BILL ANALYSIS �
AB 1804
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1804 (Perea)
As Amended August 7, 2014
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |76-2 |(May 29, 2014) |SENATE: |36-0 |(August 13, |
| | | | | |2014) |
-----------------------------------------------------------------
Original Committee Reference: INS.
SUMMARY : Provides that policyholders of most individual
insurance policies are entitled to designate a third-party who
will be sent a notice if the policy is about to lapse for
nonpayment of premium.
The Senate amendments :
1)Provide that automobile insurance policies with a policy
period of less than six months are not subject to this bill's
requirements.
2)Expand the scope of homeowners' policies that are subject to
this bill by referencing the existing definition of
homeowners' insurance in the mandatory offer of earthquake
insurance law.
3)Require that the process established by the insurer to provide
policyholders notice of the right to designate a third party
to receive cancellation notices be verifiable.
4)Provide that if, after compliance with this bill's
requirements, a policyholder initiates contact with the
insurer seeking to designate a third party, and the insurer
complies with the request, no further verification is
required.
5)Clarify the procedures that are to be used to comply with this
bill, including the right to use electronic communication for
this bill's initial notice requirements (but not for an actual
cancellation notice that must be sent to the third party in
the event of nonpayment of premium).
6)Delete the requirement that the insurer obtain the telephone
AB 1804
Page 2
number of the third party who is designated by the
policyholder.
7)Make minor technical and clarifying changes.
EXISTING LAW :
1)Establishes, with various time frames depending on the type of
insurance policy, that a policy cannot be cancelled for
nonpayment of premium unless the named insured is provided a
notice that the policy will be cancelled on a date certain.
2)Provides that an individual life insurance policy shall not be
issued or delivered in California unless the policyholder has
been afforded the right to designate at least one person in
addition to the policyholder to receive a notice that the
policy is going to lapse for nonpayment of premium.
3)Provides that an individual policy or certificate under a
group policy of Long-Term Care (LTC) insurance shall not be
issued in California unless the policyholder has been afforded
the right to designate at least one person in addition to the
policyholder to receive a notice that the policy is going to
lapse for nonpayment of premium.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)Purpose. According to the sponsor, the California Department
of Insurance (DOI), this bill is an important consumer benefit
for people who have difficulty managing their insurance
responsibilities either due to heath or residency issues. DOI
notes that policyholders of all ages can find themselves in
situations that might cause important insurance protections to
lapse due to a failure to pay the premium. In addition to
older policyholders who might want a relative or close family
friend to keep an eye on their insurance protections, others
who might have prolonged separations from their primary
residence, such as college students, members of the military,
or people who work for extended periods away from home will
find the bill's proposal a great benefit.
2)Opt-in. This bill is a consumer opt-in proposal. Insurers
AB 1804
Page 3
would be required to make the policyholders aware of the right
to designate third parties, and the policyholders would have
the right to accept or waive the right. In this regard,
insurers that oppose this bill point out that existing law
relating to life and LTC insurance provides more flexibility
to the insurer in implementing what is, essentially, the same
right that this bill would create for other types of
insurance.
3)Military personnel. United Services Automobile Association,
an insurer that covers active and retired military and their
families, believes that this bill has possible benefits for
the military personnel who are forced to leave their homes
with very short notice in order to be deployed for long
periods of time. The opportunity to plan ahead with an opt-in
provision provides the clarity needed when putting personal
business in order, and allows our military to have faith that
a policy that is critical to their family well-being is
responsibly handled.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0004584