text:
(a) “Company Action Level Event” means any of the following events:

(1) The filing of an RBC Report by an insurer that indicates any of the following:

(A) The insurer’s Total Adjusted Capital is greater than or equal to its Regulatory Action Level RBC but less than its Company Action Level RBC.

(B) If a life or health insurer, the insurer has Total Adjusted Capital that is greater than or equal to its Company Action Level RBC but less than the product of its Authorized Control Level RBC and 3.0, and has a negative trend.

(C) If a property and casualty insurer, the insurer has Total Adjusted Capital that is greater than or equal to its Company Action Level RBC but less than the product of its Authorized Control Level RBC and 3.0, and triggers the trend test determined in accordance with the trend test calculation included in the Property and Casualty RBC instructions.

(2) The notification by the commissioner to the insurer of an Adjusted RBC Report that indicates the event in paragraph (1), provided that the insurer does not challenge the Adjusted RBC Report under Section 739.7.

(3) If the insurer challenges, under Section 739.7, an Adjusted RBC Report that indicates the event in paragraph (1), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(b) In the event of a Company Action Level Event, the insurer shall prepare and submit to the commissioner a comprehensive financial plan that shall do all of the following:

(1) Identify the conditions in the insurer that contribute to the Company Action Level Event.

(2) Contain proposals of corrective actions that the insurer intends to take and would be expected to result in the elimination of the Company Action Level Event.

(3) Provide projections of the insurer’s financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, or surplus, or a combination. The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component.

(4) Identify the key assumptions impacting the insurer’s projections and the sensitivity of the projections to the assumptions.

(5) Identify the quality of, and problems associated with, the insurer’s business, including, but not limited to, its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance in each case, if any.

(c) The RBC Plan shall be submitted as follows:

(1) Within 45 days of the Company Action Level Event.

(2) If the insurer challenges an Adjusted RBC Report pursuant to Section 739.7, within 45 days after notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(d) Within 60 days after the submission by an insurer of an RBC Plan to the commissioner, the commissioner shall notify the insurer whether the RBC Plan shall be implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines that the RBC Plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination, and may set forth proposed revisions that will render the RBC Plan satisfactory, in the judgment of the commissioner. Upon notification from the commissioner, the insurer shall prepare a Revised RBC Plan, which may incorporate by reference revisions proposed by the commissioner, and shall submit the Revised RBC Plan to the commissioner as follows:

(1) Within 45 days after the notification from the commissioner.

(2) If the insurer challenges the notification from the commissioner under Section 739.7, within 45 days after a notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(e) In the event of a notification by the commissioner to an insurer that the insurer’s RBC Plan or Revised RBC Plan is unsatisfactory, the commissioner may, at his or her discretion, subject to the insurer’s right to a hearing under Section 739.7, specify in the notification that the notification constitutes a Regulatory Action Level Event.

(f) Every domestic insurer that files an RBC Plan or Revised RBC Plan with the commissioner shall file a copy of the RBC Plan or Revised RBC Plan with the insurance commissioner in any state in which the insurer is authorized to do business if both of the following apply:

(1) That state has an RBC provision substantially similar to subdivision (a) of Section 739.8.

(2) The insurance commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the RBC Plan or Revised RBC Plan in that state no later than the later of:

(A) Fifteen days after the receipt of notice to file a copy of its RBC Plan or Revised RBC Plan with the state.

(B) The date on which the RBC Plan or Revised RBC Plan is filed under subdivision (c) of Section 739.7.

history: (History: Amended by Stats. 2015, Ch. 348, Sec. 3. (AB 1515) Effective January 1, 2016.)

article: 4.1. Risk-Based Capital for Insurers


kind: section

code: INS

text:
(a) “Regulatory Action Level Event” means, with respect to any insurer, any of the following events:

(1) The filing of an RBC Report by the insurer that indicates that the insurer’s Total Adjusted Capital is greater than or equal to its Authorized Control Level RBC but less than its Regulatory Action Level RBC.

(2) The notification by the commissioner to an insurer of an Adjusted RBC Report that indicates the event in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 739.7.

(3) If the insurer challenges an Adjusted RBC Report that indicates the event in paragraph (1) under Section 739.7, the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(4) The failure of the insurer to file an RBC Report by the filing date, unless the insurer has provided an explanation for such failure that is satisfactory to the commissioner and has cured the failure within 10 days after the filing date.

(5) The failure of the insurer to submit an RBC Plan to the commissioner within the time period set forth in subdivision (c) of Section 739.3.

(6) Notification by the commissioner to the insurer of the following:

(A) The RBC Plan or revised RBC Plan submitted by the insurer is, in the judgment of the commissioner, unsatisfactory.

(B) That notification constitutes a Regulatory Action Level Event with respect to the insurer, provided the insurer has not challenged the determination under Section 739.7.

(7) If the insurer challenges a determination by the commissioner under paragraph (6) pursuant to Section 739.7, the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected such challenge.

(8) Notification by the commissioner to the insurer that the insurer has failed to adhere to its RBC Plan or Revised RBC Plan, but only if such failure has a substantial adverse effect on the ability of the insurer to eliminate the Regulatory Action Level Event in accordance with its RBC Plan or Revised RBC Plan and the commissioner has so stated in the notification, provided the insurer has not challenged the determination under Section 739.7.

(9) If the insurer challenges a determination by the commissioner under paragraph (8) pursuant to Section 739.7, the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the challenge, unless the failure of the insurer to adhere to its RBC Plan or Revised RBC Plan has no substantial adverse effect on the ability of the insurer to eliminate the Regulatory Action Level Event with respect to the insurer.

(b) In the event of a Regulatory Action Level Event the commissioner shall do all of the following:

(1) Require the insurer to prepare and submit an RBC Plan or, if applicable, a Revised RBC Plan.

(2) Perform such examination or analysis as the commissioner deems necessary of the assets, liabilities, and operations of the insurer, including a review of its RBC Plan or Revised RBC Plan.

(3) Subsequent to the examination or analysis, issue a corrective order specifying such corrective actions as the commissioner shall determine are required.

(c) In determining corrective actions, the commissioner may take into account such factors as are deemed relevant with respect to the insurer based upon the commissioner’s examination or analysis of the assets, liabilities, and operations of the insurer, including, but not limited to, the results of any sensitivity tests undertaken pursuant to the RBC Instructions. The RBC Plan or Revised RBC Plan shall be submitted as follows:

(1) Within 45 days after the occurrence of the Regulatory Action Level Event.

(2) If the insurer challenges an Adjusted RBC Report pursuant to Section 739.7 and the challenge is not in the judgment of the commissioner frivolous, within 45 days after the notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(3) If the insurer challenges a Revised RBC Plan under Section 739.7, within 45 days after notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(d) The commissioner may retain actuaries and investment experts and other consultants as may be necessary in the judgment of the commissioner to review the insurer’s RBC Plan or Revised RBC Plan, examine or analyze the assets, liabilities, and operations of the insurer and formulate the Corrective Order with respect to the insurer. The fees, costs, and expenses relating to consultants shall be borne by the affected insurer or such other party as directed by the commissioner.

history: (History: Added by Stats. 1996, Ch. 708, Sec. 1. Effective January 1, 1997.)

division: 1. GENERAL RULES GOVERNING INSURANCE

part: 2. THE BUSINESS OF INSURANCE

chapter: 1. General Regulations

article: 4.1. Risk-Based Capital for Insurers

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 4.1. Risk-Based Capital for Insurers


text:
(a) “Authorized Control Level Event” means any of the following events:

(1) The filing of an RBC Report by the insurer that indicates that the insurer’s Total Adjusted Capital is greater than or equal to its Mandatory Control Level RBC but less than its Authorized Control Level RBC.

(2) The notification by the commissioner to the insurer of an Adjusted RBC Report that indicates the event in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 739.7.

(3) If the insurer challenges an Adjusted RBC Report that indicates the event in paragraph (1) under Section 739.7, notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(4) The failure of the insurer to respond, in a manner satisfactory to the commissioner, to a Corrective Order, provided the insurer has not challenged the Corrective Order under Section 739.7.

(5) If the insurer has challenged a Corrective Order under Section 739.7 and the commissioner has, after a hearing, rejected the challenge or modified the Corrective Order, the failure of the insurer to respond, in a manner satisfactory to the commissioner, to the Corrective Order subsequent to rejection or modification by the commissioner.

(b) In the event of an Authorized Control Level Event with respect to an insurer, the commissioner shall do the following:

(1) Take such actions as are required under Section 739.4 regarding an insurer with respect to which a Regulatory Action Level Event has occurred.

(2) If the commissioner deems it to be in the best interests of the policyholders and creditors of the insurer and of the public, take such actions as are necessary to cause the insurer to be placed under regulatory control under Article 14 (commencing with Section 1010), Article 14.3 (commencing with Section 1064.1), Article 14.5 (commencing with Section 1065.1), and Article 15.5 (commencing with Section 1077). In the event the commissioner takes those actions, the Authorized Control Level Event shall be deemed sufficient grounds for the commissioner to take that action, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in those provisions. In the event the commissioner takes actions under this paragraph pursuant to an Adjusted RBC Report, the insurer shall be entitled to such protections as are afforded to insurers under the provisions pertaining to summary proceedings.

