BILL ANALYSIS �
AB 1416
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1416 (Committee on Insurance) - As Amended: April 15, 2011
SUBJECT : Insurance omnibus
SUMMARY : Repeals Insurance Code provisions that are
inconsistent with more recent legislative enactments, makes
technical corrections, and updates the codes. Specifically,
this bill :
1)Changes the reference from "fire and casualty broker agent" to
"property broker-agent" and "casualty broker-agent" in 47
sections of the Insurance Code.
2)Requires that a copy of changes to filed documents in
connection with a domestic insurer's certificate of authority
to transact business in California shall be filed with the
Insurance Commissioner.
3)Provides that, upon request, an out-of-state or foreign
country insurer shall file any change on its documents
including its articles of incorporation.
4)Requires a nonresident applicant for an organizational license
to name at least one person from a state other than California
who may exercise the power and perform the duties under their
license. Additional persons endorsed to that license may be
residents of other states, including California.
5)Repeals the section of law that requires a nonresident who
secures a license without examination through the filing of a
certificate attesting the person is licensed in another state,
and who subsequently seeks a license as a resident, to take
and pass the qualifying examination for the license sought.
Another provision of law, which is retained, specifies that
such a licensee is not required to complete an examination.
6)Authorizes personal lines broker-agents and limited lines
automobile insurance agents to be appointed as insurance
solicitors, and requires organizational licensees to notify
the IC when personal lines broker-agents and limited lines
automobile insurance agents are given authority to transact
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under the organizational license.
7)Requires every life agent who sells annuities to
satisfactorily complete four hours of training prior to each
license renewal.
8)Provides that any authority to transact variable contracts in
connection with certain pension funds is effective only while
a permanent underlying life agent's license and registration
in accordance with the rules of the U.S. Securities and
Exchange Commission (SEC) or the Financial Industry Regulatory
Authority (FINRA) remains in full force and effect.
9)Specifies that any authority granted to a life agent to
transact variable contracts shall immediately terminate upon
the life agent no longer being registered to sell securities
in accordance with the rules of the SEC or FINRA.
10)Authorizes the insurer representative serving on the advisory
committee to the California Automobile Assigned Risk Plan
(CAARP) to be an employee of one subsidiary and represent
another subsidiary. Specifically, an insurer representative
must be: (a) a salaried employee or officer of the named
insurer, (b) a salaried employee or officer of another insurer
from a group of insurance companies under the same management
as the named insurer, or (c) a salaried employee or officer of
the overall holding company.
11)Requires insurers issuing workers' compensation insurance to
deposit specified assets including cash instruments, approved
interest-bearing securities, approved stocks readily
convertible into cash, investment certificates, certain share
accounts in savings and loan associations, and certificates of
deposit or savings deposits in a bank licensed to do business
in this state, or is either domiciled in and has a principal
place of business in this state, or is a national bank
association with a trust office located in this state.
12)Requires the IC, upon adopting a report of an examination of
unfair or deceptive practices regarding an insurer, to
transmit a copy of that report electronically or by certified
US mail to the examined insurer's designated agent.
13)Allows the examined insurer 20 business days after the
transmittal of the above report to submit comments to the IC.
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14)Requires the IC to publish the adopted report on the
department's Internet website 20 business days after the
transmittal of the report.
EXISTING LAW :
1)Defines a "fire and casualty licensee" as a person authorized
to act an insurance agent, broker, or solicitor, and provides
that a license to act as a fire and casualty broker-agent is
of the following types:
a) Property, which entitles the licensee to transact
insurance coverage on the loss or damage to property;
b) Casualty, which entitles the licensee to transact
insurance coverage against legal liability, including
that for death, injury, disability, or damage to real or
personal
property. �Sec. 33.5 and 1625 of Ins Code]
2)Prohibits persons and firms from soliciting or procuring
liability insurance from a risk retention group unless the
person or firm is licensed as a fire and casualty
broker-agent. �Sec. 137 of Ins Code]
3)Provides that a producer cannot act in the capacity of
managing general agent (MGA) for an insurer that holds a
certificate of authority unless the producer is licensed as a
fire and casualty broker-agent or as a life agent. �Sec.
769.82 of Ins Code]
4)Requires that a copy of changes to filed documents in
connection with an insurer's certificate of authority to
transact business in California shall be filed with the
Insurance Commissioner. �Sec.713 of Ins Code]
5)Requires, in one provision of law, that a nonresident
applicant for an organizational license name at least one
person from their home state who may exercise the power and
perform the duties under their license (among the licenses
are: a life-only agent, an accident and health agent, a
property broker-agent, a personal lines licensee, and a credit
insurance agent). Additional persons endorsed to that license
may be residents of another state, but may not be residents of
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California. �Sec. 1679 of Ins Code] In another provision of
law, more recently amended, the additional persons endorsed to
that license may be residents of other states, including
California. �Sec. 1656 of Ins Code]
6)Requires, in one provision of law, a nonresident who secures a
license without examination through the filing of a
certificate attesting the person is licensed in another state,
and who subsequently seeks a license as a resident, to take
and pass the qualifying examination for the license sought .
