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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
DIFI; financial enterprises; insurance; compact
Purpose
Requires a
homeowners insurer to file with the Director of the Department of Insurance and
Financial Institutions (DIFI) specified policy information and underwriting
guidelines relating to fire loss and wildfire risk. Establishes the Fire
Insurance Review Task Force (Task Force) and outlines Task Force membership and
duties. Modifies the license renewal deadline for consumer lenders, debt
management companies, escrow agents, advance fee loan brokers and sales finance
companies. Makes various administrative changes for DIFI, including eliminating
the state's
opt-out of all uniform standards involving long-term care insurance products.
Background
DIFI licenses and authorizes the transaction of insurance business by insurers, producers and other enterprises and regulates state-chartered financial entities, including consumer lenders, debt management companies, escrow agents, advance fee loan brokers and sales finance companies. The Deputy Director of DIFI (Deputy Director) has the authority and responsibility for the discharge of all duties of the Financial Institutions Division (A.R.S. Title 6 and A.R.S. Title 20).
Every insurer group, association or other insurer organization that engages in joint underwriting or joint reinsurance must file with the Director of DIFI (Director): 1) a copy of the group's constitution, articles of association and bylaws; 2) a list of the group's members; and 3) the name and address of a resident of the state to whom notices or orders of the Director may be served. Every such group must notify the Director promptly of any change in the documents required to be filed with the Director (A.R.S § 20-391).
Statute prohibits a service company from offering or issuing a service contract unless the service company has qualified for and been issued a permit by the Director. Service companies and related service contract sellers, administrators and other persons that market, sell or offer to sell service contracts are exempt from any insurance licensing requirements, except for statutorily outlined service company registration requirements, as a result of activities related to marketing, selling or offering of service contracts (A.R.S. § 20-1095.01).
Any property insurance policy containing wildfire protection services, including wildfire mitigation and suppression services conducted by a private entity, that is issued for delivery to an insured individual in Arizona must contain a conspicuously stamped or written notice that states that the wildfire protection services are not subject to review by DIFI (A.R.S. § 20-398).
A consumer lender, debt management company and advance fee loan broker licensee or registrant must submit a license or registration renewal application and pay the associated renewal fee by June 30 each year. An escrow agent licensee must submit a license renewal application and pay the associated renewal fee by September 30 of each year. A sales finance company licensee must submit a license renewal application and pay the associated renewal fee by the license continuation date prescribed by the initial licensing agency or DIFI. If a consumer lender, debt management company, advance fee loan broker, escrow agent or sales finance company licensee or registrant fails to submit a license or registration renewal application and associated renewal fee within 30 days after the specific renewal deadline, the licensee's license automatically expires (A.R.S §§ 6-604; 6-707; 6-815; 6-1305; and 44-282).
In 2014, the Legislature adopted the Interstate Insurance Product Regulation Compact (IIPRC), which includes uniform standards governing asset-based insurance products like annuity, life, disability income and long-term care insurance products through a multi-state commission. Compacting states collaboratively develop uniform standards for the administration of asset-based insurance products to protect consumers equally across the compacting states. When Arizona adopted the IIPRC in 2014, the state opted-out of all uniform standards involving long-term care insurance products (A.R.S § 20-3251; IIPRC).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
DIFI Administration
1. Allows, rather than requires, the Director of DIFI to adopt rules necessary to enforce statute relating to:
a) money transmission;
b) extended warranty insurer deposits with the State Treasurer;
c) domestic, foreign and alien insurers' additional free surplus; and
d) property and casualty insurance reporting requirements.
2. Eliminates the state's opt out of all uniform standards involving long-term care insurance products.
3. Removes, from the Director of DIFI's annual reporting requirement, the requirement to report on the total number of private passenger automobile insurance policies written by risk retention groups.
Consumer Lenders
4. Modifies the consumer lender license year to begin on January 1, rather than July 1, and end on December 31, rather than June 30.
5.
Modifies the deadline, from June 30 of each year to December 30 of each
year, by which a consumer lender licensee must submit a license renewal
application to the Deputy Director and after which an applicant must pay late
fees.
6. Prohibits a consumer lender licensee, if the Deputy Director does not receive the licensee's renewal application by December 31, rather than June 30, from acting as a consumer lender.
7. Specifies that a consumer lender license automatically expires if the Deputy Director does not receive the license renewal application and associated fee by January 31, rather than July 31.
Debt Management Companies
8. Modifies the expiration date, from June 30 of each year to December 31 of each year, for a debt management company license.
9. Modifies the deadline, from June 30 of each year to December 31 of each year, by which a debt management company licensee must submit a license renewal application.
Escrow Agents
10. Modifies the deadline, from September 30 of each year to December 31 of each year, by which an escrow agent licensee must submit a license renewal application and renewal fee payment and after which an applicant must pay late fees.
