BILL ANALYSIS Ó
AB 2591
Page 1
ASSEMBLY THIRD READING
AB
2591 (Dababneh)
As Amended April 13, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Insurance |13-0 |Daly, Melendez, | |
| | |Travis Allen, | |
| | |Bigelow, Calderon, | |
| | |Chu, Cooley, Cooper, | |
| | |Dababneh, Dahle, | |
| | |Frazier, Gatto, | |
| | |Rodriguez | |
| | | | |
| | | | |
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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:
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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.
FISCAL EFFECT: Unknown.
COMMENTS:
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 (Ron Calderon), Chapter 369,
Statutes of 2013 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. This bill
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
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gives the consumer a choice in how they want their insurance
documents delivered.
Electronic Transactions. In 2000 eSIGN was enacted to establish
federal law governing electronic transactions. Generally
speaking, Uniform Electronics Transaction Act (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:
1)All parties must "opt-in" and may "opt-out" from conducting
further transactions electronically at any time.
2)A record or signature cannot be denied legal effect because it
is in electronic form.
3)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.
4)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.
5)Advantages of Electronic Transactions. Electronic
transactions notices have a number of significant advantages
including:
a) Consumer Choice. Many consumers prefer to interact with
their financial services companies electronically and
current law denies these consumers that option.
b) Faster Delivery. First class mail is typically
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delivered within a few days whereas electronic mail is
essentially instantaneous.
c) Cheaper. Electronic delivery will reduce administrative
costs for insurers.
d) Greener. Electronic delivery eliminates the consumption
of energy, paper, and other consumables associated with
delivering conventional mail.
e) Disaster Recovery. Natural disasters frequently disrupt
mail delivery. Electronic delivery of these notices
greatly reduces the potential for disruptions related to
natural disasters.
f) Portability. For the many consumers who do not receive
their mail at their primary residence or who change their
primary residence frequently, electronic delivery provides
a more timely notice.
Previous Legislation. SB 251 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).
Complete Model. Last year, AB 1131 (Dababneh), Chapter 638,
Statues of 2015 was enacted to allow all life insurance
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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 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.
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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 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.
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Given that reality, the sunset provisions are not only
unnecessary, but also getting in the way of providing consumers
with online options.
Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0002742