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Commissioner sponsored bills to protect Californians pass Senate Insurance committee

News: 2018 Press Release

For Release: June 28, 2018
Media Calls Only: 916-492-3566
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Commissioner sponsored bills to protect Californians pass Senate Insurance committee
SACRAMENTO, Calif. — Insurance Commissioner Dave Jones announced today that four bills he sponsored to protect California consumers have passed the Senate Insurance Committee. AB 1875 (Wood), AB 2594 (Friedman), AB 2634 (Chau), and AB 2802 (Friedman) strengthen consumer protections and aim to address critical issues including wildfire recovery, life insurance and child support.

"As Insurance Commissioner, my main priority is protecting California consumers while ensuring a healthy and vibrant insurance market," said Commissioner Jones. "These bills strengthen laws to protect wildfire survivors and resolve other critical issues throughout the state. I thank Assemblymembers Wood, Friedman and Chau for authoring these consumer protection bills that will improve the lives of many Californians."

AB 1875 (Wood) addresses confusion among wildfire survivors surrounding extended replacement cost coverage (ERC). Almost all insurance companies offer ERC, which allows property owners to purchase limits above the replacement cost policy limits, which are typically based upon the insurance company's estimated cost of replacement. However, those ERC limits can vary dramatically from the low of a 20 percent option to higher options of 50, 75, or even 100 percent. Many consumers are never provided these options by insurers nor are they told how the coverage options, if available, would impact their premiums. AB 1875 would require an insurer who does not provide at least 50 percent ERC to help direct the consumer to an insurer that does. This will give consumers reasonable options against underinsurance.

AB 2594 (Friedman) extends a consumer's right to sue their insurer following a declared disaster from 12 months to 24 months, given that it now takes longer to rebuild after California's significant fires in 2015 and 2017. After losing a home or business in a fire resulting in a declared state of emergency, current law provides a policyholder at least two years to rebuild their property and receive the full replacement cost coverage they paid for. However, experience shows that two years is often insufficient time for families to rebuild the insured property. Some insurers have refused consumer claims, citing the lack of a lawsuit within the 12-month timeframe.

AB 2634 (Chau) requires insurers to disclose to their policyholders within reasonable timeframes upcoming increases in the cost of insurance charge or administrative expense charge on a flexible premium life insurance policy. This important notification will at least minimally allow the policyholder to make an informed decision about whether to pay the insurer's premium increase to avoid a reduction in policy values or a possible lapse of the policy. Some increases from insurance companies have been as high as 67 percent of the previous amount the consumer had been paying. AB 2634 will provide policy owners with better and more complete information about the effect of premium increases on their life insurance policies. This will help them to understand their options and avoid a possible cancellation of coverage. Specifically, this bill would require an insurer to inform the policy owner of a flexible premium life insurance policy 90 days before the policy is subject to an increase in the cost of insurance charge or administrative expense charge and require the notice to include specified information about the increase.

AB 2802 (Friedman) establishes the Insurance Payment Intercept Program, which will require insurance companies to participate in a program matching individuals behind on child support payments with their insurance claims to verify any insurance payments are used to pay past-due child support. The bill will likely lead to tens of millions of dollars in payments to parents annually. Child support is critical income for eligible families. Unfortunately, most families are not receiving all of the support they are owed. In California alone, the total amount of unpaid child support is nearly $18 billion and over $116 billion in unpaid child support is due to families across the country.   

Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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