�Sec. 1680 of Ins Code] In another provision of law, which
was amended more recently, such a licensee is not required to
complete an examination. �Section 1675, subdivision (f), of
Ins Code]
7)Requires every fire and casualty broker-agent acting in the
capacity of an insurance solicitor to have filed on his or her
behalf with the IC a notice executed by an insurance agent or
broker appointing and agreeing to employ the solicitor as an
employee. �Sec. 1704 of Ins Code]
8)Requires every life agent who sells annuities to
satisfactorily complete four hours of training every two years
prior to license renewal. �Sec. 1749.8 of Ins Code]
9)Provides that any authority to transact variable contracts in
connection with certain pension funds is effective only while
a permanent underlying life agent's license remains in full
force and effect. �Sec. 1758.2 of Ins Code]
10)Specifies that the IC shall not grant authority to transact
variable contracts unless the life agent or applicant
furnishes proof that he or she is registered to sell
securities in accordance with the rules of the SEC or FINRA.
�Sec. 1758.3 of Ins Code]
11)Requires that all insurer representatives serving on the
advisory committee to CAARP be salaried employees. �Sec.
11623 of Ins Code]
12)Requires insurers issuing workers' compensation insurance to
deposit specified assets including cash instruments, approved
interest-bearing securities, approved stocks readily
convertible into cash, investment certificates, certain share
accounts in savings and loan associations, and certificates of
AB 1416
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deposit or savings deposits in a bank licensed to do business
in this state. �Sec. 11691 of Ins Code]
13)Requires the IC, upon adopting a report of an examination of
unfair or deceptive practices regarding an insurer, to
transmit a copy of that report by certified US mail to the
examined insurer's designated agent. �Sec. 12938 of Ins
Code.]
14)Allows the examined insurer 10 business days after the
transmittal of the above report to submit comments to the IC.
�Sec. 12938 of Ins. Code]
15)Requires the IC to publish the adopted report on the
department's website 10 business days after the transmittal of
the report. �Sec. 12938 of Ins. Code]
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Each year the Assembly Insurance Committee introduces a set of
committee bills, authored by a majority of the committee
Members, to address non-controversial insurance issues. This
bill is recommended by the Insurance Commissioner and the
Department of Insurance to remove inconsistencies within
existing laws governing the business of insurance, and to
clarify and clean-up several code sections.
2)"Fire and casualty" reference change to "property and
casualty. " Last year, AB 2782 (Committee on Insurance),
Chapter 400, Statutes of 2010, included a provision to
separate the fire and casualty broker-agent license into
separate property broker-agent and casualty broker-agent
licenses. This change was made for the purpose of being
uniform with the six major license lines of authority that are
contained in the National Association of Insurance
Commissioner's (NAIC) Producer Licensing Model Act. However,
a significant number of code sections retained the "fire and
casualty" references that were inadvertently left out of AB
2782. This proposal corrects those 47 sections of the
Insurance Code that use the outdated fire and casualty
reference.
3)Eliminate the conflict in codes regarding certain license
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requirements. Recent legislation, AB 800 (Duvall), Chapter
254, Statutes of 2009, provides that the additional persons
endorsed for an organizational license may be residents of
other states, including California. (See Section 1656 of the
Insurance Code.) However, an earlier enacted law, AB 2125,
Chapter 740, Statutes of 2006, requires that additional
persons endorsed for an organizational license be residents of
another state, but may not be residents of California. (See
Section 1679 of the Insurance Code.) Since the effective
January 1, 2010, effective date of AB 800, the Department of
Insurance has not enforced the earlier law.
4)Clarify duties regarding articles of incorporation of
licensees. This proposal eliminates the need to review the
articles of incorporation for licensees that are incorporated
in another state or country. State insurance departments
across the United States are shifting their resources to focus
on oversight of their domestic companies (companies that
consider California their home state) and rely more on sister
insurance departments to evaluate the companies originally
licensed in their states. This change will help the
Department to concentrate its resources on more pressing
matters that serve to enhance the core mission of maintaining
a vibrant and solvent insurance industry.
5)Clarify the Workers' Compensation Depository Qualifications.
This proposal is clean-up to AB 2731 (Emmerson), Chapter 78,
Statutes of 2008, which provided for a national bank
headquartered in another state but with a trust office in
California to serve as a qualified custodian of domestic
insurer investments. This bill clarifies that a bank, which
meets the requirements specified in AB 2731, may also serve as
a workers' compensation depository.
REGISTERED SUPPORT / OPPOSITION :
Support
Insurance Commissioner Dave Jones
Opposition
None received.
AB 1416
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Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086