AB487 - Insurance.

Assembly Bill No. 487 CHAPTER 558 An act to amend Sections 822, 824, 825, 845, 845.5, 846, 847, 852, 859, 1652, 1670, 1729.2, 1757.1, 1757.2, 1800, 1802.3, 1871.7, 10123.13, 10270.2, 10295.11, and 12800 of, to amend and repeal Section 11797 of, and to repeal and add Section 11103 of, the Insurance Code, relating to insurance. [ Approved by Governor October 10, 2025. Filed with Secretary of State October 10, 2025. ] LEGISLATIVE COUNSEL'S DIGEST AB 487, Committee on Insurance. Insurance. (1) Existing law generally regulates the business of insurance in the state, including the issuance of securities. Existing law defines an agent to mean every person employed or appointed by an insurer or broker who sells a security in this state for compensation. This bill would update the term “agent” to “stock agent” and would make conforming changes. (2) Existing law requires the Insurance Commissioner to submit to the Department of Justice fingerprint images and related information, as specified by statute, for specified applicants applying for a license, including a surplus line broker, a life and disability analyst, and a variable life and variable annuity agent. This bill would delete the provisions requiring the commissioner to submit fingerprint images and related information for the above-listed individuals. (3) Existing law establishes the powers and duties of the Department of Insurance and the Insurance Commissioner. Existing law requires an application for specified licenses, including a production agency license, to be automatically denied without prejudice to the filing of a new application for the license, except in specified circumstances, if the applicant does not fully qualify for and receives the license on a permanent basis or is denied the issuance of the license, as specified. This bill would additionally include applications for bail, insurance adjuster, or public insurance adjuster licenses. (4) Existing law requires an insurance licensee or applicant for a license to notify the commissioner when any of their background information changes after the application has been submitted or the license has been issued. For this purpose, existing law defines “background information” to include an administrative action regarding a professional or occupational license, among other things. This bill would expand the definition for “background information” to also include an administrative action regarding conduct or activity for which a professional or occupational license was required, but not possessed, and an administrative or civil action filed by, or on behalf of, a government or regulatory agency alleging any unlawful conduct, activity, or omission. (5) Existing law authorizes a limited license to be issued to a natural person or to an organization that acts as an agent on behalf of cargo owners or shippers, or both. This bill would update these provisions to clarify a limited license may be issued to an agent acting on behalf of the cargo owner, cargo shipper, or both. The bill would make conforming changes. (6) Existing law permits blanket insurance to be issued to a college, school, or other institution of learning, or a sports team, camp, sponsor, or proprietor of a sports team, providing benefits to students, teachers, or employees, or sports team participants, campers, employees, officials, supervisors, or persons responsible for their support, for death or dismemberment resulting from accident, or for hospital, medical, surgical, or nursing expenses resulting from accident or sickness, as specified. Existing law defines “blanket insurance” for purposes of these provisions. This bill would expand the groups for which blanket insurance may be issued to include coverage of volunteers for the entities described above. (7) Existing law prohibits knowingly employing runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits under workers’ compensation coverage or a contract of insurance or that will be the basis for a claim against an insured individual or their insurer. Existing law authorizes a district attorney, the Insurance Commissioner, or an interested person to bring a civil action for a violation of that provision. Existing law requires the district attorney or commissioner, for actions brought by an interested person, to either proceed with the action, in which case the action would be conducted by the district attorney or commissioner, or to notify the court that it declines to take over the action, in which case the person bringing the action has the right to conduct the action. Existing law prohibits a court from having jurisdiction over an action under these provisions based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing in a legislative or administrative report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. This bill would instead prohibit a court from having jurisdiction, unless the action is brought by the district attorney or commissioner, the district attorney or commissioner proceeds with an action brought by an interested person, or the person bringing the action is an original source of the information. (8) Existing law exempts agents of a fraternal benefit society from specified examination requirements if they meet specified conditions, including that the agent was in the service of the society on March 1, 1945, and was licensed to represent the society on January 1, 1952, and continuously thereafter, or the agent does not devote substantially full time to the sale of life or disability insurance. Existing law requires the society to notify the commissioner if a licensed part-time agent later devotes substantially full time to the sale of that insurance. Existing law establishes examination and fee parameters and requires that licensees pass the examination before a specified deadline. If the person fails to pass the exam within the specified timeline, existing law authorizes the person to be licensed as a fraternal benefit agent only if they file a new application and meet specified conditions, including that they take and pass the qualifying exam. This bill would replace the term “agent” with the term “individual insurance licensee” and clarify that this section applies to individual part-time fraternal insurance licensees. The bill would additionally allow the part-time fraternal insurance licensee to remain part time until they file for a new application and either take and pass the examination, or demonstrate to the commissioner that they will only remain part time. (9) Existing law establishes the State Compensation Insurance Fund to be administered by a board of directors for the purpose of transacting workers’ compensation insurance and other public employment-related insurances. Existing law requires the board to invest and reinvest all moneys in the State Compensation Insurance Fund in excess of current requirements in the same manner as is authorized in certain provisions applicable to private insurance carriers. Existing law, until January 1, 2027, authorizes the board to make discretionary investments in properties and securities, to invest in money market mutual funds, and to invest or reinvest an aggregated maximum of 20% of the moneys that are in excess of the admitted assets over the liabilities and required reserves in specified investments. This bill would extend those investment authorizations indefinitely. (10) This bill would make additional technical changes to eliminate outdated references and correct other errors. