Perspective: New California Law Means New Obligations for Insurers

California Governor Gavin Newsom’s recent actions should be of great interest to insurance agents and brokers doing business in the Golden State.

Newsom signed Senate Bill 1242, written by the Senate Insurance Committee and intended to protect California consumers by imposing a variety of requirements on producers, with a swing of the pen.

An omnibus bill is essentially a kitchen sink of unrelated topics covered under a single law. It will take effect on January 1, 2023 and will address, among other things, insurance fraud reporting and education obligations, fingerprinting and disclosure of licenses.

Report abuse

Mark Robinson

Earlier this year, agents and brokers were required to report fraud to the California Department of Insurance (CDI). More specifically, SB 1242 requires that producers who suspect or know of fraudulent claims for insurance be provided with information regarding the actual circumstances of the suspected claims through the electronic Consumer Fraud Reporting Portal. Amend California insurance law to require submission to the DOI Fraud Division. Allegations of misrepresentation contained therein.

This must be done within 60 days after the producer determines that fraud has occurred or may have occurred. Please note that mandatory notices cannot be made anonymously.

If suspected or known fraud is discovered after filing with an insurance company, the agent or broker will notify the affected insurance company (specifically, its Special Investigations Division) on or after January 1 that all must be reported with documentation and evidence of The unit may request it later.

These reporting obligations are completely new. Previously, only carriers were responsible for fraud reporting requirements.

Therefore, agents and brokers must not turn a blind eye to apparent fraudulent activity by insurance applicants. Doing so can be risky. SB 1242 poses regulatory risks for noncompliance with the law.

The good news is that agents and brokers who do their duty by reporting fraud or assisting in related investigations are insulated from civil liability, assuming they acted in good faith.

continuing education

On the topic of fraud, prospective licensed producers and current licensees meeting continuing education requirements must complete a one-hour study on insurance fraud. Effective March 1, 2023, this order will be incorporated into her existing hourly requirements for ethics training. This means that no additional 1 hour of course work will be imposed on her.

fingerprint

SB 1242 also amends the California Insurance Code to require insurance commissioners to submit fingerprint images and related information of license applicants to the Department of Justice.

This should serve as a wake-up call to would-be licensees, and all licensees should consider their criminal history, if any, whether or not previous convictions may have been expunged. there is. Remember, failure to disclose your conviction on your license application may result in your license being denied. Therefore, applicants must ensure that their complete criminal profile is fully disclosed on each individual license application before submission.

Disclosure of License Information via Email

Before SB 1242 was signed into law, agents and brokers were required by law to include license numbers on business cards, premium quotes, and print advertisements for insurance products sold only in California. . Now that obligation has been extended to e-mail.

Beginning January 1, all producers doing business in California are required to include their license number in emails related to insurance transactions. This information may appear in a font no smaller than the largest phone number, address, or producer’s email address that appears in a particular email, and may appear adjacent to the agent’s or broker’s name or title, or It should be placed on the line below it. Similarly, an organization’s licensee’s license number must appear on a line next to or below the organization’s name. This raises questions such as: If the entity’s license number is included in the email, do you want a list of individual license numbers?message? The answer is yes. This was revealed in a notice by Insurance Commissioner Ricardo Lara issued this week.

Producer Notice

Agents and brokers are advised to keep an eye out for this new mixed bag of obligations given the approaching new year and with it the effective date of SB 1242.

Robinson is a founding partner of Michelman & Robinson LLP, a national law firm headquartered in Los Angeles. As General Insurance Regulatory Commissioner at M&R, he primarily represents retail brokers and agents. Contact him at 310-299-5500 or mrobinson@mrllp.com.

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California

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