AB 601: Insurers: data reporting.
- Session Year: 2017-2018
- House: Assembly
- Latest Version Date: 2017-04-20
Existing law requires each admitted insurer with premiums written equal to or in excess of $100,000,000 to periodically submit to the Insurance Commissioner a report on its minority, women, and disabled veteran-owned business procurement efforts, as specified, and subjects an insurer to a civil penalty if the insurer fails to file the report. Existing law requires the commissioner to maintain a link on the Internet Web site of the Department of Insurance that provides public access to the contents of each report. Existing law provides that these provisions shall remain in effect until January 1, 2019.
This bill would add veteran and lesbian, gay, bisexual, and transgender (LGBT) business enterprises to the entities for which the reporting described above is required. The bill would require each admitted insurer to report information about which procurements are made from minority, women, disabled veteran, veteran, and LGBT business enterprises with at least a majority of the enterprises workforce in California. The bill would require each admitted insurer to submit a report regarding its governing board and board diversity efforts at the same time that it submits the report on procurement efforts, and would require the Insurance Commissioner to maintain a link on the Internet Web site of the Department of Insurance that provides public access to the contents of each report. The bill would require each report to be submitted on July 1, 2018, and then biennially thereafter. The bill would extend the operation of these provisions to January 1, 2025. 2022.
Existing law authorizes the commissioner to obtain information from insurers through various means, including an examination of the business and affairs of the insurer, or by the issuance of subpoenas or subpoenas duces tecum for witnesses to attend, testify, and produce documents before him on any subject touching insurance business or in the aid of his duties, as specified.
This bill would authorize the commissioner to initiate a data call by bulletin upon reasonable notice to any class of insurers if the data call directly relates to specified subjects. The bill would authorize the commissioner to initiate a data call on other subjects only through an adopted regulation. The bill would require the commissioner to limit the subject of data calls to activity within the state, and would prohibit the commissioner from initiating a data call to obtain information that is otherwise available through other specified means.
Existing law requires each admitted insurer with premiums written equal to or in excess of $100,000,000 to periodically submit to the Insurance Commissioner a report on its minority, women, and disabled veteran-owned business procurement efforts, as specified, and subjects an insurer to a civil penalty if the insurer fails to file the report. Existing law requires the commissioner to maintain a link on the Internet Web site of the Department of Insurance that provides public access to the contents of each report. Existing law provides that these provisions shall remain in effect until January 1, 2019.
This bill would add veteran and lesbian, gay, bisexual, and transgender (LGBT) business enterprises to the entities for which the reporting described above is required. The bill would require each admitted insurer to report information about which procurements are made from minority, women, disabled veteran, veteran, and LGBT business enterprises with at least a majority of the enterprises workforce in California. The bill would require each admitted insurer to submit a report regarding its governing board and board diversity efforts at the same time that it submits the report on procurement efforts, and would require the Insurance Commissioner to maintain a link on the Internet Web site of the Department of Insurance that provides public access to the contents of each report. The bill would require each report to be submitted on July 1, 2018, and then biennially thereafter. The bill would extend the operation of these provisions to January 1, 2025.
The Personal Income Tax Law defines a taxpayer for purposes of that law.This bill would make a nonsubstantive change to that definition.The Personal Income Tax Law defines a taxpayer for purposes of that law.
This bill would make a nonsubstantive change to that definition.
The Legislature finds and declares all of the following:
(a)It is in the states interest to encourage competitive business opportunities for all of its people. Insurers are uniquely positioned to build relationships within the communities they serve through the development, inclusion, and utilization of certified minority, women, LGBT, veteran, and disabled veteran-owned business enterprises whenever possible. National companies are able to leverage buying power to save costs to the benefit of policyholders.
(b)It is in the states interest to encourage corporate leadership opportunities for all of its people. Insurers are uniquely positioned to build relationships within the communities they serve through the development of a corporate board that represents the diversity of the state.
(c)By providing that each major insurer submit to the Insurance Commissioner a report explaining the insurers supplier diversity statement and expressing its goals regarding certified minority, women, LGBT, veteran, and disabled veteran-owned business enterprises, the insurers efforts and goals regarding board diversity, and the commissioner placing that information on the departments Internet Web site, that online resource will help facilitate these supplier relationships.
