BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 690|
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THIRD READING
Bill No: AB 690
Author: Solorio (D)
Amended: 5/27/11 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 6/8/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 70-0, 5/12/11 (Consent) - See last page
for vote
SUBJECT : Portable electronics insurance
SOURCE : Author
DIGEST : This bill revises and recasts the laws governing
the sale of insurance in connection with portable
electronic devices and their accessories and associated
services.
ANALYSIS :
Existing law:
1. Authorizes the Insurance Commissioner (IC) to issue a
communications equipment insurance agent license that
authorizes the licensee to sell insurance in connection
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with, and incidental to, the sale of communications
equipment or the sale or provision of service for
communication equipment by a retail vendor.
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
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
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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 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.
This bill:
1. Revises and recasts existing California Insurance Code
provisions applicable to "communication equipment
insurance" to apply to a broadened class of portable
electronic devices and related items and services under
the term 'portable electronics insurance'.
2. Authorizes the IC to issue a portable electronics
insurance agent license that authorizes the licensee and
its employees and authorized representatives, who are
termed "endorsees", 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.
3. Defines "portable electronics" as electronic devices
that are portable in nature, and their accessories and
services related to the use of the device.
4. 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 multi-peril, or similar
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insurance.
5. Modifies the requirements for an endorsee (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 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.
6. 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 three years.
7. 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 and conspicuously disclose to the
customer that the coverage is included with the purchase
of the portable electronics or related services.
8. Specifies that charges for portable electronics
insurance may be billed and collected by a portable
electronics insurance agent licensee and provides
licensees shall not be required to maintain those funds
in a segregated account if the insurer represented by
the licensee has provided in writing that the funds need
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not be segregated. This bill states all funds received
by a vendor from a customer for the sale of portable
electronics insurance shall be considered funds held in
trust by the vendor in a fiduciary capacity for the
benefit of the insurer, and provides licensees may
receive compensation for billing and collection
services.
9. 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, this
bill does 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, and states such incidental compensation
shall not exceed $15 per customer who purchases portable
electronics insurance coverage.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 6/28/11)
Asurion
AT&T
Department of Insurance
Liberty Mutual Insurance Group
ARGUMENTS IN SUPPORT : According to the author:
"Assembly Bill 690 would amend existing law applicable to
the sale of insurance on portable electronics devices to
bring the law into the 21st century and ensure that a
quickly changing technological environment is accounted
for under California's Insurance Code.
"The statutory definition of 'communications equipment'
is outdated. This bill would change that definition to
'portable electronics.' The proposed definition is
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broader and would allow new devices to be insured without
having to readdress the statutory definition each time a
new product or device is brought to the market.
"This bill would also rectify inconsistencies within the
current statutory framework and clarify that employees
and authorized representatives of a properly licensed
vendor of portable electronics may offer the insurance
product pursuant to the vendor's license.
"The bill also would authorize the sale of portable
electronics insurance outside of a scenario where the
consumer is either purchasing a portable electronics
device or is enrolled or enrolling in a wireless service
plan.
In addition, this bill would codify how these programs
are being offered today to ensure that consumers are
protected and informed when making the decision to enroll
for insurance coverage under one of these programs."
ASSEMBLY FLOOR : 70-0, 5/12/11
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel P�rez, Silva, Skinner, Smyth, Solorio,
Swanson, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Alejo, Cedillo, Conway, Garrick, Gorell,
Roger Hern�ndez, Bonnie Lowenthal, Mitchell, Portantino,
Torres
JJA:kc 6/28/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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