BILL ANALYSIS Ó
AB 2591
Page 1
ASSEMBLY THIRD READING
AB
2591 (Dababneh)
As Amended May 10, 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 | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Judiciary |10-0 |Mark Stone, Wagner, | |
| | |Alejo, Chau, Chiu, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Cristina Garcia, | |
| | |Holden, Maienschein, | |
| | |Ting | |
| | | | |
| | | | |
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AB 2591
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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, eliminates existing sunset dates for many
electronic property/casualty and life insurance transactions and
notices. 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. This bill requires that the policy holder
acknowledge the receipt of the notice before the insurer can
consider it to have been received.
3)Eliminates the use of electronic mail read receipts and other
email tracking technologies to verify delivery of electronic
cancellation and non-renewal notices for life insurance
products.
4)Establishes a sunset date of January 1, 2021 for the
provisions allowing the electronic delivery of cancellation
and non-renewal notices.
5)Sunsets Civil Code provisions governing electronic insurance
transactions at various dates.
6)Consolidates existing reporting requirements related to the
impact and implementation of allowing electronic delivery of
insurance documents and notices by requiring the Insurance
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Commissioner to submit reports to the Legislature on or before
January 1, 2019.
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
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f) Earthquake
g) Life and Disability
5)Requires the insurer to obtain consent from the insured before
transmitting insurance documents electronically.
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.
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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.
FISCAL EFFECT: Unknown
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), 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. 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
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electronic transmissions and that any transaction not
specifically exempted from UETA may be conducted
electronically, subject to specific rules including:
a) All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any time.
b) A record or signature cannot be denied legal effect
because it is in electronic form.
c) 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.
3)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 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
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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.
4)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).
5)Complete Model. Last year, AB 1131 (Dababneh), Statutes of
638, 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
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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.
6)Pending Amendments. The author is working with the Insurance
and Judiciary Committees to develop technical amendments that
will need to be adopted prior to taking the bill up on the
Assembly Floor.
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Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0002951