SEC. 3.Section 927.1 of the Insurance Code is amended to read:927.1.For the purposes of this article, the following definitions apply:
(a)Control means to exercise the power to make policy decisions.
(b)Disabled veteran business enterprise has the same meaning as defined in subparagraph (A) of paragraph (7) of subdivision (b) of Section 999 of the Military and Veterans Code, or any successor provision. Disabled veteran business enterprise certification eligibility requirements shall be consistent with those imposed by the Department of General Services, and this section applies only to those disabled veteran business enterprises certified by the Department of General Services.
(c)LGBT business enterprise (LGBTBE) means a business enterprise that is 51 percent owned, managed, operated, and controlled by one or more lesbian, gay, bisexual, or transgender (LGBT) individuals who are citizens or lawful permanent residents of the United States, has been legally formed in the United States, and exercises independence from any non-LGBT business enterprise.
(d)Minority business enterprise means a business enterprise, physically located in the United States or its trust territories, that is at least 51 percent owned by a minority group or groups, or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more minority groups, and whose management and daily business operations are controlled by one or more of those individuals. Minority includes African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans who provide proof of United States citizenship or legal resident alien status.
(e)Operate means to be actively involved in the day-to-day management of the enterprise and not to be merely officers or directors.
(f)Women business enterprise means a business enterprise physically located in the United States or its trust territories, that is at least 51 percent owned by a woman or women, or, in the case of any publicly owned business at least 51 percent of the stock of which is owned by one or more women, and whose management and daily business operations are controlled by one or more of those individuals, who provide proof of United States citizenship or legal resident alien status.
(g)Veteran business enterprise has the same meaning as defined in subdivision (a) of Section 999.51 of the Military and Veterans Code, or any successor provision. Veteran business enterprise certification eligibility requirements shall be consistent with those imposed by the Department of General Services, and this section shall apply only to those veteran business enterprises certified by the Department of General Services.
SEC. 4.Section 927.2 of the Insurance Code is amended to read:927.2.(a)(1)Commencing July 1, 2018, and biennially on July 1 of each even-numbered year thereafter, each admitted insurer, with California premiums written of one hundred million dollars ($100,000,000) or more, shall submit a report to the commissioner on its minority, women, veteran, LGBT, and disabled veteran-owned business procurement efforts during the previous two years.
(2)The report shall include all of the following:
(A)The insurers supplier diversity policy statement.
(B)The insurers outreach and communications to minority, women, LGBT, veteran, and disabled veteran business enterprises, including:
(i)How the insurer encourages and seeks out minority, women, LGBT, veteran, and disabled veteran owned business enterprises to become potential suppliers.
(ii)How the insurer encourages its employees involved in procurement to seek out minority, women, LGBT, veteran, and disabled veteran-owned business enterprises to become potential suppliers.
(iii)How the insurer conducts outreach and communication to minority, women, LGBT, veteran, and disabled veteran business enterprises.
(iv)How the insurer supports organizations that promote or certify minority, women, LGBT, veteran, and disabled veteran-owned business enterprises.
(v)Information regarding appropriate contacts at the insurer for interested business enterprises.
(C)Information about which procurements are made from minority, women, disabled veteran, veteran, and LGBT business enterprises with a headquarters address in California, and from disabled veteran business enterprises, as defined in subdivision (b) of Section 927.1, with each category aggregated separately, to the extent that information is readily accessible. An insurer may also include other relevant information in the report.
(D)Information about which procurements are made from minority, women, disabled veteran, veteran, and LGBT business enterprises with at least a majority of the enterprises workforce in California, with each category aggregated separately, to the extent that information is readily accessible. An insurer may also include other relevant information in the report.
(3)An insurer that does not enter into contracts to procure goods or services in California satisfies the requirements of paragraph (2) by filing a statement with the commissioner attesting that it does not enter into procurement contracts in California.
(b)Nothing in this section shall be construed to require quotas, set-asides, or preferences in an admitted insurers procurement of goods or services, nor does this section apply to insurer producer or licensee contracts. Admitted insurers retain the authority to use business judgment to select the supplier for a particular contract.
