California Senate Considers Agent-Broker Bill, Consumer Group Challenges Legislation

By | June 17, 2008

Three pieces of legislation will be heard in the Senate Banking, Finance and Insurance committee on Wednesday, June 17, 2008.

Assemblyman Jared Huffman’s AB 2800 would allow insurance companies to require drivers to install spyware in their cars that tracks speed, acceleration, location, time of day, mileage and other data. Sponsors say the bill would encourage motorists to drive less by lowering insurance rates for lower mileage. However, the consuemr group Consumer Watchdog says AB 2800 would give discounts to drivers who put black box technology in their cars, not those with low mileage.

“Insurers want to know where we drive, when we drive and how long it takes us to get there, but they shouldn’t get to charge more to Californians who won’t accept their spying,” said Balber. “Under new regulations that take effect next month, Proposition 103 already requires insurers to charge people less if they drive less. AB 2800 just lets insurance companies charge drivers more for refusing to let them pry in their cars.”

AB 1051, by Assemblyman Charles Calderon, would change how the Insurance Commissioner can review rates. The legislation would prevent refunds to customers when insurers impose illegal surcharges on policyholders or delay legally required rate reductions. The bill would also apply the ratemaking standards used to deregulate workers’ compensation insurance to policies regulated by Proposition 103, a change that means the Commissioner would not be able to review rates for reasonableness or fairness or establish standards prohibiting unfair practices.

According to Consumer Watchdog, AB 2800 and AB 1051 would illegally amend Proposition 103, which can only be amended by the Legislature to further its purposes.

“Proposition 103 grants the power to set new rating factors to the Insurance Commissioner, but AB 2800 would usurp that power for the Legislature. The bill would also allow insurers to unfairly discriminate against drivers solely because they choose not to put a tracking device in their car, which is also illegal under Prop 103,” the group said in a statement.

“AB 1051 would eliminate the Insurance Commissioner’s power under Proposition 103 to order refunds when insurers are charging an excessive or illegal rate. The bill would also limit Proposition 103’s broad prohibition on unfairly discriminatory rates for auto, homeowners and business insurance to the narrow, insurer-defined terms that currently rule the deregulated workers compensation market,” the group added.

Assemblyman Joe Coto’s AB 2956 will clarify the duties of an agent versus those of a broker. The bill would provide that an insurance agent is a person who transacts insurance other than life, disability or health insurance on behalf of an admitted insurance company. The bill “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.

According to the Consumer Group, the bill would “undermine a recent court ruling that protects customers from paying deceptive and illegal broker fees to insurance agents. Current law states only insurance brokers who are truly independent of insurance companies can charge broker fees, but AB 2956 would muddy the distinction between brokers and agents, who work for insurance companies not the customers, the consumer group said. This will authorize a ‘double-dipping’ in which insurance customers will be forced to pay the same person both an agent commission and a broker fee, even when the person selling insurance is not a truly independent broker.”

However, The Alliance of Insurance Agents and Brokers, Insurance Brokers and Agents of the West, and Western Insurance Agents Association support the bill, saying it will help to clarify when an insurance professional is acting in the capacity of a broker versus an agent in California.

“What we’re trying to do is restore legal status quo before the DOI attempted to rewrite all these laws,” said Steve Young, general counsel for IBA West. For more information on this bill, visit https://www.insurancejournal.com/news/west/2008/03/31/88698.htm.

To read Consumer Watchdog’s letters of opposition, visit:

AB 2800: http://www.consumerwatchdog.org/resources/Huffman_privacy.pdf

AB 1051: http://www.consumerwatchdog.org/resources/1051_oppose.pdf

AB 2956: http://www.consumerwatchdog.org/resources/AB2956.pdf

Sources: Consumer Watchdog, California Legislature

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