BILL ANALYSIS �
AB 974
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 974 (Portantino) - As Amended: March 31, 2011
SUBJECT : Workers' compensation insurance: rates
SUMMARY : Provides that workers' compensation insurance rates
may not include a price differential for policies sold through
brokers as opposed to direct sales by the insurer.
Specifically, this bill :
1)Specifies that a rate that includes a price differential
because the policyholder purchased the policy through a broker
is unfairly discriminatory.
2)Precludes the Insurance Commissioner (IC) from approving such
a rate.
EXISTING LAW :
1)Provides that workers' compensation insurers must file their
rates and rating plans with the IC.
2)Establishes a procedure whereby the IC make reject a filed
rate or rating plan, but does not require a prior approval of
the filing before it may be implemented by the insurer.
3)Specifies that rates shall not be unfairly discriminatory.
4)Specifies that rates are unfairly discriminatory if, after
allowing for practical limitations, price differentials fail
to reflect equitably the difference in expected losses and
expenses.
5)Specifies that a rate is not unfairly discriminatory because
it results in a different premium for policyholders with like
loss exposures but different expenses, or like expenses but
different loss exposures, provided the rate reflects the
differences with reasonable accuracy.
FISCAL EFFECT : Undetermined.
COMMENTS :
AB 974
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1)Purpose . According to the author, this bill will prevent the
State Compensation Insurance Fund (SCIF) from charging
business owners who secure their workers' compensation
insurance policy from SCIF extra fees if they use a broker to
acquire the policy. Specifically, the author objects to the
application of the law that allows SCIF to provide a 3% rebate
to policyholders who buy their policy directly from SCIF
without use of an agent or broker.
2)Opposition . SCIF is opposed to the bill, arguing that it
would expressly preclude that which current law currently
recognizes: there is nothing unfair about rates that reflect
different expense factors. SCIF argues that policyholders
should be free to select a less expensive option that does not
require them to pay for services that they do not want. SCIF
also notes that the new language proposed by the bill is in
direct conflict with existing language, that is not being
repealed, that expressly authorizes this sort of price
differential.
3)Bill not limited to SCIF . Although the author focuses on
pricing behavior at SCIF, the bill would apply to all workers'
compensation insurers. In some respects, SCIF is like any
other workers' compensation insurer, competing for business.
However, in other respects, as the market of last resort for
businesses that are mandated to have workers' compensation
insurance, SCIF is in a unique position. Should the bill move
forward, the author should consider whether the provisions
ought to remain broadly applicable, or be limited to SCIF.
REGISTERED SUPPORT / OPPOSITION :
Support
Compline, LLC
Opposition
American Insurance Association (AIA)
SEIU, Local 1000
State Compensation Insurance Fund
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
AB 974
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