BILL ANALYSIS Ó
AB 1131
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CONCURRENCE IN SENATE AMENDMENTS
AB
1131 (Dababneh)
As Amended September 1, 2015
Majority vote
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|ASSEMBLY: |76-0 |(May 26, 2015) |SENATE: |40-0 |(September 8, |
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Original Committee Reference: INS.
SUMMARY: Permits consumers to receive documents and conduct
certain transactions related to life insurance, disability
insurance and annuities electronically.
The Senate amendments:
1)Clarify that an agent or broker is not liable for any
deficiencies in the system used by the insurer to conduct
electronic transactions.
2)Make minor technical changes.
3)Add amendments to eliminate chaptering out conflicts with AB
1097 (Holden) of the current legislative session.
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EXISTING LAW: 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.
1)Prohibits the use of electronic transactions for many
insurance products.
2)Permits consumers, who opt-in, to receive electronic renewal
notices for the following types of insurance policies:
a) Automobile
b) Property
c) Liability
d) Commercial liability
e) Workers' Compensation
3)Requires the insurer to obtain consent from the insured before
sending electronic renewal notices.
4)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.
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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 Web site address).
5)Permits an insurer, after obtaining consent from the insured,
to send offers of earthquake insurance and renewal notices for
earthquake insurance policies electronically.
6)Requires the insurer to provide the consumer, upon request, a
printed copy of the electronic documents to the insured.
7)Requires the insurer to do one of the following within two
business days if the electronic transmission fails:
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.
8)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.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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
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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
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:
a) All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any time.
b) A record or signature cannot be denied legal effect
because it is in electronic form.
c) 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.
3)Advantages of Electronic Transactions. Electronic
transactions notices have a number of significant advantages
including:
a) Consumer Choice. Many consumers prefer to interact with
their financial services companies electronically and
current law denies these consumers that option.
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b) Faster Delivery. First class mail is typically
delivered within a few days whereas electronic mail is
essentially instantaneous.
c) Cheaper. Electronic delivery will reduce administrative
costs for insurers.
d) Greener. Electronic delivery eliminates the consumption
of energy, paper, and other consumables associated with
delivering conventional mail.
e) Disaster Recovery. Natural disasters frequently disrupt
mail delivery. Electronic delivery of these notices
greatly reduces the potential for disruptions related to
natural disasters.
f) 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.
4)Previous Legislation. Senate Bill 251 (Calderon), Chapter
369, Statutes of 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).
5)Partial Progress. Property/casualty, life, and health
insurers have long sought more flexibility in responding to
consumer demand for greater electronic commerce options. Last
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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
online, and highlights the need to recognize that same demand
in other types of insurance products.
Analysis Prepared by: Paul Riches / INS. / (916)
319-2086 FN: 0002081