(c) In the event of an Authorized Control Level Event with respect to the State Compensation Insurance Fund, the commissioner shall also issue a report to the Governor, the President pro Tempore of the Senate, and the Speaker of the Assembly setting forth the conditions that exist.

(d) Upon a determination of the commissioner that an Authorized Control Level Event has occurred, the Governor, in consultation with the Legislature, may replace the President of the State Compensation Insurance Fund and appoint a recovery administrator. The recovery administrator shall be responsible for developing a plan of recovery for the State Compensation Insurance Fund, and for implementing the plan. The recovery administrator shall be a person who, through professional credentials or job experience, or both, has a demonstrated understanding of insurance law, insurer finances, experience in the rehabilitation of insurance companies, claims administration, and any other factors as are needed to create and execute a plan of recovery. The cost of the recovery administrator shall be borne by the State Compensation Insurance Fund. The administration shall remain until the commissioner conveys to the Governor his or her opinion that the fund has improved its finances to the extent that it is no longer at the Authorized Control Level or above, at which point the Governor may dismiss the recovery administrator and appoint a new President of the State Compensation Insurance Fund. During the time that the recovery administrator is acting, the board of the State Compensation Insurance Fund shall act in an advisory capacity to the recovery administrator and the Governor.

history: (History: Amended by Stats. 2006, Ch. 740, Sec. 3.5. Effective January 1, 2007.)

article: 4.1. Risk-Based Capital for Insurers


text:
(a) “Mandatory Control Level Event” means any of the following events:

(1) The filing of an RBC Report that indicates that the insurer’s Total Adjusted Capital is less than its Mandatory Control Level RBC.

(2) Notification by the commissioner to the insurer of an Adjusted RBC Report that indicates the event in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 739.7.

(3) If the insurer challenges an Adjusted RBC Report that indicates the event in paragraph (1) under Section 739.7, notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.

(b) (1) With respect to a life or health insurer, in the event of a Mandatory Control Level Event, the commissioner shall take actions as are necessary to cause the insurer to be placed under regulatory control under Article 14 (commencing with Section 1010), Article 14.3 (commencing with Section 1064.1), Article 14.5 (commencing with Section 1065.1), and Article 15.5 (commencing with Section 1077). In that event, the Mandatory Control Level Event shall be deemed sufficient grounds for the commissioner to take action under those acts, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth therein. In the event the commissioner takes actions pursuant to an Adjusted RBC Report, the insurer shall be entitled to protections as are afforded to insurers under those provisions. Notwithstanding any of the foregoing, the commissioner may forego action for up to 90 days after the Mandatory Control Level Event if he or she finds there is a reasonable expectation that the Mandatory Control Level Event may be eliminated within the 90-day period.

(2) With respect to a property and casualty insurer, the commissioner shall take those actions as are necessary to place the insurer under regulatory control, or, in the case of an insurer which is writing no business and that is running-off its existing business, may allow the insurer to continue its runoff under the supervision of the commissioner. In either event, the Mandatory Control Level Event shall be deemed sufficient grounds for the commissioner to take action and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in Article 14 (commencing with Section 1010). If the commissioner takes actions pursuant to an Adjusted RBC Report, the insurer shall be entitled to the protections of Article 14 (commencing with Section 1010) pertaining to summary proceedings. Notwithstanding any of the foregoing, the commissioner may forego action for up to 90 days after the Mandatory Control Level Event if the commissioner finds there is a reasonable expectation that the Mandatory Control Level Event may be eliminated within the 90-day period.

(3) In the event of a Mandatory Control Level Event with respect to the State Compensation Insurance Fund, the commissioner shall also issue a report to the Governor, the President pro Tempore of the Senate, and the Speaker of the Assembly setting forth the conditions that exist.

history: (History: Amended by Stats. 2006, Ch. 740, Sec. 3.6. Effective January 1, 2007.)

article: 4.1. Risk-Based Capital for Insurers


text:
Upon any of the events described in subdivision (a), (b), (c), or (d), the insurer shall have the right to a departmental hearing, on the record, at which the insurer may challenge any determination or action by the commissioner. The insurer shall notify the commissioner of its request for a hearing within five days after the notification by the commissioner under subdivision (a), (b), (c), or (d). Upon receipt of the insurer’s request for a hearing, the commissioner shall set a date for the hearing, which date shall be no less than 10 nor more than 30 days after the date of the insurer’s request.

(a) Notification to an insurer by the commissioner of an Adjusted RBC Report.

(b) Notification to an insurer by the commissioner that:

(1) The insurer’s RBC Plan or Revised RBC Plan is unsatisfactory.

(2) That notification constitutes a Regulatory Action Level Event with respect to the insurer.

(c) Notification to any insurer by the commissioner that the insurer has failed to adhere to its RBC Plan or Revised RBC Plan and that such failure has a substantial adverse effect on the ability of the insurer to eliminate the Company Action Level Event with respect to the insurer in accordance with its RBC Plan or Revised RBC Plan.

(d) Notification to an insurer by the commissioner of a Corrective Order with respect to the insurer.

article: 4.1. Risk-Based Capital for Insurers


text:
(a) All RBC Reports, to the extent the information within those reports is not required to be set forth in a publicly available annual statement schedule, and RBC Plans, including the results or report of any examination or analysis of an insurer performed pursuant to those plans, and any Corrective Order issued by the commissioner pursuant to examination or analysis, with respect to any domestic insurer or foreign insurer, that are filed with the commissioner constitute information that might be damaging to the insurer if made available to its competitors, and therefore shall be kept confidential by the commissioner. This information shall not be made public or be subject to subpoena, other than by the commissioner and then only for the purpose of enforcement actions taken by the commissioner pursuant to this chapter or any other provision of the insurance laws of this state.

(b) It is the judgment of the Legislature that the comparison of an insurer’s Total Adjusted Capital to any of its RBC Levels is a regulatory tool that may indicate the need for possible corrective action with respect to the insurer, and is not intended as a means to rank insurers generally. Therefore, except as otherwise required under this article, the making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in any other way, an advertisement, announcement, or statement containing an assertion, representation, or statement with regard to the RBC Levels of any insurer, or of any component derived in the calculation, by any insurer, agent, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited; provided, however, that if any materially false statement with respect to the comparison regarding an insurer’s Total Adjusted Capital to its RBC Levels (or any of them) or an inappropriate comparison of any other amount to the insurers’ RBC Levels is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of such statement, or the inappropriateness, as the case may be, then the insurer may publish an announcement in a written publication if the sole purpose of the announcement is to rebut the materially false statement.

(c) It is the further judgment of the Legislature that the RBC Instructions, RBC Reports, Adjusted RBC Reports, RBC Plans, and Revised RBC Plans are intended solely for use by the commissioner in monitoring the solvency of insurers and the need for possible corrective action with respect to insurers, and shall not be used by the commissioner for ratemaking nor considered or introduced as evidence in any rate proceeding, nor used by the commissioner to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance that an insurer or any affiliate is authorized to write. This subdivision does not affect the validity of any action taken before its effective date.

article: 4.1. Risk-Based Capital for Insurers


text:
(a) The provisions of this article are supplemental to any other provisions of the laws of this state, and shall not preclude or limit any other powers or duties of the commissioner under such laws.

(b) The commissioner may adopt reasonable rules necessary for the implementation of this article.

(c) The commissioner may exempt from the application of this article any domestic property and casualty insurer that does all of the following:

(1) Writes direct business only in this state.

(2) Writes direct annual premiums of five million dollars ($5,000,000) or less.

(3) Assumes no reinsurance in excess of 5 percent of direct premiums written.

article: 4.1. Risk-Based Capital for Insurers


text:
(a) Any foreign insurer shall, upon the written request of the commissioner, submit to the commissioner an RBC Report as of the end of the calendar year just ended the later of:

(1) The date an RBC Report would be required to be filed by a domestic insurer under this chapter.

(2) Fifteen days after the request is received by the foreign insurer.

Any foreign insurer shall, at the written request of the commissioner, promptly submit to the commissioner a copy of any RBC Plan that is filed with the insurance commissioner of any other state.

(b) In the event of a Company Action Level Event or Regulatory Action Level Event with respect to any foreign insurer as determined under the RBC statute applicable in the state of domicile of the insurer, or, if no RBC provision is in force in that state, under the provisions of this chapter, if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file an RBC Plan in the manner specified under the RBC statute, or, if no RBC provision is in force in the state, under Section 739.3, the commissioner may require the foreign insurer to file an RBC Plan with the commissioner. In such event, the failure of the foreign insurer to file an RBC Plan with the commissioner shall be grounds to order the insurer to cease and desist from writing new insurance business in this state.

