BILL ANALYSIS
AB 2395
Page 1
Date of Hearing: April 7, 2010
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2395 (Anderson) - As Introduced: February 19, 2010
SUBJECT : Insurance Commissioner: powers, duties, and
complaints
SUMMARY : Requires the Insurance Commissioner's investigation
of public complaints against insurers and production agencies to
be limited to the allegations specified in the complaint.
EXISTING LAW :
1)Requires the Insurance Commissioner (IC) or employees of the
Department of Insurance (DOI) to receive complaints and
inquiries, investigate complaints, and prosecute insurers or
production agencies when appropriate and according to
guidelines established in law.
2)Requires the IC and DOI employees to respond to complaints and
inquiries by the public concerning the handling of insurance
claims by insurers or production agencies, or alleged
misconduct by insurers or production agencies.
3)Prohibits the IC from declining to investigate complaints on
the basis that the insured is represented by an attorney, or
is in mediation or arbitration, or that the insured has a
civil action against the insurer.
4)Authorizes the IC to defer the investigation until the
conclusion of the dispute, mediation, arbitration, or civil
action of the claim.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . The purposes of this bill are: a) to clarify the
distinction between individual complaints and market conduct
exams by limiting individual complaint investigations to the
allegations specified in the complaint, and b) to codify past
practices of the Department of Insurance, which had been to
treat individual consumer complaints and market conduct exams
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as separate and distinct processes
2)Background . According to the author and the bill sponsor, the
Personal Insurance Federation of California (PIFC), this bill
proposes to clarify the scope of the individual consumer
complaint process as currently undertaken by the Department of
Insurance. The author and the sponsor state:
a) The traditionally rapid consumer complaint investigation
process is now being significantly expanded into a smaller
version of the existing market conduct examination (MCE).
b) Extensive document requests and evidentiary inquiries,
often only tangentially related to the actual consumer
complaint at issue, have needlessly complicated the
complaint inquiry process.
c) Using the individual complaint process as a small-scale
market conduct exam needlessly delays the resolution of
individual consumer complaints and creates an unworkable
system for insurers.
3)Arguments in Support. According to the author and the
sponsor, this bill is a relatively simple change designed to
codify the Department's practice in investigating consumer
complaints. State law provides the Department with authority
to receive complaints and inquiries, investigate those
complaints, and prosecute insurers and production agencies
when appropriate and according to statutory guidelines. The
number of justified complaints is published and can affect the
ability of individual insurers to adequately adjust their
rating plans based on their customer service record.
The author and the sponsor state this legislation merely
clarifies the form of the inquiry, not the ability of the
Department to make that inquiry. Past practices of the
Department has been to treat these types of inquiry processes
as separate and distinct, and for good reason. The individual
consumer complaint and MCE processes are authorized by
completely different provisions of the Insurance Code, offer
different levels of confidentiality protection to proprietary
insurance information, are designed to address two markedly
different issues or sets of circumstances, stipulate different
timeframes for turnaround and response, and have completely
different effects on both insurance companies and the insured.
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The proponents further state that treating consumer concerns
under the present practice does not work because it delays the
meaningful resolution of the consumer complaint and is unfair
to the parties.
4)Arguments in Opposition . According to Consumer Watchdog, this
measure would weaken the ability of the investigators of the
Department to find and root out insurance company misbehavior
and fraud. Consumer Watchdog states this bill would create
unnecessary barriers to identifying and stopping bad behavior
by insurance companies.
The Department of Insurance (DOI) states that this bill would
restrict its ability to fully carry out its statutory
responsibilities to investigate consumer complaints and would
result in significant harm to the public. DOI states that the
premise of the bill is misplaced, and that it puts the burden
on consumers to know exactly what the law is, and if they do
not fully understand or articulate it, punishes the DOI and
the public by creating additional, needless bureaucratic steps
if the consumer happens to get it wrong. It is often that
persons who need assistance the most are the ones who least
understand the insurance laws that govern their case.
5)The Problem Addressed by Bill . The background materials
provided to the Committee state that the Department of
Insurance's (DOI's) traditionally rapid consumer investigation
process has now become drastically expanded into a smaller
version of the market conduct examination. Specifically, the
sponsor asserts that DOI makes overly broad and burdensome
data requests that slow down complaint resolution and cause
unnecessary state costs. Examples of this problem have been
requested from the sponsor but not received at the time of the
writing of this analysis. When pressed for examples of this
problem, the sponsor has expressed concern that identifying
specific insurers could lead to regulatory retaliation.
6)Possible Clarifying Amendment Needed . This bill requires the
IC's investigation of public complaints against insurers and
production agencies to be limited to the allegations specified
in the complaint. In reviewing this language with the
author's office and the sponsor, it is recommended that
consideration be given to re-drafting of the bill's provision
so that it provides that when investigating consumer
complaints that the IC's initial request for information be
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necessary or relevant to the consumer's complaint.
REGISTERED SUPPORT / OPPOSITION :
Support
Personal Insurance Federation of California (Sponsor)
Association of California Insurance Companies
Opposition
Consumer Watchdog
Consumer Attorneys of California
Department of Insurance
United Policyholders
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086