Studies, Reports & Publications
News: 2011 Press Release
For Release: October 11, 2011
Media Calls Only: 916-492-3566
Insurance Commissioner Dave Jones Applauds Governor for Signing Nine Department-Sponsored Bills Into Law
Nine strong consumer protection bills slated to go into effect next year
Insurance Commissioner Dave Jones today announced that Governor Jerry Brown signed all nine bills that Insurance Commissioner Jones sponsored this legislative year and that were sent to the Governor for his consideration.
"Protecting consumers is at the heart of everything we do at the California Department of Insurance," said Commissioner Jones. "We are very pleased that the Governor signed all nine of our sponsored bills sent to him that increase safeguards for California's consumers, seniors, and hard-working families. I also want to thank the legislators who authored these important consumer protection measures."
The nine bills sponsored by Insurance Commissioner Dave Jones and signed into law by the Governor are:
- AB 315 authored by Assembly Insurance Committee Chair Jose Solorio on "Surplus Lines Insurance Marketplace Reform" (Chapter 83, Statutes of 2011). This urgency law adds uniformity and simplicity to California's regulatory law as it pertains to the surplus lines insurance marketplace and the state's surplus lines tax collection activities. It conforms state law to mandatory changes mandated in the Nonadmitted and Reinsurance Reform Act provisions of last year's federal Dodd-Frank Wall Street Reform and Consumer Protection Act in order to avoid preemption by the federal government.
- AB 624 jointly authored by Assembly Speaker John A. Pérez and Assembly Budget Committee Chair Bob Blumenfield on the "California Organized Investment Network (COIN) Program Community Reinvestment Extension Act" (Chapter 436, Statutes of 2011). This new law extends the sunset date to January 1, 2015 on the California Organized Investment Network's (COIN) Tax Credit Program, which was set to expire at the end of this year. Extending the COIN program ensures that this successful partnership between insurance companies and community based organizations can continue to provide funding for important projects in underserved communities throughout the state, an effort that is especially important in these difficult economic times. While California continues to pull itself out of the recession, programs like COIN are vital to facilitating that momentum by providing new capital for small businesses throughout the state, spurring growth in our neighborhoods, and, most importantly, creating more badly needed jobs for Californians. The COIN program, in partnership with Community Development Financial Institutions, has invested more than $100 million into underserved communities.
- AB 689 authored by Assembly Budget Committee Chair Bob Blumenfield on "Landmark Annuity Suitability Reform" (Chapter 295, Statutes of 2011). This new law establishes landmark consumer protections in the annuities marketplace to protect the public, particularly seniors, from fraudulent activities involving these complex insurance products. For far too long, seniors have been victimized through the aggressive marketing and sale of annuity products that are simply unsuitable for them. Consumers unwittingly buy these products not realizing that their invested funds will not be available to them or their funds are terribly expensive to recover if they want to withdraw their money to pay for immediate expenses, which can be financially devastating to seniors on a fixed income. With Californians spending $20.7 billion on annuities in 2010 alone, this new law requires insurers, agents, and brokers to verify that an annuity purchase, exchange, or replacement is appropriate for the consumer based on an evaluation of his or her age, income, financial objectives, and other important factors. It also authorizes the Insurance Commissioner to revoke an insurance agent's license, impose fines, and restore money lost to the consumer when suitability standards are violated.
- AB 793 authored by Assembly Banking & Finance Committee Chair Mike Eng on the "Prohibition of Insurance Product Cross-Selling with Reverse Mortgage Lenders" (Chapter 223, Statutes of 2011). This new law limits insurance agents' and brokers' ability to "cross-sell" reverse equity mortgages and annuities. The growth of the reverse mortgage business has been accompanied by aggressive marketing and predatory abuse, especially when reverse mortgages are marketed along with insurance products or financial investment vehicles.
