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News & Press: Advocacy

NAIFA California Co-Sponsors Bill To Protect Agents From Changes In Contracts Without Warning

Tuesday, March 10, 2015   (0 Comments)
Posted by: Shari McHugh
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NAIFA California, along with the California Association of Health Underwriters (CAHU) and the Independent Insurance Agents and Brokers of California (IIABCal) have joined together to sponsor AB 1163 that will protect agents from material changes in agent contracts without advance notice.

AB 1163 will require health insurers and health maintenance organizations (HMOs) to provide their appointed agents with 120 days advance notice of any material changes in their agency agreement. The bill’s 120-day prior notice requirement is patterned on the current property and casualty insurance agent notice requirement. AB 1163 mandates a delay of implementation of any substantive change made to an agent contract by a health insurer or HMO until the proper notice is given to the agent.

AB 1163 was introduced in response to recent actions by a health insurance carrier that made substantial and material changes to their agreement with licensed health insurance agents with only 48 hours of notice before the changes took effect.
An agent or producer agreement is a written contract stipulating the arrangement between an insurance agency and the insurer or HMO it represents. Important details such as ownership of renewals and general duties and responsibilities of each party are usually spelled out in this agreement. Most agent agreements contain provisions that address how and when notice of changes to the agency agreement can be implemented.

However, agency agreements with health insurers and HMO’s often contain a separate clause that nullifies any provision of the agreement if the HMO or insurance carrier finds it necessary, in their view, to make substantial changes to the agreement without any notice at all. Such clauses are not permitted by statute in agency agreements made with property and casualty insurers. AB 1163 would align with the current statutes in P&C to ensure major changes to agency agreements with health insurers and HMO do not occur without warning.

Agents understand business necessity can sometimes drive a need for a material change. That is why special language was added to AB 1163 to ensure changes that are mutually agreed to or changes made necessary due to a change in state or federal law can occur without delay. In all other cases, under AB 1163 as introduced, a change desired by the carrier can take effect as soon as proper notice is given under the terms of the bill. Patrick Burns, President of the California Association of Health Underwriters noted “AB 1163 levels the playing field and
provides for a fair and reasonable notice to licensed agents when their contract is substantially changed.”

AB 1163 has been introduced by Assembly Freddie Rodriguez (D-Pomona) to provide for reasonable notice of major changes made by a carrier to an agent agreement. The bill is awaiting assignment to the appropriate Assembly committee for policy consideration.

The California Association of Health Underwriters, the Independent Insurance Agents and Brokers of California and the National Association of Insurance and Financial Advisors of California represent California’s licensed health insurance agents. Our licensed members provide reliable insurance advice, act as the consumer’s advocate when dealing with carriers and provide a number of essential services relating to the individual and group insurance coverage and obligations post-enrollment. Our members also act as a trusted and effective marketing and distribution channel for health insurance information for all consumers and potential consumers of health care insurance coverage.

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