BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1899| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1899 Author: Calderon (D) Amended: 8/15/16 in Senate Vote: 21 SENATE INSURANCE COMMITTEE: 9-0, 6/22/16 AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez, Liu, Mitchell, Wieckowski SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16 AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen ASSEMBLY FLOOR: 78-2, 6/1/16 - See last page for vote SUBJECT: Insurance: production agents: license examinations SOURCE: Author DIGEST: This bill requires, until January 1, 2024, the California Department of Insurance (CDI) to provide the license examinations for life, life-only, and accident and health licensees in Spanish. ANALYSIS: 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. AB 1899 Page 2 2)Establishes categories of "life licensees" that transact certain lines of insurance. a) Accident and health licensees may transact health, disability, credit disability, 24-hour care, and long-term care. b) Life-only licensees may transact life insurance, including endowments and annuities, and may include accidental death or dismemberment and disability income insurance. 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. 3)Provides that an applicant may take a single exam to be licensed as a life-only and accident and health licensee. 4)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. 5)Treats a knowing misrepresentation of information provided in a language other than English as an unfair trade practice subject to special penalties. This bill: AB 1899 Page 3 1)Requires, as of January 1, 2018, CDI to provide the license examinations for life, life-only, and accident and health licensees in Spanish. 2)Requires CDI to submit a report to the Legislature no later than March 1, 2023, that provides information about applicants and licensees that will take the Spanish exam, including pass rates, the number of licensees that have kept their licenses, and the number of consumer complaints received against those licensees. 3)Sunsets the provisions of this bill on January 1, 2024. Background According to the U.S. Census Bureau estimates for the year 2013, about 10.4 million people speak Spanish at home in California. Of those, about 4.5 million people, a population larger than many states, do not speak English "very well." A study co-authored by the U.S. Treasury Department, Council of Economic Advisors, and the U.S. Department of Labor found that "by making it harder to enter a profession, licensing can also reduce employment opportunities and lower wages for excluded workers, and increase costs for consumers." Very few professional licensing exams are offered in California in a language other than English. Currently, CDI only offers English exams although candidates who do not speak English as their primary language may receive an additional 30 minutes to complete the exam. New York, Texas, and Florida already offer examinations for insurance producer licenses in Spanish. Applicants who took Spanish exams experience a dramatically different pass rates than those who took the English version. For example, in 2015, Florida reported a 65% first-time pass rate for the English version of the life agent examination compared with a 25% first-time pass rate for the Spanish version. AB 1899 Page 4 CDI has raised several concerns about this bill and recommends that licensees that take the Spanish examination be restricted to transacting approved Spanish language consumer contracts only. No similar restriction applies to English-speaking licensees in California or appears in those states that already offer Spanish exams. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee, this bill represents estimated one-time costs of $230,000 in fiscal year 2017-18 to translate examination materials into Spanish, including psychometric testing, and $30,000 to prepare a report to the Legislature. The bill also represents estimated costs of $360,000 in fiscal year 2018-19 and ongoing costs of $370,000 per year to administer the exam in Spanish and process the additional applications. All costs are to the Insurance Fund and are offset by the potential revenue of $557,000 in fiscal year 2017-18, $1.1 million in fiscal year 2018-19 and $1.4 million per year ongoing generated from exam fees ($50 per exam) and licensing fees ($170 per license). SUPPORT: (Verified8/12/16) 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 Alliance of Life Companies National Association of Insurance and Financial Advisors, California Primerica Inc. AB 1899 Page 5 OPPOSITION: (Verified8/12/16) California Department of Insurance ARGUMENTS IN SUPPORT: Primerica Inc. cites a 2013 Survey published in National Underwriter indicating that just 6% of life agents nationally identify themselves as Hispanic, compared to 17% 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 that those households are less likely to have contact with an agent. 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. ARGUMENTS IN OPPOSITION: CDI argues that 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. ASSEMBLY FLOOR: 78-2, 6/1/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, 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, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon AB 1899 Page 6 NOES: Gallagher, Harper Prepared by:Hugh Slayden / INS. / (916) 651-4110 8/15/16 20:33:24 **** END ****