BILL ANALYSIS                                                                                                                                                                                                    Ó

                             Senator Richard Roth, Chair
                                2015 - 2016  Regular 

          Bill No:              AB 1899       Hearing Date:    June 22,  
          |Author:    |Calderon                                             |
          |Version:   |March 16, 2016    Amended                            |
          |Urgency:   |No                     |Fiscal:    |Yes              |
          |Consultant:|Hugh Slayden                                         |
          |           |                                                     |
           Subject:  Insurance:  production agents:  license examinations

           SUMMARY     Requires the California Department of Insurance (CDI) to  
          provide the license examinations for life, life-only, and  
          accident and health licencees in Spanish.  

          Existing law
           1.  Requires insurance agents and brokers (collectively  
              referred to as "producers") to be licensed by CDI and  
              requires that applicants pass a written examination to  
              become licensed.

           2.  Establishes categories of "life licensee" that transact certain  
              lines of insurance.

              a.    Accident and health licensees may transact health,  
                disability, credit disability, 24-hour care, and long-term  
                care (with additional training). 

              b.    Life-only licensees may transact life insurance, including  
                endowments and annuities, and may include accidental death or  
                dismemberment and disability income insurance.


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              c.    Limited life-only licensees may only transact specific  
                life insurance policies or annuities that pay benefits in an  
                amount of no more than $20,000 and are designated for the  
                payment of funeral and burial expenses.

           1.  Provides that an applicant may take a single exam to be  
              licensed as a life-only and accident and health licensee.

           2.  Authorizes CDI to approve insurance policies in a language  
              other than English provided that the policyholder is given a  
              copy of the English version and a disclosure that the English  
              version is the official version and the translated version is  
              for informational purposes only.

           3.  Treats a knowing misrepresentation of information provided in a  
              language other than English as an unfair trade practice and  
              subject to special penalties.
          This bill   Requires CDI to provide the license examinations for  
          life, life-only, and accident and health licensees in Spanish.
          1.  Purpose of the bill   According to the author, existing law  
              does not allow for an examination for a license as a life,  
              life-only, and accident and health producer to be provided  
              in Spanish.  California residents who want to apply for an  
              insurance producer license issued by CDI must first pass a  
              qualifying license examination.  There are 10 examinations  
              for specific insurance producer licenses.  All examinations  
              are offered only in English. Because a plurality of  
              Californians are Latino and a significant portion of this  
              population speaks only Spanish, offering the opportunity for  
              Spanish speakers to take these licensing exams will increase  
              the number of producers able to serve Spanish speaking  
              consumers. The ethnic and linguistic diversity of  
              California's population presents many communication  
              challenges.  The challenges are particularly acute in the  


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              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  
              38.6% Californians report their ethnicity as Latino.  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."  It is important for California to have  
              insurance 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.  Background   California's Constitution of 1849 required that  
              "All laws, decrees, regulations, and provisions, which from  
              their nature require publication, shall be published in  
              English and Spanish."  California removed that provision in  
              1879 when it adopted the current constitution, but has made  
              some attempts to address the challenges of its own  
              multilingualism such as the Dymally-Alatorre Bilingual  
              Services Act.  According to the U.S. Census Bureau, about  
              10.4 million people speak Spanish at home in California.   
              Given the size of the population, this lack of access would  
              likely be reflected in California's aggregate insurance  
              sales.  Although California represents about 12% of the  
              national population, it only represents 8.35% of the  
              national premium paid to life, accident, and health insurers  
              (according to data published by the National Association of  
              Insurance Commissioner).  