- AB 1416 authored by the Assembly Insurance Committee on "Insurance Code Reforms" (Chapter 411, Statutes of 2011). This new law makes several necessary changes to various Insurance Code sections regarding agent licensing, training, and previously enacted legislation. It also permits the Insurance Commissioner to remove a life agent's authority to transact variable life insurance contracts upon learning that the agent is no longer registered to transact securities with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. The current process is time consuming, leaving the door open for a life agent to continue selling these insurance products when they are no longer authorized to do so. Timelier removal of a life agent's variable contract authority better protects consumers from agents who are not authorized to sell annuities or other complex variable life contract products.
- SB 51 authored by Senator Elaine Alquist on "Medical Loss Ratio Enforcement" (Chapter 644, Statutes of 2011). This new law requires health insurers and HMOs to put a larger share of the money they collect from consumers into actual medical care instead of overhead and profits. While it does not control or limit health insurance rate increases, this new law reinforces what is required in President Obama's Patient Protection and Affordable Care Act (PPACA), which requires HMOs and health insurers to have a medical loss ratio (MLR) of 85% for large group health insurance and 80% for small group and individual health insurance - meaning that insurers and HMOs have to put 85% of what they collect from large employers and 80% of what they collect in premium from individuals and small employers into actual medical care versus that portion of the premium which goes to insurer or HMO overhead and profit.
- SB 599 authored by Senate Appropriations Committee Chair Christine Kehoe on "Retained-Asset Account Consumer Choice and Disclosure Reform" (Chapter 423, Statutes of 2011). This new law requires life insurers to obtain a beneficiary's written declaration as to how he or she wants to receive their benefit payment. Instead of sending life insurance beneficiaries a check for the full amount of benefits owed, many life insurance companies automatically deposit the benefits into a Retained Asset Account (RAA). This issue first came to the attention of Insurance Commissioner Dave Jones when military families complained that they had not been asked for permission before the life insurance benefits of loved ones who died in military service were put into a RAA by life insurers. Now, military families as well as all Californians will be able to decide for themselves how they want their life insurance benefits to be paid by requiring insurers to get their permission, based on strong consumer disclosures, before putting their benefits into a retained asset account controlled by the insurer. This new law is part of a two bill package with newly-enacted SB 713, a companion RAA-disclosure bill (Chapter 130, Statutes of 2011).
- SB 621 authored by Senate Insurance Committee Chair Ron Calderon on "Discretionary Clause Prohibition" (Chapter 425, Statutes of 2011). This new law protects consumers of life, health, and disability insurance from "discretionary clauses" in their insurance policies, which give the insurer the sole discretion to decide if a beneficiary has become disabled, even if the consumer has a doctor certify that they are disabled. Discretionary clauses have been increasingly relied upon by insurers to reject legitimate claims for disability insurance when a consumer becomes disabled - insurers know that many consumers will give up their claim and that those who challenge the claim denial face a very high legal burden to overcome the denial since the discretionary clause vests sole discretion in the insurer to decide if the consumer is disabled. This new law levels the playing field and gives consumers an even chance to prove that they are entitled to disability and other insurance, by making the "discretionary clauses" that insurers have been putting into their insurance policies as void and unenforceable.
- SB 684 authored by Senate Majority Leader Ellen Corbett on "Mandatory Out-of-State Workers' Compensation Insurance Arbitration Disclosure" (Chapter 566, Statutes of 2011). This new law protects California's businesses by preventing workers' compensation insurers from unilaterally forcing California businesses to other states like New York or Delaware to resolve disputes, without the California business's consent. It protects California businesses by requiring that there be disclosure up front at the time a quote is provided as to where the insurer proposes to resolve disputes and by making explicit that California businesses can decline to agree to being forced to arbitrate or otherwise resolve disputes in other states than California. This new law reduces costs for California businesses associated with having to fly managers and lawyers to places like New York or Delaware to resolve disputes that could just as easily be resolved here in California.
All bills go into effect on January 1, 2012, with an exception to SB 684, which applies to workers' compensation policies issued or renewed on or after July 1, 2012.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2012 the California Department of Insurance received more than 160,000 calls from consumers and helped recover over $64 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Out-of-state callers, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.
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