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california legislation > AB 53

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Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair


AB 53 (Solorio) - Insurance

Amended: July 5, 2012 Policy Vote: Ins 6-3
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Maureen Ortiz

This bill does not meet the criteria for referral to the
Suspense File.


Bill Summary: AB 53 requires each admitted insurer, with
California premiums of $100 million or more, to submit a report
to the Insurance Commissioner on its minority, women, and
disabled veteran-owned business procurement efforts. The report
is due July 1, 2013, and must be updated biennially beginning
July 1, 2015.

Fiscal Impact: The Department of Insurance indicates staffing
costs of $99,763 annually through FY 2017/18 to process and post
the annual reports and collect the required data every two
years. (Special)

It is anticipated that about 200 California admitted insurers
will file the report.

Background: In 2010, renewable energy, wireless
telecommunications, broadband, smart grid and rail projects were
added as categories for which utilities should increase
procurement from women, minority and disabled veteran business
enterprises (DVBEs). These existing laws require each utility
with an annual revenue exceeding $25 million to submit to the
Public Utilities Commission (PUC) an annual verifiable plan for
increasing procurement to women, minority and DVBEs. The PUC is
responsible for verifying the status of applicants, reporting
the results of the program, and making recommendations to
achieve maximum results in implementing the legislative policy.

Proposed Law: AB 53 requires each admitted insurer with
California premiums in excess of $100 million to report to the
Insurance Commissioner on its minority, women, and disabled
veteran-owned business procurement efforts. Insurers that do








AB 53 (Solorio)
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not enter into contracts to procure goods or services in
California may file a statement attesting to that fact and will
be exempt from the reporting requirement.

Insurers that are required to report must include the following:

a) The insurer's supplier diversity policy statement,
b) The insurer's outreach and communications to minority,
women, and disabled veteran business enterprises, as
specified, and
c) Information about which procurements are made from
minority, women, and disabled veteran business enterprises
with at least a majority of the enterprise's workforce in
California.

AB 53 specifically provides that its provisions will not be
construed to require quotas, set-asides, or preferences in an
admitted insurer's procurement of goods or services. The
provisions do not apply to insurer producer or licensee
contracts. Additionally, admitted insurers that belong to a
holding company may comply with the reporting requirement
through a single filing on behalf of the entire group of
affiliated companies.

Any insurer that is required to report but fails to do so will
be subject to civil penalties of up to $5,000, or up to $10,000
if the act or practice was willful. However, AB 53 authorizes
the commissioner to grant a 30 day extension to file the report
if needed due to unintended delays.

The first report is due by July 1, 2013, with biennially updates
beginning July 1, 2015. The provisions of AB 53 are repealed on
January 1, 2019.

AB 53 authorizes the Commissioner to establish and maintain a
link on the department's Internet Website that provides public
access to the reported information, but must include a statement
that the information is for informational purposes only.

Staff Comments: "Minority business enterprise" is defined as a
business enterprise, physically located in the United States or
its trust territories, that is at least 51 percent owned by a
minority group or groups, or, in the case of any publicly owned








AB 53 (Solorio)
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business, at least 51 percent of the stock of which is owned by
one or more minority groups, and whose management and daily
business operations are controlled by one or more minority
groups, and whose management and daily business operations are
controlled by one or more of those individuals. "Minority"
includes African Americans, Hispanic Americans, Native
Americans, and Asian Pacific Americans who provide proof of
United States citizenship or legal resident alien status.

"Women business enterprise" is defined as a business enterprise
physically located in the United States or its trust
territories, that is at least 51 percent owned by a woman or
women, or, in the case of any publicly owned business at least
51 percent of the stock of which is owned by one or more women,
and whose management and daily business operations are
controlled by one or more of those individuals, who provide
proof of United States citizenship or legal resident alien
status.

Disabled veteran business enterprise certification eligibility
requirements shall be consistent with those imposed by the
Department of General Services.

Staff Recommended Amendments: In order to clarify that the
civil penalty provisions will be enforced by the Insurance
Commissioner and to alleviate a concern brought forward from the
Judicial Council, staff recommends the following amendment:

On page 5, line 13, after "section" insert "shall be enforced by
the commissioner and"