BILL ANALYSIS Ó
AB 1131
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 1131
(Dababneh) - As Amended May 4, 2015
SUBJECT: Life Insurance: electronic transactions
SUMMARY: Permits consumers to receive documents and conduct
some transactions related to life insurance, disability
insurance and annuities electronically. Specifically, this
bill:
1)Allows consumers to opt-in to receiving a range of documents,
notices, and disclosures related to their life insurance
policy, disability insurance policy, or annuity (hereafter
referred to as life insurance) electronically.
2)Requires a licensee (generally either a life insurer or life
agent) to obtain and document the consent of the consumer
before electronically transmitting any life insurance
documents.
3)Requires a licensee, as a condition of transmitting life
insurance documents electronically, to disclose the following
to a consumer:
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a. Receiving documents electronically is voluntary.
b. The consumer may opt-out of receiving documents
electronically at any time.
c. The process for a consumer to opt-out of receiving
documents electronically.
d. A description of the documents to be received
electronically.
e. The process for the consumer to change the address
used by the insurer.
f. The licensee's phone number and internet address.
4)Requires the licensee to provide, upon request of the
consumer, a hard copy of any life insurance document
transmitted electronically to the consumer free of charge once
per year.
5)Applies existing law governing electronic transactions
(Uniform Electronic Transactions Act or UETA) to the
transmission of life insurance documents that do not currently
require a written acknowledgment of delivery. Provides that
the following are acceptable proof of transmission:
a. simple mail transfer protocol logs indicating the
document was sent.
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b. server log files demonstrating receipt of an email
message.
c. server log files demonstrating that the consumer has
logged into their secure online account.
6)Requires the licensee to demonstrate actual delivery of a
document for which current law requires a written
acknowledgement of delivery. Acceptable proof actual delivery
includes:
a. Electronic read receipt
b. Electronic signature
c. Posting the electronic document on the consumers
secure online account and that the consumer acknowledged
receipt of the document
7)Requires the licensee to send a hard copy of any document for
which a written acknowledgment of receipt is required if the
licensee cannot demonstrate that the electronic document was
actually delivered.
8)Requires the licensee to follow-up on any electronic
transmission not received by the consumer within five business
days by confirming the email address of the consumer and
resending the document or providing the consumer a hard copy
of the document.
9)Prohibits charging a fee or offering a discount based on a
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consumer's willingness to accept electronic documents.
10)Requires the licensee to confirm the email address of any
consumer who elected to receive life insurance documents
electronically if more than 12 months have elapsed since the
last electronic communication.
11)Requires the Insurance Commissioner (commissioner) to report
to the Governor and the Legislature regarding the impact and
implementation of the bill.
12)Permits the Department of Insurance (department) to suspend
the authority of a licensee to transmitting life insurance
records electronically if the department can establish a
pattern or practice that demonstrates a lack of compliance
with the provisions of this bill.
13)Sunsets the bill effective January 1, 2021.
EXISTING LAW:
1)Establishes the Uniform Electronic Transactions Act (UETA) and
the Electronic Signatures in Global and National Commerce Act
(eSIGN) that governs the conduct of electronic transactions
and requires that both parties consent to conducting
transactions electronically.
2)Prohibits the use of electronic transactions for many
insurance products.
3)Permits consumers, who opt-in, to receive electronic renewal
notices for the following types of insurance policies:
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a. Automobile
b. Property
c. Liability
d. Commercial liability
e. Workers' Compensation
4)Requires the insurer to obtain consent from the insured before
sending electronic renewal notices.
5)Requires the insurer to make the following disclosures to the
consumer before sending electronic renewal notices and
disclosures:
a. That the insured must opt-in to receiving these
electronic documents.
b. That the insured may opt-out of electronic receipt
at any time.
c. How the insured can change the email address used by
the insurer.
d. Provide the insured the insurer's contact
information (including toll free phone number and website
address).
6)Permits an insurer, after obtaining consent from the insured,
to send offers of earthquake insurance and renewal notices for
earthquake insurance policies electronically.
7)Requires the insurer to provide the consumer, upon request, a
printed copy of the electronic documents to the insured.
