AB 1416 Assembly Bill - Bill Analysis

BILL ANALYSIS �

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CONSENT

Bill No: AB 1416
Author: Assembly Insurance Committee
Amended: 7/12/11 in Senate
Vote: 21

SENATE INSURANCE COMMITTEE : 9-0, 06/22/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland

SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8

ASSEMBLY FLOOR : 75-0, 05/26/11 (Consent) - See last page
for vote

SUBJECT : Insurance omnibus

SOURCE : Department of Insurance

DIGEST : This bill is a Department of Insurance Code
Maintenance bill, which updates terminology to make the
code consistent, delete erroneous cross-references, and
perform other non-controversial code clean-up purposes.

ANALYSIS : 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:

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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]

1. 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]

2. Provides that a producer cannot act in the capacity
of managing general agent 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]

3. 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]

4. 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]

5. 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]

6. Requires, in one provision of law, a nonresident who

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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 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]

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. Establishes various fees, including a fee of
fifty-six dollars for filing for registration as a fire
casualty broker-agent. �Sec. 1750 of Ins Code]

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 remains in full force and effect.
�Sec. 1758.2 of Ins Code]

11. 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 U.S. Securities and Exchange
Commission (SEC) or the Financial Industry Regulatory
Authority (FINRA). �Sec. 1758.3 of Ins Code]

12. Requires that all insurer representatives serving on
the advisory committee to the California Automobile
Assigned Risk Plan (CAARP) be salaried employees.
�Sec. 11623 of Ins Code]

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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. �Sec. 11691 of Ins Code]

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 by certified US mail to the examined
insurer's designated agent. �Sec. 12938 of Ins Code.]

15. 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]

16. 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".

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

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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 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 SEC or the FINRA remains in full force and

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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 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.

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.

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.

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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No

SUPPORT : (Verified 7/12/11)

Department of Insurance (source)

ARGUMENTS IN SUPPORT : According to the author's office,
this bill 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 to remove inconsistencies
within existing law governing the business of insurance,
and to clarify and clean-up several Insurance Code
sections.

ASSEMBLY FLOOR : 75-0, 05/26/11 (Consent)
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Carter,
Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer,
Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hern�ndez, Hill, Huber, Hueso,
Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
P�rez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Campos, Cedillo, Davis, Gorell, Jones

JJA:nl 7/12/11 Senate Floor Analyses

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SUPPORT/OPPOSITION: SEE ABOVE

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