BILL ANALYSIS
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THIRD READING
Bill No: AB 2782
Author: Committee on Insurance
Amended: 5/28/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 9-0, 6/16/10
AYES: Calderon, Cogdill, Florez, Kehoe, Liu, Lowenthal,
Padilla, Price, Runner
NO VOTE RECORDED: Correa, Cox
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 5/13/10 - See last page for vote
SUBJECT : Insurance omnibus
SOURCE : Department of Insurance
DIGEST : This bill makes 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
Producer Licensing Model Act.
ANALYSIS : 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.
CONTINUED
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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
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 six hours.
9. Authorizes the Department of Insurance (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
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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. Makes 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. Requires a person to be licensed as an accident and
health agent in order to transact disability insurance.
3. Separates current fire and casualty broker-agent
licenses into two separate licenses: property
broker-agent license and casualty broker-agent license.
Also adjusts 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. Clarifies 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. Provides to 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. Aligns the definition of "Credit Insurance Agent" in the
Insurance Code with the definition used in the National
Association of Insurance Companies (NAIC) Producer
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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. Changes 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. Specifies 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.
9. Clarifies the DOI's authority to summarily revoke a bail
license if the licensee is convicted of a felony.
10.Specifies 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.Repeals 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.Makes other minor, conforming, and related changes and
deletes obsolete provisions.
Background
The business of insurance is principally regulated at the
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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 NAIC.
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.
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.
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.
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.
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.
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Prior Legislation
AB 2203 (DeLeon) Chapter 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.
AB 800 (Duvall) Chapter 254, Statutes of 2009, provided for
applicants and licensees to notify DOI of address changes
through an electronic means but did not specify that such
notification include changes to the licensees residence and
principal business.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/29/10)
Department of Insurance (source)
Association of California Insurance Companies
California Bail Agents Association
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava,
Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, John A. Perez
NO VOTE RECORDED: Caballero, Norby, Skinner
JA:nl 6/29/10 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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