A California lawmaker on Friday introduced a bill to give greater control of claim information held by insolvent companies over to policyholders.
Assemblyman Curt Hagman said he introduced Assembly Bill 1734 to provide choices to policyholders when an insurance company has become insolvent and is being liquidated by the state.
The bill provides for disclosure of specific information relating to claims, the financial condition of the insurance company in liquidation, and the expected outcome and duration of the liquidation effort.
When an insurance company becomes insolvent its assets are transferred to the Department of Insurance’s Conservation and Liquidation Office. After the court orders liquidation, the Insurance Commissioner informs the company’s policyholders, creditors, shareholders and all interested parties of the liquidation and then sells the company’s assets to generate cash to pay policyholders’ claims and other creditors.
This process often takes a decade or more, according to Hagman.
The bill establishes a set of procedures to allow policyholders to offer or deny access to information about their claims so entities who may wish to offer to buy the policyholder’s claim may contact them. The bill would only apply to corporate claims, individual policyholder’s information would not be made available.
“AB 1734 is a way for companies waiting with the uncertainty of whether or not a bankrupt insurance company will every pay out to have the option of selling that claim,” Hagman said in a statement. “There is no reason they should be trapped in the purgatory of a government bureaucracy averaging 10 years to complete their task.”
Nicole Mahrt Ganley, a spokeswoman for the Association of California Insurance Companies, said the group has not had a chance to look at the bill, but that there are already things in place to protect policyholders.
“We don’t have a position on the bill because it was just introduced, so we need to take a really close look at it,” Ganley said. “California, and insurance in general, has a very good safety net with the guarantee fund so that policyholders are taken care of in case of a bankruptcy.”
Managers of the California Insurance Guarantee Association, which oversee that fund, were not immediately available for comment.