BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 601 (Garrick) Hearing Date: July 1, 2009
As Amended: June 1, 2009
Fiscal: Yes
Urgency: No
SUMMARY Extends the sunset on a 30 cent per vehicle insured in
California from January 1, 2010 to January 1, 2015 to support a
variety of consumer protection functions of the California DOI
and to support public outreach concerning California's low-cost
automobile insurance program.
DIGEST
Existing law
1. Requires insurers to pay the CDI an annual special purpose
assessment of 30 cents for each vehicle insured in this state to
be expended as follows:
a. 20 cents of the assessment shall be used to pay for
consumer service functions of the California Department of
Insurance (CDI) that are related to automobile insurance.
These include services to consumers through the rating and
underwriting services bureau, the claims services bureau, the
investigations bureau, and legal services in support of those
bureaus.
b. 10 cents of the assessment shall be used to improve the
consumer functions of CDI related to automobile insurance,
including the rating and underwriting services bureau, the
claims services bureau, the investigations bureau, legal
services to support these bureaus, and to respond to consumer
complaints and information requests through the department's
toll-free telephone number, and to offer information about
automobile insurance rates to the public.
c. Provides that the CDI and the Department of Motor
Vehicles may propose to the budget committees of the
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601 (Garrick), Page 2
Legislature that 5 cents of the 10 cents assessment described
in b. above be used to inform consumers about the existence
of California's low-cost automobile insurance program. This
expenditure requires budget approval.
d. Sunsets the authority for the 30 cents per insured
vehicle special assessment on January 1, 2010.
2. Authorizes insurers to pass the assessment to their
policyholders as a surcharge.
This bill
1. Extends the sunset on the annual special purpose assessment
on automobile insurers from January 1, 2010, until January
1, 2015.
2. Makes numerous minor and non-substantive changes
reformatting the statute.
COMMENTS
1.Purpose of the bill The statute providing for the assessment
is scheduled to sunset on January 1, 2010. To ensure
continued resources for proven and effective consumer
protection efforts, this bill will extend until January 1 2015
the sunset on the "30 cent per vehicle insured" fee that
insurers now pay to support DOI consumer protection and
education activities. These activities include response to
consumer complaints, investigating law violations,
administrative actions for licensee misconduct, and outreach
and promotional efforts concerning the California Low Cost
Automobile Insurance Program.
2.Support The Department of Insurance, which is the sponsor of
this bill, states it supports continuation of this surcharge
because it "uses the funds to carry out vital auto
insurance-related consumer protection and education activities
including responding to consumer complaints, serving as a
mediator between consumers and insurers to resolve claim
issues, and investigating suspected violations of law. The
funds also support consumer education and outreach activities
including the California Low Cost Automobile Insurance
Program."
3.The DOI also states the assessment "makes it possible for CDI
AB
601 (Garrick), Page 3
to maintain the staff needed for investigations to be carried
out in a timely manner. Prompt investigations are integral to
locating witnesses while their ability to recall events and
produce vital documents is optimal, as well as minimizing
damages to victims and the number of victims. A prompt
investigation is also pivotal to CDI's ability to seek
prosecution or disciplinary actions."
4.Opposition None
5.Questions None
6.Suggested Amendments None
7.Prior Legislation
SB 940 (Speier, Chapter 884, Statutes of 1999) established
the 30 cents assessment through January 1, 2007, and
provided for the CDI to use the funds to support its
consumer activities relating to automobile insurance.
Specifically, 20 cents for consumer services activities
(investigation and enforcement) and 10 cents to improve its
consumer functions activities. Under SB 940, the highest
priority for CDI to use the funds was to eliminate the
then-existing backlog of the auto insurance-related cases in
the Investigation Division. The funds were also to be used
to improve program functions for responding to consumer
complaints and providing auto insurance rate information.
AB 1183 (Vargas, Chapter 717, Statutes of 2005) extended the
sunset date to January 1, 2010, and modified the permissible
uses for the 10 cents portion of the assessment.
Specifically, the CDI may expend up to 5 cents for informing
consumers about the low cost auto insurance program. And,
from January 1, 2006 to January 1, 2009, the CDI is to use 5
cents also toward consumer services activities. (If the low
cost auto insurance program is not fully appropriated at 5
cents, the difference is to be used to improve the CDI's
consumer functions.)
AB 2143 (de Leon, Ch. 445, Statutes of 2008) extended the
sunset date on the special assessment on insurers of 50
cents for each vehicle insured under an insurance policy to
fund the Department of Insurance's Fraud Division and
Organized Automobile Fraud Activity Interdiction Program.
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601 (Garrick), Page 4
POSITIONS
Support
California Department of Insurance
Oppose
None
Principal Consultant: Kenneth Cooley (916) 651-4102