BILL NUMBER: SB 940 CHAPTERED 10/10/99 CHAPTER 884 FILED WITH SECRETARY OF STATE OCTOBER 10, 1999 APPROVED BY GOVERNOR OCTOBER 9, 1999 PASSED THE SENATE SEPTEMBER 9, 1999 PASSED THE ASSEMBLY SEPTEMBER 3, 1999 AMENDED IN ASSEMBLY AUGUST 24, 1999 AMENDED IN ASSEMBLY AUGUST 16, 1999 AMENDED IN ASSEMBLY JULY 1, 1999 AMENDED IN SENATE APRIL 5, 1999 INTRODUCED BY Senator Speier FEBRUARY 25, 1999 An act to amend Section 12978 of, and to add and repeal Sections 1872.81 and 1874.8 of, the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST SB 940, Speier. Insurers: fees. Existing law requires each insurer doing business in this state to pay an annual fee not to exceed $1 for each vehicle it insures, in order to fund increased investigation and prosecution of fraudulent automobile insurance claims and economic automobile theft. Revenues from the fee are available for distribution by the Insurance Commissioner to the Bureau of Fraudulent Claims of the Department of Insurance, to the Department of the California Highway Patrol, and to district attorneys, as specified. This bill would require each insurer, until January 1, 2007, to pay an additional annual fee of 30 for each vehicle it insures to fund certain consumer operations of the Department of Insurance related to automobile insurance. This bill would also require the department to report to the Legislature's insurance committees on plans for use of the new revenues and on the opportunities for improving the fraud programs funded by the existing revenues, as specified. r This bill would also require each insurer, until January 1, 2007, to pay an additional annual fee, not to exceed 50 , for each vehicle it insures, to fund the Bureau of Fraudulent Claims and an Organized Automobile Fraud Activity Interdiction Program. Existing law establishes various fees to be charged by the Department of Insurance in connection with its licensing and regulatory activities relating to the business of insurance. Existing law authorizes the Insurance Commissioner to increase or decrease those statutory fees according to a specified procedure, and establishes limitations on the amount that fees may be increased or decreased. This bill would require the department to annually project forward its workload for the subsequent 3 years in order to project appropriate fee levels, and to annually make adjustments to those fees, if necessary, based on actual workload experience. Existing law also provides that any increase or decrease in those statutory fees shall be by a uniform percentage for all fees, rounded to the nearest whole dollar. This bill would delete that provision. This bill would provide that its provisions would become operative only if AB 1050 of the 1999-2000 Regular Session is enacted and becomes effective on or before January 1, 2000, in which case certain provisions of AB 1050 would prevail over provisions of this bill, as specified. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1872.81 is added to the Insurance Code, to read: 1872.81. (a) In addition to the fee imposed pursuant to Section 1872.8, each insurer doing business in this state shall pay to the commissioner an annual fee of thirty cents ($0.30) for each vehicle insured under an insurance policy it issues in this state, for expenditure as follows: (1) An amount equivalent to twenty cents ($0.20) of the fee imposed per insured vehicle by this section shall be used for the purpose of paying for consumer service functions of the department that are related to automobile insurance. The revenues under this subdivision shall be used to improve service to consumers through the rating and underwriting services bureau, the claims services bureau, the investigations bureau, or any successor bureaus of the department that may assume the consumer service functions of these bureaus. It is the intent of the Legislature that the highest priority for use of these revenues during the 1999-00 and 2000-01 fiscal years shall be to eliminate the backlog of consumer complaints relative to automobile insurance policies, insurers selling automobile policies, and agents and brokers selling those policies. The department shall develop a plan for the use of the revenues available under this subdivision for the purposes authorized, and shall submit the plan to the Assembly and Senate Committees on Insurance. (2) An amount equivalent to ten cents ($0.10) of the fee imposed per insured vehicle by this section shall be used for the purpose of improving consumer functions of the department related to automobile insurance. Revenues available under this subdivision shall be used to improve consumer functions through one or more of the following: (A) the rating and underwriting services bureau, (B) the claims services bureau, (C) the investigations bureau, and (D) any successor bureau of the department that may assume automobile insurance consumer functions of these bureaus. These revenues may also be used for improving the ability of the department to respond to consumer complaints and information requests through the department's toll-free telephone number, and for improving the ability of the department to offer information about automobile insurance rates to the public. The department shall develop a plan for the use of the revenues available under this subdivision for the purpose authorized, and shall submit the plan to the Assembly and Senate Committees on Insurance. (b) This section shall remain in effect only until January 1, 2007, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2007, deletes or extends that date. SEC. 2. Section 1874.8 is added to the Insurance Code, to read: 1874.8. (a) Each insurer doing business in this state shall pay an annual fee to be determined by the commissioner, but not to exceed fifty cents ($0.50) annually for each vehicle insured under an insurance policy it issues in this state, in order to fund the Bureau of Fraudulent Claims and an Organized Automobile Fraud Activity Interdiction Program. (b) This section shall remain in effect only until January 1, 2007, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2007, deletes or extends that date. SEC. 3. Section 12978 of the Insurance Code is amended to read: 12978. Notwithstanding any other provision of law, the commissioner may increase or decrease the fees set forth in this code as necessary to allow the department to meet the appropriation authorized by the annual Budget Act. However, any increase or decrease so made shall be made only in accordance with this section, and a fee increase shall not exceed 10 percent without the prior approval of the Legislature. A single annual increase or decrease in fees, on a fiscal year basis, may be made by the department at any time during the year provided it is announced by bulletin issued at least 90 days prior to the effective date of that increase or decrease. The bulletin shall be sent to all affected parties and to both houses of the Legislature. That fee increase or decrease may be rescinded by a majority vote of both houses of the Legislature not later than 60 days after the issuance of the bulletin announcing the increase or decrease. In the event the bulletin is issued during the period between August 1 and December 1 of any year, the department shall provide notice in writing of the necessity of any fee increase or decrease as proposed in the bulletin upon issuance of the bulletin to the chairperson of the committee in each house which considers appropriations and the Chairperson of the Joint Legislative Budget Committee. If written notice is provided to the commissioner within 60 days of the issuance of the bulletin announcing the increase or decrease by any of the chairpersons that there is an objection to the fee increase or decrease, the increase or decrease shall take effect February 1 of the following year unless rescinded by a majority vote of both houses of the Legislature by that date, rather than 60 days after issuance of the bulletin. The department shall annually project forward its workload for the subsequent three years in order to project appropriate fee levels, and shall annually make adjustments to those fees, if necessary, based on actual workload experience. The limit on the cumulative amount that the fees may be increased or decreased shall be the amount necessary to provide sufficient moneys to carry out the projected workload within the appropriations contained in the Governor's Budget for the next succeeding fiscal year, or, to the extent that moneys received or projected to be received by the department are insufficient to carry out the projected workload within the appropriation authorized by the annual Budget Act during the then current fiscal year, an amount necessary to meet that appropriation and consistent with that projected workload. SEC. 4. This act shall become operative only if Assembly Bill 1050 of the 1999-2000 Regular Session is enacted and becomes effective on or before January 1, 2000, in which case Section 1874.8 of the Insurance Code, as added by Assembly Bill 1050 of the 1999-2000 Regular Session, shall prevail to the extent that it provides for the allocation and distribution of funds under the program established to target organized automobile fraud activity.