BILL ANALYSIS �
AB 690
Page 1
Date of Hearing: March 30, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 690 (Solorio) - As Introduced: February 17, 2011
SUBJECT : Portable electronics insurance
SUMMARY : Updates the laws governing the sale of insurance in
connection with portable electronic devices and their
accessories and associated services. Specifically, this bill :
1)Authorizes the Insurance Commissioner (IC) to issue a portable
electronics insurance agent license that authorizes the
licensee and its employees and authorized representatives to
sell insurance in connection with, and incidental to, the sale
of "portable electronics" or the sale or provision of
accessories or services related to the use of portable
electronics.
2)Defines "portable electronics" as electronic devices that are
portable in nature, and their accessories and services related
to the use of the device.
3)Defines "portable electronics insurance" as insurance
providing coverage for the repair or replacement of portable
electronics that may cover portable electronics against loss,
theft, mechanical failure, malfunction, damage, or other
applicable perils. This insurance would not cover certain
service contracts, an insurance policy covering a seller's or
manufacturer's obligations under a warranty, or a homeowner's,
renter's, automobile, commercial multiperil, or similar
insurance.
4)Modifies the requirements for an employee or authorized
representative of a portable electronics vendor, issued a
portable electronics insurance agent license, to sell portable
electronics insurance, as follows:
a) The portable electronics vendor, at the time it
submits its license application, shall establish a list
of all locations in California at which it offers
portable electronics insurance.
b) Removes the requirement of this vendor to update the
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above list annually, but the vendor would be required to
maintain the list and make it available to the IC for
review and inspection upon request.
c) The portable electronics vendor, at the time it
submits its license application, shall state the number
of locations at which the vendor offers insurance
products under the portable electronics insurance agent
license.
5)Requires that the retraining of employees and authorized
representatives shall be conducted whenever there is a
material change in the insurance products sold that requires
modification of the training materials, but in no event less
frequently than every two years.
6)Requires, in connection with the sale of portable electronics
insurance by telephone, that if the insurance cost is included
in the purchase or lease of the portable electronic product or
related services, the vendor shall clearly disclose to the
customer that the charges for these products includes the
charge for the insurance coverage.
7)Specifies that charges for portable electronics insurance may
be billed and collected by a portable electronics insurance
agent licensee, and that licensees may receive compensation
for billing and collection services.
8)Prohibits a portable electronics insurance agent from paying
an employee or authorized representative any compensation,
fee, or commission based primarily on the number of customers
electing coverage under the portable electronics insurance
agent's license. However, the law would not prohibit the
payment of compensation to employees and authorized
representatives of a portable electronics agent for activities
under the agent's license that is incidental to their overall
compensation.
EXISTING LAW :
1)Authorizes the IC to issue a communications equipment
insurance agent license that authorizes the licensee to sell
insurance in connection with, and incidental to, the sale of
communications equipment or the sale or provision of service
for communication equipment by a retail vendor.
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2)Defines "communications equipment" as handsets, pagers,
personal digital assistants, portable computers, cellular
telephones, batteries, and other devices or their accessories
used to originate or receive communications signals or
service.
3)Authorizes the charging of application and renewal fees
sufficient to defray the Department of Insurance's (DOI's)
actual costs of processing the applications and renewals for
licensure.
4)Specifies the requirements that must be met by an employee or
franchisee of a communications equipment vendor in order to be
an endorsee authorized to offer insurance products as a
communications equipment insurance agent. These requirements
include:
a) The employee is 18 years of age or older.
b) The communications equipment vender, at the time it
submits its communications equipment agent's license
application, shall establish a list of the names of
endorsees to its communications equipment agent license.
The list must be updated annually, retained for three
years, and made available to the IC for review and
inspection.
c) The communications equipment vendor submits to the
IC with its initial license application and annually
thereafter a certification providing specified
information.
5)Requires that the retraining of "endorsees" (i.e., unlicensed
employees of a communications equipment insurance agent) shall
be conducted whenever there is a material change in the
insurance products sold that requires modification of the
training materials, but in no event less frequently than every
two years.
6)Authorizes the IC to impose fines and suspend or revoke the
license of a communications equipment insurance agent.
7)Prohibits a communications equipment insurance agent from
paying any endorsee any compensation, fee, or commission
dependent on the placement of insurance under the agent's
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license. However, the law does not prohibit the payment of a
"performance-related incentive" which is defined as money or
other tangible or intangible items of value paid or given to
any endorsee of the licensee which is not based solely on the
offering or selling of the insurance products issued to cover
the loss, theft, mechanical failure, or malfunction of or
damage to communications equipment.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Background. In 2002, the California Legislature enacted AB
2856 (Chapter 437, Statutes of 2002) which created a
regulatory framework for the sale of communications equipment
insurance in California. As enacted, this law provides the
Insurance Commissioner with the authority to issue to retail
vendors selling communications equipment the limited authority
to sell insurance covering communications equipment to its
customers.
2)Arguments in support. According to the author, since the
enactment of existing law, the wireless industry has changed
significantly. There has been an increase in the types and
functionality of the devices, they are more technologically
advanced, and they have increased in value. This has led to
more consumers demanding insurance options to protect their
investment and remain electronically connected. Thus, it is
important that the state laws be updated to provide consumers
with adequate access to insurance products so that their
investments are appropriately protected.
This bill would update the existing law to allow new devices to
be insured by replacing the term "communication equipment"
with "portable electronics," would specify that employees and
authorized representatives of a licensed vendor of portable
electronics may offer portable electronics insurance, would
specify that portable electronics insurance may be sold at
times other than when purchasing a portable electronics device
or enrolling in a wireless service plan, and would provide
specified consumer disclosures.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 690
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Asurion
Liberty Mutual Insurance Group
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086