(c)Nothing in this section shall preclude an admitted insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraphs (1) and (2) of subdivision (a) through a single filing on behalf of the entire group of affiliated companies.
(d)Failure to file the report required by subdivision (a), by July 1, 2013, shall subject the admitted insurer to a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000), or if the act or practice was willful, a civil penalty not to exceed ten thousand dollars ($10,000). An insurer may request, and the commissioner may grant, a 30-day extension to file the report if needed due to unintended or unforeseen delays. If the insurer has failed to file the report within 30 days of a written notice by the commissioner that the insurer has failed to file the report, the commissioner may find that the failure to file the report was willful and increase the civil penalty to an amount not to exceed ten thousand dollars ($10,000). The penalty imposed by this section shall be enforced by the commissioner and is appealable by means of any remedy provided by Section 12940, or by Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code. This subdivision is the sole means for enforcement of this section.
(e)By September 30 of the reporting year, the commissioner shall establish and maintain a link on the departments Internet Web site that provides public access to the contents of each admitted insurers report on minority, women, LGBT, veteran, and disabled veteran-owned business procurement efforts. The commissioner shall include a statement on the departments Internet Web site that the information contained in the insurers report on minority, women, LGBT, veteran, and disabled veteran-owned businesses is provided for informational purposes only.
SEC. 5.Section 927.3 of the Insurance Code is amended and renumbered to read:927.4.This article shall remain in effect only until January 1, 2025, 2022, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2025, 2022, deletes or extends that date.
SEC. 6.Section 927.3 is added to the Insurance Code, to read:927.3.(a)(1)Commencing July 1, 2018, and biennially on July 1 of each even-numbered year thereafter, each admitted insurer with California premiums written of one hundred million dollars ($100,000,000) or more, shall submit a report to the commissioner on its governing board and board diversity efforts during the previous two years.
(2)The report shall include the following information:
(A)The demographic makeup of the insurers governing board.(A)The insurers policy for recruiting and selecting board members.
(B)The insurers goals surrounding board diversity, including outreach and communication strategies to diversify its board.
(b)Neither the insurer nor the department may ask an individual board member if he or she identifies with any particular demographic group, including race, ethnicity, religious affiliation, sexual orientation, or considers himself or herself to be disabled. A board member who wishes to be publicly identified as a member of any demographic group may disclose that information to the commissioner, who shall compile those disclosures and publish the compiled data pursuant to subdivision (e).
(b)(c)This section shall not be construed to require quotas, set-asides, or preferences in regard to an admitted insurers governing board.
(c)(d)This section shall not preclude an admitted insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraphs (1) and (2) of subdivision (a) through a single filing on behalf of an entire group of affiliated companies.
(d)(e)By September 30 of the reporting year, the commissioner shall establish and maintain a link on the departments Internet Web site that provides public access to the contents of each admitted insurers report submitted pursuant to this section. The commissioner shall include a statement on the departments Internet Web site that the information contained in the insurers report is provided for informational purposes only.
(e)(f)The report required by this section may be submitted as a single report with the report required by Section 927.2.
SEC. 7.Section 12962.5 is added to the Insurance Code, to read:12962.5.(a)The commissioner may initiate a data call by bulletin upon reasonable notice to any class of insurers if the subject of the data call directly relates to any of the following:
(1)The insurers obligations under an insurance contract.
(2)Consumer behavior in selecting products or coverage limits.
(3)The insurers underwriting and marketing practices.
(4)The characteristics or behavior of claimants and insureds.
(b)The commissioner may initiate a data call on other subjects only through a regulation adopted pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) or as otherwise specifically authorized by statute.
(c)The commissioner may not initiate a data call except as provided in this section.
(d)The commissioner shall limit the subject of data calls to activity within California.
(e)The commissioner shall not initiate a data call to obtain information that is otherwise available by financial examination or submitted through regular filings with the department.
The Legislature finds and declares all of the following:
(a)It is in the states interest to encourage competitive business opportunities for all of its people. Insurers are uniquely positioned to build relationships within the communities they serve through the development, inclusion, and utilization of certified minority, women, LGBT, veteran, and disabled veteran-owned business enterprises whenever possible. National companies are able to leverage buying power to save costs to the benefit of policyholders.
