BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1131|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: AB 1131
Author: Dababneh (D)
Amended: 9/1/15 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 7/8/15
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Liu,
Wieckowski
NO VOTE RECORDED: Mitchell
SENATE JUDICIARY COMMITTEE: 7-0, 7/14/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
ASSEMBLY FLOOR: 76-0, 5/26/15 - See last page for vote
SUBJECT: Insurance: electronic transmission
SOURCE: Association of California Life and Health Insurance
Companies
Department of Insurance
DIGEST: This bill permits life insurance carriers, agents and
brokers to send documents and conduct transactions related to
life insurance and annuities electronically.
Senate Floor Amendments of 9/1/15 add double-jointing language
to avoid a chaptering problem with AB 1097.
ANALYSIS:
Existing law:
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1) Codifies the Uniform Electronic Transactions Act (UETA)
which provides that a record or signature cannot be denied
legal effect or enforceability because it is in electronic
form provided that the transaction complies with specified
standards and principles.
2) Exempts types of transactions or classes of records
related to specified Insurance Code sections from being
conducted under UETA.
This bill:
1) Applies UETA (by eliminating the exemption) to the
following:
a) Notices included or attached to individual policies
or annuities that disclose the period in which the
applicant has the right to return the policy without
penalty ("free look period") (Ins. Code §§ 786, 10127.7,
10127.9, 10127.10.)
b) A notice of premium increase for individual
policies. (Ins. Code § 10113.7.)
c) Notices and signed statements regarding replacement
policies and annuities. (Ins. Code §§ 10509.4 and
10509.7.)
2) Defines "licensee" as an insurer, agent, broker, or any
other person who is required to be licensed by California
Department of Insurance (CDI).
3) Requires the licensee to document the consumer's consent to
engage in electronic transactions, as specified, and retain
documentation while the policy is in force and at least five
years thereafter.
4) Requires a licensee to disclose to the consumer the
following:
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a) The option to receive records electronically is
voluntary.
b) The consumer may opt-out at any time and a
description of the opt-out process.
c) A description of the documents to be received
electronically.
d) The process to change the consumer's email address.
e) The licensee's contact information, including phone
number and Internet Web site address.
5) Requires the licensee to provide, upon request of the
consumer, a hard copy of any life insurance document free of
charge once per year.
6) Requires that the consumer's email address be placed on the
consent disclosure and, if provided, an annual statement.
7) Prohibits charging a fee or offering a discount based on a
consumer's willingness to accept electronic documents.
8) 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 with the consumer.
9) Requires the insurer to follow-up with the consumer within
five business days, as specified, if the licensee receives
information that the record was not received.
10) Establishes that the following records, if not otherwise
prohibited due to formatting, placement, or other
restrictions, may be sent electronically:
a) Records sent by first class or regular mail.
b) Records not subject to a particular delivery method.
c) Records sent in compliance with the Insurance
Information and Privacy Protection Act (Ins. Code §§
Section 791 et seq.)
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11) Establishes that the following records, if not excluded
from UETA, may be sent electronically if not otherwise
prohibited by other law if the licensee maintains a system
or process that can demonstrate actual receipt of a
document:
a) Records sent by registered or certified mail.
b) Records sent by any method requiring return receipt
or signed written receipt of delivery, or other method of
delivery evidencing actual receipt by the person.
c) Notices of termination or nonrenewal.
12) Provides that acceptable proof of actual receipt includes
any of the following:
a) An electronic receipt returned by the consumer or
electronic signature executed by the consumer.
b) A confirmation receipt or some other evidence that
the person received the email in his or her email account
and opened the email.
c) Evidence demonstrating that the person logged onto
the licensee's secure Internet Web site and downloaded,
printed, or otherwise acknowledged receipt of the record.
13) Requires the licensee to send a hardcopy of any document
for which a written acknowledgment of receipt is required if
the licensee cannot demonstrate that the electronic document
was actually received.
14) Provides that even if a life insurance transaction is
excluded from UETA by Section 1633.3(b)(4) of the Civil Code
(documents that must be separately signed), any statutory
requirement for a separate acknowledgment, signature, or
initial may be transacted using an electronic signature or
by electronic transaction so long as the requirement is not
specifically excluded from UETA and the licensee complies
with all applicable provisions of this bill.
