BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
AB 1024 (Hueso) Hearing Date: June 22, 2011
As Amended: May 11, 2011
Fiscal: Yes
Urgency: No
SUMMARY Would, subject to approval by the DOI, authorize
insurance agents and brokers to sell low-cost auto insurance
through an Internet website, and requires the California
Automobile Assigned Risk Plan (CAARP or plan) to establish and
maintain, or contract with an entity to establish and maintain a
Web site, meeting specified requirements, to sell low-cost auto
insurance policies to eligible consumers.
DIGEST
Existing law
1. The California Automobile Assigned Risk Plan operates the
California Low-Cost Automobile Insurance program which provides
an affordable auto insurance option for low-income good drivers
in California and since December 2007 the program has been
available to qualifying motorists in all 58 counties;
2. To qualify for a low-cost policy, household income can't exceed
250 percent of the federal poverty level, the driver must be a
"good driver" as defined by law, and the applicant must be a
state resident 19 years of age or older meeting other criteria
too. The program offers policy limits prescribed by law of
$10,000 for bodily injury or death per person in an accident,
$20,000 for bodily injury or death per accident, and $3,000
property damage for each accident with premium that vary by
county; installment options are available;
3. Requires that access to the plan for an immediate date be
provided via a tool-free number and specifies the procedure for
establishing an electronic effective date shall be established
by the plan;
4. The Insurance Commissioner is required to adopt a plan for
operation of the program, including the apportionment of the
AB 1024 (Hueso), Page 2
costs of this program equitably among admitted liability
insurers.
This bill
1. Authorizes a CAARP-certified "producer" (i.e., insurance
agent or broker) to accept and process applications to
purchase low-cost automobile insurance policies through an
Internet Website.
2. Specifies that any consumer information required by this
bill may be accepted by electronic means after the
Department of Insurance (DOI) adopts rules and only if the
information is submitted in accordance with the rules.
3. Requires CAARP to coordinate with the DOI to develop a
system for receiving and assigning policies issued through
Internet websites.
4. Authorizes the plan to request, and the DOI to include in
its annual report to the Legislature that up to $50,000 from
the DOI's existing consumer outreach fund to be used for the
purpose of implementing the above provisions.
5. Requires CAARP to establish and maintain or contract with
an entity to establish and maintain a website that shall
provide the public an option of either:
(1) Referral to a list with full contact
information on certified agents or brokers with an
office near the consumer whom they can contact to buy
a program policy.
(2) Assignment to a randomly selected certified
agent or broker near the consumer who offers in
accordance with this bill the online ability to
receive applications for the program policy.
6. Authorizes the plan, with the Insurance Commissioner's
approval, to permit the use, for a designated period of
time, of the DOI-owned Internet website domain name
http://www.mylowcostauto.com , or other relevant domain
names controlled by the DOI.
7. Requires CAARP to ensure that the Web Site does all the
following:
AB 1024 (Hueso), Page 3
(1) Provides all disclosures and other information
required by law that would otherwise be provided by
the producer;
(2) Effectively educates consumers about the
policy eligibility limits, benefits and limits;
(3) Describes or sets up a process to collect
needed documents for policy qualification
determinations, if any;
(4) Establishes a process to electronically
certify consumer-provided information;
(5) Maintains safeguards to ensure security of
a consumer's information;
(6) Provides the physical address, telephone
number and email of the producer;
(7) Indicates how the consumer may contact the
DOI's Consumer Services Division;
(8) Adheres to any other rules and regulations of
the DOI adopted in furtherance of this bill; and
(9) Notifies the consumer that if he or she does
not qualify for the program policy, other policies may
be available from producers or insurers and directs
the consumer to the Department of Insurance's auto
insurance premium comparison Internet Web page.
8. Specifies the program Web site is not to be made available
to the public until the commissioner determines it provides
all information necessary for consumers to apply to buy the
policy.
9. Requires the Web site to let plan-certified producers
forward applications, supporting documents, and the
applicant's certification to the plan and also requires the
Web site to accept payment by credit card, debit card, such
other forms of electronic payment as the Department
determines appropriate and shall allow payment by check.
10. Requires the Web site to be made available in English and
AB 1024 (Hueso), Page 4
Spanish and as many other languages as is feasible.
11. Requires, if the plan contracts with an entity to
establish and maintain the website, the plan use an open,
competitive bidding process once the Insurance Commissioner
approves the request. The contract period may not exceed 3
years and the plan may determine to renew the contract.
12. Authorize the plan to request, and the DOI to include in
its annual report to the Legislature that up to $100,000
from DOI's existing consumer outreach fund be made
available for the development of the Primary California
Low-Cost Auto Insurance Web Site.
13. Specifies that are not required to provide a copy of the
consumer or other household members' driver's licenses upon
a finding by the DOI that other suitable documentation of
drivers' licensure status is available.
COMMENTS
1. Purpose of the bill According to the author, the purpose of
the bill is to broaden access to California's Low Cost Auto
Insurance Program by making a web-based application process
available to potentially interested consumers.
2. Background and Discussion:
a. The existing program policies are only available via
agents and brokers and utilization has been limited. This
bill proposes to open up an additional channel for
consumers to obtain and carry legally required liability
insurance. The Web-based mechanism proposed by AB 1024
will provide consumers with the ability to both identify
nearby producers whom they can contact directly for
assistance and also permit the direct online submittal of
applications for coverage.
b. While it is unclear that the low-income consumer's
targeted by the Low Cost Auto Program will be a good fit
for a web-based marketing and application system for this
program, it is hard to argue that the innovation proposed
by AB 1024 should not be tried simply because "We've
never done it that way before".
AB 1024 (Hueso), Page 5
c. The problem of uninsured drivers is a persistent one
in California and the hybrid nature of this proposal,
using a web-based system to permit applications as well
as identification of nearby agents, may yield increased
writings; it will definitely provide lessons to CAARP,
the DOI and the private sector on updated marketing
strategies.
3. Summary of Arguments in Support:
a. According to Consumer Watchdog, the bill's Sponsor,
this bill "does not change" California's Low Cost Auto
Insurance program in any substantive way but it will
operate to "bring the program into the 21st century to
improve access to car insurance for low-income families,
while at the same time achieving the fundamental goal of
reducing the number of uninsured drivers on the road".
b. According to the Department of Insurance, this bill
will make low-cost auto insurance more easily accessible
and it will help to reduce the number of uninsured
drivers.
4. Summary of Arguments in Opposition:
a. Insurance Brokers & Agents of the West (IBA West),
who opposed the bill prior to amendments accepted by the
author in the Assembly, has informed the author they are
now neutral on the bill.
b. The California Agents and Brokers Insurance
Association advised the Author prior to the last two sets
of Assembly amendments that they were opposed because the
bill only gives low income consumers a single insurance
option and the Web site mechanism would be in direct
competition with agents and brokers.
5. Amendments:
a. None proposed
6. Prior and Related Legislation:
a. None
AB 1024 (Hueso), Page 6
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
Consumer Watchdog (Sponsor)
California Department of Insurance
Opposition
None Communicated to this Committee
Consultant: Ken Cooley (916) 651-4110