(b)It is in the states interest to encourage corporate leadership opportunities for all of its people. Insurers are uniquely positioned to build relationships within the communities they serve through the development of a corporate board that represents the diversity of the state.
(b)(c)By providing that each major insurer submit to the Insurance Commissioner a report explaining the insurers supplier diversity statement and expressing its goals regarding certified minority, women, LGBT, veteran, and disabled veteran-owned business enterprises, and the insurers efforts and goals regarding board diversity, and the commissioner placing that information on the departments Internet Web site, that online resource will help facilitate these supplier relationships.
SEC. 3.Section 927.1 of the Insurance Code is amended to read:927.1.For the purposes of this article, the following definitions apply:
(a)Control means to exercise the power to make policy decisions.
(b)Disabled veteran business enterprise has the same meaning as defined in subparagraph (A) of paragraph (7) of subdivision (b) of Section 999 of the Military and Veterans Code, or any successor provision. Disabled veteran business enterprise certification eligibility requirements shall be consistent with those imposed by the Department of General Services, and this section applies only to those disabled veteran business enterprises certified by the Department of General Services.
(c)LGBT business enterprise (LGBTBE) means a business enterprise that is 51 percent owned, managed, operated, and controlled by one or more lesbian, gay, bisexual, or transgender (LGBT) individuals who are citizens or lawful permanent residents of the United States, has been legally formed in the United States, and exercises independence from any non-LGBT business enterprise.
(c)(d)Minority business enterprise means a business enterprise, physically located in the United States or its trust territories, that is at least 51 percent owned by a minority group or groups, or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more minority groups, and whose management and daily business operations are controlled by one or more of those individuals. Minority includes African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans who provide proof of United States citizenship or legal resident alien status.
(d)(e)Operate means to be actively involved in the day-to-day management of the enterprise and not to be merely officers or directors.
(e)(f)Women business enterprise means a business enterprise physically located in the United States or its trust territories, that is at least 51 percent owned by a woman or women, or, in the case of any publicly owned business at least 51 percent of the stock of which is owned by one or more women, and whose management and daily business operations are controlled by one or more of those individuals, who provide proof of United States citizenship or legal resident alien status.
(g)Veteran business enterprise has the same meaning as defined in subdivision (a) of Section 999.51 of the Military and Veterans Code, or any successor provision. Veteran business enterprise certification eligibility requirements shall be consistent with those imposed by the Department of General Services, and this section shall apply only to those veteran business enterprises certified by the Department of General Services.
SEC. 4.Section 927.2 of the Insurance Code is amended to read:927.2.(a)(1)By July 1, 2013, Commencing July 1, 2018, and biennially on July 1 of each even-numbered year thereafter, each admitted insurer, with California premiums written of one hundred million dollars ($100,000,000) or more, shall submit a report to the commissioner on its minority, women, veteran, LGBT, and disabled veteran-owned business procurement efforts during the reporting period. previous two years.
(2)The report shall include all of the following:
(A)The insurers supplier diversity policy statement.
(B)The insurers outreach and communications to minority, women, LGBT, veteran, and disabled veteran business enterprises, including:
(i)How the insurer encourages and seeks out minority, women, LGBT, veteran, and disabled veteran owned business enterprises to become potential suppliers.
(ii)How the insurer encourages its employees involved in procurement to seek out minority, women, LGBT, veteran, and disabled veteran-owned business enterprises to become potential suppliers.
(iii)How the insurer conducts outreach and communication to minority, women, LGBT, veteran, and disabled veteran business enterprises.
(iv)How the insurer supports organizations that promote or certify minority, women, LGBT, veteran, and disabled veteran-owned business enterprises.
(v)Information regarding appropriate contacts at the insurer for interested business enterprises.
(C)The report shall include information Information about which procurements are made from minority and women minority, women, disabled veteran, veteran, and LGBT business enterprises with a headquarters address in California, and from disabled veteran business enterprises, as defined in subdivision (b) of Section 927.1, with each category aggregated separately, to the extent that information is readily accessible. An insurer may also include other relevant information in the report.
