BILL ANALYSIS Ó
AB 2588
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Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2588 (Chu) - As Amended May 9, 2016
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|Policy |Insurance |Vote:|9 - 4 |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill creates new individual licensing programs for
independent property/casualty insurance adjusters (adjusters)
and apprentice independent property/casualty insurance adjusters
(apprentices), overseen by the California Department of
Insurance (CDI).
To become licensed, individuals will have to complete
pre-licensing education, pass a qualifying examination, and pass
a fingerprint-based background check. In addition, licensees
must complete 24 hours of continuing education every two years.
AB 2588
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FISCAL EFFECT:
1)Estimated costs of $400,000-$500,000 to CDI annually for
licensing and enforcement (Insurance Fund).
2)Revenue associated with licensure fees is estimated are $2-4
million. These estimates are subject to considerable
uncertainty and depend on the number of licenses sought.
3)Significant costs over the first one to two years of
licensure, and minor ongoing costs to Department of Justice
for additional background checks, reimbursed by the
individuals being screened (Fingerprint Fees Account).
COMMENTS:
1)Purpose. According to the author, this bill will improve the
caliber of independent insurance adjusters in California by
requiring anyone who is not employed by an insurer to be
licensed. This bill will also allow California and other
states with similar licensing laws to license non-residents on
a reciprocal basis.
2)Background. Insurance adjusters investigate, negotiate, and
settle property and casualty claims for insurers. 34 other
states require licensure of independent adjusters, and the
National Association of Insurance Commissioners (NAIC)
publishes a model law for states to adopt at their option.
This bill is similar to the NAIC model law. Unlike some other
model laws produced by NAIC, however, the model law for
AB 2588
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insurance adjuster licensure is a guideline, not a
recommendation or an accreditation requirement for state
insurance departments.
According to CDI, California's independent insurance adjuster
licensing laws are the least stringent of any of the states
that require this license. Unlike the other states,
California law allows unlicensed individuals to adjust claims
on behalf of their independent adjuster employer without
having to obtain a license. Current state law only requires
licensure of the employers. Consequently, CDI notes, the
claims adjusters have never had to: 1) pass a
fingerprint-based background review, which would reveal any
criminal arrests and convictions such as felony convictions
involving dishonesty and breach of trust; 2) complete a
pre-licensing education course; 3) prove their competency in
adjusting claims by passing a qualifying license examination;
and finally: 4) complete continuing education courses that
would ensure ongoing competency.
3)Support and Opposition. This bill is sponsored by CDI, and
opposed by the American Association of Independent Claims
Professionals, a group that represents the adjusters required
to be licensed under this bill.
4)Staff Comments. There is some inherent difficulty in
estimating costs, workload, and revenue for a new licensure
program. CDI estimates 20,000 to 40,000 new licensees. The
bill allows for a fee of up to $170 for each license which is
valid for two years, and requires a license renewal fee of up
to $170 every two-years. First time applicants would also pay
an exam fee of $50. The CDI estimates that the added
licensing and enforcement costs for these new licensees would
be $400,000 - $500,000 per year. If the volume of
applications is near the CDI estimate and the maximum $170
license fee is charged, the DOI would expect to receive
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roughly $4 million per year in added revenue which far exceeds
the estimated cost of the licensing program. Given the broad
disparity between the estimated costs and the maximum possible
revenue, DOI will have to refine its estimates before
establishing the fee and implementing the license requirement.
This bill could also be amended to provide additional
legislative oversight and to require CDI to report on fee
revenue, number of new licenses, and the associated ongoing
workload costs.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081