BILL ANALYSIS AB 1926 Date of Hearing: January 11, 1994 ASSEMBLY COMMITTEE ON FINANCE, INSURANCE AND PUBLIC INVESTMENT Steve Peace, Chair AB 1926 (Peace) - As Amended: January 10, 1994 SUBJECT Insurance: fraud. DIGEST Existing law: 1) Authorizes the suspension or revocation of a license on the ground that the licensee has been convicted of a crime, if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the license was issued. 2) Requires each insurer doing business in this state to pay an annual fee not exceed one dollar for each vehicle insured under an insurance policy it issues in this state in order to fund increased investigation and prosecution of fraudulent automobile insurance claims. Ninety cents of the fee is distributed to the Bureau of Fraudulent Claims and the district attorneys. The remaining ten cents is distributed to fund the Automobile Insurance Claims Depository. This bill: 1) Authorizes the license of any licensee to be summarily and permanently revoked when the licensee is found guilty of violating specified insurance fraud statutes. The revocation of the license must be consistent with applicable laws protecting a licensee's right to due process of the law. 2) Requires the ten cents currently allocated to fund the Automobile Insurance Claims Depository to be distributed to the Department of the California Highway Patrol to investigate suspected automobile insurance fraud. 3) Establishes that it is unlawful to intentionally inflate an estimate of materials or services required to repair or replace an insured dwelling or building. Requires punishment by imprisonment in county jail for one year or in state prison for two, three, or five years, or by fine not exceeding fifty thousand dollars or double the value of fraud, - continued - AB 1926 Page 1 AB 1926 whichever is greater, or by both imprisonment and fine. A two-year enhancement provision is also provided. 4) Establishes a demonstration program in San Diego County rewarding persons who report information to law enforcement agencies leading to arrests and prosecution of suspected motor vehicle thieves. Authorizes an assessment not to exceed five cents per vehicle insurance policy written in San Diego County to fund the demonstration project. Provides for a January 1, 1998 sunset. 5) Authorizes law enforcement to use available funds to apply vanguard telecommunications technology to track and recover stolen vehicles. 6) Provides guidelines for which a certificate of title may be used as evidence to prove that a suspected vehicle thief was using the vehicle without the owner's permission. 7) Requires the cancellation of vehicle titles by the Department of Motor Vehicles before export to deter phony and collusive auto theft claims. FISCAL EFFECT Undetermined. COMMENTS The sponsor of this bill, Association of California Insurance Companies š(ACIC), state that the proposed legislation is necessary to deter šfraudulent auto insurance claims which have become a sophisticated and šlucrative business in California. Specifically, the sponsor indicates that šcomplex rings of dishonest lawyers, health professionals, "cappers" and šinsureds conspire to defraud insurance companies and their customers of š$100 million last year in and around the Los Angeles area alone. ACIC šasserts that these losses are generated by staging accidents, filing claims šfor "paper" accidents and padding medical and legal bills with treatment šand services never rendered. In addition, these criminals have mastered šthe claims system and insulated themselves inside layers of legal šdeniability. Convictions depend upon investigation and infiltration by štrained law enforcement professions. Therefore, this legislation provides šthe necessary resources and mechanisms to to address vehicle fraud and štheft. SUPPORT Association of California Insurance Companies OPPOSITION None Received. - continued - AB 1926 Page 2 AB 1926 - continued - AB 1926 Page 3