BILL ANALYSIS
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THIRD READING
Bill No: AB 800
Author: Duvall (R)
Amended: 7/15/09 in Senate
Vote: 21
SEN. BANKING, FINANCE, AND INS. COMMITTEE : 10-0, 7/9/09
AYES: Calderon, Cogdill, Correa, Cox, Florez, Kehoe, Liu,
Lowenthal, Padilla, Runner
NO VOTE RECORDED: Harman, Price
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 05/21/09 (Consent) - See last page
for vote
SUBJECT : Insurance omnibus
SOURCE : Department of Insurance
DIGEST : This bill eliminates the option to conduct
several significant classes of transactions with the
Department of Insurance by paper in favor of electronic
transactions and makes numerous other changes, including
changes needed to increase the conformity of the Department
of Insurance law with the Producer Licensing Model Act of
the National Association of Insurance Commissioners.
ANALYSIS :
Existing Law
CONTINUED
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1.Provides that no person can solicit, negotiate or effect
contracts of insurance unless they hold a valid
Department of Insurance (DOI) license.
2.States no application for an insurance license shall be
deemed filed unless it "has been actually delivered to",
with the proper fee paid, "an office of the insurance
commissioner during office hours".
3.States, in the Uniform Electronic Transactions Act, that
a party that agrees to conduct a transaction by
electronic means may refuse to conduct other
transactions by electronic means and additionally states
that "this subdivision may not be varied by agreement."
4.All California state agencies are subject to Government
Code rules that payments required by law to be made and
applications required by law to be filed can be made by
delivery through the United States mail, with timeliness
of submittal ascertainable by the cancellation marked
stamped on the envelope.
5.Allows licensees of, and persons applying for licenses
issued by, the DOP Producer Licensing Bureau to conduct
their licensing business via paper documents that are
delivered to DOI either through the mail or personal
delivery. Additionally, current law requires DOI to
mail new license certificates and license renewal
notices in paper.
6.Declares minors ineligible for licensure to act as a
fire and casualty broker-agent, or a life agent without
defining "minor".
7.Does not expressly state that applicants for bail agent,
independent insurance adjuster, public insurance
adjuster, surplus line broker and life and disability
analyst licenses must submit to criminal and
administrative background questions as a condition for
license renewal whereas other licensees of the DOI's
Producer Licensing Bureau are required to complete these
questions for license renewal. Additionally, all
applicants for licenses issued by DOI's Producer
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Licensing Bureau must respond to criminal and
administrative background questions and provide
fingerprints to undergo a criminal history check as a
condition for initial licensure.
8.Prohibits California nonresident organizations to
endorse California resident agents to their license.
Additionally, current law requires a California
nonresident organization to endorse at least one person
from its home state.
9.Applications for insurance licenses by natural persons
are required to contain the residence address, the
principal business address, and the mailing address of
the applicant; organizational license applications are
required to contain the principal business address, and
the mailing address.
10.Requires a California nonresidential licensee, other
than those licensees form states that require more
pre-licensing hours than California, applying for a
California resident fire and casualty license to have
completed 40 hours of pre-licensing education in their
former resident state to be exempt from California's
pre-licensing education requirement. A California
nonresident licensee, other than those licensees form
states that require more pre-licensing hours than
California, applying for a California life-only agent
license must complete 20 hours of pre-licensing
education.
11.Requires the Insurance Commissioner (Commissioner) to
send a written notice setting forth the time and place
of the examination to an applicant for licensure a
reasonable time before they are required to appear for a
qualifying examination.
12.Requires a person licensed as a personal lines
broker-agent to complete 20 hours of continuing
education courses during each two-year license term.
13.References the non-existent "National Association of
Securities Dealers" and requires the Commissioner to
administer a written qualifying exam as a condition to
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granting the variable contract authority on a life agent
license.
This bill:
1.Recasts the prohibition on insurance licensure by
underage individuals by stating a "person under 18 years
of age is not eligible to apply for a license."
2.Clarifies that responding to criminal and administrative
background questions is required for license renewal by
all individuals and entities issued licenses by the
DOI's Producer Licensing Bureau.
3.Eliminates the ability of licensed individuals and
organizations and unlicensed individuals and
organizations seeking licenses or certificates to
conduct their licensing related activity via paper
documents personally delivered to the DOI or deposited
in the U.S. Mail as provided in the Government Code.
Specifies that "no application for a license shall be
deemed filed" unless "submitted by a means of electronic
service approved by the commissioner". However, an
applicant may request an exemption to the electronic
filing request.
4.Permits California resident agents to transact on behalf
of California nonresident organizations and specifies
that a California nonresident organization must name at
least one person to perform duties under its license
from a state other than California.
5.Adds the requirement that all DOI applications, whether
submitted by natural persons or organizations, shall
contain the e-mail address "to which the applicant wants
the commissioner to direct all license-related
correspondence".
