BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 2782 (Committee on Insurance) Hearing Date: June 16, 2010
As Amended: May 28, 2010
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor(05/13/10)76-0/Pass
Asm. Appr.
(05/05/10)17-0/Pass
Asm. Ins. (04/21/10)12-0/Pass
SUMMARY Would make various changes, including technical
revisions to investment law and licensing-related changes,
including changes to conform California law with the National
Association of Insurance Commissioners (NAIC) Producer Licensing
Model Act (PLMA).
DIGEST
Existing law
1. Imposes a limit on the amount of foreign investments
that domestic insurers may make of 20 percent and sets
forth requirements related to mutual funds that invest in
foreign securities;
2. Prevents fire and casualty broker-agents from
transacting life insurance, but permits these agents to
transact disability insurance;
3. Provides that the combined fire and casualty
broker-agent license requires a pre-licensing education
requirement of 40 hour, and 25 hours of continued education
annually for the first four years of licensure and 24 hours
every two years thereafter as a condition for license
renewal;
4. Requires insurance licensees to immediately notify the
AB
2782 (Committee on Insurance), Page 2
Insurance Commissioner of changes to their mailing address;
5. Requires an administrative hearing to be conducted to
consider a business entity license application when one of
its officers or controlling persons holds a restricted
license;
6. Provides that the insurance that may be sold in
connection with the sale of, or incidental to a loan for,
real property may include, under specified conditions,
credit life, credit disability, credit involuntary
unemployment or credit loss of income, and credit property
insurance;
7. Specifies that bail licenses are for a one year term
expiring on June 30 and insurance adjusters licenses are
for a two-year term expiring on May 31 of even-numbered
years;
8. Specifies the continuing education for bail agent and
solicitor license renewal is 6 hours;
9. Authorizes DOI to summarily revoke a license, including
a bail license, if the licensee is convicted of a felony.
However, Insurance Code Section 1807.5 specifies that a
hearing is required prior to the suspension of a bail agent
license;
10. Requires independent and public insurance adjusters to
complete 24 hours of continued education as a condition of
license renewal, but does not specify the number of hours
that must involve ethics training;
11. Authorizes DOI to intervene in "qui tam" cases, but sunsets
those provisions on December 31, 2010.
This bill
1.Would make technical changes in current law to enable insurers
to invest in mutual funds that make investments in foreign
securities without the requirement that such a fund must have
arrangements to hold all assets in the United States;
2.Would require a person to be licensed as an accident and
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2782 (Committee on Insurance), Page 3
health agent in order to transact disability insurance;
3.Would separate current fire and casualty broker-agent licenses
into two separate licenses - property broker-agent license and
casualty broker-agent license. Would also adjust the
pre-licensing education requirement to 20 hours for each
respective license so there is no net change resulting from
the bifurcation, and would modify the continuing education
requirement for individuals licensed less than four years to
24 hours every two years;
4.Would clarify that the obligation under current law for an
insurance licensee to immediately notify the Insurance
Commissioner of their change of address includes changes of
address to either their residence or their principal business.