11. Suspends an escrow agent's license if the Deputy Director does not receive the license renewal application by December 31, rather than September 30.
12. Specifies that an escrow agent license expires if the licensee does not submit a license renewal application and renewal fee payment by January 31, rather than October 31.
Advance Fee Loan Brokers
13. Modifies the deadline, from June 30 of each year to December 31 of each year, by which a registered advance fee loan broker must apply for registration renewal.
14. Suspends an advance fee loan broker's registration if the Deputy Director does not receive the registration renewal application by December 31, rather than September 30.
15. Specifies that an advance fee loan broker registration expires if the registrant does not submit a renewal application and renewal fee payment by January 31, rather than July 31.
Sales Finance Companies
16. Modifies the deadline for a sales finance company license renewal application and renewal fee payment to December 31 of each year, rather than the license continuation date prescribed by either the initial licensing department or DIFI.
17. Specifies that current, active sales finance company licensees do not have to renew the license until December 31, 2025.
Homeowners Insurance Policy Information Report
18. Requires each insurer that writes homeowners insurance in Arizona to report to DIFI, by April 1 of each year in a manner and form prescribed by the Director, the following information on each homeowners insurance policy the insurer had in force in Arizona for the prior calendar year:
a) if the policy was newly issued or renewed, the date the policy was issued or renewed;
b) if the policy was nonrenewed or canceled by the insurer:
i. the date the policy ended;
ii. whether the policy was nonrenewed due to fire loss risk, condition of the premises or any other reason; and
iii. if the policy was cancelled, whether the policy was cancelled due to premium nonpayment or any other reason;
c) the physical address or location of the insured property;
d) the total written and earned premium for the policy;
e) the number of paid claims due to fire loss or for reasons other than fire loss;
f) the total of all losses paid due to fire loss or for reasons other than fire loss;
g) the type of policy form;
h) the policy's deductible;
i) the policy's coverage limits;
j) any other information prescribed by the Director in rule, except that in any year the Director may require reporting information requested in a data call issued by the National Association of Insurance Commissioners (NAIC) on the homeowners insurance market.
19. Deems, as confidential, the information reported by homeowner insurers to DIFI.
20. Exempts the information reported to DIFI from public records requirements and from discovery or subpoena, unless the subpoena is issued by the Attorney General (AG), a county attorney or a court at the request of the AG, a county attorney or a law enforcement agency, and specifies that the subpoena is not admissible in evidence in a private civil action.
21. Allows the Director, in any year in which the NAIC issues a data call on the homeowners insurance market, to prescribe a due date, other than April 1, for the homeowners insurer policy information report that coincides with the due date for the NAIC data call.
22. Requires the Director, by December 31, to prepare an annual report, in an aggregated and anonymized manner, of the information submitted by homeowners insurers and to submit the report to the Governor, Speaker of the House of Representatives (Speaker of the House), Senate President and Secretary of State and post the report on DIFI's website.
Fire Insurance Review Task Force
23. Establishes the Task Force consisting of:
a) the Director or the Director's designee, who serves as Chairperson of the Task Force;
b) two members, appointed by the Director, one of which is an employee of an insurance company that represents the homeowners and commercial property insurance industry;
c) one member, appointed by the Director, who represents a wildfire risk reduction organization and who is informed on wildfire risk;
d) the State Forester or the State Forester's designee, who serves as Vice Chairperson of the Task Force; and
e) four members, appointed by the State Forester, with expertise in wildfire areas, prevention and mitigation;
24. Specifies that appointed members serve two-year terms beginning and ending on the third Monday in January and allows members to be reappointed for up to two consecutive terms.
25. Allows a Task Force member, on expiration of the member's term, to continue to serve on the Task Force until the member is reappointed to another term or a new member is appointed.
26. Requires any Task Force vacancy to be filled in the same manner as the original appointment.
27. Requires the Task Force to:
a) review homeowners and commercial property insurance premium and policy coverages in every zip code in Arizona and designated wildfire and wildland urban interface areas within the state;
b) review consumer complaints that relate to an insurance company's nonrenewal of a homeowners of commercial property insurance and increased homeowners or commercial property insurance premiums; and
c) identify current and historic data, as available, that relate to trends in homeowners and commercial property insurance rates by geographic area, including designated wildfire or wildland urban interface areas, rural and metropolitan areas or zip codes.
28. Allows the Task Force to establish ad hoc work groups to carry out Task Force duties and consult with experts in the field of wildfire risks and the impact on homeowners and commercial property insurance premiums and policy coverages.
29. Requires the Task Force to hold at least four meetings per calendar year.
30. Deems Task Force members eligible to receive reimbursement of travel and associated lodging and meal expenses.
31. Requires the Task Force, by December 31, to submit an annual report of its findings and recommendations to the Governor, Speaker of the House, Senate President, House and Senate Minority Leaders and Secretary of State.