(c) In the event of a Mandatory Control Level Event with respect to any foreign insurer, if no domiciliary receiver has been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the commissioner may make application to the superior court with respect to the liquidation of property of foreign insurers found in this state, and the occurrence of the Mandatory Control Level Event shall be considered adequate grounds for the application.

article: 4.1. Risk-Based Capital for Insurers


text: If any provision of this article, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of this article that can be given effect without the invalid provision or application, and to that end the provisions of this article are severable.

article: 4.1. Risk-Based Capital for Insurers


text:
(a) All notices by the commissioner to an insurer that may result in regulatory action hereunder shall be effective upon dispatch if transmitted by registered or certified mail, or in the case of any other transmission shall be effective upon the insurer’s receipt of such notice.

(b) Copies of all notices from the commissioner to the State Compensation Insurance Fund under this article shall be sent to the Governor.

history: (History: Amended by Stats. 2006, Ch. 740, Sec. 3.7. Effective January 1, 2007.)

article: 4.1. Risk-Based Capital for Insurers


citation: INS § 740

text:
(a) Notwithstanding any other provision of law, and except as provided herein, any person or other entity that provides coverage in this state for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital, or optometric expenses, whether the coverage is by direct payment, reimbursement, or otherwise, shall be presumed to be subject to the jurisdiction of the department unless the person or other entity shows that while providing the services it is subject to the jurisdiction of another agency of this or another state or the federal government.

(b) A person or entity may show that it is subject to the jurisdiction of another agency of this or another state or the federal government by providing to the commissioner the appropriate certificate or license issued by the other governmental agency that permits or qualifies it to provide those services for which it is licensed or certificated.

(c) Any person or entity that is unable to show that it is subject to the jurisdiction of another agency of this or another state or the federal government, shall submit to an examination by the commissioner to determine the organization and solvency of the person or the entity, and to determine whether the person or entity is in compliance with the applicable provisions of this code, and shall be required to obtain a certificate of authority to do business in California and be required to meet all appropriate reserve, surplus, capital, and other necessary requirements imposed by this code for all insurers.

(d) Any person or entity unable to show that it is subject to the jurisdiction of another agency of this or another state or the federal government shall be subject to all appropriate provisions of this code regarding the conduct of its business.

(e) The department shall prepare and maintain for public inspection a list of those persons or entities described in subdivision (a) that are not subject to the jurisdiction of another agency of this or another state or the federal government and that the department knows to be operating in this state. There shall be no liability of any kind on the part of the state, the department, and its employees for the accuracy of the list or for any comments made with respect to it.

(f) Any administrator licensed by the department who advertises or administers coverage in this state described in subdivision (a), that is provided by any person or entity described in subdivision (c), and where the coverage does not meet all pertinent requirements specified in this code and that is not provided or completely underwritten, insured or otherwise fully covered by an admitted life or disability insurer, hospital service plan or health care service plan, shall advise and disclose to any purchaser, prospective purchaser, covered person or entity, and any production agency licensed by the department involved in the transaction, all financial and operational information relative to the content and scope of the plan and, specifically, as to the lack of insurance or other coverage.

Any production agency obtaining knowledge of any coverage relative to the content and scope of a hospital service plan or health care service plan, as required under this subdivision, shall advise and disclose to any purchaser, prospective purchaser, covered person or entity, the knowledge regarding the content and scope of the plan and, specifically, as to the lack of insurance by an admitted carrier or other qualified plan.

(g) A health care service plan, as defined in Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code, shall not be subject to this section.

(h) The department shall notify, in writing, the Director of the Department of Managed Health Care whenever it determines that a multiple employer trust qualifies as a health care service plan subject to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code.

(i) Any health care service plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by any city, county, city and county, public entity, or political subdivision, or a public joint labor management trust as described in subdivision (c) of Section 1349.2 of the Health and Safety Code, that is exempt pursuant to Section 1349.2 of the Health and Safety Code from the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), is also exempt from this code.

history: (History: Amended by Stats. 2000, Ch. 857, Sec. 53. Effective January 1, 2001.)

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 4.5. Special Provisions Regarding Health Coverage


citation: INS § 742

text:
(a) Any person or other entity that provides coverage in this state for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital, or optometric services, whether this coverage is by direct payment, reimbursement, or otherwise, and that enters into an arrangement or contract with, or underwrites, a preferred provider organization or arrangement subject to Section 10133 is subject to the jurisdiction of the Department of Insurance.

(b) Any person or entity subject to regulation under Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code shall not be subject to this section.

history: (History: Amended by Stats. 2007, Ch. 100, Sec. 1. Effective January 1, 2008.)

article: 4.5. Special Provisions Regarding Health Coverage


text:
(a) Any person or other entity or arrangement in this state that is organized for the purpose of offering or providing coverage in this state, for the benefit of employees of two or more employers, for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital, or optometric services, whether that coverage is by direct payment, reimbursement, or otherwise, is subject to the jurisdiction of the department.

(b) Any person or entity subject to regulation under Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code shall not be subject to the provisions of this section.

history: (History: Added by Stats. 1984, Ch. 640, Sec. 1. Effective August 16, 1984.)


text:
The Legislature finds and declares the following:

(a) An alternative to insurance programs, health care maintenance organizations, and panel provider organizations was established by Congress in 1974 through the Employee Retirement Income Security Act (ERISA). Among the various employee benefit programs established and governed by ERISA are multiple employer welfare arrangements (MEWA), which are subject as well to state regulatory and fiscal standards not inconsistent with ERISA. MEWAs permit employer members of trade associations to create trust funds for the purpose of offering and providing health care benefits to their employees. MEWAs can be created as fully insured or self-funded or partially self-funded benefit programs.

(b) The Legislature recognizes that some MEWAs provide an alternative mechanism to traditional health insurance for small employers. It is the intent of the Legislature to ensure the financial integrity of those MEWA programs that are already in existence by requiring self-funded or partially self-funded MEWAs to obtain a certificate of compliance from the Department of Insurance. In order for the Department of Insurance to grant a certificate of compliance, the MEWA must adhere to standards set forth in this act which are not inconsistent with the provisions of ERISA. Further, it is the intent of the Legislature to provide the Department of Insurance with the authority to levy monetary penalties and to revoke certificates of compliance from MEWAs that violate the provisions of this act.

(c) The Legislature has passed significant reforms in the area of small group health insurance. This article, in no manner, circumvents these reforms nor is it intended to be a precedent to do so. Therefore, the small group reform legislation applies to MEWAs to the extent it is not inconsistent with ERISA.

(d) The provisions of this article are consistent with and authorized by ERISA, which confers upon the states limited authority to regulate MEWAs.

history: (History: Added by Stats. 1994, Ch. 1082, Sec. 1. Effective January 1, 1995.)

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 4.7. Multiple Employer Welfare Arrangements


text: “Multiple employer welfare arrangement” as used in this article has the same meaning as that contained in Section 1002(40)(A) of Title 29 of the United States Code. “Employee welfare benefit plan,” as used in this article, has the same meaning as that contained in Section 1002(1) of Title 29 of the United States Code. A multiple employer welfare arrangement shall comply with the criteria set forth for an employee welfare benefit plan in order to qualify to obtain a certificate of compliance.

article: 4.7. Multiple Employer Welfare Arrangements


text: It is the intent of the Legislature in enacting this article to allow a self-funded or partially self-funded multiple employer welfare arrangement to meet the requirements for a certificate of compliance to do business in California. If the self-funded or partially self-funded multiple employer welfare arrangement obtains and maintains a certificate of compliance under these sections, it shall not be considered an unauthorized insurer.


text:
(a) After December 31, 1995, a self-funded or partially self-funded multiple employer welfare arrangement shall not provide any benefits for any resident of this state without first obtaining a certificate of compliance pursuant to this article, provided, however, that if the commissioner has not issued or denied an application for a certificate of compliance within 180 calendar days of the date of the filing of the completed application, the commissioner shall not take any action against the applicant solely on the basis that the department has not granted the certificate of compliance.

(b) The department may take regulatory action against a MEWA pursuant to all applicable provisions of this code during the period beginning on the effective date of this act and ending on the date on which the MEWA is certified under this article, at which time the provisions of this article shall apply.


text:
To be eligible for a certificate of compliance, a self-funded or partially self-funded multiple employer welfare arrangement shall meet all of the following requirements:

(a) Be nonprofit.

(b) Be established and maintained by a trade association, industry association, professional association, or by any other business group or association of any kind that has a constitution or bylaws specifically stating its purpose, and have been organized and maintained in good faith with at least 200 paid members and operated actively for a continuous period of five years, for purposes other than that of obtaining or providing health care coverage benefits to its members. An association is a California mutual benefit corporation comprised of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, and which uses membership dues solely for and in consideration of the membership and membership benefits.

(c) Be organized and maintained in good faith with at least 2,000 employees and 50 paid employer members and operated actively for a continuous period of five years.

(d) Have been operating in compliance with ERISA on a self-funded or partially self-funded basis for a continuous period of five years pursuant to a trust agreement by a board of trustees that shall have complete fiscal control over the multiple employer welfare arrangement, and that shall be responsible for all operations of the multiple employer welfare arrangement. The trustees shall be selected by vote of the participating employers and shall be owners, partners, officers, directors, or employees of one or more employers participating in the multiple employer welfare arrangement. A trustee may not be an owner, officer, or employee of the insurer, administrator, or service company providing insurance or insurance-related services to the association. The trustees shall have authority to approve applications of association members for participation in the multiple employer welfare arrangement and to contract with an authorized administrator or service company to administer the day-to-day affairs of the multiple employer welfare arrangement.

