BILL ANALYSIS Ó SENATE COMMITTEE ON INSURANCE Senator Richard Roth, Chair 2015 - 2016 Regular Bill No: AB 1515 Hearing Date: July 8, 2015 ----------------------------------------------------------------- |Author: |Committee on Insurance | |-----------+-----------------------------------------------------| |Version: |May 19, 2015 Amended | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Hugh Slayden | | | | ----------------------------------------------------------------- Subject: Insurance. SUMMARY Makes technical, noncontroversial, and clarifying changes to the Insurance Code. DIGEST Existing law 1) Prohibits a person, generally, from transacting insurance without a certificate of authority or license from the IC and establishes laws and standards applicable to the business of insurance. 2) Requires insurers, multiple employer welfare arrangements, surplus lines brokers and others to provide consumers with various notices and disclosures that also contain contact information for the California Department of Insurance. 3) Requires insurers to maintain specified levels of "risk based capital" (RBC) as a means to ensure their solvency. 4) Requires various licensees to prominently use on business cards, written price quotations, and other documents, the AB 1515 (Committee on Insurance) Page 2 of ? word "insurance" in type size no smaller than the largest indicated telephone number. 5) Requires most agents and brokers to notify the CDI of specified criminal convictions, bankruptcy proceedings, and admissions or judicial findings related to lying, cheating and stealing. 6) Requires all bail licensees to complete 20 hours of prelicensing education. 7) Requires insurers to pay interest on claims against a disability income insurance policy after 30 days. 8) Requires the Insurance Commissioner (IC) to personally approve all settlements negotiated on his behalf. 9) Repeals a provision of the Credit for Reinsurance Act related to certified reinsurers on January 1, 2016. This bill 1) Makes numerous technical and clarifying changes, updates statutory references to other codes or documents incorporated by reference, and repeals obsolete language that has no legal or practical effect. 2) Requires, as of January 1, 2017, specified insurers, multiple employer welfare arrangements, surplus lines brokers and others to add the CDI website, or other contact information, to specified documents. 3) Increases the amount of RBC that a life insurer must hold without triggering increased financial oversight by the CDI. AB 1515 (Committee on Insurance) Page 3 of ? 4) Requires, as of July 1, 2016, insurance agents and brokers to use a minimum size of 12-point type for the word "insurance" printed on the specified documents and eliminates bail agent licensees form that requirement. 5) Requires life settlement agents, life settlement providers, and title marketing to notify CDI of specified criminal convictions, bankruptcy proceedings, and admissions or judicial findings related to lying, cheating and stealing. 6) Corrects the prelicensing education requirements applicable to bail licensees to match the requirement in effect at the time the license was granted. 7) Expands the requirement that insurers pay interest on claims not paid within 30 days from just disability income insurance to any "non-health" disability insurance. 8) Permits the IC to delegate the authority to approve settlements for agents/brokers if the settlement does not involve financial misconduct involving more than $50,000 or other factors. 9) Extends the sunset date to January 1, 2021, for the provisions of the Credit for Reinsurance Act related to certified reinsurers. COMMENTS 1.Purpose of the bill This bill is the annual insurance omnibus bill and contains numerous technical, clarifying, and noncontroversial changes to the Insurance Code. 10.Background AB 1515 (Committee on Insurance) Page 4 of ? CDI Website: This bill requires insurers or other entities to add CDI's website to specified notices, disclosures, and other documents. More recently enacted statutes require insurers to include CDI's website on various notices and disclosures, but older statutes lack that critical information. According to CDI, since most consumers utilize computers, tablets, and smart phones as a primary or important means of communication, CDI's website should be included on notices and disclosures so consumers can more easily contact CDI. The bill adds that information to several notices and disclosers requirements effective January 1, 2017. Life Risk-Based Capital Trend Test. Risk-based capital (RBC) is the minimum amount of capital appropriate to support an insurer's overall business operations. According to CDI, this bill would adopt the revised National Association of Insurance Commissioner's (NAIC) Life Risk-Based Capital Trend Test Model. The NAIC adopted a change to the regulatory trigger so that it would be more sensitive to insurers who have a declining RBC. The states must have the revised law in place by January 1, 2017, in order to maintain their NAIC accreditation. Required Reportable Events. Existing law requires most licensees to report criminal convictions and bankruptcies. However, life settlement brokers, life settlement providers, and title marketing representatives are not subject to the reporting requirement. This bill would require those types of applicants and licensees to notify the IC, as specified, and any changes to the background information that they reported on their original license application. Vehicle Code Cross-References. According to the author, this bill corrects erroneous cross-references to the Vehicle Code relating to individual motor vehicle records and the use "points" on a driver's record when determining "good driver" status and auto insurance rates. Interest on Late Payments from Disability Insurance. Health insurance is a form of disability insurance, along with AB 1515 (Committee on Insurance) Page 5 of ? disability income and accidental death coverage. According to CDI, several changes made to the Insurance Code in 2001 clarified the difference between health and "non-health" disability insurance. In 2005, changes made to the provision requiring insurers to pay interest on older claims accidentally eliminated the requirement that insurers pay interest on some types of "non-health" disability claims (but left the requirement of disability income). This bill revises the requirement to capture currently excluded "non-health" disability policies. Documents Sent to the Department of Aging. Existing law requires long-term care insurers to provide CDI with specified materials to pass along to the Department of Aging. At one time, the Department of Aging helped consumers obtain copies of these documents. Chapter 627, Statutes of 2012 (AB 999, Yamada) requires insurers to provide a copy of an individual policy form or group master policy form directly to the consumer upon the request. This bill repeals outdated language related to the Department of Aging. Delegation of Settlement Authority to Deputy Commissioner. Existing law requires the IC to personally approve all administrative settlements. While Government Code Section 1194 establishes the general rule that each deputy possesses the powers and may perform the duties attached by law to the office of the principal, Chapter 1091, Statutes of 2000 (SB 2107, Speier) restricted the IC's authority to delegate the approval of a settlement in response to allegations against former IC Chuck Quackenbush of misusing the settlement process. According to CDI, the majority of these settlements involve license actions against insurance brokers and agents that have suffered relatively minor, non-insurance related criminal convictions. This bill would permit the IC to delegate settlement authority to deputy commissioner in limited cases, including those that do not involve insurers or insurer management and do not relate to financial misconduct of an agent, broker, or applicant, involving more than $50,000. Sunset for Credit for Reinsurance Act. Chapter 277, Statutes AB 1515 (Committee on Insurance) Page 6 of ? of 2012 (SB 1216, Lowenthal) updated California insurance law relating to the regulatory oversight of reinsurance financial statement credits. The provision regarding certified reinsurers is scheduled to sunset at the end of this year. This bill extends the sunset until January 1, 2021. According to CDI, this change provides additional time to evaluate the certified reinsurer review and renewal process and to analyze how certified reinsurers impact the California market. POSITIONS Support Department of Insurance (sponsor) Golden State Bail Agents Association Oppose None received -- END --