AB 640

Under current law, a consumer insurance policy is a life, disability, property, or

casualty insurance policy, or a certificate of a substitute for a certificate for group life,

disability, property, or casualty insurance that is issued to a person, for a personal,

family, or household purpose and a copy of which is customarily delivered or required

to be delivered to the person obtaining coverage. Current law requires that insurers

only deliver consumer insurance policies that are coherent, written in commonly

understood language, legible, appropriately divided and captioned by its various

sections, and presented in a meaningful sequence. The commissioner of insurance

(commissioner) is required to promulgate rules establishing standards for

determining whether the consumer insurance policy complies with those

requirements. The commissioner is allowed under current law to exempt a type of

consumer insurance policy from the requirements if the commissioner finds that the

type of consumer insurance policy is generally understood by persons to whom it is

delivered. Currently, a violation of the readability requirements does not void or

render voidable any portion of the insurance policy and is not a defense to an action

under the policy.

This bill eliminates the current readability requirements for consumer

insurance policies and substitutes other requirements. The bill clarifies that

consumer insurance policies include both health care plans and disability income

insurance policies. An insurer is prohibited from delivering or issuing a consumer

insurance policy, except for an individual or group annuity, life insurance policy,

disability income policy, long-term care policy, or property and casualty insurance

policy, unless the score of the applicable text of that policy on the Flesch reading ease

test is 50 or higher. All consumer insurance policies that are not required to have

a Flesch reading ease score of 50 or higher must have a score of 40 or higher.

Generally, under the bill, consumer insurance policies must comply with all of the

following: if printed, the print of the policy is in not less than ten-point type with

spacing between the lines at least as high as the height of the font with some

exceptions; if electronic, the policy appears in final format in not less than ten-point

type with some exceptions; the policy is appropriately divided and captioned and

presented in a meaningful sequence, the language ensures effective communication

for individuals with a disability or with limited English proficiency, and the style,

arrangement, and overall appearance of the policy enhances its understandability;

if the policy contains more than 3,000 words or more than three pages, it has a table

of contents or an index of principal sections; the policy contains a single section

listing exclusions and limitations and any exclusions or limitations also appearing

within the form are given at least equal prominence with the rest of the language;

the policy defines words and expressions not commonly understood and words and

expressions of which the commonly understood meaning is not intended by the policy

language; cross-references between policy sections are minimized; and the policy