(e) Benefits shall be offered only to association members.

(f) Benefits may be offered only through life agents, as defined in Section 1622, licensed in the state whose names, addresses, and telephone numbers have been filed with the commissioner as licensed life agents for the multiple employer welfare arrangement.

(g) Be operated in accordance with sound actuarial principles and conform to the requirements of Section 742.31.

(h) File an application with the department for a certificate of compliance no later than November 30, 1995.

(i) The multiple employer welfare arrangement shall at all times maintain aggregate stop loss insurance providing the arrangement with coverage with an attachment point which is not greater than 125 percent of annual expected claims. The commissioner may, by regulation, define “expected claims” for purposes of this subdivision and provide for adjustments in the amount of the percentage in specified circumstances in which the arrangement specifically provides for and maintains reserves in accordance with sound actuarial principles as provided in Section 742.31.

(j) The multiple employer welfare arrangement shall establish and maintain specific stop loss insurance providing the arrangement with coverage with an attachment point that is not greater than 5 percent of annual expected claims. The commissioner may, by regulation, define “expected claims” for purposes of this subdivision and provide for adjustments in the amount of that percentage as may be necessary to carry out the purposes of this subdivision determined by sound actuarial principles as provided in Section 742.31.

(k) The multiple employer welfare arrangement shall establish and maintain appropriate loss and loss adjustment reserves determined by sound actuarial principles as provided in Section 742.31.

(l) The association has within its own organization adequate facilities and competent personnel to serve the multiple employer welfare arrangement, or has contracted with a licensed third-party administrator to provide those services.

(m) The association has established a procedure for handling claims for benefits in the event of the dissolution of the multiple employer welfare arrangement.

(n) On and after January 1, 2003, in addition to the requirements of this article, maintain a surplus of not less than one million dollars ($1,000,000), and that this amount be increased as follows: one million seven hundred fifty thousand dollars ($1,750,000) by January 1, 2004; two million five hundred thousand dollars ($2,500,000) by January 1, 2005; three million two hundred fifty thousand dollars ($3,250,000) by January 1, 2006; and four million dollars ($4,000,000) by January 1, 2007.

(o) Submit all proposed rate levels to the department for informational purposes no later than 45 days prior to their implementation. The proposed rates shall contain an aggregate benefit structure which has a loss ratio experience of not less than 80 percent. The loss ratio experience shall be calculated as claims paid during the contract period plus a reasonable estimate of claims liability for the contract period at the end of the current year divided by contributions paid or collected for the contract period minus unearned contributions at the end of the current year.

(p) Comply with the investment requirements of Section 724.245.

history: (History: Amended by Stats. 2005, Ch. 218, Sec. 1. Effective January 1, 2006.)


text:
In determining the qualification of a multiple employer welfare arrangement, the commissioner will consider, among other things:

(a) The history of the multiple employer welfare arrangement.

(b) The competency, character, integrity, responsibility, and general fitness of the management and administration.

(c) Financial stability.

(d) Whether claims were promptly and fairly adjusted and are promptly and fully paid in accordance with the law and the terms of the plan.

(e) Fairness and honesty of methods of doing business.

(f) Hazard to covered employees or creditors.


text: The multiple employer welfare arrangement shall issue to each covered employee a certificate evidencing coverage and a summary plan description of benefits and coverages provided. This evidence of the benefits and coverage provided shall contain the following statement: “The benefits and coverages described herein are provided through a trust fund established and funded by the ____ Plan, sponsored by the ____ Association. The trust is a self-funded plan established under ERISA (29 U.S.C. 1001 et seq.). This is not an insurance contract and the plan and trust is not acting as, or deemed to be an insurance company.”


text:
The department shall have the authority to revoke a certificate of compliance to any self-funded or partially self-funded multiple employer welfare arrangement if the department determines any of the following:

(a) The multiple employer welfare arrangement has failed, after written request by the commissioner, to remove or discharge any officer, director, trustee, or other employee who has been convicted of any crime involving fraud, dishonesty, or moral turpitude.

(b) The multiple employer welfare arrangement has unreasonably failed or refused to furnish any report or statement or has unreasonably refused the department access to its books or records as required by this article.

(c) The multiple employer welfare arrangement has failed for an unreasonable period to pay any judgment rendered against it by a court or other applicable regulatory agency or body.

(d) The multiple employer welfare arrangement is conducting business fraudulently or is not meeting its contractual obligations in good faith.

(e) The multiple employer welfare arrangement fails to comply with the provisions of Section 790.03.

(f) The multiple employer welfare arrangement fails to comply with Chapter 14 (commencing with Section 10700) of Part 2 of Division 2.

(g) The multiple employer welfare arrangement fails to comply with Article 3.1 (commencing with Section 1357) of Chapter 2.2 of Division 2 of the Health and Safety Code.

(h) The multiple employer welfare arrangement fails to establish, or at all times maintain, compliance with the requirements of this article, or other laws made applicable to the multiple employer welfare arrangement by this article.


text:
A self-funded or partially self-funded multiple employer welfare arrangement authorized by this article shall be limited to providing the following benefits:

(a) Medical, dental, optical, surgical, or other hospital care benefits.

(b) Benefits in the event of sickness, accident, or disability.

(c) Flexible benefits under Section 125 of the Internal Revenue Code. These benefits shall not include loss from liability imposed by law upon employers to compensate employees and their dependents for injury sustained by the employees arising out of and in the course of the employment, irrespective of negligence or the fault of either party.


text:
An association seeking to establish an employee welfare benefit plan by the use of a self-funded or partially self-funded multiple employer welfare arrangement shall apply for a certificate of compliance on a form prescribed by the commissioner. The application shall be completed and submitted to the commissioner along with all of the following:

(a) Copies of all articles, bylaws, agreements, or other documents or instruments describing the rights and obligations of the employers, employees, and beneficiaries of the association with respect to the multiple employer welfare arrangement.

(b) Current audited financial statements of the association and the multiple employer welfare arrangement, and Internal Revenue Service Form number 5500 for the last five years.

(c) Proof of a fidelity bond in an amount equal to 10 percent of the funds handled annually by the multiple employer welfare arrangement. In no case may the amount of the bond be less than fifty thousand dollars ($50,000) nor more than five hundred thousand dollars ($500,000).

(d) A fiduciary liability policy with limits of not less than five hundred thousand dollars ($500,000).

(e) A statement showing in full detail the benefit plan upon which the association has established and maintained the multiple employer welfare arrangement.

(f) A copy of all contracts or other instruments that it makes with or issues to the association members, together with a copy of its plan description and the printed material which was used in enrolling members during 1993 and 1994.

(g) Proof of aggregate and specific stop loss insurance with an insurer licensed to do business in this state.

(h) A copy of all contracts or other instruments that were used with administrators and producers during 1993 and 1994.

(i) Biographical affidavits for the trustees, plan administrators of the multiple employer welfare arrangement, officers and directors of the association, other persons acting in a fiduciary capacity and any third-party administrators performing services on behalf of the multiple employer welfare arrangement.


text: The commissioner shall not issue a certificate of compliance to a self-funded or partially self-funded multiple employer welfare arrangement unless the employers participating in the multiple employer welfare arrangement are members of a bona fide trade, industrial, or professional association as described in subdivision (b) of Section 742.24.


text:
Each self-funded or partially self-funded multiple employer welfare arrangement transacting business in the state shall file all of the following with the commissioner:

(a) No later than May 15th of each calendar year or four months and 15 days after the end of each fiscal year not on a calendar year basis, financial statements audited by a certified public accountant, and no later than March 1 of each calendar year or 60 days after the end of each fiscal year not on a calendar year basis, an actuarial opinion rendered by a qualified actuary that satisfies the requirements of Section 10489.15. The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on any additional standards that the commissioner may, by regulation, prescribe. For the purposes of this section, “qualified actuary” means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in regulations of the commissioner. The qualified actuary shall be liable for damages to any person caused by his or her negligence or other tortious conduct.

(b) Within 60 days after the end of each fiscal quarter, unaudited financial statements, affirmed by an appropriate officer or agent of the multiple employer welfare arrangement.

(c) Within 60 days after the end of each fiscal quarter, a report certifying that the multiple employer welfare arrangement maintains cash or liquid assets in a claim reserve account sufficient to meet its contractual obligations and that it maintains a policy of aggregate and specific stop loss insurance.

history: (History: Amended by Stats. 2002, Ch. 357, Sec. 2. Effective January 1, 2003.)


text: The commissioner or any persons designated by the commissioner shall have the power to examine the affairs of any self-funded or partially self-funded multiple employer welfare arrangement and the association which established and maintains it, and for that purpose shall have access to all books, records, and documents that relate to the business of the multiple employer welfare arrangement, and may examine under oath its trustees, officers, agents, and employees in relation to the affairs, transactions, and condition of the multiple employer welfare arrangement.


text: Books, records, and documents pertaining to the business of the multiple employer welfare arrangement shall be maintained by the administrator for a period of five years. “Administrator,” as used in this section, has the same meaning as that contained in Section 1002(16)(A) of Title 29 of the United States Code.

history: (History: Amended by Stats. 1997, Ch. 17, Sec. 85. Effective January 1, 1998.)


text:
(a) The following notice shall be provided to employers and employees who obtain coverage from a multiple employer welfare arrangement: “NOTICE

(A) THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT IS NOT AN INSURANCE COMPANY AND DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE FUNDS CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER WELFARE ARRANGEMENT BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED.

