BILL ANALYSIS
SENATE RULES COMMITTEE AB 3313
Office of Senate Floor Analyses
1020 N Street, Suite 524
(916) 445-6614 Fax: (916) 327-4478
.
THIRD READING
.
Bill No: AB 3313
Author: Brewer (R)
Amended: 6/27/96 in Senate
Vote: 21
.
SENATE INSURANCE COMMITTEE: 9-0, 6/19/96
AYES: Rosenthal, Lewis, Hughes, Johnson, Johnston, Killea,
O'Connell, Peace, Russell
ASSEMBLY FLOOR: 63-0, 5/2/96 (Passed on Consent)
.
SUBJECT: Insurance: assigned risk plans
SOURCE: Personal Insurance Federation of California
.
DIGEST: This bill revises requirements relating to the
electronic effective date procedure for applicants seeking
insurance coverage from the California Automobile Assigned
Risk Plan (CAARP).
ANALYSIS: Existing law:
1. Establishes CAARP, which administers the "assigned risk"
plan for automobile insurance. Drivers who are unable
to obtain from the voluntary market the insurance which
is required by law are "assigned" by CAARP to specific
insurance companies on a fair share basis.
?1
CONTINUED
AB 3313
Page
2
2. Specifies certain conditions that must be met in order
for CAARP coverage to be effective on the date and at
the time application forms are completed and executed.
Included among these provisions are the requirements
that producers:
A. Electronically transmit the documents to the plan
manager within one hour of completion.
B. Mail the appropriate paperwork to the plan manager
within two working days of the completion of the
application forms.
3. Provides that if a producer does not electronically
transmit the appropriate documentation to the plan
manager, coverage will become effective on the day after
the application is received in the plan office.
This bill:
1. Eliminates the one-hour requirement (see #2 above) for
producers to electronically transmit the documents in
order for CAARP coverage to become effective at the time
the application is completed. Instead provides that
coverage becomes effective whenever the producer or
agent electronically transmits the documents.
2. Allows an applicant to request a future effective date
for the policy up to 15 days from completion of the
application.
3. Specifies that a producer of record is to have a duty to
comply with the requirements of law within 24 hours of
the date and time the application is done and executed.
4. Specifies that to ensure compliance with the electronic
effective date procedure, application forms are to
contain the following statement in 12-point boldface
type:
IMPORTANT NOTICE
THIS POLICY IS NOT EFFECTIVE UNTIL YOUR APPLICATION
IS ELECTRONICALLY TRANSMITTED TO THE PLAN BY YOUR
?2
?
AB 3313
Page
3
AGENT OR BROKER. THE FOLLOWING CONDITIONS MUST ALSO
BE MET:
(1) BOTH YOU AND YOUR AGENT OR BROKER MUST SIGN AND
DATE A PROPERLY COMPLETED APPLICATION.
(2) YOUR AGENT OR BROKER MUST MAIL YOUR APPLICATION
TO TH E PLAN WIOTHIN TEWO DAYS OF ITS COMPLETION.
YOU MAY REQUEST THAT YOUR AGENT OR BROKER TRANSMIT
THE DOCUMENTS IN YOUR PRESCENCE TO ENSURE IMMEDIATE
COVERAGE, PROVIDED THE ABOVE REQUIREMENTS ARE MET.
IF THE ABOVE REQUIREMENTS ARE NOT MET, YHOUR COVERAGE
WILL TAKE EFFECT THE DAY AFTER THE PLAN OFFICE
RECEIVES YOUR APPLICATION. YOU MAY REQUEST THAT YOUR
AGENT OR BROKER NOTIFY YOU WHEN YOUR COVERAGE IS
EFFECTIVE.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No
Local: No
SUPPORT: (Verified 6/27/96)
Personal Insurance Federation of California (source)
Department of Insurance
Association of California Insurance Companies
Insurance Agents and Brokers Legislative Council
State Farm Insurance Companies
David Towle Insurance
ARGUMENTS IN SUPPORT: Proponents note that previous
legislation by Senator Johnston, SB 1721 (Chapter 1092,
1994), required CAARP to establish an electronic effective
date program, which included the requirement that producers
electronically transmit completed applications within one
hour of completion in order for coverage to be effective at
the time the application was completed. However, according
to the sponsor, producers are often unable to transmit
completed applications to the plan manager within one hour.
Therefore, coverage does not take effect until the day
after the plan office receives the application by mail,
which could take several days. As a result, a CAARP
applicant could leave the office of a producer with the
?3
?
AB 3313
Page
4
faulty assumption that coverage is in effect. If the
applicant were to become involved in an accident after
completing the application and before the producer submits
the documents to the plan manager, under existing law the
applicant would not be covered.
According to the CAARP Digest newsletter, 53 percent of
denials of coverage are due to producers failing to
transmit the application within one hour of its completion.
Elimination of this requirement will allow producers to
submit the application electronically either at the time of
the application or at a later date. Coverage will become
effective when the documents are electronically transmitted
by the producer or agent.
Proponents argue that the current one-hour grace period
should be repealed because it allows back-dating of
application forms, and causes confusion if a producer does
not transmit the forms within the required one hour.
Supporters further state that this bill will provide
consumers, producers and CAARP with greater certainty as to
the effective date of coverage because it mandates that
coverage becomes binding once the application is
electronically transmitted.
DLW:ctl 6/27/96 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
?4
?