BILL ANALYSIS �
AB 2056
Page 1
Date of Hearing: April 23, 2014
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
AB 2056 (Dababneh) - As Amended: February 20, 2014
And as Proposed to Be Amended
SUBJECT : Pet Insurance
SUMMARY : Increases disclosure of exclusions and payment
provisions in pet insurance policies and establishes uniform
definitions for exclusions commonly used in pet insurance
policies. Specifically, this bill :
1)Clarifies that pet insurance is a "miscellaneous" insurance
for the purpose of regulatory classification.
2)Requires pet insurance policies to use standard definitions
for a number of terms including the following:
a) "Veterinary expenses" are the costs associated with
medical advice, diagnosis, care or treatment by a
licensed veterinarian.
b) "Pre-existing condition" is a condition for which a
veterinarian has provided advice or treatment or a
condition for which the pet exhibited signs or symptoms
before the effective date of the insurance policy.
c) "Waiting period" is the period of time from when the
policy is effective and when some or all of the coverage
begins.
d) "Hereditary disorder" is a genetically transmitted
abnormality that causes illness or disease.
e) "Congenital disorder" is a condition present from
birth which causes or contributes to an illness or
disease.
f) "Chronic condition" is one that can be treated or
managed but not cured.
3)Requires pet insurers to disclose whether the policy excludes
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coverage for any of the following:
a) Pre-existing condition.
b) Hereditary disorder.
c) Congenital disorder.
d) Chronic condition.
e) Waiting period.
4)Requires pet insurers to disclose if any other exclusions are
included in the policy and direct the consumer to the policy
for details regarding those exclusions.
5)Requires pet insurers to provide consumers with a summary
description of the method used to determine claim payments.
6)Requires pet insurers to allow anyone who purchases pet
insurance to return the policy within 30 days with a full
refund of any premium paid unless the insurer has paid a claim
under the policy. If a claim has been paid, the option to
return the policy is not available, and the cancellation
provisions in the policy will apply.
7)Permits the Insurance Commissioner (commissioner) to impost
civil penalties of up to $5,000 for each violation and up to
$10,000 for each willful violation.
8)Requires the commissioner to hold a hearing regarding any
violations and that the hearing is subject to the provisions
of the Administrative Procedures Act.
9)Provides the commissioner with the authority to adopt
regulations necessary to administer the provisions of this
bill.
10)Defers implementation of the bill until July 1, 2015.
EXISTING LAW :
1)Classifies pet insurance as property/casualty insurance.
2)Requires those selling pet insurance to be licensed as a
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property/casualty broker-agent.
3)Requires property/casualty insurance policy rates to be
reviewed and approved by the commissioner.
4)Prohibits property/casualty insurance rates from being
excessive, inadequate, or unfairly discriminatory.
FISCAL EFFECT : Undetermined
COMMENTS :
1)Purpose . According to the sponsor, pet insurance policies
are often difficult for consumers to navigate and understand.
Typically there are several types of policies that itemize
covered treatments, deductibles, and lifetime/per illness
maximums. Additionally, the costs of different policies can
vary based on the amount of coverage, the type of coverage, as
well as the species, age, and breed of the pet. AB 2056 would
require pet insurers to disclose this information regarding
their policies so that consumers can more easily determine the
most appropriate policy to fit their needs. By allowing
consumers to better ascertain the constrictions and
limitations of pet insurance policies, they will limit their
financial risk, be more likely to purchase a product that fits
their needs, and be less likely to complain when utilizing
their pet insurance coverage.
2)Cost of Veterinary Care . According to the American Pet
Products Association, the total United States pet industry
expenditures in 2012 were an estimated $53.33 billion, $27.4
billion of which was spent on veterinary care and over the
counter medicine. In 2011, total pet insurance expenditures
accounted for $450 million and it is expected to grow rapidly
to an estimated $750 million by 2015.
3)Miscellaneous Insurance . Pet Insurance is currently
classified as miscellaneous insurance by the California
Insurance Code (Section 120). All insurers offering pet
insurance in California are currently licensed to sell
miscellaneous insurance, and the bill codifies this
classification of pet insurance by adding an explicit
reference to pet insurance in Section 120. Codifying this
classification is important because a change in the
classification of pet insurance would require pet insurers to
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amend their license to sell insurance and likely require pet
insurers to comply with increased capital requirements.
Formalizing this classification will not affect the how pet
insurers report to the National Association of Insurance
Commissioners (NAIC). The NAIC requires that pet insurers
report under the inland marine category and existing
provisions in the Insurance Code (Section 923) specify that
insurers are to make their reports to the NAIC consistent with
NAIC classifications.
4)Previous Legislation . AB 2411 (Jones) of 2010 passed the
Legislature but was vetoed by the Governor. This bill is more
expansive than AB 2411 in terms of the definitions, disclosure
requirements, and enforcement mechanisms relating to pet
insurance.
REGISTERED SUPPORT / OPPOSITION :
Support
Department of Insurance (sponsor)
Actors and Others for Animals
Consumer Action
Humane Society of the United States
Pet Industry Joint Advisory Council
Opposition
None received
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086