BILL ANALYSIS                                                                                                                                                                                                    



          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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