California’s New Commissioner-Sponsored Bills

California Insurance Commissioner, Dave Jones, has recently sponsored four new bills into the state legislature with the purpose of enhancing protections for Californian consumers, as well as engaging current issues like insurance for the rising wildfire problem in our state. The bills were written by California State Assembly members Laura Friedman, Ed Chau and Jim Wood. Since then, the bills were approved by the Senate Insurance Committee. Two of the bills entered around disaster relief and wildfire concerns, while the other two deal with life insurance and child support respectively. These newly commissioner sponsored bills can and, if passed, will affect the insurance industry in the Golden State.

AB 1875 (Wood)

AB 1875 was written by Assemblyman Jim Wood. Such bill would place requirements around insurers’ provisions of extended replacement costs coverage throughout California. While many insurance companies offer ERC coverage that enables the insured to buy past limits of the estimated replacement costs, as established by the insurance company’s policies, these replacement cost limits can vary wildly from 20 percent, all the way to 100 percent. AB 1875 would mandate that companies who do not provide an ERC coverage of at least 50%, must provide information to get the potential client to a company that does. The objective of the bill is to assure customers are able to avoid becoming under-insured as much as possible.

Accessible Insurance Coverage

While this can be a potentially great boon for consumers in California, it will put on extra pressure on insurance companies to either provide a high ERC limit or produce information that will lead the client to another provider. Furthermore, Californian consumers would be able to find companies that insure at an ERC rate of 100 percent or more with a California Home Insurance Finder, as developed by the Department of Insurance. As such, in a scenario where a consumer will be looking for insurance, the bill will provide ample resources for information regarding coverage.

AB 2594 (Friedman)

AB 2594 was given by Assemblywoman and assistant speaker pro tempore, Laura Friedman. The bill was written in response to reports that consumers were cut off from payments after 12 months following the Butte and Valley fires in 2015, rather than the allotted 24 months. As the law stands right now, no lawsuit could be created unless the violation happened within the first 12 months after the loss. Current law also provides the insured individuals up to 24 months to file a lawsuit. This is applicable after following a declaration of a state of emergency that repairs the damage and collects the complete value of the costs developed by the loss, in addition to any subsequent living expenses affected by the loss.

Lawsuit Extension

The new AB 2594 bill would fix any prior confusion by extending the timeline to sue an insurer for withdrawing payments from 12 months, to the full 24 months. Following the 2015 fires, any withdrawals from payments after the 12-month window has already passed. As such, insurance companies will now have to adhere to the 24-month model or face litigation. Under the new bill, those in the future who have experienced a stoppage in their insurance payments between the 12th and 24th month (following the incident of loss), would be advised to seek legal action against the insurer for what is initially owed to them.

AB 2634 (Chau)

Next, the AB 2634 was composed by Assemblyman Ed Chau. Such requires life insurance companies to disclose to consumers when increases in costs of insurance or administrative expense charges are forthcoming. The objective is designed to allow the policyholder time to decide whether to continue with premium payments to prevent a downgrade in policy, or risk a lapse in policy. With better information on oncoming payment increases, policyholders will have a better understanding on their options to prevent their policy being cancelled in the wake of an unexpected price hike in their life insurance. This is in response to life insurance companies hiking prices or adding administrative expense charges as high as 67 percent at a time, catching policyholders unaware.

Proper Payment Notice

Under the new AB 2634 bill, if a life insurance company were paying to raise premiums forthwith or increase administrative expense charges, policyholders would have to be notified 90 days prior to any changes being made. This would have to be considered in any overall financial planning for life insurance companies, as no increase in payments may be established with policyholders until the allotted time has passed. The new bill would also require the life insurance company to provide the policyholder with specific information on the nature of the change in payments. This is just one of the many advantages of California’s new commissioner sponsored bills.

AB 2802 (Friedman)

Of these newly commissioner sponsored bills is AB 2802 by Assembly Friedman, which was written for the development of the Insurance Payment Intercept Program. The new program will mandate insurance companies to opt into a program where they will match consumers on any past due child support payments with insurance claims. The idea behind the program is to verify payments to individuals who are being brought towards child support payments that are past due. The program is based on similar models established by the Department of Child Support Services in California and Texas. The Californian model was purely voluntary which only managed to bring in $3.9 million while the Texan model was a mandatory program established in 2009 for insurers to comply with, all in which netted $65 million in child support payments for families who were owed reimbursement for delinquent payments.

Justice for Unpaid Child Support

The hope is that the Insurance Payment Intercept Program will bring in tens of millions of dollars in child support payments to compensate the reported $18 billion in unpaid child support that plagues families in California. The Insurance Payment Intercept Program will be just one method among others to fix the payment gap in child support in California. The Texan program saw a 184 percent increase following their program, an example California hopes to emulate. This will mean that insurance companies will have to comply with the Insurance Payment Intercept Program. Similar successful mandatory programs exist in Massachusetts, New Jersey, Oklahoma, Oregon, Pennsylvania, and Rhode Island, as well as the aforementioned program in Texas.

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