Assurex E&O Plus | An Interesting New Law Pertaining to Insurance Agents and Brokers
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An Interesting New Law Pertaining to Insurance Agents and Brokers

10 Jan An Interesting New Law Pertaining to Insurance Agents and Brokers

Posted at 08:53h in Pearsall’s Perspective – E&O Plus Tip of the Week by

I was intrigued by a recent Insurance Journal article (authored by Mark Robinson, a founding partner of Michelman & Robinson LLP, a national law firm headquartered in Los Angeles) that addressed a new California law that went into effect at the beginning of 2023. While the new legislation pertains only to insurance agents and brokers doing business in California, there is no doubt many E&O Plus agencies, while not physically located in California, may be writing business in the state. 

The new law, aimed at protecting California consumers by imposing various requirements upon producers, addresses various issues, including insurance fraud reporting and education mandates, fingerprinting, and licensing disclosures.

Some of the noteworthy pieces of the legislation (from my perspective):

  • Agents and brokers must report fraud to the California Department of Insurance (CDI). More specifically, the law amends the California Insurance Code to require producers who suspect or know a fraudulent application for insurance is being made to submit to the DOI Fraud Division information regarding the factual circumstances of a dubious application and the alleged misrepresentations it contains. This must be done within 60 days after the producer determines fraud has or may have occurred. The mandated notification cannot be made anonymously. Where suspected or known fraud is discovered after an application has been placed with a carrier, the agent or brokers will be obligated from January 1 onward to report it to the impacted insurer (specifically, their special investigation unit), along with all documents and evidence that the unit may later request.

 

  • The California Insurance Code was amended to compel the insurance commissioner to submit to the Department of Justice fingerprint images and related information that pertains to applicants for licensing—fingerprints that could serve to reveal criminal convictions. The article noted that this should serve as a wake-up call to would-be licensees, who must now think through their criminal histories if they have any — whether or not prior convictions may have been expunged.

 

  • Agents and brokers are now required to include their license numbers on any emails they send involving the transaction of insurance. Previously, this requirement pertained to business cards, premium quotes, and print advertisements for insurance products distributed exclusively in California.

 

Agents and brokers should take note of these issues, especially if they are conducting business in California. But it is also important to note and recognize that your state may be next.