(B) THE HEALTH CARE BENEFITS THAT YOU HAVE PURCHASED OR ARE APPLYING TO PURCHASE ARE BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE ARRANGEMENT THAT IS LICENSED BY THE STATE OF CALIFORNIA.

(C) FOR ADDITIONAL INFORMATION ABOUT THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT YOU SHOULD ASK QUESTIONS OF YOUR TRUST ADMINISTRATOR OR YOU MAY CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT ________.”

(b) Each multiple employer welfare arrangement should include the department’s current “800” consumer service telephone number and Internet Web site in the blank provided in paragraph (C) of this notice.

(c) This section shall become operative on January 1, 2017.

history: (History: Repealed (in Sec. 4) and added by Stats. 2015, Ch. 348, Sec. 5. (AB 1515) Effective January 1, 2016. Section operative January 1, 2017, by its own provisions.)


text: The department may conduct an examination of the financial condition of a self-funded or partially self-funded multiple employer welfare arrangement, and if it determines that the multiple employer welfare arrangement’s financial condition does not comply with the requirements of this article, the department may apply any remedies authorized by this code.


text: Subject to the annual fee provisions of Section 742.39, every certificate of compliance shall be for an indefinite term and shall expire with the expiration or termination of the existence of the holder thereof. Notwithstanding the provisions of this section, whenever the commissioner shall determine, after notice and hearing, that any person to whom the certificate has been issued is in arrears to the state or to any county or city in the state for fees, licenses, taxes, assessments, fines, or penalties, accrued on business transacted in the state, or is otherwise in default for failure to comply with any of the laws of this state regarding the governmental control of the person by the state, the commissioner may order the certificate holder to comply with those requirements within 30 days of that determination. If the certificate of compliance holder fails to comply within that period, the certificate of compliance may then be revoked, unless the commissioner’s order is stayed by a court of appropriate jurisdiction.


text:
(a) The commissioner may suspend the certificate of compliance of a holder thereof for not exceeding one year whenever he or she finds, after proper hearing following notice, that the person engages in any of the following practices:

(1) Conducting its business fraudulently.

(2) Not carrying out its contracts in good faith.

(3) Habitually and as a matter of ordinary practice and custom compelling claimants under policies, or liability judgment creditors of the certificate of compliance holder, to either accept less than the amount due under the terms of its contracts or resort to litigation against the certificate of compliance holder to secure the payment of the amount due.

(b) The order of suspension shall prescribe the period of each suspension.

(c) Proceedings under this section shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except that the hearings shall be conducted by administrative law judges chosen under Section 11502 or appointed by the commissioner.


text:
The commissioner, in any proceeding under Section 742.37 for any of the violations specified in that section, may by alternative order permit the holder of that certificate of compliance to elect in writing to pay a specified money penalty, within a specified time, in lieu of the suspension of its certificate of compliance. If the holder so elects, the sum of money specified shall be paid to the commissioner for use of the state, and shall not exceed fifty-five thousand dollars ($55,000). If the holder so electing fails to pay the specified sum within the specified time, the commissioner shall, unless his or her order is stayed, put in effect the alternatives specified in his or her order.

All money received by the commissioner pursuant to this section shall, when appropriated for that purpose by the Legislature, be available for expenditure by the commissioner in accordance with law in administration and enforcement of this code and other insurance laws.

The authority vested in the commissioner by this section shall be additional to and not in lieu of any other authority to enforce any penalties, fines or forfeitures, denials, suspensions, restrictions, or revocations of certificates of compliance unless otherwise authorized by law.


text: The commissioner shall require the payment of five thousand two hundred twenty-nine dollars ($5,229), in advance, as a fee for filing an application for each certificate of compliance. Notwithstanding Section 742.36, each holder of a certificate of compliance of indefinite term shall owe and pay an annual fee of four hundred twenty-four dollars ($424), in advance, on account of the certificate until final expiration. In addition, each holder of a certificate of compliance of indefinite term shall owe and pay an annual fee of four hundred twenty dollars ($420) for filing of financial information. These fees shall be for annual periods commencing on July 1 of each year and ending on June 30 of each year, and shall be due on each March 1 and be delinquent on and after April 1.

history: (History: Amended by Stats. 2017, Ch. 534, Sec. 9. (AB 1699) Effective January 1, 2018.)


text:
(a) A multiple employer welfare arrangement shall offer health care coverage benefits to any new eligible person and his or her dependents under terms and conditions no less favorable to those offered to their employers’ existing employees and their dependents, if the newly eligible person had health care benefit coverage with either the same or a different multiple employer welfare arrangement within 31 days. The new coverage shall comply with existing eligibility rules of the multiple employer welfare arrangement.

(b) A multiple employer welfare arrangement shall comply with the requirements set forth in Sections 10198.7 and 10198.9.

(c) Notwithstanding any other provision of law, commencing January 1, 2014, a multiple employer welfare arrangement shall not offer, market, represent, or sell any product, contract, or discount arrangement as minimum essential coverage or as compliant with the essential health benefits requirement under the federal Patient Protection and Affordable Care Act, unless it meets the applicable requirements under that act.

history: (History: Amended by Stats. 2012, Ch. 266, Sec. 1. (SB 615) Effective January 1, 2013.)


text: All employer groups who have health care coverage benefits provided by a multiple employer welfare arrangement for their employees and their dependents, regardless of individual condition or history of that employee and their dependents, shall continue to provide coverage thereunder pursuant to the terms and conditions of their multiple employer welfare arrangement, subject to only cancellation for nonpayment of contribution, or in the event of the termination of the multiple employer welfare arrangement.


text: The provisions of this code governing domestic incorporated insurers, their business, and their contracts shall, so far as applicable and not inconsistent, govern multiple employer welfare arrangements subject to this article and the business and contracts of these multiple employer welfare arrangements, except that these multiple employer welfare arrangements, their business, and their contracts shall not be subject to Article 14.7 (commencing with Section 1067) of Chapter 1 of Part 2 of Division 1. There shall be a rebuttable presumption that any provision of this code is applicable to multiple employer welfare arrangements.


text: The commissioner may adopt reasonable rules and regulations for the implementation and administration of this article.


text: As used in this article, “self-funded” means a multiple employer welfare arrangement that undertook at all times and for a continuous period of five years to reimburse health benefit costs incurred by covered persons pursuant to the benefits and coverages provided by their plan exclusively from plan assets. “Partially self-funded” means a multiple employer welfare arrangement that undertook at all times and for a continuous period of five years to reimburse health benefit costs incurred by covered persons pursuant to the benefits and coverages provided by their plan exclusively from plan assets, provided, however, that these benefits are reimbursable to the multiple employer welfare arrangement by stop loss insurance only to the extent that the benefits exceed fifty thousand dollars ($50,000) per claim.


text:
(a) A self-funded or partially self-funded multiple employer welfare arrangement shall maintain at least 25 percent of the surplus required by subdivision (n) of Section 742.24 in investments specified in Article 3 (commencing with Section 1170) of Chapter 2 of Part 2 of Division 1 and in Section 1192.5.

(b) The balance of the assets of a self-funded or partially self-funded multiple employer welfare arrangement may be invested in the following:

(1) An open-ended diversified management company, as defined in the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), that meets all of the following requirements:

(A) It is registered with, and reports to, the Securities and Exchange Commission.

(B) It is domiciled in the United States.

(C) Substantially all of its investments consist of investment grade debt instruments and cash.

(D) All of its assets are held in the United States by a bank, trust company, or other custodian chartered by the United States, its states, or territories.

(2) An amount not to exceed 75 percent of any excess of invested assets over the sum of the reserves and related actuarial items held in support of policies and contracts, plus the surplus required by subdivision (n) of Section 742.24, may be invested in the following:

(A) An open-ended diversified management company, as defined in the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), that meets all of the following requirements:

(i) It is registered with, and reports to, the Securities and Exchange Commission.

(ii) It is domiciled in the United States.

(iii) Its investments consist of common and preferred stocks and cash.

(iv) All of its assets are held in the United States by a bank, trust company, or other custodian chartered by the United States, its states, or territories.

(B) Corporate notes, bonds, and preferred stocks that meet all of the following requirements:

(i) The issuer is domiciled in the United States or Canada.

(ii) The investments are rated investment grade or better by at least two of the following rating agencies, or their successors:

(I) Standard & Poor’s.

(II) Moody’s.

(III) Fitch.