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 822 of the Insurance Code is amended to read: 822. Except as otherwise provided by this article, “sale” or “sell” means every disposition, or attempt or arrangement to dispose, of a security or interest in a security for value, whether done by direct or indirect means. A security is conclusively presumed to be sold for value if given with any purchase of any nature or if given as a bonus on account of a purchase. “Sale” or “sell” shall also mean a contract of sale, an exchange, any change in the rights, preferences, privileges, or restrictions on outstanding securities, an attempt to sell, an option of sale, a solicitation of a sale, a subscription or an offer to sell directly or by a stock agent, or a circular letter, advertisement or otherwise. SEC. 2. Section 824 of the Insurance Code is amended to read: 824. “Broker” means every person, other than a stock agent, who in this state engages either wholly or in part in the business of (a) dealing in any security issued by others, (b) underwriting any issue of such securities, (c) purchasing such securities with the purpose of reselling them, or (d) offering such securities for sale to the public. Authority to act as a broker shall not be implied from an appointment executed by an insurer appointing a stock agent of that insurer. SEC. 3. Section 825 of the Insurance Code is amended to read: 825. “Stock agent” means every person employed or appointed by an insurer or broker who, within this state and for a compensation, sells any security. SEC. 4. Section 845 of the Insurance Code is amended to read: 845. (a) A person shall not sell or resell any security of a domestic, foreign, or alien insurer: (1) As an insurer with respect to securities of its own issue without securing the permit of the commissioner as provided in this article. (2) As a stock agent of that insurer except under authority of a certificate issued by the commissioner under this code. (3) As a broker or as a stock agent for a broker except under authority of a certificate or license issued by the Commissioner of Financial Protection and Innovation under the provisions of the Corporations Code and in full conformity with all provisions of the Corporations Code. (b) Subdivision (a) shall not prohibit a bona fide owner of securities of an insurer from selling or reselling those securities if: (1) The securities were originally issued under the authority of a permit of the commissioner and the sale or resale is made in conformity with the conditions, if any, in the permit effective at the time of sale or resale; or (2) The securities were originally issued in a jurisdiction other than California in full conformity with the applicable laws, if any, governing the issuance in that jurisdiction. A sale or resale of securities of an insurer by the owner of the securities which is made for the purpose of evading the provisions of this article requiring an insurer to secure a permit from the commissioner or for any other fraudulent purpose shall, however, be null and void and a violation of the criminal provisions of this article. (c) A sale or resale permitted by this section is subject to the stop power of the commissioner under Section 854 and the similar powers of the Commissioner of Financial Protection and Innovation pursuant to the provisions of the Corporations Code. (d) A violation of this section is subject to the penalties provided in Section 833. SEC. 5. Section 845.5 of the Insurance Code is amended to read: 845.5. The certificate required by Section 845 to act as a stock agent of an insurer shall be secured as provided in Section 846 and shall expire on the first day of July after its issue, unless sooner suspended or revoked. The permission granted by Section 845 to persons holding certificates or licenses issued by the Commissioner of Financial Protection and Innovation does not affect the provisions of this article requiring that an insurer and that a stock agent appointed by an insurer secure a permit or certificate from the commissioner to issue, sell, or resell securities and the issue, sale, or resale and the advertising thereof is subject to the provisions of this article, nor does that section permit an owner of securities to sell or resell the same except in conformity with that section and this article. SEC. 6. Section 846 of the Insurance Code is amended to read: 846. To secure such certificate, the applicant shall make and file in the office of the commissioner an application therefor in writing, verified by or in behalf of the applicant. Such application shall set forth: (a) The name and address of the applicant. (b) 1. In the case of an applying corporation, association, or joint stock company, the name and address of each of its managing officers and managing stock agents. 2. In the case of an applying partnership, the name and address of each of the partners. (c) A succinct statement of facts showing possession of a good business reputation: 1. By the applicant. 2. In the case of an applicant corporation, association, or joint stock company, by its managing officers and managing stock agents. 3. In the case of an applicant partnership, by its members. (d) If the applicant is a broker, the general plan and character of the business of the applicant. (e) Such other information as the commissioner requires. SEC. 7. Section 847 of the Insurance Code is amended to read: 847. At the time of filing an application for a broker’s certificate, the applicant shall file with the commissioner a bond for five thousand dollars ($5,000), payable to the people of the State of California, for the use and benefit of any interested person, to be approved by the commissioner. The bond shall be conditioned upon the following conduct by the broker, the broker’s stock agents, and employees: (a) Strict compliance with the provisions of this article. (b) Honest and faithful application of all funds received. (c) Honest and faithful performance of all obligations and undertakings in the purchase or sale of securities. (d) Payment of all damages suffered by any person damaged or defrauded by reason of the violation of any of the provisions of this article, or by reason of any fraud connected with or growing out of any transaction contemplated by the provisions of this article. SEC. 8. Section 852 of the Insurance Code is amended to read: 852. The commissioner may at any time in accordance with the procedure provided in Section 1738 suspend or revoke any broker’s or stock agent’s certificate issued by the commissioner if the commissioner finds that the holder thereof is of bad business repute, has violated this article, or has engaged, or is about to engage, in any fraudulent transaction. SEC. 9. Section 859 of the Insurance Code is amended to read: 859. The commissioner shall also collect the following fees: (a) For filing any application for a broker’s certificate, two hundred eighty-three dollars ($283) for the first office or location plus one hundred thirty-six dollars ($136) for each additional office or location. ( [Text truncated for display. Full text available on Congress.gov.]