California House Passes Agent-Broker Bill

By Patricia-Anne Tom | June 2, 2008

The California Assembly on May 22, 2008, passed a bill that would help to clarify when an insurance professional is acting in the capacity of a broker versus an agent. The Assembly voted 60-6 in favor of AB 2956. The measure is in the Senate Rules Committee waiting to be assigned to the Senate Insurance Committee.

According to the bill text, existing law provides that an insurance agent is a person authorized by and on behalf of an insurer to transact all classes of insurance, except life insurance. The law provides that an insurance broker is a person who, for compensation and on behalf of another person, transacts insurance other than life insurance with, but not on behalf of, an insurer.

AB 2956 “would establish a rebuttable presumption, subject to exception, that a person is acting as an insurance broker if the application shows that the person is acting as an insurance broker and is licensed to act as an insurance broker in the state in which the application is submitted. The bill would specify the grounds for rebutting the presumption,” the bill text states.

Furthermore, the bill would permit notice specifying the scope of an agency appointment. Existing law provides that life agents, travel agents, and fire and casualty insurance agents shall not act as an agent of an insurer unless the insurer has filed with the commissioner a notice of appointment, executed by the insurer, appointing the licensee as the insurer’s agent.

Existing law provides that a person licensed as a broker-agent shall be deemed to be acting as an insurance agent in the transaction of insurance placed with those insurers for whom a notice of appointment has been filed.

“It is the intent of the Legislature that this act foster a competitive marketplace for all insurance products and services,” the bill text states. “The Legislature finds and declares that it is in the best interest of consumers of insurance products to encourage and maintain a variety of different insurance delivery systems that will compete for consumers on price and service. In order to achieve this goal, it is important to remove any ambiguity in the law defining insurance brokers, provide circumstances wherein a licensee can be presumed to be acting in the capacity of a broker, and set forth circumstances where the presumption may be rebutted.

“An insurance broker is a person who, for compensation and on behalf of another person, transacts insurance other than life insurance with, but not on behalf of, an admitted insurer. Every application for insurance submitted by an insurance broker to an admitted insurer shall show that the person is acting as an insurance broker. … In the event that any transaction involves both a retail broker and a wholesale intermediary broker, the wholesale intermediary broker shall satisfy its disclosure obligation under this section if it provides written disclosure to the retail broker of the nature and amount of its fees, and the fact of any insurer compensation it receives,” the bill states.

The Alliance of Insurance Agents and Brokers, Insurance Brokers and Agents of the West, and Western Insurance Agents Association support the bill.

From This Issue

Insurance Journal West June 2, 2008
June 2, 2008
Insurance Journal West Magazine

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