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15) Exempts an insurance agent or broker from civil liability
for any deficiency in the electronic procedures agreed to by
the parties if the insurance agent or broker meets various
requirements, including that the agent or broker has not
engaged in negligent, reckless, or intentional tortious
conduct.
16) Requires the Insurance Commissioner (IC) to report to the
Governor and the Legislature regarding the impact and
implementation of the bill on or before January 1, 2020.
17) Permits CDI to suspend the authority of a licensee to
transmit life insurance records electronically if CDI can
establish a pattern or practice that demonstrates a lack of
compliance with the provisions of this bill.
18) Sunsets the bill effective January 1, 2021.
19) Provides that if this bill and AB 1097 are enacted and go
into effect January 1, 2016, and this bill goes into effect
after AB 1097, the changes made by both bills to Civil Code
Section 1633.3 will go into effect.
Background
Some types of agreements and transactions are only enforceable
if they are in writing. Most electronic transactions are
recognized as the equivalent of paper transaction as provided by
the Uniform Electronic Transactions Act (UETA) enacted in 1999
and the federal Electronic Records and Signatures in Global and
National Commerce Act (ESIGN) enacted in 2000. Both laws
provide that electronic transactions and signatures satisfy
writing requirements so long as both parties consent ("opt-in")
and follow some basic rules. Both acts also have provisions
that allow for certain exceptions.
When electronic commerce was still young, electronic delivery
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was seen as unreliable. This led to California adopt numerous
exceptions to UETA in 1999, including many insurance-related
documents. Now many consumers rely on their cell phones,
computers, and other devices to manage their affairs. This bill
specifically applies UETA to the purchase of life insurance
(including annuities), notices related to life insurance, and
notices of cancelation of life insurance. This bill also
authorizes other types of transactions generally so long as the
transaction meets specified standards.
Consistent with UETA and ESIGN, this bill imposes duties for
electronic delivery based on the prescribed hardcopy delivery
method. For regular or first-class mail, the basic UETA rules
apply along with additional safeguards established in this bill,
including requirements that the licensee must provide a free
hardcopy every year if requested and must follow-up if he or she
receives information that an electronic document was not
received.
If a record must be sent by certified or registered mail, the
insurer will also be required to obtain proof of "actual
receipt" to verify that the document was delivered. The bill
specifies the evidence necessary to show actual receipt, such as
a returned electronic receipt or signature, or record showing
the consumer logged onto a website and downloaded the document.
Although notices of cancelation may be sent by first-class mail,
they are excluded by ESIGN and UETA. This bill would allow an
insurer to send notices of cancelation electronically so long as
it can prove receipt in the same manner.
If a licensee habitually fails to follow the standards and
procedures in this bill, CDI would be authorized to suspend the
licensee from engaging in electronic transaction.
Prior Legislation
SB 820 (Sher, Chapter 428, Statutes of 1999) enacted UETA based
on the model act adopted by the National Conference of
Commissioners on Uniform State Laws.
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AB 328 (C. Calderon, Chapter 433, Statutes 2009) authorized
electronic transmission of specified documents, such as the
notice of reasons for refusal to issue a good driver policy and
the notice of the reasons for cancelling an automobile insurance
policy, related to property and casualty lines.
SB 251 (R. Calderon, Chapter 369, Statutes of 2013) authorized
electronic transmission of offers of renewals and conditional
renewals related to property and casualty lines.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified9/2/15)
Association of California Life and Health Insurance Companies
(co-source)
Department of Insurance (co-source)
American Council of Life Insurers
OPPOSITION: (Verified9/2/15)
None received
ARGUMENTS IN SUPPORT: According to the author, AB 1131 will
further modernize California's e-commerce law for life insurance
and annuities which are otherwise authorized pursuant to
California's version of the UETA, the California Insurance Code,
and the federal ESIGN framework.
ASSEMBLY FLOOR: 76-0, 5/26/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla,
Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mayes, McCarty, Medina, Melendez, Mullin,
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Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis
Prepared by:Hugh Slayden / INS. / (916) 651-4110
9/2/15 12:29:06
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