Sacramento, CA, July 18, 2017 -- Governor Jerry Brown yesterday signed legislation to permit California insurance agents and brokers to utilize out of state banking services for deposit of premium dollars. AB 1460, authored by Assembly Insurance, Banking and Financial Institutions Committee Chair Matthew Dababneh (D-Encino), passed in every phase of the legislative process without any opposition from legislators or the public. AB 1460 is supported by IIABCal.
“California’s agents and brokers will now be able to take advantage of banking services tailored to the insurance sector and the premiums related to their products," IIABCal President Dave Nelson said. "This will make the management of premium trust accounts more seamless and efficient because agents and brokers will be required to expend less time educating bankers about the nature of their business.”
Assembly Member Dababneh added, “As Chair of the Assembly Banking and Finance Committee, it is important that this financial service be allowed in California, particularly since the technology utilized is proven and developed right here in our state. By providing more flexibility with their banking needs, my legislation will help agents and brokers, most of them small business owners with limited resources, choose the best location for depositing their premiums.”
The new law allows agents or brokers to maintain his or her fiduciary account, required by law, in any state or federally chartered bank or financial institution," Nelson said. “Because of Chair Dababneh’s leadership, expertise, and trust on financial services matters in the Legislature, AB 1460 successfully updated 1959 statute that required licensees to maintain his or her fiduciary account in a California bank or savings and loan association."
As a part of their licensing requirements, 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 comingled 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.
IIABCal agents and brokers in California sought to amend this statute in order to access financial institutions that specialize in the needs of these firms. InsurBanc is one of these firms. It was established by the Independent Insurance Agents & Brokers of America (the national association) 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.
AB 1460 requires trust accounts be maintained by California or federally chartered banks or financial institutions. In addition, the bill requires that such financial institutions agree to litigate or arbitrate any dispute relative to such accounts in California. Federally chartered banks and financial institutions have consumer protections equal to or greater than state chartered banks and savings and loan associations. These financial institutions are insured by the Federal Deposit Insurance Corporation.