              Examinations.  Given that professional licensing  
              examinations are a substantial barrier for someone seeking  
              to enter a profession, the government is required to meet  
              rigorous standards to assure that an examination is a fair  
              measure of the knowledge, skills, and abilities required to  
              practice a profession.  Although the content of an  
              examination can fairly easily be translated to another  
              language, translating examinations so they are useful in  
              practice as a measure of an individual's skill, knowledge,  
              and ability is not straightforward. In order to ensure  
              validity and comparability of results with the original  
              language, the entire test development process involves  
              detailed statistical analysis and is overseen by a  
              psychometrician (a psychologist credentialed in  


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              psychological measurement and testing) to ensure that the  
              translation does not inadvertently introduce error or  
              systematic bias.

              Candidates with disabilities or those who would otherwise  
              have difficulty taking the examination, including applicants  
              whose do not speak English as their primary language, may  
              request a special accommodation.  Qualified candidates will  
              be provided an additional 30 minutes.
              Other States.  Some states already offer examinations for  
              insurance producer licenses in Spanish.  New York offers  
              examinations for life and accident and health.  Texas and  
              Florida offer life, accident and health, and property and  
              casualty licenses.  There are 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.  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.   
              Examinations in Spanish for property and casualty licenses  
              have even lower passing scores.

           3.  Support   Primerica Inc. supports AB 1899 because it will  
              knock down a barrier to entry and open doors into the  
              insurance profession for individuals who might otherwise not  
              apply and bring diversity to an industry that desperately  
              needs it.  Primerica cites a 2013 Survey published in  
              National Underwriter indicating that just 6 percent of life  
              agents nationally identify themselves as Hispanic, compared  
              to 17 percent of the general population.  Additionally,  
              Primerica cites a 2012 Insurance Barometer Study by LIMRA  
              that found Hispanic households are less likely to own life  
              insurance than the general population and that a  
              contributing factor is the that those households are less  
              likely to have contact with an agent. Primerica states that  
              offering a Spanish-language licensing exam is one way the  


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              state can do its part to help ensure agents are available in  
              all communities.

              Several insurance trade associations state that the option  
              to have the examination administered in Spanish will  
              decrease potential miscommunication, increase agent  
              understanding of their duties and obligations, and allow  
              California to keep pace with the needs of its multilingual  
              and multicultural insurance consumers.

           4.  Opposition   CDI opposes the bill because permitting an agent  
              to sell products and policies in English although they took  
              and passed the Spanish examination does not provide adequate  
              protection for the agent or the consumer.  CDI explains that  
              there is no evidence stating that simply taking and passing  
              an examination in Spanish prevents miscommunication or  
              potential fraud during the sales process.  As a result, CDI  
              has concerns with the bill and proposed amendment to the  
              author that would the following:

              a.    Require CDI to establish a pilot program to administer  
                the examination for life only and life-only limited to the  
                payment of funeral and burial expenses in English or  
                Spanish on or after January 1, 2018.  The three year pilot  
                program would have at least six specific evaluation  

              b.    Limit those individual who pass the Spanish  
                examination to transacting approved Spanish language  
                consumer contracts only.  The appointing insurer would  
                need to certify under penalty of perjury that the Spanish  
                translation is a true, correct, comprehensive, and  
                complete interpretation of the official English version  
                and would be required to ensure the appointed agents only  
                transact Spanish language consumer contracts on the  
                insurer's behalf.

           1.  Prior and Related Legislation   

              AB 720 (De León), Chapter 720, Statutes of 2007, split the  
              existing license into a life-only license and an accident  


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              and health license.

              SB 1974 (Polanco), Chapter 358, Statutes of 2002, authorized  
              CDI to approve policies and associated materials in  
              languages other than English, but provided that the English  
              version is the official version and declares that an insurer  
              that knowingly misrepresents information provided in a  
              language other than English commits an unfair trade  

          American Council of Life Insurers
          Association of California Life and Health Insurance Companies
          Assurant Solutions - Preneed Division
          California Health Underwriters
          Cemetery and Mortuary Association of California
          Lincoln Heritage Life Insurance Company
          National Association of Insurance and Financial Advisors,  
          Primerica Ins.
          California Department of Insurance

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