BILL ANALYSIS �
AB 1416
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CONCURRENCE IN SENATE AMENDMENTS
AB 1416 (Committee on Insurance)
As Amended August 24, 2011
Majority vote
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|ASSEMBLY: |75-0 |(May 26, 2011) |SENATE: |38-0 |(August 31, |
| | | | | |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.
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.
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
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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5)Repealed the section of law that requires a nonresident who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 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
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
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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
US 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 website 20 business days after the
transmittal of the report.
FISCAL EFFECT : There are no significant costs associated with
this bill.
COMMENTS : 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.
This bill changes the reference from "fire and casualty" 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
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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 47 sections of the Insurance Code
that use the outdated fire and casualty reference.
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
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.
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.
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, may
also serve as a workers' compensation depository.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
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