BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2591|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: AB 2591
Author: Dababneh (D), et al.
Amended: 8/2/16 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez,
Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
ASSEMBLY FLOOR: 80-0, 5/31/16 - See last page for vote
SUBJECT: Insurance: electronic transmission
SOURCE: American Insurance Association
Association of California Insurance Companies
Independent Insurance Agents and Brokers of
California
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
DIGEST: This bill consolidates and recasts the several
standards applicable to insurance transactions made
electronically, in addition to those provided by the Uniform
Electronic Transactions Act (UETA), and applies those standards
and UETA to additional insurance documents.
AB 2591
Page 2
ANALYSIS:
Existing law:
1)Requires that various insurance notices, contracts, or other
documents (collectively referred to as "records") be provided in
writing and transmitted as specified.
2)Validates electronic records and signatures that are otherwise
required to be provided in writing.
a) Provides that, under California's version of the UETA, a
record or signature cannot be denied legal effect or
enforceability because it is in electronic form provided that
all parties agree and that the transaction complies with
specified standards and principles, but exempts some classes of
records and some specific documents as provided. (Civil Code §
1633.1 et seq.)
b) Authorizes an insurer (including other licensees
transmitting records on behalf an insurer) to transmit
electronically specified informational notices for property and
casualty insurance so long as the insurer maintains certain
records as specified. (Ins. Code Section § 38.5(a).)
c) Authorizes an insurer to transmit electronically specified
renewal and other notices for property and casualty insurance
and workers' compensation insurance, until 2019, so long as the
insurer complies with UETA, documents consent as specifically
provided, provides specified disclosures, documents the
insured's email address on the declaration page, provides one
free hardcopy annually on request, and complies with other
consumer protections. (Ins. Code § 38.5(b).)
d) Authorizes an insurer to transact life insurance
electronically, until 2021, so long as the insurer complies
with UTEA and meets other conditions similar to those
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Page 3
applicable to notices of renewal for property and casualty
insurance records. (Ins. Code § 38.6.)
e) Authorizes a life insurer to electronically transmit notices
of cancellation or documents that must otherwise be sent by
registered mail, certified mail, or other method providing
confirmation of delivery, until 2021, so long as the insurer
can demonstrate actual receipt as specified. (Ins. Code §
38.6.)
f) Requires the Insurance Commissioner (IC) to submit a report
to the Governor and to the appropriate legislative committees
on the impact of electronic transmission of certain property
and casualty insurance records by January 1, 2018, and another
report on the impact of electronic transmission of certain life
insurance records by January 1, 2020.
This bill:
1)Revises and consolidates the several standards applicable to
the electronic transaction of property and casualty insurance
and life insurance into a single, universal set of rules, in
addition to UETA, that applies to most insurance transactions
and lines of insurance.
a) Requires a disclosure that informs the consumer that the
electronic transmission is voluntary and may be revoked at
any time, provides a description of the record, describes
the process to report or correct an email address, and
provides contact information for the insurer.
b) Requires the insurer to document the consumer's consent.
c) Prohibits an insurer from charging a fee for hardcopy
transactions or providing a discount for agreeing to
electronic transactions.
AB 2591
Page 4
d) Authorizes, until January 1, 2021, the electronic
transmission of records that must be sent by registered and
certified mail, or other form of delivery providing proof
of delivery, and requires an insurer to retain proof of
actual receipt by the consumer.
e) Authorizes, until January 1, 2021, the electronic
transmission of notices of cancellation or nonrenewal and
requires an insurer to retain proof of actual receipt by
the consumer.
f) Prescribes a process for documents posted on a secure
Web site or portal.
g) Prescribes a follow-up process for contacting the
insured if the insurer receives information that the
document was not received.
h) Requires the insurer to verify the consumer's electronic
address when more than a year has passed since the last
electronic communication.
i) Establishes that agents and brokers are not liable for a
deficiency in the electronic procedures agreed in the
contract under specified conditions.
j) Requires insurers to maintain relevant records for at
least five years.
aa) Authorizes the Department of Insurance to suspend a
licensee's authority to transmit documents electronically
under certain conditions.
2)Applies specifically UETA and the additional standards to
certain property and casualty records, including certain
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Page 5
cancellation and nonrenewal notices, proof of mailing, and a
notice of policy change or cancellation requested by insured,
and others.
3)Eliminates the use of electronic mail read receipts and other
email tracking technologies to prove actual receipt for
insurance records and establishes standards to prove actual
receipt for an application used on a personal electronic
device for most lines of insurance.