(D)Information about which procurements are made from minority, women, disabled veteran, veteran, and LGBT business enterprises with at least a majority of the enterprises workforce in California, with each category aggregated separately, to the extent that information is readily accessible. An insurer may also include other relevant information in the report.
(3)An insurer that does not enter into contracts to procure goods or services in California satisfies the requirements of paragraph (2) by filing a statement with the commissioner attesting that it does not enter into procurement contracts in California.
(b)Nothing in this section shall be construed to require quotas, set-asides, or preferences in an admitted insurers procurement of goods or services, nor does this section apply to insurer producer or licensee contracts. Admitted insurers retain the authority to use business judgment to select the supplier for a particular contract.
(c)Nothing in this section shall preclude an admitted insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraphs (1) and (2) of subdivision (a) through a single filing on behalf of the entire group of affiliated companies.
(d)Failure to file the report required by subdivision (a), by July 1, 2013, shall subject the admitted insurer to a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000), or if the act or practice was willful, a civil penalty not to exceed ten thousand dollars ($10,000). An insurer may request, and the commissioner may grant, a 30-day extension to file the report if needed due to unintended or unforeseen delays. If the insurer has failed to file the report within 30 days of a written notice by the commissioner that the insurer has failed to file the report, the commissioner may find that the failure to file the report was willful and increase the civil penalty to an amount not to exceed ten thousand dollars ($10,000). The penalty imposed by this section shall be enforced by the commissioner and is appealable by means of any remedy provided by Section 12940, or by Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code. This subdivision is the sole means for enforcement of this section.
(e)Commencing July 1, 2015, each admitted insurer specified in subdivision (a) shall biennially update its supplier diversity report and submit the new report to the commissioner no later than July 1. (f)(e)By September 30 of the reporting year, the commissioner shall establish and maintain a link on the departments Internet Web site that provides public access to the contents of each admitted insurers report on minority, women, LGBT, veteran, and disabled veteran-owned business procurement efforts. The commissioner shall include a statement on the departments Internet Web site that the information contained in the insurers report on minority, women, LGBT, veteran, and disabled veteran-owned businesses is provided for informational purposes only.
SEC. 5.Section 927.3 of the Insurance Code is amended and renumbered to read:927.3.927.4.This article shall remain in effect only until January 1, 2019, 2025, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2019, 2025, deletes or extends that date.
SEC. 6.Section 927.3 is added to the Insurance Code, to read:927.3.(a)(1)Commencing July 1, 2018, and biennially on July 1 of each even-numbered year thereafter, each admitted insurer with California premiums written of one hundred million dollars ($100,000,000) or more, shall submit a report to the commissioner on its governing board and board diversity efforts during the previous two years.
(2)The report shall include the following information:
(A)The demographic makeup of the insurers governing board.
(B)The insurers goals surrounding board diversity, including outreach and communication strategies to diversify its board.
(b)This section shall not be construed to require quotas, set-asides, or preferences in regard to an admitted insurers governing board.
(c)This section shall not preclude an admitted insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraphs (1) and (2) of subdivision (a) through a single filing on behalf of an entire group of affiliated companies.
(d)By September 30 of the reporting year, the commissioner shall establish and maintain a link on the departments Internet Web site that provides public access to the contents of each admitted insurers report submitted pursuant to this section. The commissioner shall include a statement on the departments Internet Web site that the information contained in the insurers report is provided for informational purposes only.
(e)The report required by this section may be submitted as a single report with the report required by Section 927.2.
SECTION 1.Section 17004 of the Revenue and Taxation Code is amended to read:17004.Taxpayer includes any individual, fiduciary, estate, or trust subject to any tax that is imposed by this part, or any partnership.Taxpayer includes any individual, fiduciary, estate, or trust subject to any tax that is imposed by this part part, or any partnership.
