BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1054
                                                                  Page  1

          Date of Hearing:  January 21, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                   AB 1054 (Coto) - As Amended:  January 11, 2010 

          Policy Committee:                              Insurance  
          Vote:9-1 

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill excludes insurer credit card expenses associated with  
          individuals paying car insurance premiums from a specified  
          calculation (the "efficiency standard") made by the California  
          Department of Insurance (CDI) under provisions of Proposition  
          103. 

           FISCAL EFFECT  

          Minor absorbable workload to CDI to adjust calculations of the  
          efficiency standard. The efficiency standard caps insurers'  
          expenses that are accepted as part of the rate calculation under  
          Proposition 103.

           COMMENTS  

           Rationale  . This bill modifies a calculation established by  
          Proposition 103, enacted by the voters in November 1988. Under  
          Proposition 103, car insurance companies must justify rate  
          changes to CDI prior to imposing higher rates. 

          The efficiency standard caps insurers' expenses that are  
          accepted as part of the rate calculation. Under current law,  
          transaction expenses incurred by insurers when accepting payment  
          by credit card may put upward pressure on car insurance rates.  
          This bill may prevent that upward premium pressure. This bill is  
          designed to provide increased consumer flexibility during the  
          economic downturn by allowing consumer payment of premiums with  
          credit cards without a corresponding increase in car insurance  
          rates in the broader marketplace.  
           








                                                                 AB 1054
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          Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081