Earthquake insurance: mandatory offer.

Existing law prohibits a policy of residential property insurance from being issued or delivered or initially renewed in this state unless the named insured is offered coverage for loss or damage caused by an earthquake, as provided, and, if the offer of earthquake coverage is accepted, requires the insurer to provide certain disclosures based on whether the policy was issued by the California Earthquake Authority (CEA) . Existing law created the CEA, to be administered under the authority of the Insurance Commissioner, and authorized it to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance in the manner provided. The CEA has no authority to transact any other type of insurance business. The CEA's operating expenses are capped at 3% of its premium income. This bill would revise and recast these provisions by revising the disclosure language an insurer is required to use in offering earthquake coverage, making the contents of that disclosure language dependent upon whether the insurer is a member of the CEA or not, and by requiring insureds to be provided with specified disclosures with regard to coverage of losses, the CEA's liability limitations, and premiums concurrent with the issuance or renewal by the CEA of a residential earthquake insurance policy. The bill would require a participating insurer, at least once each year, to provide each of its residential property insureds with marketing documents produced at the CEA's expense. The bill would make these provisions operative on January 1, 2016. This bill would increase the cap on the CEA's operating expenses to not more than 6% of its premium income, and exclude certain expenses and costs from being classified as operating expenses. This bill also would incorporate additional changes in Section 10083 of the Insurance Code, as amended by Section 12 of Chapter 369 of the Statutes of 2013, proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015, and this bill is enacted last. This bill would incorporate into Section 10083 as proposed to be added to the Insurance Code changes proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015. This bill also would incorporate additional changes in Section 10083 of the Insurance Code, as added by Section 13 of Chapter 369 of the Statutes of 2013, proposed by AB 2735, to be operative if AB 2735 and this bill are both enacted and become effective on or before January 1, 2015, and this bill is enacted last.