Potential Department of Insurance Legislative Proposals for 2011
Representatives from the California Department of Insurance met with insurance industry advocates this past week to discuss their legislative agenda for 2011. Michael Martinez, Commissioner Jones’ new Deputy Commissioner for legislation and Laura Alarcon of the Department’s legislation unit informed industry representatives that new Insurance Commissioner Dave Jones was focused on the implementation of the federal health care reform as his number one priority. His second priority was long term care insurance and his third was a healthy insurance marketplace. Martinez also said that the Department will be working on the surplus line market and ensuring the state was in compliance with the federal Frank/Dodd Act. Both Martinez and Alarcon alluded to the fact that they were currently looking into whether they would also address reinsurance issues that arise from passage of federal legislation.
The CDI provided the following list of potential legislative proposals for 2011. They indicated that some, not all, of the proposals would be placed in an omnibus bill to be carried by Assembly Insurance Committee Chairman Jose Solorio or be introduced as a committee bill. They cited the following items as “non-controversial, technical clean-up” items:
1. Mailing Requirements for Adopted Market Conduct Examination Reports: Current law requires CDI to serve final market conduct examination reports through the insurer's designated agent for service of process. Problems have arisen with the report delivery process when a single exam is conducted for multiple insurers in a group managed and operated in common. This proposal would provide for an insurer group to specify the responsible party to whom the exam report should be issued and permit the exam report to be issued electronically.
2. Insurer Tax Credit for Community Development Investments: Current law, which is scheduled to sunset on January 1, 2012, allows insurers a tax credit for investments with a Community Development Financial Institution (CDFI). This proposal extends the sunset date for the tax credit to January 1, 2017.
3. Electronic Publication of Withdrawal Notice: Current law, which was enacted in 1935, requires insurer applications for withdrawal, and revocations and cancellations of certificates of authority to be published one week in a general circulation newspaper — SF and Sac for withdrawal notices and SF and LA for revocations/ cancellations — with the insurer bearing the cost of the publication. This concept proposes elimination of this requirement and instead provides for the notifications to be published on the department's public website.
4. Reduction in Amended Articles of Incorporation Filings: Current law requires admitted insurers, domestic and non-domestic, to re-file their Articles of Incorporation each time they amend the document. This concept proposes to require admitted, non-domestic insurers to submit their amended Articles of Incorporation only upon request from the department. This change better aligns insurer filing requirements with department regulatory duties.
5. Property and Casualty Actuarial Opinion — Adopt NAIC Model Law: California is out of compliance with NAIC accreditation standards relating to property and casualty actuarial opinions (filing an opinion, opinion summary, supporting documents and confidentiality). This concept adopts NAIC Model Law relating to actuarial opinion to assure California retains continued NAIC accreditation.
6. Public Disclosure of Homeowners Policy Forms: This concept proposes to have insurers provide a link on their websites where their homeowner policy forms can be reviewed. This information would provide consumers/applicants a convenient means to review and compare the various levels of coverage.
7. Administrative Hearing Bureau — Specified Hearing Authorization: Insurance law authorizes the Commissioner to conduct hearings on various insurance matters through the Office of Administrative Hearings (OAH) in accordance with the Administrative Procedure Act. The department's Administrative Hearing Bureau (AHB) is authorized by statute to conduct evidentiary hearings on specified insurance matters. This concept would permit the Commissioner the discretion to conduct certain hearings, currently only carried out by the OAH, by either the OAH or AHB. This concept would result in more timely hearings and cost savings.
8. Implementation of the Wall Street Reform and Consumer Protection Act: California needs to implement the surplus lines provisions of the Non-admitted Reinsurance Reform portion (NRRA) of the Dodd-Frank Act, including eligibility criteria for carriers, authorization to collect and disburse premium taxes when California is the home state as well as multistate policies, and broker licensing. Most provisions of the NRAA go into July 21, 2011, so this will likely be an urgency bill.
9. WC Depository Qualifications: Clean up to AB 2731 (Statutes of 2008) which provided for a national bank headquartered in another state but with a trust office in California to serve as a qualification custodian of domestic insurer investments. This proposal clarifies that a bank, which meets the requirements specified in AB 2731, may also serve as a workers' compensation depository.
10. Public Disclosure of Long Term Care Policies: This concept proposes to have insurers provide a link on their websites where their LTC policy forms can be reviewed. This information would provide the consumer with more information and the ability to ask questions prior to the purchase.
11. Reverse Mortgage Elder Protection Act Change: This concept extends the same prohibitions for improper reverse mortgage cross- selling by mortgage brokers and lenders (AB 329, 2009) to insurance agents and brokers.
12. Agent Signature on Insurance Application/Annuity Contract: Not all insurers require the agent who sold a policy or annuity to sign the application as the agent of record, which makes it difficult for insureds to contact the agent of sale and, even more problematic, easier for unscrupulous agents to churn annuities and life insurance or oversell policies in a way that is difficult for the insurer to detect. This concept requires the agent who sold the policy or annuity to sign the application.
In addition to this list of technical proposals being considered by the commission, there are additional proposals specific to insurance agents and brokers. They are as follows:
1. Clarify CD authority to remove variable contract authority of a life agent who is no longer registered with the Financial Industry Regulatory Authority (FINRA). The concept is to specify that a life agent's variable contract authority automatically terminates if the life agent is no longer registered with FINRA to sell securities.
2. Cleanup to exempt a non-resident license from the application qualifying exam when applying for a resident license. Repeal a code section regarding non-resident application qualifying exams which contains an outdated licensing requirement that was eliminated by the passage of AB 2044, Duvall, Statutes of 2008.
3. Cleanup relating to Agent endorsements on non-resident organizational license. This concept would be cleanup language to amend code which contains an outdated licensing requirement that was eliminated by the passage of AB 800, Duvall, Statutes of 2009.
4. Clarify the appointment and endorsement requirements for Personal Lines and Limited Lines Automobile Licensees. This concept would clarify that Personal Lines and Limited Lines Automobile licensees maybe appointed as insurance solicitors and that organizational licensees are required to notify CD! when individual Personal Lines and Limited Lines Automobile licensees are given authority to transact under the organizational license.
5. Clarification of Life Agent annuity-related training for license renewal. Clarify the timeframe for the 4-hour annuity training requirement. It is the intent of this proposal to clarify that the annuity training requirements are due prior to each license renewal.
6. Cleanup to AB 2782 (Statutes 2010) relating to Property Broker-Agent and Casualty Broker- Agent licensing. Amend code to change "Fire and Casualty" references to "Property and Casualty" as reference in AB 2782.
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