BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON INSURANCE
                             Senator Richard Roth, Chair
                                2015 - 2016  Regular 

          Bill No:              AB 1515       Hearing Date:    July 8,  
          2015
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          |Author:    |Committee on Insurance                               |
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          |Version:   |May 19, 2015    Amended                              |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Hugh Slayden                                         |
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                                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  







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              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.









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           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  










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            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  








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            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  








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            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


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