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Date
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Status
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| Feb 1, 2018 | From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. |
| Jan 31, 2018 | Died pursuant to Art. IV, Sec. 10(c) of the Constitution. |
| May 26, 2017 | In committee: Held under submission. |
| May 17, 2017 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| May 10, 2017 | In committee: Hearing postponed by committee. |
| Apr 24, 2017 | Re-referred to Com. on APPR. |
| Apr 20, 2017 | Read second time and amended. |
| Apr 19, 2017 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 11. Noes 0.) (April 19). |
| Mar 23, 2017 | From committee chair, with author's amendments: Amend, and re-refer to Com. on INS. Read second time and amended. |
| Mar 27, 2017 | Re-referred to Com. on INS. |
| Mar 23, 2017 | Referred to Com. on INS. |
| Feb 15, 2017 | From printer. May be heard in committee March 17. |
| Feb 14, 2017 | Read first time. To print. |
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Date
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Description
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Location
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Votes
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| Apr 19, 2017 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Insurance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
Date of Hearing: May 17, 2017
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez Fletcher, Chair
ABPCA Bill Id:AB 601
Author:(Ridley-Thomas) – As Amended Ver:April 20, 2017
Policy Committee: | Insurance | Vote: | 11 - 0 |
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill requires large insurers to submit reports on the diversity of their board of directors, as well as efforts to increase diversity, and adds lesbian, gay, bisexual, and transgender (LGBT)‑owned and veteran-owned businesses to the list of business enterprises for which insurers must report their efforts related to procurement activity.
It also restricts the authority of the commissioner to initiate data calls (requests for data) by bulletin to those calls that relate directly to enumerated insurance industry regulatory issues, or are initiated pursuant to regulation.
FISCAL EFFECT:
- Approximately $100,000 over two years to the California Department of Insurance (CDI) for data collection on diversity issues, as specified (Insurance Fund).
- Uncertain fiscal impact associated with restrictions on data calls. If CDI chooses to pursue regulations to require data calls, there could be regulatory cost pressure, as compared to the more streamlined bulletin process. However, the restrictions could also reduce the number of data calls that are not specifically authorized in statute, which would have a negligible impact or even reduce administrative workload. In essence, there could be administrative cost pressure in the hundreds of thousands of dollars (Insurance Fund) if the Insurance Commissioner chose to issue multiple regulations, but their issuance and the related cost would be at the Commissioner's discretion.
COMMENTS:
- Purpose. The author indicates the reports required pursuant to this bill are needed to increase diversity in the insurance industry.
- Diversity in the Insurance Industry. CDI established the Insurance Diversity Initiative in 2012. According to the CDI, the Initiative focuses on transparency and administers surveys to understand the state of supplier diversity and governing board diversity amongst the insurers with written premiums of $100 million or more in California. CDI reports that between 2012 and 2015, insurers increased their procurement with California diverse businesses by $586.6 million. In 2016, CDI engaged with five other jurisdictions (Minnesota, New York, Washington, Oregon, and the District of Columbia) to generate a combined data call known as the Multi-State Insurance Diversity Survey (MIDS) to query insurers on a broader basis regarding their diversity efforts. That survey confirmed the notion that insurance industry leadership is composed overwhelmingly of white men.
- Opposition. CDI opposes this bill unless amended to remove provisions restricting the Commissioner's authority to issue data calls.
- Staff Comment. This bill restricts the commissioner's authority to issue data calls by bulletin to those related to the following: insurers' obligations under an insurance contract, consumer behavior in selecting products or coverage limits, insurer’s underwriting and marketing practices, or the characteristics or behavior of claimants and insureds. The Commissioner states this is the most straightforward and cost-effective way to request information. It is unclear whether the list in this bill is an exhaustive list of circumstances under which it makes sense to provide the Commissioner authority to collect data from regulated entities in a relatively streamlined manner.
Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081
Date of Hearing: April 19, 2017
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
ABPCA Bill Id:AB 601 (
Author:Ridley-Thomas) – As Amended Ver:March 23, 2017
SUBJECT: Insurers: women, minority, disabled veteran, veteran, and LGBT business enterprises: procurement and board diversity
SUMMARY: Requires each insurer to periodically provide the Department of Insurance (DOI) with information regarding the diversity of its board of directors. Specifically, this bill:
- Makes legislative findings that corporate leadership opportunities should be available to all Californians and that insurers are well positioned to have their boards of directors reflect the states' diversity.
- Adds LGBT and veterans to the categories of minorities in existing legislative findings regarding insurer efforts to do business with minority owned businesses.
- Defines an LGBT business enterprise to be one that is 51% owned, managed, controlled, and operated by lesbian, gay, bisexual, or transgendered individuals.
