BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 2588 (Chu) - Independent insurance adjusters ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: August 1, 2016 |Policy Vote: INS. 5 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Debra Cooper | | | | ----------------------------------------------------------------- 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 ? 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 ? 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. -- END --