(iii) The investments are exchange-traded. “Exchange-traded” as used in this clause means listed and traded on the National Market System of the NASDAQ Stock Market or on a securities exchange subject to regulation, supervision, or control under a statute of the United States and acceptable to the commissioner.

(C) An investment in a single issuer made pursuant to subparagraph (B) shall not exceed in the aggregate 10 percent of the multiple employer welfare arrangement’s funds described in this paragraph.

(3) An investment made pursuant to paragraph (1) or subparagraph (A) of paragraph (2) shall be made in, at minimum, three of the companies described in those provisions.

(4) An office building or buildings that will be used for the multiple employer welfare arrangement’s principal operations and business if both of the following requirements are met:

(A) The multiple employer welfare arrangement obtains prior written approval from the commissioner.

(B) The office building or buildings are treated on the financial statements filed with the commissioner pursuant to Section 742.31 as nonadmitted assets.

(c) The commissioner may, in his or her discretion and after a hearing, require by written order disposal of an investment made either in violation of, or no longer in compliance with, this section. The commissioner may also, after a hearing, require the disposal of any investment made pursuant to paragraph (2) of subdivision (b) if the multiple employer welfare arrangement has failed to maintain cash or liquid assets sufficient to meet its claims and any other contractual obligations. The commissioner may also for good cause and after a hearing, by written order require the disposal of an investment described in subdivision (b).

history: (History: Amended by Stats. 2008, Ch. 428, Sec. 1. Effective January 1, 2009.)


text:
(a) No multiple employer welfare arrangement shall refuse to enroll any person or accept any person as a subscriber or renew any person as a subscriber after appropriate application on the basis of a person’s genetic characteristics that may, under some circumstances, be associated with disability in that person or that person’s offspring. No multiple employer welfare arrangement shall require a higher rate or charge, or offer or provide different terms, conditions, or benefits, on the basis of a person’s genetic characteristics that may, under some circumstances, be associated with disability in that person or that person’s offspring than is at that time required of any other individual in an otherwise identical classification, nor shall any multiple employer welfare arrangement make or require any rebate, discrimination, or discount upon the amount to be paid or the service to be rendered under the arrangement because the person carries those traits.

(b) No multiple employer welfare arrangement shall seek information about a person’s genetic characteristics for any nontherapeutic purpose.

(c) No discrimination shall be made in the fees or commissions of a solicitor or solicitor firm for an enrollment or a subscription or the renewal of an enrollment or subscription of any person on the basis of a person’s genetic characteristics that may, under some circumstances, be associated with disability in that person or that person’s offspring.

(d) “Genetic characteristics” as used in this section shall have the same meaning as defined in Section 10123.3.

history: (History: Amended by Stats. 1998, Ch. 521, Sec. 3. Effective January 1, 1999.)


text:
(a) This section shall apply to the disclosure of genetic test results contained in an applicant or enrollee’s medical records by a multiple employer welfare arrangement.

(b) Any person who negligently discloses results of a test for a genetic characteristic to any third party in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization as described in subdivision (g), shall be assessed a civil penalty in an amount not to exceed one thousand dollars ($1,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test.

(c) Any person who willfully discloses the results of a test for a genetic characteristic to any third party in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization as described in subdivision (g), shall be assessed a civil penalty in an amount not less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test.

(d) Any person who willfully or negligently discloses the results of a test for a genetic characteristic to a third party in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization as described in subdivision (g), that results in economic, bodily, or emotional harm to the subject of the test, is guilty of a misdemeanor punishable by a fine not to exceed ten thousand dollars ($10,000).

(e) In addition to the penalties listed in subdivisions (b) and (c), any person who commits any act described in subdivision (b) or (c) shall be liable to the subject for all actual damages, including damages for economic, bodily, or emotional harm which is proximately caused by the act.

(f) Each disclosure made in violation of this section is a separate and actionable offense.

(g) The applicant’s “written authorization,” as used in this section, shall satisfy the following requirements:

(1) Is written in plain language.

(2) Is dated and signed by the individual or a person authorized to act on behalf of the individual.

(3) Specifies the types of persons authorized to disclose information about the individual.

(4) Specifies the nature of the information authorized to be disclosed.

(5) States the name or functions of the persons or entities authorized to receive the information.

(6) Specifies the purposes for which the information is collected.

(7) Specifies the length of time the authorization shall remain valid.

(8) Advises the person signing the authorization of the right to receive a copy of the authorization. Written authorization is required for each separate disclosure of the test results, and the authorization shall set forth the person or entity to whom the disclosure would be made.

(h) This section shall not apply to disclosures required by the Department of Health Services necessary to monitor compliance with Chapter 1 (commencing with Section 124975) of Part 5 of Division 106 of the Health and Safety Code, nor to disclosures required by the Department of Managed Health Care necessary to administer and enforce compliance with Section 1374.7 of the Health and Safety Code.

history: (History: Amended by Stats. 2000, Ch. 857, Sec. 54. Effective January 1, 2001.)


text: The provisions of this article shall not apply to multiple employer welfare arrangements as defined in Section 1144(b)(6)(D) of Title 29 of the United States Code.


citation: INS § 750

text:
(a) Except as provided in Section 750.5, any person acting individually or through his or her employees or agents, who engages in the practice of processing, presenting, or negotiating claims, including claims under policies of insurance, and who offers, delivers, receives, or accepts any rebate, refund, commission, or other consideration, whether in the form of money or otherwise, as compensation or inducement to or from any person for the referral or procurement of clients, cases, patients, or customers, is guilty of a crime.

(b) A violation of subdivision (a) is punishable upon a first conviction by imprisonment in a county jail for not more than one year, or by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine. A second or subsequent conviction is punishable by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code or by that imprisonment and a fine of fifty thousand dollars ($50,000).

(c) Nothing in this section shall prohibit a licensed collection or lien agency from receiving a commission on the collection of delinquent debts nor prohibits the agency from paying its employees a commission for obtaining clients seeking collection on delinquent debts.

(d) Nothing in this section is intended to limit, restrict, or in any way apply to, the rebating of commissions by insurance agents or brokers, as authorized by Proposition 103, enacted by the people at the November 8, 1988, general election.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 206. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)

article: 5. Unlawful Referrals

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 5. Unlawful Referrals


text:
Section 750 of the Insurance Code, Sections 3215 and 3219 of the Labor Code, and Section 549 of the Penal Code shall not apply to any person, corporation, partnership, association, or firm, that is operating under both of the following circumstances:

(a) On behalf of an insurer or self-insured person, company, association, or group.

(b) Pursuant to, and within the scope of, a certificate of consent issued pursuant to Section 3702.1 of the Labor Code or pursuant to, and within the scope of, a license issued pursuant to Article 3 (commencing with Section 14020) of Chapter 1 of Division 5.

history: (History: Amended by Stats. 2006, Ch. 538, Sec. 452. Effective January 1, 2007.)

article: 5. Unlawful Referrals


text:
Nothing in Section 750 of the Insurance Code, Section 549 of the Penal Code, or Section 3215 of the Labor Code shall be construed to prevent an attorney or law firm from the following:

(a) Dividing fees for legal services with a lawyer under circumstances expressly permitted by Rule 2-200 of the Rules of Professional Conduct of the State Bar.

(b) Offering or giving an incidental nonmonetary gift or gratuity to a person who has made a recommendation resulting in the employment of the attorney or law firm, provided that the gift or gratuity was not offered in consideration of any promise, agreement, or understanding that the gift or gratuity would be forthcoming or that referrals would be made or encouraged in the future.

(c) Offering or giving a bonus to an employee who has made a referral or recommendation resulting in the employment of the attorney or law firm, provided that the bonus was not offered in consideration of any promise, agreement, or understanding that the bonus would be forthcoming or that referrals or recommendations would be made or encouraged in the future.

history: (History: Amended by Stats. 1993, Ch. 120, Sec. 2.7. Effective July 16, 1993.)

article: 5. Unlawful Referrals


citation: INS § 753

text:
(a) It is unlawful for any insurance agent or broker, or any insurance solicitor employed thereby, to receive any financial benefit from an automobile repair facility or any other form of direct or indirect consideration from any person for referring insureds to that person or that person’s designee for vehicle repairs covered under the automobile comprehensive coverage, property damage coverage, or automobile collision coverage, of an insurance policy issued through the insurance agent or broker or by an insurer represented by the insurance agent.

(b) Subdivision (a) applies with respect to commercial and noncommercial policies of automobile insurance.

(c) For purposes of this section, “financial benefit” means the receiving of any commission or gratuity, discount on repair costs, free repairs, or employment by a repair facility.

history: (History: Added by Stats. 1989, Ch. 372, Sec. 1. Effective September 12, 1989.)

article: 5. Unlawful Referrals


citation: INS § 754

text:
(a) It is unlawful for any person to solicit, receive, offer, or pay any referral fee for the referral of an individual for the furnishing of services or goods for which the person knows or should have known whole or partial reimbursement is or may be made, directly or indirectly, by any insurer. As used in this section, a referral fee is a fee paid by a person furnishing goods or services to another in return for the referral of an individual to that person for the furnishing of services or goods. It includes any referral fee, kickback, bribe, or rebate, whether made directly or indirectly, overtly or covertly, or in cash or in kind. This subdivision does not apply to any of the following:

(1) Discounts or similar reductions in prices.

