BILL ANALYSIS �
AB 1416
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CONCURRENCE IN SENATE AMENDMENTS
AB 1416 (Insurance Committee)
As Amended July 12, 2011
Majority vote
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|ASSEMBLY: |75-0 |(May 26, 2011) |SENATE: |37-0 |(July 14, |
| | | | | |2011) |
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Original Committee Reference: INS.
SUMMARY : Repeals Insurance Code provisions that are
inconsistent with more recent legislative enactments, makes
technical corrections, and updates the codes.
The Senate amendments :
1)Define a "general agent" as an individual licensed as a
property broker-agent and licensed as a casualty broker-agent
who, pursuant to a written contract with an insurer, manages
insurance transactions and has the power to appoint and
terminate local agents, accept or decline risks, and collect
premium moneys from producing broker-agents.
2)Specify that individuals and organizations licensed for both
property and casualty are only required to obtain one $10,000
bond to act as a broker.
3)Require in connection with vehicle service contracts that the
service contract administrator be licensed as a property
broker-agent and casualty broker-agent.
4)Eliminate specified requirements in connection with the
issuance of a license to operate more than one surplus line
office. This amendment would inadvertently chapter out
Section 22 of the recently enacted AB 315 (Solorio), Chapter
83, Statutes of 2011.
AS PASSED BY THE ASSEMBLY , this bill:
1)Changed the reference from "fire and casualty broker-agent" to
"property broker-agent" and "casualty broker-agent" in 47
sections of the Insurance Code.
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2)Required 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 (IC).
3)Provided that, upon request, an out-of-state or foreign
country insurer shall file any change on its documents
including its articles of incorporation.
4)Required 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5)Repealed the section of law that requires a nonresident who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)Authorized 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
under the organizational license.
7)Required every life agent who sells annuities to
satisfactorily complete four hours of training prior to each
license renewal.
8)Provided 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 United States (U.S.)
Securities and Exchange Commission (SEC) or the Financial
Industry Regulatory Authority (FINRA) remains in full force
and effect.
9)Specified 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
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in accordance with the rules of the SEC or FINRA.
10)Authorized 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
would be required to 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)Required 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)Required 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
U.S. mail to the examined insurer's designated agent.
13)Allowed the examined insurer 20 business days after the
transmittal of the above report to submit comments to the IC.
14)Required the IC to publish the adopted report on the
department's Internet Web site 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; and,
b) Casualty, which entitles the licensee to transact
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insurance coverage against legal liability, including that
for death, injury, disability, or damage to real or
personal
property.
2)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 IC.
3)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. In another provision of law, more recently
amended, the additional persons endorsed to that license may
be residents of other states, including California.
4)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.
In another provision of law, which was amended more recently,
such a licensee is not required to complete an examination.
5)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.
6)Requires every life agent who sells annuities to
satisfactorily complete four hours of training every two years
prior to license renewal.
7)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.
8)Specifies that the IC shall not grant authority to transact
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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.
9)Requires that all insurer representatives serving on the
advisory committee to CAARP be salaried employees.
10)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.
11)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 U.S. mail to the
examined insurer's designated agent.
12)Allows the examined insurer 10 business days after the
transmittal of the above report to submit comments to the IC.
13)Requires the IC to publish the adopted report on the
department's Web site 10 business days after the transmittal
of the report.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, there are no significant costs associated with this
bill.
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 IC 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)This bill changes the reference from "fire and casualty" to
"property and casualty." Last year, AB 2782 (Insurance
Committee), Chapter 400, Statutes of 2010, included a
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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 bill corrects those 47 sections of the Insurance
Code that use the outdated fire and casualty reference.
3)This bill eliminates the conflict in code sections regarding
certain license 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
Insurance Code Section 1656.) However, an earlier enacted
law, AB 2125 (Vargas), 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 Insurance Code Section 1679.) Since January
1, 2010, effective date of AB 800 (Duvall), the Department of
Insurance has not enforced the earlier law.
4)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 U.S.
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 of Insurance to
concentrate its resources on more pressing matters that serve
to enhance the core mission of maintaining a vibrant and
solvent insurance industry.
5)This bill clarifies 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
(Emmerson), may also serve as a workers' compensation
depository.
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Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0001737