4)Eliminates the sunset date on the provisions authorizing the
electronic transmission of most property and casualty
insurance notices currently subject to a sunset date (not
including cancellation or nonrenewal notices and those
requiring proof of receipt).
5)Changes the date by which the IC must submit reports regarding
the electronic transaction of property and casualty insurance
and life insurance to January 1, 2019.
Background
Not long ago "in writing" meant hardcopy and it was not clear
whether the law recognized agreements formed and memorialized
electronically. In 1999, the National Conference of
Commissioners on Uniform State Laws adopted the model UETA to
establish consistent interstate rules for electronic
transactions. California enacted its version of UETA the same
year. In 2000, Congress enacted the Electronic Records and
Signatures in Global and National Commerce Act (ESIGN), in part,
to encourage the states to adopt UETA.
UETA establishes ground rules and principles for parties
engaging in electronic commerce. Most importantly, UETA
requires all parties to agree to engage in the transaction
electronically. Since concepts from the paper world do not
always translate easily into the digital, UETA also establishes
extensive default rules and definitions. However, when
AB 2591
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California enacted UETA, it exempted numerous records, including
many insurance documents. Since then, the Legislature has
applied UETA to many of the exempted records on a case-by-case
basis.
Since 2009, three bills have expanded the number of records
subject to UETA, as well as established additional consumer
protections specific to those records. AB 328 (C. Calderon.
Chapter 433, Statutes of 2009) addressed basic informational
documents related to property and casualty insurance (auto,
homeowners, liability, commercial, etc.). SB 251 (R. Calderon,
Chapter 369, Statutes of 2013) applied UETA to notices of
renewal and other documents for property and casualty insurance,
and added consumer protections specific to those documents.
Last year, AB 1131 (Dababneh, Chapter 638, Statutes of 2015)
applied UETA with additional consumer protections similar to
those established by SB 251, to all life insurance transactions,
including cancelation notices and documents sent by certified
and registered mail. SB 251 is scheduled to sunset in 2019 and
AB 1131 in 2021.
Meanwhile insurers have developed a wide variety of services
offered electronically. Consumers may provide proof of
insurance, file a claim, summon emergency assistance, access
documents, and seek other services through an application on a
tablet or cell phone or through its Web site.
In the end, the case-by-case approach as applied with multiple
sunset dates has produced inconsistent standards within
California insurance law that change every other year. Several
insurers and insurance trade associations have indicated that
these shifting standards have discouraged insurers, especially
small insurers, from making the necessary investments in human
and IT resources to send documents electronically.
This bill establishes a single set of standards applicable to
most insurance records, eliminates the sunset provisions
applicable to many documents (but leaves the sunset provisions
applicable to life insurance and sensitive documents) and more
closely aligns California law to the national standards
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established by ESIGN.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/1/16)
American Insurance Association (co-source)
Association of California Insurance Companies (co-source)
Independent Insurance Agents and Brokers of California
(co-source)
Pacific Association of Domestic Insurance Companies (co-source)
Personal Insurance Federation of California (co-source)
American Council of Life Insurers
Association of California Life and Health Insurance Companies
National Association of Mutual Insurance Companies
State Farm Mutual Automobile Insurance Company
Western Insurance Agents Association
OPPOSITION: (Verified8/1/16)
Consumer Attorneys of California
ARGUMENTS IN SUPPORT: Several insurance trade associations
explain that developments in everyday business electronic
communications is already here and it includes secure inbox
capabilities, real-time claims reporting and many other
customer-friendly features enabled by mobile phone apps and
internet-based solutions. As the majority of commerce moves to
an online platform driven largely by consumers, the trade
associations believe that it is appropriate to review remaining
prohibitions on the electronic transaction insurance -
particularly those that empower consumers to choose to opt-in.
ARGUMENTS IN OPPOSITION: The Consumer Attorneys of
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California (CAOC) highlights the importance of receiving
documents that alter or cancel coverage. They argue that the
consequences of a reduction or cancellation of coverage for a
consumer can be serious, including financial exposure to
significant uninsured losses for auto accidents and damage to
one's home. CAOC emphasizes that it is crucial that consumers
actually receive these documents and that the same rules that
may be acceptable for telephone bills or credit card statements
are not appropriate for auto and home insurance.
ASSEMBLY FLOOR: 80-0, 5/31/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,
Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,
Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
Prepared by:Hugh Slayden / INS. / (916) 651-4110
8/3/16 19:38:10
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