On Sept. 5, California Governor Gray Davis signed into law AB 393, the state’s new agent licensing law.
Sponsored by Assemblymember Jack Scott (D-Altadena), AB 393 requires anyone transacting insurance to meet specified minimum professional standards. The law also creates two new license categories—a personal lines insurance agent’s license and a new license category for organizations that sell credit insurance. The bill goes into effect Jan. 1, 2002.
The bill passed in the State Assembly on an overwhelming vote of 63-2 and 36-1 in the Senate. The Governor received physical possession of AB 393 on Aug. 21 and he had until Sept. 30 to act on the bill. But rather than take the full 30-day time period to sign or veto the bill, the Governor placed his signature on AB 393 on Sept. 5.
Two days later (Sept. 7) the bill was chaptered—a technical recording procedure by the Secretary of State.
AB 393 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 new law applies to insurance company employees and call centers, as well as agents and brokers and their consumer sales representatives.
In addition, AB 393 adopts the regulatory framework of a bill signed into law last year creating a rental car limited license. Many consumers already have auto policies that provide liability coverage on rental vehicles, but quite often they unknowingly purchase duplicate coverage when renting a car. With this new law, salespeople at car rental agencies will now have to disclose that the coverage they are purchasing may be duplicated (and unnecessary).
The agent licensing bill was supported in the Legislature by a wide coalition of agents associations, insurers and financial service organizations. The Independent Insurance Agents and Brokers Legislative Counsel (ABL) and its member associations joined forces and kept AB 393 moving in the right direction.
“It’s been a long road with many obstacles to overcome,” said John Norwood, legislative counsel for ABL. It took two years for AB 393 to get through the Legislature, but IBA West has been fighting for this type of licensing law for at least three years from the initial licensing bill (AB 333, authored by Figueroa).
“The bill makes clear the licensing law applies to everyone whether employed by an agency or brokerage, insurance company, financial institution or independent contractor doing direct marketing for an insurer,” said John Johnson, IBA West president. “The bill also levels the playing field regarding costs of regulation, licensure and continuing education to protect consumers.”
According to Norwood, AB 393 “makes a strong statement…that we are opposed to Section 4(b)(8) of the proposed NAIC Producer Licensing Model Act, which would allow unlicensed individuals to transact insurance with existing policyholders.”
The only disagreement over the bill, Norwood said, is with some insurers who want to create a license exemption for their employees to service existing policyholders. Not only has this never been the CDI’s interpretation as to licensing of employees by insurance agencies, but there also wasn’t support for such a provision in the Legislature, Norwood added.
If insurers establish regional service centers and fill them with unlicensed individuals, the end result is not a good one for independent agents, according to Norwood. “Ultimately, this threatens the ownership of businesses produced by independent agents and reduces the quality of service provided to consumers of insurance products,” he explained.
The goal is to protect the consumer, according to the American Agents Alliance. “Some direct writers and other insurers using telephone sales representatives have been able to skirt individual licensing requirements by using their certificates of authority as a blanket license for their people,” said Don Lukenbill, spokesman for the Alliance. “AB 393 closes this loophole.”
Topics California Carriers Agencies Legislation
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