Legislation recently signed by Governor Schwarzenegger now mandates that all California insurers are now required to disclose cancelation penalties with an application for insurance.
The law previously stated that if a policy was canceled, rejected, rescinded, or surrendered, that the insured person under the policy was entitled to the return of their premium. The new law (AB2404) which will be in effect as of January 1, 2012, is requiring that any policy including a provision to refund a premium, including the assessment and cancelation fees, now must disclose in writing that it intends to do so. The disclosure must be written and sent to the new policy owner within 5 business days of purchase.
According to Steve Young of the general council for Insurance Brokers and Agents of the West, the law was changed to prevent an insurer from trying to impose a short-rate cancelation penalty that would not equal the administrative costs fined to the insurer as a result of policy cancelation.
The bill also authorizes the Insurance Commissioner to postpone a market conduct exam that is scheduled at least every five years for insurers. The exam can be postponed up to three years.
The law previously stated that if a policy was canceled, rejected, rescinded, or surrendered, that the insured person under the policy was entitled to the return of their premium. The new law (AB2404) which will be in effect as of January 1, 2012, is requiring that any policy including a provision to refund a premium, including the assessment and cancelation fees, now must disclose in writing that it intends to do so. The disclosure must be written and sent to the new policy owner within 5 business days of purchase.
According to Steve Young of the general council for Insurance Brokers and Agents of the West, the law was changed to prevent an insurer from trying to impose a short-rate cancelation penalty that would not equal the administrative costs fined to the insurer as a result of policy cancelation.
The bill also authorizes the Insurance Commissioner to postpone a market conduct exam that is scheduled at least every five years for insurers. The exam can be postponed up to three years.
