BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2588 (Chu) - Independent insurance adjusters
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|Version: August 1, 2016 |Policy Vote: INS. 5 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 1, 2016 |Consultant: Debra Cooper |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2588 would make changes to the Insurance Adjuster
Act relative to qualifications for an independent insurance
adjusters (IA) license.
Fiscal
Impact:
Estimated ongoing costs to the Department of Insurance (CDI)
of $700,000-$800,000 per year for the added licensing and
enforcement costs for the new licensees. (Insurance Fund)
Estimated revenue of $2-3 million per year from fees generated
from these new licenses.
Background: Insurance adjusters investigate and evaluate insurance claims,
negotiate, and settle property and casualty claims for insurers.
The National Association of Insurance Commissioners (NAIC)
AB 2588 (Chu) Page 1 of
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publishes a model law for states to adopt at their option. This
bill is similar to the NAIC model law.
Unlike many other states, existing California law allows
unlicensed individuals to adjust claims on behalf of his or her
independent adjuster employer without having to obtain a
license; only the employers are required to obtain a license.
Claims adjusters, therefore, have not been required to pass a
fingerprint-based background check, complete a pre-licensing
educations course, prove their competency in adjusting claims by
passing a qualifying examination, or complete continuing
education courses.
Proposed Law:
This bill would:
Redefine an IA as an individual, business entity, independent
contractor, or employee of a contractor who contracts for
compensation with insurers, a person whose tax treatment by
the insurers is consistent with that of an independent
contractor, and a person who investigates, negotiates, or
settles property and casualty claims for insurers.
Require an unlicensed individual adjusting claims during an
emergency, disaster, or catastrophe to register with CDI
within five working days of commencing to adjust claims in
California.
Eliminate, as of January 1, 2018 the company license and
require all individuals employed by an IA that adjusts claims
to be licensed as well.
Revise exemptions and add new categories of exempted persons.
Create an apprentice IA license and require apprentices to be
supervised by a fully licensed IA.
Specify the requirements an applicant must complete in order
for a license to be granted.
Establish "reciprocity" with states with similar licensing
requirements.
Authorize the Insurance Commissioner to place a licensee on
inactive status for failing to complete the necessary
continuing education coursework.
Exempt a licensed IA who adjusts on behalf of his or her
employer from the requirement to file a surety bond with the
Insurance Commissioner.
Add or adjust various fees.
AB 2588 (Chu) Page 2 of
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Require CDI to report to the Legislature annually on or before
March 1, 2019 and for a total of three years thereafter, on
the number of individuals licensed, the implementation costs
and revenues received, and the annual projected costs and
revenues associated with licensure and enforcement activities.
Staff
Comments: There is some difficulty in estimating costs,
workload, and revenue for a new licensure program. CDI estimates
approximately 30,000 new licenses being issued over a two-year
period if this bill is enacted. If the maximum licensee fee of
$120 is charged, plus the new applicant fee of $50, CDI would
expect to receive nearly $3 million per year in added revenue,
which exceeds the estimated cost of administering and enforcing
the licensing program.
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