BILL ANALYSIS �
SB 1212
Page 1
Date of Hearing: June 27, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 1212 (Calderon) - As Amended: June 21, 2012
And As Proposed To Be Amended
SENATE VOTE : Not relevant
SUBJECT : Property and casualty insurance: electronic renewal
SUMMARY : Authorizes insurers to offer to renew motor vehicle
and property-casualty policies electronically. Specifically,
this bill :
1)Authorizes an insurer to comply with statutory notice and
offer to renew requirements for private passenger automobile
insurance by means of electronic communication, if the
policyholder agrees to this electronic communication.
2)Authorizes an insurer to comply with statutory notice and
offer to renew requirements for homeowners' and other property
and liability insurance by means of electronic communication,
if the policyholder agrees to this electronic communication.
3)Provides that, notwithstanding certain restrictions in law,
any provision of law in the Insurance Code that specifically
authorizes use of electronic communication shall govern over
the general provisions.
EXISTING LAW :
1)Requires a motor vehicle insurer to provide a notice of
renewal of a private passenger automobile insurance policy at
least 20 days prior to the expiration of the policy, and
requires a confirmation notice to be delivered within the same
time period if a verbal offer to renew is rejected by the
policyholder.
2)Requires an insurer that is renewing a policy of property or
other casualty insurance on risks located in California to
deliver a notice of renewal, which must include notice of any
changes in coverage or premium, at least 45 days prior to the
termination of the policy.
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3)Establishes a procedure for obtaining valid electronic
signatures on various documents that require a signature, and
authorizes various forms of "e-commerce" communication among
parties to contracts, but does not include the renewal notices
contained in this bill among the documents that may be
delivered to a policyholder in electronic form.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . According to the author, and the sponsor the
Personal Insurance Federation of California, policyholders are
demanding that insurers move toward "paperless" transactions,
and frequently react negatively when the insurer responds that
it is not authorized by law to provide certain documents or
notices in an electronic format. This bill identifies two
categories where the insurer's action is in the policyholders'
favor - offers to renew certain policies - and empowers
policyholders to mutually agree with their insurer that the
statutory requirements may be satisfied via electronic
communication. According to proponents, the documents
authorized for electronic transmission by this bill are less
sensitive than many documents already eligible for delivery
electronically.
2)Background . In 1999, the California Legislature passed the
Uniform Electronic Transactions Act (UETA) which established
uniform standards for conducting business electronically in
California. Since then almost every state has adopted similar
laws to facilitate E-Commerce. The UETA requires that a
consumer must agree to have the transaction conducted
electronically and cannot be compelled by the business to
conduct the business electronically. Since 1999, consumers
have grown more and more comfortable conducting business on
the internet and through e-mail, but most of the exclusions
contained in the original Act remain. Currently, according to
proponents, the only state other than California that does not
allow electronic delivery of renewal notices is Arkansas.
3)Federal law . After California enacted its version of the UETA
in 1999, the federal government enacted Public Law 106-229,
the Electronic Signatures in Global and National Commerce Act,
in June, 2000. The federal Act is in many ways similar to
California law, in that it prohibits requiring a consumer to
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agree to use of electronic means to complete the contract,
establishes the requirements that must be met for the
electronic signature to be effective, and creates various
obligations and exceptions. Some insurers have suggested that
the federal Act preempts states' ability to more narrowly
limit which transactions may be limited to non-electronic
communication, and that California law inappropriately
attempts to restrict too many insurance transactions to only
non-electronic communication. Nonetheless, the proponents of
this measure are taking the narrow approach of adding the two
additional types of communication identified by the bill as
appropriate for electronic communication.
4)Policyholder consent . According to proponents, there is no
intention that the bill would alter California law that
requires the policyholder to agree to receive the mandatory
offers in electronic form. However, the way the bill is
structured, "notwithstanding" certain restrictions in the
Insurance Code, a specific authorization to use electronic
means (as proposed by the bill) enacted elsewhere in the
Insurance Code controls. Unfortunately, the "policyholder
choice" element in current law is part of the subdivision of
Section 38.5 to which the "notwithstanding" clause applies.
An amendment may be appropriate to ensure that this crucial
consumer protection element is not inadvertently written out
of the law with respect to the renewal offers covered by the
bill.
5)Prior legislation . AB 328 (Calderon) -- Statutes 2009,
Chapter 433 -- authorized electronic transmission of certain
notices that otherwise would require a mailing, upon agreement
by the policyholder to receive the electronic communication in
lieu of regular mail, including notice of reasons for refusal
to issue a good driver policy pursuant to Proposition 103,
notice of the reasons for cancelling an automobile insurance
policy, notice of the right of a homeowner to purchase
earthquake coverage from or as arranged by the homeowner's
insurer, or the proof of mailing this notice, and the standard
residential property insurance disclosure that sets forth the
various types of homeowners' insurance policies.
REGISTERED SUPPORT / OPPOSITION :
Support
SB 1212
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Personal Insurance Federation of California
Association of California Insurance Companies
Opposition
None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086