California expands health insurance protection
California made changes to its insurance laws effective January 2, 2009 that are designed to better protect consumers who purchase supplemental insurance for medical bills and other related risks. California law (and laws in most other states) require insurance advertisements, including Web sites, to disclose the identity of the responsible insurance company and the selling agent or broker. While reputable insurance companies have this disclosure built into their online product software, some less reputable companies may use unlicensed marketing entities to sell their products online. These unlicensed companies lack the requisite errors and omission insurance to protect consumers and are not subject to the professional standards and continuing education requirements. This adds up to a dangerous situation for California consumers and triggered complaints from unwary consumers affected by these unlicensed marketing scams.
Now California assembly bill number 2956 amends section 1621, 1623, 1623 and 1732 of the California insurance code to affect the actions of insurance agents and brokers and expand responsibility for unlicensed entities. The law should have the effect of restricting the Internet-based advertising of supplemental health insurance and 24 hour accident insurance that is marketed without the proper legal disclosures.
Section §1621 now reads (emphasis added):
An insurance agent is a person who transacts insurance, including 24-hour care coverage as defined in section 1749.02, other than life, disability, or health insurance, on behalf of them admit to the insurance company. The term "insurance agent" as used in this chapter does not include a life agent as defined in this article.
Section § 1623 now reads:
(a) an insurance broker is a person who, for compensation, and on behalf of another person, transacts insurance other than life insurance web, but not on behalf of, an admitted insurer. It shall be presumed that the person is acting as an insurance broker. If the person is licensed to act as an insurance broker, maintains the bond required by this chapter, and discloses in a written agreement signed by the consumer, all of the following: (1) that the person is transacting insurance on behalf of the consumer. (2) a description of the basic services that person will perform as a broker. (3) the amount of all broker fees being charged by the person. (4) if applicable, the fact that the person may be entitled to receive compensation from the insurer, directly or indirectly, for the consumers purchase of insurance as a consequence of the transaction.
(b) if a transaction involves both retail broker and a wholesale intermediary broker, the wholesale intermediary broker shall be deemed to have satisfied its disclosure obligations under this section if it provides written disclosures to the retail broker of the criteria set forth in paragraphs (2), (3), and (4) of subdivision (a). (c) the presumption of broker status is rebutted as to any transaction in the admitted market in which any of the following is present: (1) The licensee is appointed, pursuant to section 1704, as an agent of the insurer for the particular class or type of insurance being transacted. (2) The licensee as a written agreement with an insurer containing express terms authorize the licensee to obligate the insurer without first obtaining notification from the insurer that the insurer has excepted, conditionally or unconditionally, the submitted risk. (3) The licensee is authorized, pursuant to a written agreement with an insurer, to a point other licensees as agents of the insurer, pursuant to section 1704. (4) The licensee is authorized, pursuant to a written agreement with an insurer, to pay claims on behalf of the insurer. (d) in all other cases, the presumption of broker status is rebutted based on the totality of the circumstances indicated that the broker-agent is acting on behalf of the insurer. (e) for purposes of this section, "totality of the circumstances"means evidence indicating whether a broker-agent was acting on behalf of the insurer was acting on behalf of the third person. In determining the totality of circumstances, all relevant facts and circumstances shall be reviewed and the review is not limited to any particular factor factors in this section does not require that any particular circumstance, receive greater or lesser weight.affordable health insurance, accident insurance, supplemental insurance, scam protection