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F I S C A L I M P A C T R E P O R T

SPONSOR Leavell

ORIGINAL DATE

LAST UPDATED

2/5/07

2/13/07 HB

SHORT TITLE

Capital Requirement & Insurance Provisions

SB 350/aSCORC

ANALYST Wilson

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

Minimal

Minimal Recurring

Various

(Parenthesis ( ) Indicate Revenue Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1) ($0.1)

Recurring Various

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the Attorney General (OAG)

Public Regulation Commission (PRC)

SUMMARY

Synopsis of SCORC Amendment

The Senate Corporations and Transportation Committee to Senate Bill 350 defines for the

purposes of the protection after natural disaster section that a natural disaster means any

hurricane, tornado, storm, flood, high water, wind-driven water, earthquake, landslide, mudslide,

snowstorm, drought, fire, explosion or other catastrophe that results in substantial damage to

property, hardship, suffering or loss of life.

Senate Bill 350/aSCORC – Page

2

Synopsis of Original Bill

Senate Bill 350 amends the Insurance Code (IC) as follows:

• Sections 1 and 11 re-enact a more readable and understandable version of the table of

minimum capital, surplus and deposit requirements for authorized insurers

• Section 2 permits the Superintendent of Insurance to rely on electronic versions

(currently PDF files) of filings maintained by the National Association of Insurance

Commissioners in lieu of paper filings made with the Superintendent, as long as they can

readily be made available for public inspection

• Section 3 clarifies that premium tax is calculated using the numbers reported in the

insurance company's audited annual statement rather than a separately calculated and

unaudited value for premium “received"

• Section 4 provides for refund or credit of non-"erroneous" payments of fees or taxes, and

limits the look back period for all refunds or credits to three years

• Section 5 is a new provision for a $25 penalty for dishonored checks or electronic

payments

• Section 6 permits a new agent to be paid a commission for any initial policies submitted

to an insurance company prior to being appointed by the company. This fixes a problem

arising from recent changes in the law that allowed agents to submit applications to a

company within 15 days prior to being appointed by the company

• Section 7 simplifies the procedure for limited licensing of vendors of telecommunication

devices (cell phones, pagers, etc.) who sell insurance on the equipment

• Sections 8 & 9 clarify that staff adjusters can adjust claims for all insurance companies

within a group of insurance companies under common ownership (i.e., "affiliated

companies")

• Section 10 eliminates the requirement that an adjuster maintain an office in this state

(consistent with several other recent amendments that have eliminated residency

requirements for licensees). This does not affect the specific requirement in 59A-13-11 for

in-state adjusters for workers compensation claims

• Section 12 applies the Insurance Holding Company Law to prepaid dental plans as it does

with all other insurers

• Section 13 removes "cash" from the list of acceptable deposits for service contract

providers

• Section 14 recompiles an existing section of law relating to the Superintendent’s

rulemaking authority for healthcare provider credentialing from the PRC Act to the IC

FISCAL IMPLICATIONS

The penalty of $25 for dishonored checks will generate a small but unknown amount of revenue

SIGNIFICANT ISSUES

The PRC claims this bill is a cleanup bill addressing various non-controversial issues in the IC.

They believe removal of ambiguous or unnecessary provisions of the IC will ease administration.

Section 12 will enable improved monitoring of the financial condition of prepaid dental plans

Removal of the requirement for in-state offices for adjusters is consistent with recent changes to

Senate Bill 350/aSCORC – Page

3

the IC that removed residency requirements for agents and brokers. It recognizes the common

practice of adjusting many claims telephonically or otherwise from offices located in other states.

It may reduce costs to insurers, which would be reflected in premiums charged to consumers.

Local independent adjusters may face more competition from independent adjusters located out-

of-state. Note that in-state adjusters are still required for workers compensation claims.

ADMINISTRATIVE IMPLICATIONS

The PRC believes there will be improved efficiency of Department of Insurance operations.

TECHNICAL ISSUES

The PRC has provided the following:

The table on page 3, line 18, through page 5, line 19 is visually challenging to read in

legislative format over multiple pages. For example, on page 4, lines 1 through 3, the

terms “Basic Capital" and “Additional Surplus" are presented in a manner that is

somewhat ambiguous without specific knowledge of the intent. It is hoped and intended

that the compiler will format the table as shown on the attached version of Schedule I.

On page 4, lines 6 and 11, the word “Million" appears by itself, although it is the

completion of the phrase “$5 Million" begun on the preceding line.

On page 5, line 1, the line break after “Capital," should be removed in order to complete

the sentence, which is continued on page 5, line 2.

On page 5, the list contained on lines 3 through 6 should be indented to differentiate it as

a list.

DW/mt