BILL ANALYSIS �
AB 2734
Page 1
Date of Hearing: April 2, 2014
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
AB 2734 (Committee on Insurance) - As Amended: March 18, 2014
SUBJECT : Insurance: omnibus
SUMMARY : Contains several technical or noncontroversial
changes to the Insurance Code. Specifically, this bill :
1)Raises from $5,000 to $20,000 the threshold that triggers an
obligation on surplus line brokers and insurers to make their
tax payments in quarterly installments.
2)Clarifies what constitutes a "California business" for
purposes of insurers' duty to file information with the
Insurance Commissioner concerning procurement contracts with
minority, women, and disabled veteran-owned businesses.
3)Delays from July 31 to September 30 of each year the date by
which the Insurance Commissioner must post the diversity in
procurement data on the Department of Insurance (DOI) internet
web site.
4)Changes an annual data call of information relating to private
passenger automobile liability and physical damage information
to an every-other-year data call.
5)Allows a nonprofit cooperative assessment association as
specified in the Insurance Code to provide its members with
limited accidental death benefits, in addition to the loss of
wages benefits currently authorized.
EXISTING LAW :
1)Requires any insurer or surplus line broker that had a tax
obligation of $5,000 or more in the preceding year to make
quarterly payments of the current year's tax obligations.
2)Requires insurers that write over $100 million of annual
premium in California to submit data to the Insurance
Commissioner (IC) concerning the procurement contracts it has
with California minority, women, and disabled veteran-owned
businesses, and requires the IC to post that data on the DOI
AB 2734
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web site by July 31 of each year.
3)Requires every insurer that writes private passenger
automobile insurance to file with the DOI specified data
concerning liability and property damage claims on an annual
basis.
4)Exempts a nonprofit cooperative assessment association from
the requirements of the Insurance Code, provided that the
association limits the financial protection benefits it
provides to its members to wage loss benefits.
FISCAL EFFECT : Undetermined
COMMENTS :
1)Purpose . As a matter of convenience to the DOI, and to the
industries that are governed by the Insurance Code, the
Assembly Insurance Committee introduced AB 2734 to serve as a
vehicle for noncontroversial statutory changes to effectuate,
but that would be too minor for a stand-alone bill.
2)LECMPA . The Insurance Code requires any entity that sells
"insurance" in California to be "admitted" (licensed) to
transact insurance in the state, subject to a number of
exceptions. Among these exceptions are membership-type mutual
benefits societies of various forms. The premise of these
exemptions is that the organizations have their members'
interests as their primary function, and do not need a
regulatory structure to ensure proper behavior toward those
members. The exemption statute that governs Locomotive
Engineers and Conductors Mutual Protective Association
(LECMPA) limits the benefits it may offer for California
members to wage loss benefits, despite the fact that 48 other
states allow accidental death benefits. There is no
controversy about expanding the scope of benefits that can be
paid by LECMPA, but the statute must be amended to authorize
it.
3)Tax provisions . According to the DOI, there are very few
insurance taxpayers that fall below the $20,000 quarterly
filing threshold proposed by the bill, and the administrative
costs associated with retaining the $5000 standard does not
justify keeping the standard that low.
AB 2734
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4)Auto data call . The DOI engages in a substantial amount of
statistical analysis on a broad range of issues. The
department's view is that this particular statutory
requirement for annual submissions is unnecessarily burdensome
on both the DOI and the insurers. The same analytical results
can be achieved if the data were filed on an every-other-year
basis.
5)Procurement provisions . According to the DOI, insurers that
complied with the requirements of AB 53, Statutes 2012,
Chapter 414, struggled with how to properly identify the
businesses that qualify under the law as reportable California
businesses. The bill is designed to add clarity, and ease
administrative compliance for the DOI by giving it more time
after the filing of data before it is mandated to post that
data on its web site.
REGISTERED SUPPORT / OPPOSITION :
Support
LECMPA
Department of Insurance
Opposition
None received
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086