BILL ANALYSIS Ó SENATE COMMITTEE ON INSURANCE Senator Richard Roth, Chair 2015 - 2016 Regular Bill No: AB 1899 Hearing Date: June 22, 2016 ----------------------------------------------------------------- |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. DIGEST 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. AB 1899 (Calderon) Page 2 of ? 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. COMMENTS 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 AB 1899 (Calderon) Page 3 of ? 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 AB 1899 (Calderon) Page 4 of ? 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 AB 1899 (Calderon) Page 5 of ? 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 metrics. 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 AB 1899 (Calderon) Page 6 of ? 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 practice. POSITIONS Support 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, California Primerica Ins. Oppose California Department of Insurance -- END --