SACRAMENTO, CA, March 29, 2017 - A bill to modernize California Banking laws would allow an insurance agent or broker to maintain his or her fiduciary account, required by law, in any state or federally chartered bank or financial institution. The bill - AB 1460 (Assembly Member Matt Dababneh, D-Encino) will be heard in the Assembly Banking Committee on Monday, May 1st.
“Current law enacted in 1959 requires such licensee to maintain his or her fiduciary account in a California bank or savings and loan association,” IIABCal Lobbyist John Norwood said. “Considering California is at the forefront of technology innovation and activities, the banking law is antiquated. All but three states allow interstate insurance agency banking.”
As a part of their licensing requirements, Norwood said, California insurance agents and brokers must maintain a fiduciary account, separate from any other business accounts, in an amount at least equal to the premiums and return premium, net of commission, received by him or her and unpaid to the persons entitled thereto, at their direction or pursuant to a written contract, for the account of such persons.
These funds can be co-mingled with such additional funds as the agent or broker may deem to be prudent for the purposes of advancing premiums, establishing reserves for the paying of return commissions or for such contingencies as may arise in his or her business of receiving and transmitting premiums or return premium funds, Norwood said.
Current banking and consumer protection laws, enacted prior to 1959, require premium trust accounts hold California business in a bank or savings and loan institution in this state.
“IIABCal member agents and brokers in California would benefit by the amended statute as they would have access to additional safe options to maintain their fiduciary funds and have access to financial institutions that specialize in the needs of insurance agencies,” Norwood said. "InsurBanc is one of these financial institutions.”
InsurBanc was established by the Independent Insurance Agents & Brokers of America (IIABA), and it provides a broad range of services and access to capital specifically designed to cater to the needs of independent insurance agents and brokers. InsurBanc is a federally chartered bank and, as such, provides all the consumer protections associated therewith federally chartered financial institutions.
“Under current law, Insurance Code Section 1734.5, if an agent’s or broker’s fiduciary funds are held in a certificate of deposit, rather than cash, those funds could be held in any bank or savings and loan licensed by any state within the U.S. or by the U.S. government,” Norwood said.
“The amendments proposed by AB 1460 are a bit narrower than this section of the law, in that we are proposing that such fiduciary accounts be held only in a California chartered or federally chartered bank or financial institution,” he said.
“In addition, AB 1460 would require that such financial institutions agree to litigate or arbitrate any dispute relative to such accounts in California.”
Norwood said AB 1460, as proposed to be amended, will provide independent insurance agents and brokers with additional options where they can maintain their fiduciary funds, provide such businesses access to additional products and services while not in any way reducing protections provided under current law to those insurers or consumers that might claim a right to some or all of the funds held in these accounts.