Short-term disability insurance and long-term disability insurance policies provide insurance benefits to consumers who are unable to continue working due to injury or sickness.  Such coverage can be offered as a benefit of employment by an employer (in which case, the policy is usually governed by a federal law called the Employee Retirement Income Security Act of 1974 or ERISA) or can be purchased by the individual insured.

Regardless of how the coverage is obtained, the terms of every policy form for disability insurance must be approved by the California Department of Insurance before it is offered for sale.  Recently, Governor Jerry Brown signed Assembly Bill 387, authored by Assembly Member Kevin McCarty and co-sponsored by Insurance Commissioner Dave Jones, which will improve the Department of Insurance’s ability to review draft disability policies before they are sold to the general public.

Among other changes, the new law increases the time the California Department of Insurance has to review policy forms and any associated risks and premium rates from 30 to 120 calendar days.  Here is the press release from the California Department of Insurance:

New law improves rate filing review process

SACRAMENTO, Calif.– Governor Brown signed Assembly Bill 387 today, authored by Assembly Member Kevin McCarty. Co-sponsored by Insurance Commissioner Dave Jones, the law will ultimately improve the department’s ability to review and approve disability policy filings more effectively and completely in the specified timeframe.

“This law will allow my department to continue to protect consumers, make the approval process more effective and still allow for timely marketplace availability of products,” said Commissioner Jones. “I’d like to thank Assembly Member McCarty for authoring this bill.”

AB 387 reflects an agreement between the California Department of Insurance and the Association of California Life and Health Insurance Companies. The law extends the period of time allowed for the department to review and approve policy forms and any associated risks and premium rates from 30 to 120 calendar days.

The new law will also authorize the Commissioner to develop and publish new guidelines on the department’s public website for the purpose of streamlining and expediting the department’s file review process for life and disability insurance forms. Providing clear guidelines for insurers to follow when submitting policies for approval, coupled with increasing the amount of time to review and approve policies, will improve the overall process and reduce confusion for consumers and the industry.

The new law also requires the requesting of an independent study to examine and compare California law with standards set forth in the Interstate Insurance Product Regulation Compact. This study would examine important consumer protections established under current law for annuity, life insurance, disability income, and long-term care insurance products.