(2) Referral fees between attorneys if legal services are provided pursuant to a contingency fee arrangement if any referral fee is consistent with the Rules of Professional Conduct of the State Bar of California.

(b) This section applies to all forms of insurance covering a motor vehicle, including commercial and personal lines, and comprehensive coverage, property damage coverage, collision coverage, and liability coverage.

(c) A violation of this section is a misdemeanor punishable by a fine not to exceed one thousand dollars ($1,000) for each violation. Proceedings to enforce this section may be brought by any district attorney or other prosecuting attorney.

history: (History: Added by Stats. 1990, Ch. 255, Sec. 1.)

article: 5. Unlawful Referrals


citation: INS § 755

text:
If at the time of the solicitation and issuance of a policy of life or disability insurance, or of a surety bond which by its terms continues until canceled, a person may lawfully receive commissions on it, that person, or in the event of that person’s death, his or her estate or heirs may continue to receive commissions on it during the continuance in force or renewal of the policy or bond without being licensed under the provisions of Chapter 5 (commencing with Section 1621) of Part 2 if all of the following requirements are met:

(a) The recipient does not transact insurance in connection with the policy or bond while not so licensed.

(b) The payment is made pursuant to a contract entered into, before that solicitation and issuance, between the insurer paying or allowing the commission and that person.

history: (History: Added by Stats. 1989, Ch. 1099, Sec. 1. Effective September 30, 1989.)

article: 5.1. Unlawful Practices

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 5.1. Unlawful Practices


citation: INS § 756

text:
When the premium on a policy insuring an employer is based upon the amount or segregation of the employer’s payroll, and the employer, personally or knowingly through his or her employee, procures a lower premium by willfully misrepresenting the amount or segregation, that misrepresentation is an unlawful act as to the employer.

In addition to any penalty provided by law, the employer in that case is liable to the state in an amount 10 times the difference between the lower premium paid and the premium properly payable. The commissioner shall collect the amount so payable and may bring a civil action in his or her name as commissioner to enforce collection unless the misrepresentation is made to, and the lower premium procured from the State Compensation Insurance Fund. In the latter case the liability to the state under this section shall be enforced in a civil action in the name of the State Compensation Insurance Fund and any amount so collected shall become a part of that fund.

article: 5.1. Unlawful Practices


citation: INS § 757

text: When a statement of the amount or segregation of a payroll is materially false, and an insurer, through a person employed by it in a managerial capacity, accepts the statement as the basis for the premium on a policy, the acceptance is an unlawful act if the accepting employee knows of the falsity.

article: 5.1. Unlawful Practices


citation: INS § 758

text:
(a) It is unlawful for an insurer to require an auto body repair shop registered pursuant to Sections 9884 and 9889.52 of the Business and Professions Code, as a condition of participation in the insurer’s direct repair program, to pay for the cost of an insured’s rental vehicle that is replacing an insured vehicle damaged in an accident, or to pay for the towing charges of the insured with respect to that accident. However, the insurer and the auto body repair shop may agree in writing to terms and conditions under which the rental vehicle charges become the responsibility of the auto body repair shop when the shop fails to complete work within the agreed-upon time for repair of the damaged vehicle.

(b) A registered auto body repair shop that is denied participation in an insurer’s direct repair program may report a denial to the department, which shall maintain a record of all those denials for the purposes of gathering market conduct information. An insurer, upon the request of the department, shall disclose the fact that a denial was made.

(c) Any insurer that conducts an auto body repair labor rate survey to determine and set a specified prevailing auto body rate in a specific geographic area shall report the results of that survey to the department, which shall make the information available upon request. The survey information shall include the names and addresses of the auto body repair shops and the total number of shops surveyed.

history: (History: Added by Stats. 2000, Ch. 867, Sec. 15. Effective January 1, 2001.)

article: 5.1. Unlawful Practices


text:
(a) No insurer shall require that an automobile be repaired at a specific automotive repair dealer, as defined in Section 9880.1 of the Business and Professions Code.

(b) (1) No insurer shall suggest or recommend that an automobile be repaired at a specific automotive repair dealer unless either of the following applies:

(A) A referral is expressly requested by the claimant.

(B) The claimant has been informed in writing of the right to select the automotive repair dealer.

(2) An insurer may provide the claimant with specific truthful and nondeceptive information regarding the services and benefits available to the claimant during the claims process. This may include, but is not limited to, information about the repair warranties offered, the type of replacement parts to be used, the anticipated time to repair the damaged vehicle, and the quality of the workmanship available to the claimant.

(3) If an insurer’s recommendation of an automotive repair dealer is accepted by the claimant, the insurer shall cause the damaged vehicle to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy or as is otherwise allowed by law. If the recommendation of an automotive repair dealer is done orally, and if the oral recommendation is accepted by the claimant, the insurer shall provide the information contained in this paragraph, as noted in the statement below, to the claimant at the time the recommendation is made. The insurer shall mail or provide the notice required by this paragraph within five calendar days from the acceptance of the recommendation. The written notice required by this paragraph shall include the following statement plainly printed in no less than 10-point type in a separate and freestanding document: “WE ARE PROHIBITED BY LAW FROM REQUIRING THAT REPAIRS BE DONE AT A SPECIFIC AUTOMOTIVE REPAIR DEALER. YOU ARE ENTITLED TO SELECT THE AUTO BODY REPAIR SHOP TO REPAIR DAMAGE COVERED BY US. WE HAVE RECOMMENDED AN AUTOMOTIVE REPAIR DEALER THAT WILL REPAIR YOUR DAMAGED VEHICLE. WE RECOMMEND YOU CONTACT ANY OTHER AUTOMOTIVE REPAIR DEALER YOU ARE CONSIDERING TO CLARIFY ANY QUESTIONS YOU MAY HAVE REGARDING SERVICES AND BENEFITS. IF YOU AGREE TO USE OUR RECOMMENDED AUTOMOTIVE REPAIR DEALER, WE WILL CAUSE THE DAMAGED VEHICLE TO BE RESTORED TO ITS CONDITION PRIOR TO THE LOSS AT NO ADDITIONAL COST TO YOU OTHER THAN AS STATED IN THE INSURANCE POLICY OR AS OTHERWISE ALLOWED BY LAW. IF YOU EXPERIENCE A PROBLEM WITH THE REPAIR OF YOUR VEHICLE, PLEASE CONTACT US IMMEDIATELY FOR ASSISTANCE.”

(c) Except as provided in subparagraph (A) of paragraph (1) of subdivision (b), or as to information of the kind authorized by paragraph (2) of subdivision (b), after the claimant has chosen an automotive repair dealer, the insurer shall not suggest or recommend that the claimant select a different automotive repair dealer.

(d) Any insurer that, by the insurance contract, suggests or recommends that an automobile be repaired at a particular automotive repair dealer shall also do both of the following:

(1) Prominently disclose the contractual provision in writing to the insured at the time the insurance is applied for and at the time the claim is acknowledged by the insurer.

(2) If the claimant elects to have the vehicle repaired at the shop of his or her choice, the insurer shall not limit or discount the reasonable repair costs based on charges that would have been incurred had the vehicle been repaired by the insurer’s chosen shop.

(e) For purposes of this section, “claimant” means a first-party claimant or insured, or a third-party claimant who asserts a right of recovery for automotive repairs under an insurance policy.

(f) The powers of the commissioner to enforce this section shall include those granted in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1.

(g) The changes to this section made by the act enacted during the 2009–10 Regular Session that amended this section shall only apply to actions filed on or after January 1, 2010.

history: (History: Amended by Stats. 2009, Ch. 387, Sec. 1. (AB 1200) Effective January 1, 2010.)

article: 5.1. Unlawful Practices


text: Insurers shall not engage in capping. For the purposes of this section, “capping” means offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.

history: (History: Added by Stats. 2008, Ch. 526, Sec. 2. Effective January 1, 2009.)

article: 5.1. Unlawful Practices


text:
An insurer, upon receiving notice from an insured, shall reimburse any fees and extra premium charged to an insured due to a late premium payment or a lapse in coverage under the policy if the late payment or lapse in coverage was the result of fraud committed by an agent or broker licensed pursuant to this code and one of the following has occurred:

(a) The agent or broker has been convicted of fraudulent activity in court.

(b) An administrative penalty has been imposed on the agent or broker for fraudulent activity.

(c) The agent or broker has been charged with fraud in court or in an administrative action and has agreed to plead guilty to a lesser charge for the fraudulent activity of which he or she is accused.

history: (History: Added by Stats. 2004, Ch. 160, Sec. 1. Effective January 1, 2005.)

article: 5.1. Unlawful Practices


citation: INS § 759

text:
This article establishes consumer protections in connection with retail sales practices, solicitations, advertising, or offers of any insurance product or annuity to a consumer by either of the following:

(a) Any depository institution, as defined in subdivision (b) of Section 760.

