptions, the insurers that elect to transact insurance  
              through independent insurance agents and brokers explicitly  
              require the agent or broker to obtain the driving record and  
              submit it to the insurer as a condition for coverage to be  
              bound.
               

           2.  Opposition    None received.

           
          3.  Questions    Although it has not taken an official position  
              on the bill, the DMV has indicated it has concerns about the  
              confidentiality of DMV information and liability for data  
              breaches among the various parties. Under the language in AB  
              822, the agent/broker would have no liability for the  
              violations of the confidentiality of the data by the insurer  








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              or underwriter, or for providing notifications of a breach,  
              as long as they are also authorized by the DMV to receive  
              records. Nothing in this bill appears to interfere with the  
              DMV requirement that the agent or broker maintain a log of  
              each entity to which it has provided the MVR information.   
              Is this sufficient? Is there more the agent/broker could or  
              should do to ensure the proper handling of the information?  
              Should the agent/broker be required to have an express  
              agreement with the transferor insurer regarding  
              confidentiality and breach handling requirements. 




           4.  Suggested Amendments    

                 a)       On page 3, add a new sub-paragraph to paragraph  
                   (h) as follows:
                    "Prior to transmitting records to any insurer with whom  
                   the insurance broker or agent does not have a written  
                   agreement, or to a third party authorized by this  
                   section to receive such records, the broker or agent  
                   shall obtain written agreement from the insurer or  
                   other third party that all such records shall be  
                   treated by them in accordance with state and federal  
                   fair credit and privacy statutes." 
                  b)       This bill and SB 491 (Committee on  
                   Transportation and Housing) amend Vehicle Code 1808.   
                   SB 491 is the Committee's omnibus bill and makes  
                   technical changes to 1808. To prevent chaptering out  
                   one of the bills, amend AB 933 to include the following  
                   technical changes from SB 491: On page 2 line 28 and  
                   page 3 lines 1-2  amend as follows: "Sections 13202.6  
                   and 13202.7, Section 17520 of the Family Code,  or  
                   Section 256 or  former Section   11350.6  of the Welfare  
                   and Institutions Code"
               

          
          POSITIONS
          
          Support
           
          Independent Insurance Agents & Brokers of California (sponsor)  








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          Oppose
               
          None received

                                      -- END --