- Defines a veteran business enterprise to be one that meets the definition provided in the Military and Veterans Code which generally permits non-profit veteran service agencies to qualify for small business bid preferences.
- Extends from 2019 to 2025 the sunset date on existing statute that requires insurers to report to the DOI on supplier diversity.
- Adds LGBT and veteran enterprises to the list of categories required in the supplier diversity reporting.
- Requires an insurer to report on procurement from minority owned businesses that have at least 50% of their workforce located in California.
- Requires an insurer with California written premiums of at least one-hundred million dollars to biennially submit a board diversity report with the following elements:
- Demographic information of current board members.
- The insurer's goals, strategies, and outreach efforts related to board diversity.
- Requires the Insurance Commissioner (commissioner) to report the results of the board diversity data call by September 30 of each reporting year.
EXISTING LAW:
- Requires an insurer with at least one-hundred million dollars in California premium to report data regarding supplier diversity to the DOI every two years.
- Established the COIN program that included a data call requiring insurers to report qualifying community development investments to the Department of Insurance (DOI) and offering a tax credit for an insurer making a qualified community development investment. This law expired due the veto of 2016 legislation extending the sunset date on the tax credit and authorizing additional data calls.
FISCAL EFFECT: Undetermined
COMMENTS:
- Purpose. According to the author, this bill would expand the categories of minority owned enterprises for which insurers must report procurement activity to the DOI. AB 601 also requires each admitted insurer to submit a report regarding its governing board and board diversity efforts at the same time that it submits the reports on procurement efforts. These data calls are vital to encouraging greater diversity in the insurance industry.
- Personal Privacy. The bill requires insurers to report on the demographic characteristics of individual board members as part of the board diversity data call. While the bill does not articulate the specific demographic categories that must be reported on, the prior DOI data calls relating to board diversity have included racial/ethnic identification and sexual orientation.
These are sensitive personal issues and it is inappropriate for either the government or an employer to pressure an individual to publicly identify themselves as a condition of serving as a director. Insurers have voiced objections to being forced to make such delicate inquiries on appropriateness grounds and have expressed concerns that asking the question of their board members can put the insurer at risk of violating other laws governing the workplace. The goal of increasing diversity among corporate leaders is a laudable one, but these efforts should be respectful of individual privacy rights. Many directors may well be comfortable making such public identifications and there should be no obstacle to the DOI collecting and publishing that information. However, individuals should not be subject to the pressure to disclose created either by their company or the state directly asking. Accordingly, the author should consider amending the bill to prohibit either the DOI or the insurer from asking individual directors to disclose their demographic characteristics, but allow any director wishing to disclose that information to provide it directly to the DOI.
- Insurer Concerns. California law generally protects individuals from discrimination based on their race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation. Employers are generally prohibited from asking questions regarding these personal characteristics absent a specific job related need (e.g., linguistic capabilities, legal eligibility to work, scheduling, etc.) because these questions are likely to limit employment opportunities. Guidance to employers published by the California Department of Fair Employment and Housing (DFEH-161) advises that it is unacceptable for an employer to ask an employee about their race, color, or sexual orientation. That same guidance does acknowledge that it is not unlawful for employers to collect applicant flow data and other data for statistical purposes but does specify that any misuse of that data constitutes a violation of the Fair Employment and Housing Act. Asking these questions of board members puts the insurer in dangerous and complicated legal territory. The apprehension expressed by insurers regarding the legal implications attached to asking these questions is valid.
- Information Practices Act (IPA). The Information Practices Act of 1977 (Civil Code §§ 1798 et. seq.) governs the collection of information about individuals by state agencies. It covers personal information including any information that identifies or describes an individual. Among the requirements of the IPA is that state agencies must collect personal information, to the greatest extent possible, from the individual rather than from another source. However, the bill inserts the insurer as a third party reporting personal information to the DOI. The protections in the IPA may be particularly important in this case because insurers are reporting demographic information on a very small population of individuals who might be readily identified using other publicly available information. If the bill moves forward, the author should request a legal analysis from the DOI assessing how board member demographic information should be collected, maintained, and disclosed to ensure data collection under the bill is performed in compliance with the IPA.