32. Requires the Director to post the Task Force's report on DIFI's website.
Homeowners Insurance Underwriting Guidelines
33. Requires each insurer writing homeowners insurance in Arizona to file with the Director the insurer's underwriting guidelines relating to fire loss risk, including wildfire risk and all changes and amendments to the guidelines, within 30 days after the guidelines become effective.
34. Requires a group of insurers that files one set of underwriting guidelines to identify which guidelines apply to each insurer in the group.
35. Requires the underwriting guidelines to be actuarily justified, reasonable and substantially commensurate with a contemplated risk and prohibits the guidelines from being unfairly discriminatory.
36. Requires DIFI, by December 31, to prepare an annual report that summarizes and analyzes the underwriting guidelines that impact fire coverage for homeowner's insurance and commercial property insurance.
37. Requires DIFI to submit the report on underwriting guidelines to the Governor, Speaker of the House, Senate President, House and Senate Minority Leaders and Secretary of State and post the report on DIFI's website.
38. Requires DIFI's report on underwriting guidelines to include:
a) any underwriting guidelines in forested or wildland urban interface areas of the state; and
b) any other information related to fire coverage determined by the Task Force.
39. Deems the underwriting guidelines filed with the Director as confidential.
40. Exempts the underwriting guidelines filed with the Director from public records requirements, discovery or subpoena, unless the subpoena is issued by the AG, a county attorney or a court at the request of the AG, a county attorney or a law enforcement agency, and specifies that the subpoena is not admissible in evidence in a private civil action.
41. Defines underwriting guidelines as a rule, standard, guideline or practice, whether written, oral or electronic, that an insurer or an agent of the insurer uses to decide whether to accept or reject an application for coverage under a homeowners insurance policy and does not include supplementary rate information.
Property and Casualty Insurers Service Contracts
42. Allows a property and casualty insurer that issues homeowners insurance or motor vehicle insurance policies in Arizona to file with the Director for approval a service contract to be marketed, offered or issued as a rider or endorsement to the insurer's homeowners insurance of motor vehicle insurance policies.
43. Requires a service contract rider or endorsement that is marketed, offered or issued to:
a) be marketed, offered or issued only as a rider or endorsement for a separately stated consideration from the policy; and
b) otherwise comply with statutes that apply to riders or endorsements to any homeowners insurance or motor vehicle insurance policy.
44. Exempts an approved service contract rider or endorsement that is marketed, offered or issued from statutes governing service companies.
45. Specifies that an approved service contract rider or endorsement that is marketed, offered or issued does not alter or expand any right, privilege or authority granted to a property and casualty insurer.
46. Repeals the authorization for a property and casualty insurer to submit a service contract rider or endorsement for approval to the Director and the outlined requirement and exemption for service contract riders or endorsements on January 1, 2027.
47. Defines service contract.
Miscellaneous
48. Applies the modified license renewal application deadlines for consumer lenders, escrow agents, debt management companies, advance fee loan brokers and sales finance companies retroactive to January 1, 2025.
49. Specifies that holders of current, active consumer lender, debt management company, escrow agent or advance fee loan broker licenses that are subject to renewal by June 30, 2025, or September 30, 2025, do not have to renew the license until December 31, 2025.
50. Removes references to the repealed Continuing Education Review Committee.
51. Makes technical and conforming changes.
52. Becomes effective on the general effective date, with retroactive provisions as noted.
Amendments Adopted by Committee
1. Requires each insurer that writes homeowners insurance in Arizona to annually report to DIFI outlined homeowners insurance policy information for the prior calendar year and specifies that the information is confidential.
2. Requires the Director to annually prepare a report that compiles the information submitted by homeowners insurers, submit the report to the Governor, the Speaker of the House of Representatives and the Senate President and provide a copy of the report to the Secretary of State.
3. Establishes the Task Force and outlines Task Force membership, duties and reporting requirements.
4. Requires homeowners insurers in Arizona to file with the Director, the insurer's underwriting guidelines relating to fire loss risk, including wildfire risk, within 30 days after the guidelines become effective and specifies that the underwriting guidelines are confidential.
5. Requires the underwriting guidelines to be actuarily justified, reasonable and substantially commensurate with a contemplated risk and prohibits the guidelines from being unfairly discriminatory.
6. Allows a property and casualty insurer that issues homeowners insurance or motor vehicle insurance policies in Arizona to file specified service contracts with the Director for approval.
7. Outlines requirements for an approved service contract rider or endorsement that is marketed or issued.
8. Prescribes reporting requirements for DIFI.
House Action Senate Action
COM 1/21/25 DP 10-0-0-0 FIN 3/24/25 DPA 6-1-0
3rd Read 2/6/25 59-0-1
Prepared by Senate Research
March 31, 2025
MG/AL/ci