Understanding California’s Senate Bill 1242: What Agents Need to Know

Senate Bill 1242, signed into law by Newsom last year, is an all-encompassing piece of legislation aimed at safeguarding California consumers through various requirements imposed on producers.

The omnibus bill, which went into effect on January 1st, covers a wide range of topics, including insurance fraud reporting, education mandates, fingerprinting, and licensing disclosures. Let’s break down the key points of the new law that agents should be aware of:

  1. Reporting Fraud

Starting in the new year, agents and brokers must report suspected or known fraudulent insurance applications to the California Department of Insurance (CDI). This requirement applies to any dubious application and must be submitted through the electronic Consumer Fraud Reporting Portal within 60 days of detecting potential fraud. Importantly, these reports cannot be made anonymously.

If fraud is discovered after the application has been placed with an insurer, agents and brokers must report it to the impacted insurer’s special investigation unit along with all requested documents and evidence.

Notably, this marks a significant change, as only carriers were previously responsible for fraud reporting. Agents must comply with these reporting obligations to avoid regulatory exposure.

  1. Continuing Education

For agents seeking licensing and current license holders fulfilling their continuing education requirements, a one-hour study on insurance fraud is now mandatory. This additional hour of course work will be integrated with the existing hourly ethics training requirements, and is available here at Lytespeed Learning.

  1. Fingerprinting

The new law requires the California Insurance Commissioner to submit fingerprint images and related information to the Department of Justice for licensing applicants. These fingerprints will be used to check for any criminal convictions. Aspiring licensees should take this as a warning to thoroughly consider their criminal history, whether or not any prior convictions have been expunged. Failure to disclose criminal convictions on a license application can lead to license denial.

  1. License Information on Emails

Previously, agents and brokers were required to include their license numbers on business cards, premium quotes, and print advertisements exclusively distributed in California. Now, this requirement extends to emails involving insurance transactions. All agents conducting business in California must include their license number in emails, ensuring it is presented in a font size no smaller than other contact details. Similarly, organizational licensees must include their license number adjacent to or below their organization’s name in emails.

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