BILL ANALYSIS Ó
AB 2591
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Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 2591
(Dababneh) - As Amended March 31, 2016
SUBJECT: Insurance: electronic transmission
SUMMARY: Allows a consumer who opts-in to initiate changes to
their automobile insurance policy online, receive non-renewal
and cancellation notices for homeowner's and automobile policies
electronically, and repeals the sunset dates on existing
statutes permitting electronic notices and transactions for both
property/casualty and life insurance policies. Specifically,
this bill:
1)Permits a consumer who opts-in to make consumer initiated
changes to their automobile insurance policy online.
2)Permits automobile and/or homeowner's policy holders who
opt-in to receive notices of cancellation and non-renewal
electronically. The bill requires that the policy holder
acknowledge the receipt of the notice before the insurer can
consider it to have been received.
3)Repeals the sunset dates on existing statutes allowing online
transactions and electronic delivery of some notices for
property/casualty polices and life insurance policies.
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EXISTING LAW:
1)Establishes the Uniform Electronic Transactions Act (UETA) in
California law and the Electronic Signatures in Global and
National Commerce Act (eSIGN) in federal law that govern the
conduct of electronic transactions and require that both
parties consent to conducting transactions electronically.
2)Permits consumers who opt-in to receive any documents relating
to their life insurance policy electronically.
3)Requires consumers to opt-in to the electronic transmission of
life insurance documents to acknowledge receipt of a notice of
non-renewal or cancellation before the insurer can consider
the document to have been received.
4)Permits consumers, who opt-in, to receive electronic renewal
notices for the following types of property/casualty insurance
policies:
a. Automobile
b. Property
c. Liability
d. Commercial liability
e. Workers' Compensation
f. Earthquake
g. Life and Disability
5)Requires the insurer to obtain consent from the insured before
transmitting insurance documents electronically.
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6)Requires the insurer to make the following disclosures to the
consumer before sending electronic renewal notices and
disclosures:
a. That the insured must opt-in to receiving these
electronic documents.
b. That the insured may opt-out of electronic receipt
at any time.
c. How the insured can change the email address used by
the insurer.
d. Provide the insured the insurer's contact
information (including toll free phone number and website
address).
7)Requires the insurer to provide the consumer, upon request, a
printed copy of the electronic documents to the insured.
8)Requires the insurer to do one of the following within two
business days if the electronic transmission fails:
a. Contact the insured to confirm the email address and
resend the document electronically.
b. Resend the documents by regular mail to the
insured's address.
9)Permits the department to suspend an insurer's authorization
to send electronic documents if the insurer has a pattern or
practice that demonstrates a failure to comply with statutory
requirements.
10)Allows an insurer to appeal this suspension and, when the
department determines the insurer has complied with the
requirements of the bill, resume electronic transmission of
these documents.
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FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . According to the author, current law must be updated
to preserve the consumer protections that exist today in the
California Civil and Insurance Codes and allow broader use of
voluntary e-delivery and e-signature of property and casualty
insurance documents. SB 251 (Calderon), which allowed
consumers to opt-in to receive a narrow range of insurance
documents electronically, was a great first step in
modernizing California's insurance laws to reflect the
technology that is available today, but more is needed. For
example, insurers still cannot electronically add a new driver
or new car to an insurance policy without mailing paper
copies, even when the consumer has chosen to go paperless. AB
2591 takes the next step by expanding consumer's options to
receive electronic documents, and would preserve the consumer
protections that exist today in the California Civil and
Insurance Codes. This bill would also decrease paper use and
gives the consumer a choice in how they want their insurance
documents delivered.
2)Electronic Transactions . In 2000 eSIGN was enacted to
establish federal law governing electronic transactions.
Generally speaking, UETA (adopted by California in 1999)
provides that the law should be construed to facilitate
electronic transmissions and that any transaction not
specifically exempted from UETA may be conducted
electronically, subject to specific rules including:
All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any
time.
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A record or signature cannot be denied legal effect
because it is in electronic form.
If a law requires a person to provide information in
writing to another, that requirement is satisfied if the
information is provided in an electronic record that the
recipient can preserve and access for future reference.
Since that time is has become common practice to buy, sell and
manage financial products online. Online banking and
investing is routine and has been for many years.
1)Advantages of Electronic Transactions . Electronic
transactions notices have a number of significant advantages
including:
Consumer Choice. Many consumers prefer to interact
with their financial services companies electronically
and current law denies these consumers that option.
Faster Delivery. First class mail is typically
delivered within a few days whereas electronic mail is
essentially instantaneous.
Cheaper. Electronic delivery will reduce
administrative costs for insurers.
