Laws and Regulations - 2003 Legislation

Last Update: October, 2003

United States Senate Bill (Hollings D-SC)
Congress Considers Federal Charters for Insurers

The issue of federal insurance regulation has surfaced again in the U.S. Congress in response to concerns about inefficiencies in state regulation. The changes desired by some have been presented in a bill sponsored by Senator Ernest “Fritz” Hollings (D-SC) in the form of SB 1373. The Insurance Consumer Protection Act of 2003, as it is called, would repeal the McCarran-Ferguson Act and create a new Federal Insurance Regulatory Commission (IRC) under the Department of Commerce. The IRC would regulate rates and hear challenges from consumers on rate hikes. The IRC would also have authority over accounting issues, solvency reviews, market conduct examinations, and licensing standards.Similar to the Hollings bill, the American Insurance Association supports the establishment of a Federal Insurance Chartering Office that would allow insurers to receive a federal charter instead of a state charter. The American Bankers Insurance Association (ABIA) advocates optional federal charters for both insurers and producers in all lines of coverage. The ABIA’s plan would create a National Insurance Commissioner under the U.S. Treasury Department modeled after the Controller of the Currency. The Commissioner would set solvency requirements but would prohibit the regulation of rate and form. The American Council of Life Insurers ACLI also supports optional federal charters modeled after the dual Federal and state system that currently regulates commercial banks, thrifts and credit unions. In contrast to the national insur-ance groups, the Independent Insurance Agents & Brokers of America (IIABA – AKA Big ‘I’) supports a more modest approach of minimum federal standards and streamlined state insurance regulation. Congressional watchers say there is little interest in federal charters on Capitol Hill. However, with five bills currently pending in Congress, the federal effort has set into motion a more vigorous response from the National Association of Insurance Commissioners (NAIC) to modernize and streamline insurance regulation. The NAIC supports a modernized system of functional state-based regulation and has already engaged in cooperative reforms required by the Gramm-Leach-Bliley Act.

California Assembly Bill 1049, (Calderon & Wyland)
Homeowners’ Insurance

Prohibits insurers or agents from basing an adverse underwriting decision on a homeowners policy based on an individuals inquiry about the scope of their coverage.

Status: Pending the Governor’s signature.

California Assembly Bill 1191, (Wiggins)
Homeowners’ Insurance

Requires insurers to provide policyholders with the reasons for the nonrenewal of their homeowner’s insurance policies and requires insurers to provide policyholders, upon request, the reasons for the change in their annual premium.

Status: Pending the Governor’s signature.

Insurance General Assembly Bill 794, (Frommer)

Requires that records regarding minor disciplinary actions against agents and brokers posted on the Department of Insurance’s web page to be aged off after 10-years.

Status: Signed into Law – Chapter 310, Statutes of 2003.

Senate Bill 1, (Speier)

Requires that customers of insurance companies, banks and securities firms be informed of their privacy rights and be asked to opt in before their financial data can be shared with third parties.

Status: Signed into Law – Chapter 241, Statutes of 2003.

Worker’s Compensation Reform

The California Legislature approved a package of 8 bills to overhaul the state’s workers’ compensation system. Governor Davis promised to sign the measures. The package requires treatment guidelines for work-related injuries. Limits an injured worker to 24 physical therapy or chiropractic treatments but allows for additional treatments when authorized by the insurer in writing. Allows employers to get a second opinion when doctors recommend spinal surgery for injured workers. Requires use of generic drugs, unless a brand name is specified by the treating physician. Requires payment of medical bills in 45 working days instead of 60 days from the date of complete billing. Increases the maximum fine for workers’ compensation fraud from $50,000 to $150,000.