BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  April 20, 2016


                           ASSEMBLY COMMITTEE ON INSURANCE


                                   Tom Daly, Chair


          AB 1899  
          (Calderon) - As Amended March 16, 2016


          SUBJECT:  Insurance:  agents:  license examinations


          SUMMARY:  Requires the Department of Insurance (DOI) to provide  
          the license examinations for life, life-only, and accident and  
          health agents in Spanish.  


          EXISTING LAW:  


          1)Requires insurance agents to be licensed by the DOI and  
            requires that an applicant pass a written examination to  
            become licensed.


          2)Establishes a variety of agent license categories based on the  
            nature of the products the agent will be selling.


          FISCAL EFFECT:  Undetermined


          COMMENTS:  










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           1)Purpose  .  According to the author, existing law does not  
            require an examination for a license as a life-agent,  
            life-only agent, or accident and health to be provided in  
            Spanish. Because a plurality of Californians are Latino, a  
            significant portion this population speaking only Spanish,  
            offering the opportunity for Spanish speakers to take the  
            licensing exam will increase the number of agents able to  
            serve Spanish speaking consumers.  It is important for  
            California to have agents who are better able to serve these  
            communities.  Spanish speakers serving these communities will  
            help prevent miscommunication and potential fraud during the  
            sales process. 
           2)Demographics  .  The ethnic and linguistic diversity of  
            California's population presents many communication  
            challenges.  The challenges are particularly acute in the  
            insurance industry which has complex products that are hard to  
            understand even for native English speakers.  Estimates from  
            the 2014 American Community Survey (ACS) indicate that over  
            one-half Californians report their ethnicity as either Latino  
            (38.6%) or Asian (13.7%).  The ACS data also indicates that  
            22% of households where Spanish is spoken have no one over 14  
            who speaks English fluently or "very well."  For households  
            where an Asian language is spoken, 28% do not have a member  
            over 14 who speaks English fluently or "very well."   


           3)License Examinations  .  California residents who want to apply  
            for an insurance producer (agent or broker) license issued by  
            DOI must first pass a qualifying license examination.  There  
            are 10 examinations for specific insurance producer licenses.   
            Presently, all examinations are offered only in the English  
            language.  Candidates with disabilities or those who would  
            otherwise have difficulty taking the examination (including a  
            language barrier) may, prior to the examination, request a  
            special accommodation.  Special accommodation requests for ESL  
            require the candidate to provide a personal letter requesting  
            the accommodation and a letter from the candidate's English  
            instructor or sponsoring company, certifying that English is  
            not their primary language.  Candidates satisfying these  








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            requirements will be provided an additional 30 minutes on  
            their license examination.


           4)Other States  .  Some states offer examinations for insurance  
            producer licenses in Spanish: New York (since 2004), Texas  
            (since 2005) and Florida (since 2013).  New Jersey will offer  
            Spanish versions of their insurance producer license  
            examinations later this year. The states who have offered the  
            exam in Spanish have seen dramatically different pass rates  
            between the English and Spanish language versions of the  
            examinations.  In Calendar Year (CY) 2014, New York reported a  
            42 percent first-time pass rate for the English version of the  
            Life Agent examination compared with a 13 percent first-time  
            pass rate for the Spanish version of the same examination.   
            Similarly, for CY 2015, Texas reported a 57 percent first-time  
            pass rate for the English version of the Life Agent  
            examination compared with a 24 percent first-time pass rate  
            for the Spanish version of the same examination.  Finally, for  
            CY 2015, Florida reported a 65 percent first-time pass rate  
            for the English version of the Life Agent examination compared  
            with a 25 percent first-time pass rate for the Spanish version  
            of the same examination.  


           5)Psychometrics  .  Professional licensing examinations are a  
            substantial governmental barrier for someone seeking to enter  
            a profession, and, accordingly, the government is required to  
            meet rigorous standards to assure that an examination is a  
            fair measure of the knowledge, skills, and abilities (KSAs)  
            required to practice a profession.  The examinations are  
            developed and updated by periodic surveys of licensed  
            professionals to determine what KSAs are used in their daily  
            work.  The results of those surveys are then compiled and  
            analyzed and substantially determine what subjects will be  
            covered in the test (generally known as the content outline).   
            Individual examination items are developed by practicing  
            professionals (subject matter experts or SMEs) to test each  
            KSA, and those items are then tested to determine if they are  








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            fair questions or if they need to be modified.  Once the  
            questions are final, they are assembled into a test (known as  
            a "form") that matches the content outline.  Typically, a  
            licensing exam will have multiple forms each with some  
            overlapping and some unique items.  Having multiple forms  
            helps to prevent particular items from becoming known through  
            overuse and helps to thwart efforts to "steal" exam questions.  
            To establish a passing score, the SMEs go through a process to  
            determine the passing score by assessing how a "minimally  
            competent, entry level practitioner" would perform on the  
            test.  This process must be repeated for each form of the exam  
            because some forms are "harder" than others and the passing  
            scores need to be calibrated to ensure fairness among the  
            different exam forms.  The entire test development process is  
            informed by statistical analysis and overseen by a  
            "psychometrician" who is a psychologist credentialed in  
            psychological measurement and testing.  


            Tests are necessarily bounded by the language in which they  
            are written.  Making a small change (changing a word or  
            altering the syntax) in a test item can drastically alter how  
            any individual item performs.  These challenges are multiplied  
            when developing a test form in another language.  Simply  
            translating an existing form can cause problems because some  
            concepts do not move easily between languages and even slight  
            changes in meaning or context can lead to dramatically  
            different results among similarly situated test takers.  Those  
            "dramatically different results" are the essence of disparate  
            treatment and threaten the validity of a licensing examination  
            program.





          REGISTERED SUPPORT / OPPOSITION:










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          Support


          American Council of Life Insurers


          Association of California Life and Health Insurance Companies


          California Health Underwriters


          Lincoln Heritage Life Insurance Company


          National Association of Insurance and Financial Advisors,  
          California




          Opposition


          None received




          Analysis Prepared by:Paul Riches / INS. / (916) 319-2086















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