BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
AB 2354 (Solorio) Hearing Date: June 13, 2012
As Amended: June 4, 2012
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor(05/17/12)75-0/Pass
Asm. Appr. (05/09/12)17-0/Pass
Asm. Ins. (04/18/12)13-0/Pass
SUMMARY Would update the definition of travel insurance and
shift the licensing and regulatory compliance responsibilities
from travel retailers to limited lines travel insurance agents.
DIGEST
Existing law
1. Authorizes the issuance of limited licenses as travel
insurance agents for employees of railroads, steamships,
airlines, and other organizations engaged in transporting
persons as common carriers and to individuals or employees
of persons engaged in selling transportation on those
common carriers;
2. Requires that a limited license to sell travel insurance
be applied for and renewed in the same manner as is
provided for a licensee to act as a property broker-agent
or a casualty broker-agent, and that an applicant pay a
filing fee, except that an applicant for a limited license
as a travel insurance agent need not pass a qualifying
examination.
This bill
1. Would revise and recast the provisions related to travel
insurance by, among other things, changing the definition
of travel insurance to delete references to transportation
ticket policies in disability insurance policies and
AB 2354 (Solorio), Page 2
include interruption or cancellation of a trip or event,
loss of baggage or personal effects, damages to
accommodations or rental vehicles, and sickness, accident,
disability, or death occurring during travel;
2. Would authorize the Insurance Commissioner to issue a
limited lines travel insurance agent license to any
organization engaged in transacting travel insurance,
through travel retailers, as those terms are defined, and
would define a limited lines travel insurance agent to mean
an insurer designee that is licensed to transact travel
insurance;
3. Would require the licensed limited lines travel
insurance agent and a travel retailer to follow
administrative and disclosure requirements such as
including the agent's identification information on and
making certain disclosures to the consumer in the marketing
materials and fulfillment packages, and requiring the agent
to establish and maintain a register noting each travel
retailer that transacts travel insurance;
4. Would delete provisions requiring a limited license as
provided for a licensee to act as a property or casualty
broker-agent and incidental regulations, and would instead
require that the applicant for a limited lines travel
insurance agent license file with the Insurance
Commissioner a written application for licensure, signed by
the applicant or an officer of the applicant, in the form
prescribed by the commissioner, a certificate by the
insurer on a form prescribed by the commissioner stating,
among other things, that the insurer has satisfied itself
that the applicant is trustworthy and competent to act as
its limited lines travel insurance agent, and an
application fee and a renewal fee in an amount determined
by the commissioner as sufficient to defray the increased
reasonable costs incurred by the department to implement
the provisions of this bill;
5. Would authorize the commissioner to take disciplinary
action against a limited lines travel insurance agent for a
violation of the provisions of the Insurance Code by a
travel retailer or a travel retailer's employee;
6. Would make conforming changes and delete obsolete
provisions.
AB 2354 (Solorio), Page 3
COMMENTS
1. Purpose of this bill To revise California law relating to
the sale of travel insurance to comply with the licensing
standards adopted by the National Association of Insurance
Commissioners. These standards were developed to establish
nationally consistent licensing requirements for travel
insurance agents while ensuring consumer protection.
Implementing an approach consistent with the model drafted
by the NAIC will reduce the burden of regulation on travel
retailers while focusing regulatory scrutiny on those most
responsible for the insurance product.
2. Background
a. Travel Insurance. Travel insurance protects
against interruption or cancellation of a trip; loss of
baggage or personal effects; damage to accommodations or
rental vehicles (not including damage waiver contracts);
and sickness, accident, disability, or death occurring
during travel. Frequently, travel insurance is offered
through travel retailers.
Existing law provides that limited licenses to sell
travel insurance may be issued to employees of common
carriers and to individuals or employees of persons
engaged in selling transportation on such common
carriers (a travel retailer). This allows a travel
retailer to transact travel insurance to their
customers, although travel retailers are not agents of
travel insurance companies. The travel retailer retains
the responsibility for regulatory compliance, license
fees, etc. that comes with the limited license.
The following summarizes how the American Association of
Travel Agents (ASTA) describes the typical travel
insurance transaction:
The agent informs a client during the
reservation and booking process that travel
insurance is available for purchase and calls
attention to the possibility that the client
may become ill or experience some other event
after the booking and before or during travel.
AB 2354 (Solorio), Page 4
The agent tenders a brochure, or links to
online information, that is provided by the
actual insurer. The client then decides
whether he or she wants to pay the fee, and if
so, pays the insurance vendor directly. In
some cases, the travel agency might accept the
payment and forward it to the insurance
company. In either case the insurance company
is the provider of the insurance policy and is
the source of any binding explanation of the
coverages, amounts, etc.
b. Shifting the Licensing Requirement from Travel
Retailers to Insurance Agents. AB 2354 would shift the
licensing requirements from travel agents and employees
of common carriers (airlines, railroads, bus lines,
etc.) to a limited lines travel insurance agent
appointed by an insurance company and licensed by the
department.
The limited lines travel insurance agent could then
authorize a travel retailer to transact travel insurance
on its behalf, but the agent remains responsible for
complying with regulations that provide notice to
potential purchasers of travel insurance, requires
maintenances of certain records, etc.
c. Fees. SB 2354 would significantly reduce the
number of licenses issued by CDI and the fees collected.
The bill permits CDI to make up the difference by
increasing licensing fees sufficient to defray the costs
of implementing this bill.
1. Summary of Arguments in Support
a. Numerous travel agents and agencies support this
bill because it is consistent with national standards
adopted by the NAIC and proposed by the National
Conference of Insurance Legislators (NCOIL).
b. According to several supporters of this bill,
regulations vary from state to state and retailers are
sometimes discouraged from offering travel insurance
AB 2354 (Solorio), Page 5
due to burdens of licensing and regulation, especially
for retailers doing business online or in multiple
jurisdictions. According to ASTA, Travel insurance
amounts to, on average, only 1.9% of total travel
retailer revenue and becoming a limited license travel
insurance agent becomes a substantial burden.
c. Additionally, Travelex notes that SB 2354 will
allow greater transparency and consumer protection than
California's current travel insurance licensing scheme
by shifting the licensing burden on the limited lines
travel insurance producer.
1. Summary of Arguments in Opposition
None received.
2. Prior and Related Legislation
Assembly Bill 690 (enacted as chapter 165, statutes of
2011) enacted a similar model for agents that sell
insurance covering portable electronics where a parent
organization (e.g., cell phone company, electronics
retailer) is licensed to transact insurance on portable
electronic devices (e.g., cell phones, laptops, etc.)
through its individual employees and authorized
representatives.
POSITIONS
Support
American Society of Travel Agents (ASTA)
Away To Travel
California Coalition of Travel Organizations (CCTO)
California Travel Association (CalTravel)
Jason Coleman, Inc.
Plaza Travel
Surf City Cruise and Travel
Travelex Insurance Services
US Travel Insurance Association, Inc. (USTIA)
Your Travel Center
AB 2354 (Solorio), Page 6
Opposition
None received.
Consultant: Hugh Slayden, (916) 651-4773