(b) Any person who is engaged in those activities at an office of a depository institution or on behalf of a depository institution.

history: (History: Added by Stats. 2002, Ch. 203, Sec. 2. Effective January 1, 2003.)

path: 1. GENERAL RULES GOVERNING INSURANCE > 2. THE BUSINESS OF INSURANCE > 1. General Regulations > 5.2. Consumer Protection in Sales of Insurance by or Through Depository Institutions


citation: INS § 760

text:
As used in this article, the following terms have the following meanings:

(a) “Affiliate” has the same meaning as defined in Section 1215.

(b) “Depository institution” means any of the following:

(1) National banks, operating subsidiaries of a national bank, and federal branches or agencies of a foreign bank, as defined in Section 1 of the International Banking Act of 1978 (12 U.S.C. Sec. 3101 et seq.), in the case of institutions supervised by the Office of the Comptroller of the Currency.

(2) State member banks in the case of the Board of Governors of the Federal Reserve System.

(3) State nonmember banks in the case of the Federal Deposit Insurance Corporation (FDIC).

(4) Savings associations and operating subsidiaries of savings associations, in the case of the Office of the Comptroller of the Currency.

(c) “Company” means any corporation, partnership, business trust, association, or similar organization, or any other trust, other than a trust that by its terms must terminate within 25 years or not later than 21 years and 10 months after the death of individuals living on the effective date of the trust. “Company” does not include any corporation the majority of the shares of which are owned by the United States or by any state, or a qualified family partnership, as defined in paragraph (10) of subsection (o) of Section 2 of the federal Bank Holding Company Act of 1956, as amended (12 U.S.C. Sec. 1841(o)(10)).

(d) “Consumer” means an individual who purchases, applies to purchase, or is solicited to purchase from a covered person insurance products or annuities primarily for personal, family, or household purposes.

(e) “Control” has the same meaning as defined in Section 1215.

(f) (1) “Covered person” means either of the following:

(A) A depository institution.

(B) Another person only when the person sells, solicits, advertises, or offers an insurance product or annuity to a consumer at an office of a depository institution, or on behalf of a depository institution.

(2) For purposes of this definition, activities on behalf of a depository institution include activities pursuant to which a person, whether at an office of the depository institution or at another location, sells, solicits, advertises, or offers an insurance product or annuity and where at least one of the following applies:

(A) The person represents to a consumer that the sale, solicitation, advertisement, or offer of any insurance product or annuity is by or on behalf of the depository institution.

(B) The depository institution refers a consumer to a seller of insurance products or annuities and the institution has a contractual arrangement to receive commissions or fees derived from a sale of an insurance product or annuity resulting from that referral.

(C) Documents evidencing the sale, solicitation, advertising, or offer of an insurance product or annuity identify or refer to the depository institution.

(g) “Electronic media” includes any means for transmitting messages electronically between a covered person and a consumer in a format that allows visual text to be displayed on equipment such as a personal computer monitor.

(h) “Office” means the premises of a depository institution where retail deposits are accepted from the public.

(i) “Subsidiary” has the same meaning as defined in Section 1215.

history: (History: Amended by Stats. 2019, Ch. 143, Sec. 69. (SB 251) Effective January 1, 2020.)

article: 5.2. Consumer Protection in Sales of Insurance by or Through Depository Institutions


citation: INS § 761

text:
(a) A covered person shall not engage in any practice that would lead a consumer to believe that an extension of credit, in violation of subsection (b) of Section 106 of the federal Bank Holding Company Act Amendments of 1970 (12 U.S.C. Sec. 1972), is conditional upon either of the following:

(1) The purchase of an insurance product or annuity from the depository institution or any of its affiliates.

(2) An agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an affiliated entity.

(b) A covered person shall not engage in any practice or use any advertisement at any office of, or on behalf of, the depository institution or a subsidiary of the depository institution that could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to any of the following:

(1) The fact that any insurance product or annuity sold or offered for sale by a covered person or any subsidiary of the depository institution is not backed by the federal government or the depository institution, or the fact that the insurance product or annuity is not insured by the Federal Deposit Insurance Corporation.

(2) In the case of an insurance product or annuity that involves investment risk, the fact that there is an investment risk, including the potential that principal may be lost and that the product may decline in value.

(3) In the case of a depository institution or subsidiary of the depository institution at which insurance products or annuities are sold or offered for sale, the fact that:

(A) The approval of an extension of credit to the consumer by the depository institution or subsidiary may not be conditioned on the purchase of an insurance product or annuity by the consumer from the depository institution or a subsidiary of the depository institution.

(B) The consumer is free to purchase the insurance product or annuity from another source.


citation: INS § 762

text:
(a) In connection with the initial purchase of an insurance product or annuity by a consumer from a covered person, a covered person shall disclose to the consumer, except to the extent the disclosure would not be accurate, all of the following:

(1) That the insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the depository institution or an affiliate of the depository institution.

(2) That the insurance product or annuity is not insured by the Federal Deposit Insurance Corporation or any other agency of the United States, the depository institution, or, if applicable, an affiliate of the depository institution.

(3) In the case of an insurance product or annuity that involves an investment risk, that there is investment risk associated with the product, including the possible loss of value.

(b) In the case of an application for credit in connection with which an insurance product or annuity is solicited, offered, or sold, a covered person shall disclose that the depository institution may not condition an extension of credit on either of the following:

(1) The consumer’s purchase of an insurance product or annuity from the depository institution or any of its affiliates.

(2) The consumer’s agreement not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity.

(c) (1) The disclosures required by subdivision (a) shall be provided orally and in writing during any solicitation of an insurance product or annuity to a consumer. The disclosures required by subdivision (b) shall also be made orally and in writing at the time the consumer applies for an extension of credit in connection with which an insurance product or annuity will be solicited, offered, or sold.

(2) If a sale of an insurance product or annuity is conducted by mail, a covered person is not required to make the oral disclosures required by subdivision (a). If a covered person takes an application for credit by mail, the covered person is not required to make the oral disclosures required by subdivision (b).

(3) If the sale of an insurance product or annuity is conducted by telephone, a covered person shall provide the written disclosure required by subdivision (a) by mail within three business days, beginning on the first business day after the sale, but excluding Sundays and the legal public holidays specified in subsection (a) of Section 6103 of Title 5 of the United States Code.

(4) Subject to the requirements of subsection (c) of Section 101 of the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001(c)), a covered person may provide the written disclosures required by subdivisions (a) and (b) through electronic media instead of paper, if the consumer affirmatively consents to receiving the disclosures electronically and if the disclosures are provided in a format that the consumer may retain or obtain later, for example, through printing or storing electronically by downloading. Any disclosures required by subdivision (a) or (b) that are provided by electronic media are not required to be provided orally.

(5) The disclosures provided shall be conspicuous, simple, direct, readily understandable, and designed to call attention to the nature and significance of the information provided. For example, a covered person may use the following disclosures in visual media, including television, broadcasting, ATM screens, billboards, signs, posters, and written advertisements and promotional materials, as appropriate and consistent with subdivisions (a) and (b):

(A) “NOT A DEPOSIT.”

(B) “NOT FDIC-INSURED.”

(C) “NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY.”

(D) “NOT GUARANTEED BY THE BANK (OR SAVINGS ASSOCIATION).”

(E) “MAY GO DOWN IN VALUE.”

(6) (A) A covered person shall provide the disclosures required by subdivisions (a) and (b) in a meaningful form. Examples of the types of methods that could call attention to the nature and significance of the information provided include all of the following:

(i) A plain language heading to call attention to the disclosure.

(ii) A typeface and type size that are easy to read.

(iii) Wide margins and ample line spacing.

(iv) Boldface or italics for key words.

(v) Distinctive type style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information.

The disclosures required by subdivisions (a) and (b) shall be in the same language as principally used in any oral solicitation leading to the execution of the purchase by the consumer of the insurance product or annuity.

(B) A covered person has not provided the disclosures in a meaningful form if the covered person merely states to the consumer that the required disclosures are available in printed material, but does not provide the printed material when required and does not orally disclose the information to the consumer when required.

(C) With respect to disclosures made through electronic media for which paper or oral disclosures are not required, the disclosures are not meaningfully provided if the consumer may bypass the visual text of the disclosures before purchasing an insurance product or annuity.

(7) A covered person shall obtain from the consumer, at the time the consumer receives the disclosures required by subdivisions (a) and (b), or at the time of initial purchase by the consumer of the insurance product or annuity, a written acknowledgment by the consumer that the consumer received the disclosures. A covered person may permit a consumer to acknowledge receipt of the disclosures electronically or in paper form. If the disclosures required under subdivisions (a) and (b) are provided in connection with a transaction that is conducted by telephone, a covered person shall do the following:

(A) Obtain an oral acknowledgment of receipt of the disclosures and maintain sufficient documentation to show that the acknowledgment was given.

(B) Make reasonable efforts to obtain a written acknowledgment from the consumer.

(d) The disclosures described in subdivision (a) are required in advertisements and promotional material for insurance products or annuities unless the advertisements or promotional material are of a general nature describing or listing the services or products offered by the depository institution.