8)Requires the insurer to do one of the following within two
business days if the electronic transmission fails:
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a. Contact the insured to confirm the email address and
resend the document electronically.
b. Resend the documents by regular mail to the
insured's address.
9)Permits the department to suspend an insurer's authorization
to send electronic documents if the insurer has a pattern or
practice that demonstrates a failure to comply with the bill's
requirements.
10)Allows an insurer to appeal this suspension and, when the
department determines the insurer has complied with the
requirements of the bill, resume electronic transmission of
these documents.
FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . According to the author, current law needs to be
updated to allow broader use of voluntary e-delivery and
e-signature of life insurance documents. While California law
largely follows the principles of the federal eSIGN
legislation, many life insurance documents are still required
to be delivered in hardcopy form, and many transactions still
have a "wet signature" requirement. This has prevented the
life insurers from implementing a completely electronic sales
process, presenting challenges to customers and agents, and
undermining the benefits to insurers and consumers of full
electronic processing. In advancing this legislation, the
department and the life insurance industry are attempting to
meet the increasing demand of California consumers to conduct
business electronically, and take advantage of the convenience
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of e-delivery and e-signatures in life insurance.
2)Electronic Transactions . In 2000 eSIGN was enacted to
establish federal law governing electronic transactions.
Generally speaking, UETA (adopted by California in 1999)
provides that the law should be construed to facilitate
electronic transmissions and that any transaction not
specifically exempted from UETA may be conducted
electronically, subject to specific rules including:
All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any
time.
A record or signature cannot be denied legal effect
because it is in electronic form.
If a law requires a person to provide information in
writing to another, that requirement is satisfied if the
information is provided in an electronic record that the
recipient can preserve and access for future reference.
1)Advantages of Electronic Transactions . Electronic
transactions notices have a number of significant advantages
including:
Consumer Choice. Many consumers prefer to interact
with their financial services companies electronically
and current law denies these consumers that option.
Faster Delivery. First class mail is typically
delivered within a few days whereas electronic mail is
essentially instantaneous.
Cheaper. Electronic delivery will reduce
administrative costs for insurers.
Greener. Electronic delivery eliminates the
consumption of energy, paper, and other consumables
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associated with delivering conventional mail.
Disaster Recovery. Natural disasters frequently
disrupt mail delivery. Electronic delivery of these
notices greatly reduces the potential for disruptions
related to natural disasters.
Portability. For the many consumers who do not
receive their mail at their primary residence or who
change their primary residence frequently, electronic
delivery provides a more timely notice.
1)Previous Legislation . Senate Bill 251 (Calderon) was enacted
in 2013 which allows policy renewal notices for
property/casualty insurance policies to be delivered
electronically. This bill closely parallels the requirements
of SB 251 as it relates to notices and disclosures related to
life insurance. However, this bill allows for a dramatically
broader range of electronic transactions in life insurance
including the transmission of key documents requiring an
affirmative acknowledgment of receipt by the consumer
(including the policy document itself and notices of lapse,
termination, cancellation or non-renewal).
2)Partial Progress . Property/casualty, life, and health
insurers have long sought more flexibility in responding to
consumer demand for greater electronic commerce options. Last
Session, SB 251 made the first significant strides. However,
the scope of electronic activity allowed by this bill stands
in stark contrast to current law that still prohibits simple,
common, consumer initiated transactions in property/casualty
insurance. If this bill is enacted consumers would face the
incongruous reality of being able to purchase an annuity
costing hundreds of thousands of dollars online, but still
have to use a paper process to add a vehicle to their
automobile policy. This bill recognizes the increasing demand
from consumers, who already safely conduct most of their
financial affairs online, to bring life insurance products
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online, and highlights the need to recognize that same demand
in other types of insurance products.
3)Suggested Amendment . The author should consider amending the
bill to clarify that notices of lapse, termination,
cancellation and non-renewal may be transmitted
electronically.
Delete paragraph (8) of subdivision (b) of Section 38.6 and
replace it with the following:
(8) Notwithstanding any other provision of law, a notice of
lapse, non-renewal, cancellation, or termination for any
product subject to this section may be transmitted
electronically if the licensee demonstrates proof of
delivery as set forth in paragraph (7).
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Life and Health Insurance Companies
(sponsor)
Department of Insurance (sponsor)
Opposition
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None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086