BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
AB 1416 (Committee on Insurance)Hearing Date: June 22, 2011
As Amended: June 14, 2011
Fiscal: Yes
Urgency: No
SUMMARY This is a DOI "Code Maintenance" bill, which updates
terminology to make the code consistent, delete erroneous
cross-references, and perform other non-controversial code
clean-up purposes.
DIGEST
Existing law
1. Defines a "fire and casualty licensee" as a person
authorized to act as 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]
AB
1416 (Committee on Insurance), Page 2
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 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 the bond of a fire and casualty broker-agent to
be in the amount of $10,000, as specified. �Sec. 1665 of
Ins Code]
7. 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]
8. 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 Insurance Commissioner a notice
executed by an insurance agent or broker appointing and
agreeing to employ the solicitor as an employee. �Sec. 1704
of Ins Code]
9. 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]
10. Establishes various fees, including a fee of fifty-six
dollars for filing for registration as a fire casualty
AB
1416 (Committee on Insurance), Page 3
broker-agent. �Sec. 1750 of Ins Code]
11. 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]
12. Specifies that the Insurance Commissioner 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]
13. Requires that all insurer representatives serving on the
advisory committee to CAARP be salaried employees. �Sec.
11623 of Ins Code]
14. 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. �Sec. 11691 of Ins
Code]
15. Requires the Insurance Commissioner, 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.]
16. Allows the examined insurer 10 business days after the
transmittal of the above report to submit comments to the
Insurance Commissioner. �Sec. 12938 of Ins. Code]
17. Requires the Insurance Commissioner to publish the adopted
report on the department's website 10 business days after
the transmittal of the report. �Sec. 12938 of Ins. Code]
This bill
1. Revises current law throughout the Insurance Code to
update references from "fire and casualty broker agent" to
"property broker-agent" and "casualty broker-agent".
AB
1416 (Committee on Insurance), Page 4
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. Revises current law to clarify that individuals and
organizations licensed for both property and casualty are
only required to obtain one $10,000 bond to act as a broker.
6. 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.
7. Authorizes personal lines broker-agents and limited lines
automobile insurance agents to be appointed as insurance
solicitors, and requires organizational licensees to notify
the Insurance Commissioner when personal lines broker-agents
and limited lines automobile insurance agents are given
authority to transact under the organizational license.
8. Requires every life agent who sells annuities to
satisfactorily complete four hours of training prior to each
license renewal.
9. Conforms the authorized fee for the casualty broker-agent,
and property broker-agent as that nomenclature is revised by
this bill to that of the current fire casualty broker-agent
($56.00 dollars) and authorizes the same fee ($56.00
AB
1416 (Committee on Insurance), Page 5
dollars) when a single application is tendered for a joint
property and casualty broker-agent application.
10. 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.
11. 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.
12. 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.
13. 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.
14. Requires the Insurance Commissioner, 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.
15. Allows the examined insurer 20 business days after the
transmittal of the above report to submit comments to the
Insurance Commissioner.
AB
1416 (Committee on Insurance), Page 6
16. Requires the Insurance Commissioner to publish the adopted
report on the department's Internet website 20 business days
after the transmittal of the report.
COMMENTS
Purpose of the bill According to the Author, AB 1416,
sponsored by the DOI, repeals Insurance Code provisions that are
inconsistent with more recent legislation, makes technical
corrections, and updates the codes governing insurance.
Existing law contains a series of conflicting code sections
governing the business of insurance, and that require technical
amendments in order for the Insurance Code to become consistent
on a policy basis.
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 (DOI) to remove inconsistencies within
existing law governing the business of insurance, and to clarify
and clean-up several Insurance Code sections.
1. Background and Discussion:
a. The length of this bill notwithstanding, the changes
are all technical in nature, revising and updating
nomenclature, removing erroneous cross-references and
generally functioning as a "maintenance of the code"
bill.
2. Summary of Arguments in Support:
a. AB 1416 is a needed Code maintenance bill. As stated
by the DOI, this bill's sponsor "(t)his bill remedies
various issues vetted by the Department of Insurance
(CDI) to clarify and cleanup several code sections".
3. Summary of Arguments in Opposition:
a. None received
4. Amendments:
a. It is suggested the author may wish to consider
AB
1416 (Committee on Insurance), Page 7
revisions to page 6, line 33, page 7 line 10, and page 7
line 14, to delete the phrase "property-broker agent" and
replace it with "property broker-agent" so as to remain
consistent with the use of the hyphen in the new
nomenclature added elsewhere throughout the bill.
b. The Author should note that the Legislative Counsel
Corrections Unit advises AB 1416 requires a corrective
amendment to eliminate avoid a conflict with AB 999.
5. Prior and Related Legislation:
a. None
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Department of Insurance (Sponsor)
Opposition
None
Consultant: Ken Cooley (916) 651-4110