BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2884|
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THIRD READING
Bill No: AB 2884
Author: Committee on Insurance
Amended: 8/15/16 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 APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 79-0, 4/21/16 (Consent) - See last page for
vote
SUBJECT: Insurance
SOURCE: California Department of Insurance
DIGEST: This bill contains numerous technical and
noncontroversial provisions related to insurance law.
Senate Floor Amendments of 8/15/16 remove a provision in the
bill that removed the exemption from the definition of
automobile insurance policies those insuring more than four
vehicles.
ANALYSIS:
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Existing law:
1) Defines an automobile insurance policy, and provides
specified requirements for the cancellation or non-renewal of
such a policy (Insurance Code §660 et seq.).
2) Prohibits a person from soliciting, negotiating, or
effecting contracts of insurance, or acting in the capacity
of an insurance agent or broker unless the person holds a
valid license issued by the Insurance Commissioner (IC).
3) Allows the IC, without hearing, to deny an application for a
license if the applicant has committed a felony as shown by a
plea of guilty or no lo contendere or a final judgment of
conviction, or committed a misdemeanor denounced in the
California Insurance Code (CIC) or other laws regulating
insurance as shown by a plea of guilty or no lo contendere,
or by a final judgment of conviction.
4) Requires an applicant for a license to pass a qualifying
examination for licensure prior to receiving a permanent
license and allows the applicant to retake the qualifying
examination subject to reasonable time limits limiting when a
person who has failed the test may retake it.
5) Requires a person licensed as an insurance agent or broker
to submit any fictitious name for doing business that is
different from the name on their license to the IC, and
permits the IC to disapprove that name if it is misleading or
too similar to another name already in use.
6) Requires an insurance agent or broker who advertises
insurance on the Internet to include specified information,
including the name on their license and any fictitious name
approved by the IC.
7) Prohibits the IC from suspending or revoking a bail agent's
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license without first granting a hearing.
8) Specifies the procedure for calculating cash surrender
benefits and paid up annuity benefits for individual annuity
contracts.
9) Requires the IC to annually prepare a consumer rate guide
for long-term care insurance and to include specified
information from insurers regarding all policies, including
rate history, for the current year and the four previous
years.
10)Requires insurers or other entities marketing long-term care
insurance to develop suitability standards to determine
whether the purchase or replacement of long-term care
insurance is appropriate for the needs of the applicant,
including the applicant's ability to pay for the proposed
coverage, the applicant's goals and needs, and the value,
benefits and cost of the applicant's existing insurance.
11)Requires a long-term care insurer to disclose all rate
increases and rate increase requests for all policies,
whether issued by the insurer or purchased or acquired from
another insurer, since January 1, 1990, and inform the
consumer of the availability of the long-term care insurance
rate guide.
12)Specifies the method of determining the reasonableness of
benefits under long-term insurance policies in relation to
expected loss ratios.
13)Provides for the regulation of grants and annuities
societies by the IC, specifies qualifications for a
certificate of authority, and requires specified fees.
14)Regulates the business of workers' compensation insurance,
including the deposit of cash instruments or other forms of
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security.
15)Requires the IC to establish a program to investigate
complaints and respond to inquiries by members of the public
regarding the handling of insurance complaints, bring
enforcement actions when warranted, and provide to the
insurer or production agency a description of any complaint
the IC has deemed justified at least 30 days prior to public
release of a report summarizing the information.
This bill:
1) Deletes an obsolete section dealing with fees in the
1996-1997 fiscal year.
2) Clarifies that the IC may revoke or deny a license based on
a guilty verdict for a felony charge.
3) Prohibits a person who has failed an examination for
licensure 10 times within the previous 12 months from
enrolling in any future examinations for 12 months from the
date of the 10th failed examination.
4) Specifies that an insurance agent or broker who advertises
insurance on the Internet shall list his or her name as filed
with the IC as long as it has not been disapproved by the IC.
5) Prohibits the IC from denying a bail agent license without
first granting the applicant a hearing.
6) Specifies that for annuities with fixed maturity dates under
which the fixed maturity date is later than the later of the
anniversary of the contract following the annuitant's 70th
birthday or the 10th anniversary of the contract, the
maturity date shall be deemed to be the later of the two
dates.
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7) Requires the IC to include in the long-term care insurance
rate guide the rates for all policies issued in California
for the previous nine years.
