BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1515|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
CONSENT
Bill No: AB 1515
Author: Committee on Insurance
Amended: 5/19/15 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 7/8/15
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Liu,
Wieckowski
NO VOTE RECORDED: Mitchell
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 4/23/15 (Consent) - See last page for
vote
SUBJECT: Insurance
SOURCE: California Department of Insurance
DIGEST: This bill makes technical, noncontroversial, and
clarifying changes to the Insurance Code.
ANALYSIS:
Existing law:
1) Prohibits a person, generally, from transacting insurance
without a certificate of authority or license from the
Insurance Commissioner (IC) and establishes laws and
standards applicable to the business of insurance.
AB 1515
Page 2
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
(CDI).
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
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
pre-licensing education.
7) Requires insurers to pay interest on claims against a
disability income insurance policy after 30 days.
8) Requires the 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:
AB 1515
Page 3
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.
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 specified documents and eliminates
bail agent licensees from that requirement.
5) Requires life settlement agents, life settlement providers,
and title marketing representatives to notify CDI of
specified criminal convictions, bankruptcy proceedings, and
admissions or judicial findings related to lying, cheating
and stealing.
6) Corrects the pre-licensing 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
AB 1515
Page 4
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.
Background
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. This bill adds that
information to several notices and disclosers requirements
effective January 1, 2017.
Life Risk-Based Capital Trend Test. RBC is the minimum amount
of capital appropriate to support an insurer's overall business
operations. According to CDI, this bill adopts 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 CDI
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 requires those types of applicants and
licensees to notify the IC, as specified, and any changes to the
AB 1515
Page 5
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 of
"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
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 for 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. Legislation enacted in 2012 (AB 999 Yamada,
Chapter 627 Statutes of 2012) 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, legislation enacted in 2000 (SB 2107, Speier,
AB 1515
Page 6
Chapter 1091, Statutes of 2000) 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 relatively minor, non-insurance related criminal
convictions. This bill permits the IC to delegate settlement
authority to a 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. Legislation enacted in
2012 (SB 1216, Lowenthal, Chapter 277, Statutes of 2012) updated
California insurance law relating to regulatory oversight of
reinsurance financial statement credits. A provision regarding
certified reinsurers is scheduled to sunset at the end of this
year. This bill extends that 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (8/18/15)
California Department of Insurance (source)
Golden State Bail Agents Association
OPPOSITION: (8/18/15)
AB 1515
Page 7
None received
ASSEMBLY FLOOR: 78-0, 4/23/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Campos, Salas
Prepared by:Erin Ryan / INS. / (916) 651-4110
8/18/15 16:54:12
**** END ****