BILL ANALYSIS Ó
AB 1232
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 1232
Cristina Garcia - As Amended April 13, 2015
SUBJECT: Insurance Commissioner: administrative hearings
SUMMARY: Permits administrative law judges (ALJs) at the
Department of Insurance (department) to hear the appeal of
individuals who are denied a license by the department.
Specifically, this bill:
1)Permits the Insurance Commissioner (commissioner) to select an
ALJ from the department or from the Office of Administrative
Hearings (OAH) to hear the appeal of an individual who was
denied a license.
2)Requires the department to annually report on number of times
department ALJs hear these cases and their performance when
hearing these cases.
EXISTING LAW:
AB 1232
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1)Requires insurance agents/brokers and other "producers" to be
licensed by the department.
2)Establishes the OAH to perform the administrative adjudication
function for other state agencies.
3)Establishes the Administrative Procedures Act (APA) to define
the process by which administrative complaints are resolved.
4)Permits the department to hire ALJs to hear rate setting cases
under Proposition 103.
5)Permits the department to deny a license to an applicant for a
range of reasons including:
a) Absence of qualifications
b) Lying on an application
c) Conviction of a felony
d) Conviction of a misdemeanor related to insurance
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e) Unlicensed activity
FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . According to the author, existing law does not
provide the commissioner the authority to hear new licensee
applicant cases. As a result, an overwhelming majority of the
hearings are heard by OAH. OAH conducts hearings, mediations,
and settlement conferences for more than 1,600 state, local,
and county agencies, which makes it challenging to schedule
hearings for all outstanding applicants in a timely and
expeditious manner. Individuals with a pending application or
a new licensee applicant are unable to work in a licensed
capacity in the insurance industry and must wait for their
case to be resolved. The department sends approximately 160
licensee cases per year to the OAH since the commissioner does
not have the authority to assign licensing matters to the
Administrative Hearing Bureau (AHB) within the department.
However 60 percent (or roughly 100) of those cases are new
licensee applicant cases that could be heard by the AHB. It is
not uncommon for more than a year to pass before an ALJ in OAH
is able to hear a case. This bill will provide governmental
efficiency by streamlining the licensee hearing adjudication
process for new licensee applicants. An administratively
efficient process better serves new licensee applicants and
consumers protected.
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2)Administrative Hearing Bureau . The department employs four
ALJs in its AHB. These ALJs are hired to hear insurance rate
cases under Proposition 103 which requires property/casualty
insurers to submit their proposed rating plans to the
commissioner for approval. Because the flow of proposed
rating plans is irregular, these ALJs have time available for
other duties. Presently, the department assigns other legal
work to the ALJs when they have available time, but the
department would prefer to use available ALJ time to speed up
the process for license applicant cases. Applicant cases
would continue to be referred to OAH when AHB does not have
the time available to handle the cases.
3)License Denial Process . Insurance agents must obtain a
license in order to practice and this license must be renewed
every two years by the department. Every new applicant must
complete a background check prior to receiving a license as a
part of the application and examination process. If the
background check is cleared and the applicant has successfully
passed the examination a license is granted. However, in
certain cases, based on an applicant's background check, the
department may deny or grant a license with restrictions. When
this occurs applicants may request to have their case heard by
an ALJ, who in turn gives a proposed decision on the case at
the hearing. The commissioner then upholds, denies, or
modifies this decision.
REGISTERED SUPPORT / OPPOSITION:
Support
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Department of Insurance (sponsor)
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086