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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