The Independent Insurance Agents and Brokers Legislative Counsel (ABL), with the backing of eight trade associations representing the great majority of California’s nearly 300,000 licensed insurance agents and brokers, is calling on Governor Gray Davis to sign AB 393, the agent licensing bill, into law.
Recently passing in the State Assembly on an overwhelming vote of 63-2 and 36-1 in the Senate, AB 393 (Jack Scott, D-Altadena) clarifies various provisions of the Insurance Code to require any person who sells or solicits insurance to be properly licensed as an insurance agent or broker.
The bill also creates a new personal lines insurance agent license and a limited lines license for the sale of credit related insurance products similar to legislation enacted last year requiring the licensing of those companies and their employees who sell insurance products in connection with renting cars. In a recent letter to Governor Davis, John Norwood, legislative counsel for ABL, explained that AB 393 is first and foremost a consumer protection bill.
“The changes provided in this bill will increase funding of the consumer protection activities of the Department of Insurance. Consumers will be more likely be assisted by licensed and qualified insurance salespeople and the insurance commissioner will have more authority to regulate the sale of insurance products,” Norwood said.
Norwood said AB 393 removes ambiguities and closes loopholes in the Insurance Code that have allowed insurers utilizing mass media and toll-free telephone numbers to market insurance products to consumers.
“Many of these insurers utilize call centers located outside California staffed by unlicensed salespeople,” Norwood explained. “In trade for these clarifications, the bill creates a new personal lines license that can be utilized by insurers or agencies that specifically market these products to more easily meet the state license and nonresident licensing laws.”
Norwood also said the only disagreement over the bill is with some insurers who want to create a license exemption for their employees to service existing policyholders. “There wasn’t support for such a provision in the Legislature,” Norwood explained.
“We simply cannot understand how making coverage changes, which is clearly transacting insurance under Section 35 of the Insurance Code and requires a license, is somehow magically not transacting when it concerns existing policyholders.
This has never been the Department of Insurance’s interpretation as to licensing of employees by insurance agencies and is simply contrary to the public interest and consumer protection.”
Norwood said many insurers want to establish regional service centers to handle this type of business without licensed individuals.
“Ultimately, this threatens the ownership of businesses produced by independent insurance agents and reduces the quality of service provided to consumers of insurance products.”
The National Association of Independent Insurers (NAII) feels much differently about the bill. The insurer association recently sent a letter to Governor Gray Davis in hopes that he will veto AB 393. The NAII feels that a new provision to the bill would hinder insurers’ ability to provide fast and convenient service to their customers. Under AB 393, any insurance company employee who solicits, negotiates or “effects” insurance contracts would also have to be licensed in California.
The NAII believes that the exact meaning of “effects” is unclear and carries major implications for insurers and their customers. The NAII supports current law, which requires insurance company employees who solicit or negotiate insurance contracts in California to be licensed as agents.
Sam Sorich, vice president and western regional manager for NAII, feels that there is no practical need for AB 393. He said the bill would force insurers to forward every incoming call relating to a policy change from California customers to an employee who has a California agent license.
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