BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                       AB 1899|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                   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

           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.  

           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.


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          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  

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

             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:  


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                                                                    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  

          3)Sunsets the provisions of this bill on January 1, 2024.


          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.


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          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,  
          Primerica Inc.


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          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  

          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


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          NOES:  Gallagher, Harper

          Prepared by:Hugh Slayden / INS. / (916) 651-4110
          8/15/16 20:33:24

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