5.Would provide to the Department of Insurance (DOI) authority
to summarily issue a restricted license to a business entity
when an officer or controlling person of the entity holds a
restricted individual license, but maintains the business
entity's right to request DOI to reconsider the restricted
license decision;
6.Would align the definition of "Credit Insurance Agent" in the
Insurance Code with the definition used in the NAIC Producer
Licensing Model Act (PLMA). The PLMA definition permits these
credit insurance agents to transact Guaranteed Automobile
Protection (GAP) insurance (GAP insurance is insurance which
protects a car buyer/lessee with a promise to indemnify the
purchaser or lessee for any of the difference between the
actual cash value of the insured's vehicle at the time of an
unrecovered theft or total loss and the amount owed on the
vehicle pursuant to the terms of a loan, lease agreement, or
installment sales contract used to purchase or lease the
vehicle) ;
7.Would change the bail agent and solicitor license from a
one-year term to a two-year term, and would modify the
continuing education requirement to 12 hours biennially so
there is a no net change from current requirements;
8.Would specify that the expiration date on new bail and
insurance adjuster licenses issued after December 31, 2010 is
the last day of the month in which the original license was
issued;
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2782 (Committee on Insurance), Page 4
9.Would clarify the DOI's authority to summarily revoke a bail
license if the licensee is convicted of a felony;
10.Would specify that three of the 24 hours of continued
education that independent public insurance adjusters must
complete as a condition of license renewal must be in ethics
training;
11.Would repeal the sunset date of December 31, 2010 for the law
authorizing the Insurance Commissioner to receive attorney
fees and costs as part of a judgment in "qui tam" cases (suits
brought in the state's name by private parties) in which the
department intervenes. The cases impacted by this provision
involve insurance fraud and the department's involvement in
such cases serves as a significant fraud deterrent;
12.Would make other minor, conforming, and related changes and
deletes obsolete provisions.
COMMENTS
1. Purpose of the bill To clarify California Department of
Insurance (DOI) responsibilities and authorities and to make
various licensing-related-changes, including several to
align California law with the NAIC Producer Licensing Model
Act (PLMA).
2. Background The business of insurance is principally
regulated at the state level. Because certain issues of
insurance law and trends transcend state boundaries,
insurance regulators have a long history of collaboration on
matters of common concern, a process which is undertaken
under the auspices of the National Association of Insurance
Commissioners (NAIC).
3. In the effort to promote commonality among the states so as
to support a seamless oversight system built on the platform
of 50 independently sovereign states, the NAIC has
undertaken various initiatives. Some of these fit within
NAIC accreditation program where the ability of a state to
receive accreditation is dependent on its adoption of
statutes and regulations that bear a substantial similarity
to models promulgated by the NAIC.
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2782 (Committee on Insurance), Page 5
4. In other areas, commonality is advanced by the formulation
of suggested model laws which are intended to serve as a
resource and a framework to further important regulatory
ends as well as support the national system of state-based
regulation.
5. The NAIC's Producer Licensing Model Act is a suggested or
advisory model which has gained support among various
groups, including insurance agent groups, who believe it
supports achieving a modern, nationwide insurance producer
licensing system.
6. Generally speaking, the PLMA Changes proposed by this act
are non-controversial as are the non-PLMA changes proposed
by the Department to facilitate improved management and
regulatory oversight.
7. The one change that has drawn an objection is the change to
a two year licensing cycle for bail agents with expiration
dates tied to the month of issuance, rather than renewal for
all licensees based on a June 30th expiration date. While
this change is supported by the Department of Insurance for
purposes of improved workload management and administration
and two statewide associations of bail agents, a continuing
education provider for bail agents has expressed opposition
to this change as approved by the Assembly for the added
burden it may impose on continuing education providers and
their practices.
8. Questions None
9. Suggested Amendments None
10. Prior and Related Legislation
a. AB 2203 (DeLeon, Ch. 129, Statutes of 2008), increased
the limit on the amount of foreign investments that
domestic insurers may make from 4 to 20 percent. The bill
also clarified the requirements related to mutual funds
that invested in foreign securities but the issue of how a
mutual fund holds its assets relating to foreign
investments was inadvertently not addressed.
b. AB 800 (Duvall, Ch. 254, Statutes of 2009) provided
for applicants and licensees to notify CDI of address
changes through an electronic means but did not specify
AB
2782 (Committee on Insurance), Page 6
that such notification include changes to the licensees
residence and principal business.
POSITIONS
Support
California Department of Insurance (Sponsor)
Association of California Insurance Companies
Golden States Bail Agents Association
California Bail Agents Association
Oppose
Mr. J.F. Schneider, CEO, CE3000.com, a bail agent continuing
education provider
Consultant: Kenneth Cooley (916) 651-4102