Greener. Electronic delivery eliminates the
consumption of energy, paper, and other consumables
associated with delivering conventional mail.
Disaster Recovery. Natural disasters frequently
disrupt mail delivery. Electronic delivery of these
notices greatly reduces the potential for disruptions
related to natural disasters.
Portability. For the many consumers who do not
receive their mail at their primary residence or who
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change their primary residence frequently, electronic
delivery provides a more timely notice.
1)Previous Legislation . Senate Bill 251 (Calderon) was enacted
in 2013 which allows policy renewal notices for
property/casualty insurance policies to be delivered
electronically. This bill closely parallels the requirements
of SB 251 as it relates to notices and disclosures related to
life insurance. However, this bill allows for a dramatically
broader range of electronic transactions in property/casualty
insurance including the transmission of key documents
requiring an affirmative acknowledgment of receipt by the
consumer (including the policy document itself and notices of
lapse, termination, cancellation or non-renewal).
2)Complete Model . Last year, Assembly Bill 1131 (Dababneh) was
enacted to allow all life insurance documents to be
transmitted electronically if the consumer opts-in. The bill
built on the foundation established by SB 251 in many ways.
For instance, the requirements for a consumer to opt-in, the
ability for a consumer to request hardcopies of a record on a
periodic basis, protocols to confirm email addresses, and the
steps required to respond to email messages that are not
successfully delivered are all drawn from SB 251. However,
because the bill allows all life insurance documents to be
sent electronically, it sets up different standards to ensure
that documents are sent and received based on the sensitivity
of the document. For less sensitive documents (e.g.,
statements and routine notices) life insurers must comply with
the send/receive standards established by UETA. For notices
of cancellation and non-renewal (which are regarded as the
most sensitive documents), the bill requires the policyholder
to acknowledge receipt of the notice before it is considered
to have been received. This is a key consumer protection
because the policyholder has a limited amount of time to
respond to such a notice. For instance, among the most common
causes for a cancellation notice is the failure to timely pay
a premium, but the policyholder has a window to pay the
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premium to keep the policy in force after receiving the
notice. This is particularly significant for life insurance
products as it can be difficult to replace a life insurance
policy later in life because life insurance policies are
harder to obtain and more costly as a person ages. It is
worth noting that this standard imposes a greater level of
consumer protection than current law which merely requires the
insurer to have proof of mailing with no assurance that the
policyholder is aware of receiving the notice.
This bill adds authority for policyholders to receive the full
range of documents for automobile and homeowner's policies
electronically by repealing the existing statute governing
electronic transmission requirements for property/casualty
policies and instead applying the standards developed in AB
1131. The bill would apply a common set of standards to both
life insurance and property/casualty policies.
3)Sunset Provisions . Despite the long record of online services
in banking and investing, when SB 251 was being considered the
sunset provision was added to the bill in response to
lingering concerns of some about this limited expansion of
online notices for property/casualty policies. AB 1131
included a sunset provision as well in keeping with SB 251.
Those provisions are now unnecessary and may be discouraging
some insurers from making the investment needed to give their
customers the option to move online.
This bill is applying the same comprehensive standards for
automobile and homeowner's insurance that were adopted last
year for life insurance without controversy. At this writing,
there is little dispute regarding the propriety of allowing
consumers to receive their automobile and homeowners insurance
notices online on the same basis as they do for life
insurance. There is also little substantive dispute that
moving insurance online alongside other financial services is
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responsive to the many consumers who have shown, not only
comfort with, but a preference for conducting the rest of
their financial affairs online. Online insurance services are
a fact of life, and it is unrealistic to believe that the
Legislature would allow these laws to sunset and force
consumers who have chosen to interact with their insurers
online to go back to relying on paper and the postal service.
Preserving these sunset provisions in the face of this reality
makes little sense. If problems arise from allowing consumers
this choice, the Legislature can always make changes to
address those problems in future legislative sessions.
In addition, the committee is aware of a number of insurers
(representing a significant portion of the property/casualty
insurance market in California) who have been unwilling to
make the considerable financial investment required to go
online because of the uncertainty created by the sunset
provisions. Given that reality, the sunset provisions are not
only unnecessary, but also getting in the way of providing
consumers with online options.
4)Suggested Amendment . The most recent amendments inadvertently
deleted a requirement for the commissioner to report to the
legislature on the implementation of SB 251. The author may
want to consider reinstating that provision to provide the
Legislature with feedback on the impact of these bills.
REGISTERED SUPPORT / OPPOSITION:
Support
American Insurance Association
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Association of California Insurance Companies
Independent Insurance Agents and Brokers of California
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086