8) Specifies the method for calculating the discount rate in
the calculation of lifetime expected loss ratios for
long-term care insurance.
9) Prohibits the IC from billing or attempting to collect fees
from a grants and annuities society upon receipt of a notice
of filing of a petition of bankruptcy.
10)Requires the IC to cancel the certificate of authority of a
grants and annuities society upon the suspension of its
corporate status by the Secretary of State for a period of 12
months.
11)Makes technical and clarifying changes to the regulation of
workers' compensation insurer deposits of cash and other
forms of security.
12)Allows the IC to establish an Internet-accessible complaints
response system to distribute and receive complaint
information from the public, and to require insurers to
submit and receive complaint information through any system
as established by the IC.
Background
This is the annual California Department of Insurance (CDI)
omnibus bill. The following are CDI's explanations of
substantive changes made in this bill:
1)Provide Consistency Regarding Judgments, Pleas, Verdicts, and
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Convictions. CIC Sections 1668 and 1669 were meant to use
similar standards to deny or revoke licenses, either through a
hearing or summarily but CIC Section 1669 does not include the
ability to summarily deny or revoke a license based on a
guilty verdict for a felony charge. This inconsistency
creates an unfair standard for individuals who enter in a plea
of guilty or nolo contendere versus those who have received a
guilty verdict by a jury, but have not received a final
judgment. This proposal would make the language consistent
and basis for punishment consistent between CIC Sections 1668
and 1669.
2)Set Statutory Limitations on Taking License Examinations to
Prevent Question Harvesting. Individuals applying for an
insurance producer, bail agent, life and disability insurance
analyst, independent insurance adjuster or public insurance
adjuster license must first pass a qualifying license
examination. Depending on the license type, between 30
percent and 60 percent of these individuals end up taking the
examination more than once. However, CDI has found that there
are undetected test takers harvesting examination questions
and then selling the questions to education providers. This
proposal would place a limitation of 10 examinations taken in
a 12-month period, including a waiting period of 12 months
after failing an examination the 10th time in the 12 month
period.
3)Technical Clean-up for Internet Advertising Required
Information. This proposal would require licensees to only
post on the Internet the name they have had approved by the IC
so that even if they are not going to use it, consumers can
still look up a licensee by their DBA ("Doing Business As")
and find out who they actually are. This proposal cleans-up
the conflicting code section so licensees can properly comply.
4)Amend Insurance Code Section 1807.5 to Provide Consistency in
the Statues Affecting Bail Agents. CIC Section 1807.5, which
applies specifically to bail agents, is inconsistent with
disciplinary actions taken against other licensed agents and
applicants. This proposal amends this section to ensure that
bail agents are held to the same enforcement standards as
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other licensees.
5)Amend the Annuity Non-forfeiture Law. The existing statute
CIC Section 10168.6 clarifies what the maturity date in an
annuity contract is deemed to be when applying the
non-forfeiture tests described in CIC Sections 10168.4 and
10168.5 to a contract under which an election may be made to
have annuity payments commence at optional maturity dates. The
proposed language would clarify that the deemed maturity date
used in the non-forfeiture compliance testing will be the same
for contracts which have a fixed maturity date beyond what is
considered reasonable, and for optional maturity date
contracts.
6)Update Inconsistency in the Long-Term Care Rate History
Information. This bill streamlines all the relative sections
in the code to provide long-term care rate history for the
current year and preceding nine years.
7)Grant and Annuities Forced Withdrawal. CDI bills all licensed
Grants and Annuities Societies annually and then attempts to
collect from the delinquent companies, but there have been
non-responsive companies that have not withdrawn under CIC
Section 11520.5 but are no longer in business or functioning.
This proposal would allow CDI to stop imposing or collecting
periodic and annual fees from licensed Grants and Annuities
Societies upon notice of a Bankruptcy filing or if their
corporate status has been suspended by the Secretary of State
for a period of 12 months and further would permit the
Certificate of Authority to expire.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified8/1/16)
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California Department of Insurance (source)
OPPOSITION: (Verified8/1/16)
None received
ASSEMBLY FLOOR: 79-0, 4/21/16
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, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Ridley-Thomas
Prepared by:Erin Ryan / INS. / (916) 651-4110
8/16/16 17:38:50
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