- Data Calls. Because of its importance in daily life and the potentially staggering impact of insurance failures, insurance is a highly regulated industry. Insurers are subject to strict financial and market oversight to ensure they can fulfill their obligations to policyholders and that they are treating consumers fairly. Part of the oversight system is regular reporting of data to the DOI, and the DOI has routinely requested insurers to make additional reports of data on particular aspects of their operations or the state of the insurance market. There is little controversy or objection to the need for, and appropriateness of, these routine data calls. They provide the DOI with useful information to inform the ongoing oversight and regulation of day-to-day insurance activity. However, the DOI has also issued a number of data calls in the recent past that have generated considerable controversy among industry participants (e.g., thermal coal investments, multi-state insurance diversity, climate change). In addition to the frequency of data calls on these broader policy subjects, controversy has attached to these data calls on a range issues including scope, authority, clarity, need, and duplication. This controversy clouds the consideration of other data call requirements (such as the COIN data call included in this bill).
As a general matter, the rulemaking provisions of the Administrative Procedures Act (APA) require that any rule of general application be adopted by the process specified in the APA.
"No state agency shall issue, utilize, enforce, or attempt to enforce any
guideline, criterion, bulletin, manual, instruction, order, standard of
general application, or other rule, which is a “regulation” under the
APA unless it has been adopted as a regulation and filed with the
Secretary of State pursuant to the APA." (Government Code Section 11340.5)
In addition to outlining a formal process of notice and public comment, the APA requires the Office of Administrative Law (OAL) to review proposed regulations and ensure that the proposed regulation was adopted by a process that complies with the procedural requirements in the APA, and that the proposed rule substantively complies with six standards of review. Those six standards are: 1) necessity, 2) non-duplication, 3) authority, 4) reference, 5) clarity, and 6) consistency. These standards ensure that an agency rule is reasonably necessary to fulfill a statutory/constitutional purpose within the agency's jurisdiction, and that the rule is written with sufficient clarity to allow compliance by those subject to the rule. The author should consider amending the bill to require data calls on subjects not directly related to day-to-day insurance business (e.g., claims, sales/marketing, underwriting, billing) be adopted as rules under the APA or specifically authorized by statute. The commissioner should be freely able to make data calls on core, day-to-day insurance issues as needed to fulfill his oversight and consumer protection duties. However, recent experience with data calls on broader policy issues indicates that such data calls would benefit from the notice, comment, and independent review offered by the APA rulemaking process.
- Insurance Diversity. The DOI established the Insurance Diversity Initiative in 2012. According to the DOI, the Initiative focuses on transparency and administers surveys to understand the state of supplier diversity and governing board diversity amongst the insurers with written premiums of $100 million or more in California. DOI reports that between 2012 and 2015, insurers increased their procurement with California diverse businesses by $586.6 million. In 2016, DOI engaged with five other jurisdictions (Minnesota, New York, Washington, Oregon, and the District of Columbia) to generate a combined data call known as the Multi-State Insurance Diversity Survey (MIDS) to query insurers on a broader basis regarding their diversity efforts. That survey confirmed the notion that insurance industry leadership is composed overwhelmingly of white men. The survey results indicate that 80% of board members were male, 77% were white (6% - African American, 3% - Hispanic / Latino, 2% - Asian / Pacific Islander, 1% - Mixed Race), and 12 out of the over 2300 board members identified themselves as LGBT.
- Related Legislation. Senate Bill 488 (Bradford) is virtually identical to this bill. Two other bills are currently pending that address the COIN program. Assembly Bill 566 (Ridley-Thomas) would re-establish the COIN tax credit subject to a January 1, 2022 sunset. AB 566 is expected to be considered by the committee at the same hearing as this bill. Senate Bill 325 (Mendoza) would re-establish the COIN tax credit subject to a January 1, 2020 sunset.
REGISTERED SUPPORT / OPPOSITION:
Support
None received
Opposition
None received
Analysis Prepared by: Paul Riches / INS. /
Discussed in Hearing
1H
Assembly Standing Committee on Appropriations
7MIN
Assembly Standing Committee on Insurance
Bill Author
Bill Co-Author(s):