6.Provides that whenever an organization licensed as a
life agent or fire and casualty broker agent desires to
inform the DOI of a change in who is authorized to
transact business under its license, it shall
immediately file the form indicating the change, which
form "must be submitted by a means of electronic service
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approved by the commissioner".
7.Recasts the examination and testing provisions to
specify that instead of written notice being provided to
an applicant by the Commissioner, the applicant shall
schedule and reschedule his or her qualifying
examination using an electronic service approved by the
Commissioner.
8.For purposes of various license renewals, authorizes the
DOI to send license renewal notices to its licensees
vial mailed paper document or electronically.
9.Makes numerous technical changes relating to individuals
and organizations providing DOI with e-mail addresses to
facilitate the electronic transmittal of license-related
information, including adding a requirement that the DOI
be immediately notified "using an electronic service
approved by the commissioner" of any change in the
licensees e-mail address.
10.Waives the pre-licensing education requirement for
California resident applicants who recently moved from
another state and hold a current California nonresident
license, but continues to require them to a specified
course on ethics and the California Insurance Code.
11.Increases the two-year continuing education requirement
for Personal Line Broker-Agents from 20 to 24 hours.
12.Replaces a reference to the non-existent "National
Association of Securities Dealers (NASD)" with the
current "Financial Industry Regulatory Authority
(FINRA)" and eliminates the requirement for a qualifying
written exam to grant the variable contract authority on
a life agent license.
13.Revises a provision added to the code last year stating
the Commissioner "shall mail" an application for renewal
of a title marketing representative not less than 60
days before a current certificate will expire to make it
permissive ("may") and to authorize the renewal
application to be sent electronically or to a mailing
address.
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Background
The American system of insurance regulation is vested in
the 50 individual states. The regulators in the various
states work on common issues of the national insurance
marketplace through the mechanism of the National
Association of Insurance Commissioners (NAIC).
California's DOI is an active member of the NAIC.
In 1999, the Congress passed and the President signed the
Gramm-Leach-Bliley Act (GLBA). GLBA required that within
three years of its effective date a majority of states had
to either enact uniform laws for licensure of individuals
and entities transacting insurance in the state or enact
reciprocity laws to facilitate the licensure of
non-resident individuals and entities for sale and
solicitation of insurance in those states. If this GLBA
uniformly/reciprocity requirement was not mess, states
faced the possibility of partial federal preemption of
their licensing activity. The NAIC opted to pursue state
reciprocity with uniformity remaining a longer term goal
for non-resident (and resident) producer licensing.
To provide states a model for meeting reciprocity, the NAIC
adopted the Producer Licensing Model Act (PLMA) I 2000.
The PLMA is the primary vehicle for states not only to
achieve reciprocity, but also to take major steps toward
reaching uniformity. With respect to reciprocity, the PLMA
provides for streamlined administrative licensing
requirements, reciprocal recognition of continuing
education, and reciprocity for surplus lines and limited
lines producers, and creates uniform standards for key
areas of producer licensing. Among other provisions, PLMA
provides for the following:
1.Creates uniform definitions for various terms, including
"minor".
2.Promotes a uniform application process for both resident
and non-resident applications by reference to the use of
the NAIC Uniform Application.
3.Establishes uniform exemptions from completing
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pre-licensing education and examinations for licensed
producers who apply for a non-resident license.
4.Encourages the use of the NAIC's State Producer Licensing
Database (SPLD) and the electronic processing of
applications.
While the PLMA does promote the use of electronic
processing of applications, it does not require that states
rely exclusively on electronic filings and applications for
the conduct of insurance licensing-related transactions as
many provisions of the bill will do. Specific examples are
the processes for applying for licensure, notification of
changes to persons authorized to transact insurance under
an organizational license and applying for a qualifying
examination testing date.
The provision eliminating the right of applicants for
insurance licenses and licensees with respect to certain
other transactions to decline to conduct business
electronically, and the requirement that all applications
for insurance licensure include an e-mail address "to which
the applicant wants the commissioner to direct all
license-related correspondence" appears to conflict with
the Uniform Electronic Transactions Act. More
specifically, it appears to be in conflict with the right
UETA provides to choose not to conduct transactions
electronically and also to be in conflict with the UETA
provisions that this right for consumers "may not be varied
by agreement".
While this eliminates the ability for licensees and
applicants for licenses to apply via paper documents for
transactions described above, this bill defers to the IC
the specific details of the electronic application and
filing process which must be utilized, describing the
required process as "a means of electronic service approved
by the commissioner". This makes it impossible to evaluate
the impact of the change upon possible barriers to
licensing whether based upon language, access to
technology, visual disability or otherwise.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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SUPPORT : (Verified 8/17/09)
Department of Insurance (source)
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Price, Ruskin, Salas, Silva, Skinner,
Smyth, Solorio, Audra Strickland, Swanson, Torlakson,
Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Fuentes, Nava, Saldana
JJA:cm 8/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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