California Legislature not Hesitant to Act on Insurance Issues
Dysfunctional. Inefficient, Ineffective. Slow. Partisan. Irrelevant. These are terms that regularly appear on editorial pages and political blogs to describe the California Legislature.
It is true that when the Legislature ended its 2012 session, major problems confronting California were still not solved. Legislators argued about the state’s budget, school funding, water, roads, prisons and other big challenges this year, but these challenges will still be on lawmakers’ desks when they return to Sacramento in December.
However, that does not mean that this year’s legislative session was not productive. The Legislature is capable of taking action on issues.
The always topical area of insurance is a good example of the Legislature’s ability to act on important issues. There is an interest and willingness among California legislators to become actively engaged on insurance issues. Depending on the issue and one’s perspective, that may be a positive or a negative.
This year the Legislature passed dozens of bills affecting various aspects of the insurance business. Gov. Jerry Brown signed more than 30 insurance-related bills into law.
Some of the noteworthy bills signed into law can be put into six categories.
• Non-controversial issues
• Modernizing California insurance
• Increased regulation
• Specific concerns
• Politically motivated measures
• A major issue
Non-Controversial Issues
Almost every year the Department of Insurance puts forward an omnibus bill which makes non-controversial changes to the insurance code. AB 2303 was this year’s omnibus bill. Among many other things, AB 2303 addresses applications for non-resident surplus lines broker licenses, pre-licensing requirements for bail agents, the creation of a limited lines license for crop insurance adjusters, changes to the conservation and liquidation process, and elimination of reports that insurers had to file with the department.
AB 2084 and AB 2354 are two other non-controversial new laws. AB 2084 establishes new permitted types of blanket insurance policies and expands the list of eligible policyholders who can purchase blanket insurance. AB 2354 revises the licensing requirements for travel insurance agents.
Modernizing California Insurance
The National Association of Insurance Commissioners has adopted model laws which incorporate ideas for modernizing state insurance regulation. This year California enacted two new laws that conform California law to NAIC models.
SB 1216 amends the insurance code to include revisions to the NAIC Credit for Reinsurance Model Law. Among other things, SB 1216 establishes criteria that the insurance commissioner is to use in certifying reinsurers. Reinsurance provided by certified reinsurers can qualify as an asset or a credit for a ceding insurer.
SB 1448 amends the Insurance Code to include revisions to the NAIC Insurance Holding Company Model Act. SB 1448 authorizes the insurance commissioner to evaluate the enterprise risk related to an insurer that is part of a holding company.
Increased Regulation
It is common for legislators to pass bills to address perceived problems in insurance transactions. Three new laws are examples of this.
SB 1449 permits the approval of life insurance and annuity products that include the waiver of premium during periods of disability and waiver of surrender charges if the insured encounters specified medical conditions, disability or unemployment.
AB 999 revises the standards used by the insurance commissioner to approve the rates for long-term care insurance. AB 999 also prohibits an insurer from using asset investment yield changes to justify a rate increase for long-term policies unless specified conditions exist.
AB 1747 requires every life insurance policy to include a provision for a grace period of not less than 60 days from the premium due date. AB 1747 also requires an insurer to provide an applicant for an individual life insurance policy an opportunity to designate a person to receive notice of lapse or termination of a policy for nonpayment of premium.
Specific Concerns
Some insurance bills are aimed at concerns about how specific elements of the insurance system are operating.
AB 1708 responds to drivers who want a better way to provide proof of insurance. AB 1708 authorizes auto insurers to provide proof of insurance coverage in an electronic format that may be displayed on a mobile electronic device. Proof of insurance in this format is allowed to be presented to a peace officer.
AB 2298 stems from complaints raised by peace officers and firefighters. AB 2298 prohibits an insurer from increasing the premium charged to a peace officer or firefighter who was involved in an accident while using his or her car at the direction of his or her employer.
AB 2406 addresses concerns about fees paid to consumer advocates. AB 2406 requires the Department of Insurance to publish on the department’s website information about fees paid to groups representing the interests of consumers that intervene in proceedings involving insurer rate filings.
Politically Motivated Measures
It is difficult to identify the problems that AB 53 and AB 2160 are supposed to address. Insurers do a good job procuring business from diverse sources, and few insurers make investments in Iran. The best explanation for these new laws is that they are politically motivated.
AB 53 requires each admitted insurer with written California premiums of $100 million or more to submit a report to the insurance commissioner on its minority, women and disabled veteran-owned business procurement efforts.
AB 2160 requires the insurance commissioner to treat a domestic insurer’s investment in a company that has business operations in Iran as a non-admitted asset.
A Major Issue
In the last hours of the legislative session, just when political pundits were ready to accuse the Legislature of being incapable of tackling issues of major significance, the Legislature passed a sweeping 160-page workers’ compensation bill.
For years, labor representatives had complained about inadequate workers’ compensation benefits. At the same time, employers were increasingly alarmed by rising workers’ compensation costs.
SB 863 attempts to balance higher workers’ compensation benefits with lower workers’ compensation costs. Gov. Brown signed the bill into law soon after it was passed.
SB 863 increases workers’ compensation permanent disability benefits by an estimated $750 million per year. The new law also changes several aspects of the workers’ compensation system. Among other things, SB 863 creates a medical review process for resolving medical care disputes, establishes a bill review process for resolving medical billing disagreements, adopts a statute of limitations for workers’ compensation liens, and restricts the reasons that can be used to avoid obtaining treatment within a medical provider network.
It will take many months to determine whether SB 863’s goals of higher benefits and lower costs can be achieved. Yet, the very passage of the bill revives hope that the Legislature is able to take action on critical public policy issues facing California.