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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 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).
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).
Any direct denial of prior authorization of a service requested by a health care provider on the basis of medical necessity by a health care insurer must be made in writing by a medical director who holds an active unrestricted allopathic or osteopathic license to practice medicine in Arizona. The written denial must be signed by the medical director and include an explanation of why the treatment was denied. The medical director is responsible for all direct denials that are made on the basis of medical necessity (A.R.S. § 20-2510).
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 the Director, by April 1 of each year and in a manner and form prescribed by the Director, the following information on each homeowners insurance policy the insurer had in force during the prior calendar year in the geographic areas of Arizona designated as heightened fire risk areas by the Director of the Department of Forestry and Fire Management 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, the insurer in not required to provide the reason for nonrenewal or cancellation but must provide:
i. the date the policy ended;
ii. whether the policy was nonrenewed due to fire loss risk or condition of the premises; and
iii. if the policy was cancelled, whether the policy was cancelled due to premium nonpayment or fire loss risk;
c) the zip code in which the insured property is located;
d) the total written premium for the policy;
e) the total number of paid claims due to fire loss or reasons other than fire loss;
f) the total of all losses paid due to fire loss or 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 clarifying information requested in a data call issued by the National Association of Insurance Commissioners (NAIC) on the residential property insurance market.
19. Allows the Director to request additional geographic information to clarify the location within a specific zip code for the purposes of the homeowners insurance policy information report.
20. Deems, as confidential, the information reported by homeowner insurers to DIFI.
21. Exempts the information reported to DIFI from discovery, subpoena or disclosure pursuant to statutory public records requirements, 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.
22. Requires the Director, if a subpoena is issued by the AG, a county attorney or any other law enforcement agency for homeowners insurance policy information that was reported to the Director, to provide notice to the insurer of the subpoena, unless otherwise prohibited by law.
23. Allows the Director, in any year in which the NAIC issues a data call on the residential property 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.
24. 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 public website.
Fire Insurance Review Task Force
25. 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 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;
26. 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.
27. 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.
28. Requires any Task Force vacancy to be filled in the same manner as the original appointment.
29. Requires DIFI to provide the Task Force with:
a) the annual aggregated and deidentified insurance premium and policy coverage data reported by homeowners insurers; and
b) the total number of consumer complaints for the calendar year that is related to nonrenewal or cancellation of homeowners policies due to risk of fire loss and related to increases in homeowners insurance premiums.
30. Requires the Task Force to:
a) review the data received from DIFI;
b) identify possible current and historic trends in homeowners coverage availability, insurance rates, nonrenewal and cancellation; and
c) review data related to fire risk mitigation science and make recommendations related to building codes, defensible space requirements and ordinances that reduce wildfire risk.
31. 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 of wildfires and wildfire risk on homeowners insurance premiums.
32. Requires the Task Force to hold at least four meetings per calendar year.
33. Deems Task Force members eligible to receive reimbursement of travel and associated lodging and meal expenses.
34. 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, Secretary of State and DIFI.
35. Requires the Director to post the Task Force's report on DIFI's website.
36. Repeals the Task Force and the requirement for insurers to submit an annual homeowners insurance policy information report on January 1, 2028.
Motor Vehicle Insurance Policy Claims
37. Requires, for motor vehicle insurance claims communications, an insurer that conducts business in Arizona to accept electronic content submissions and communications through a method designated by the insurer as an acceptable form of communication between the insurer and the claimant or the claimant's authorized representative.
38. Requires an insurer to respond with an acknowledgement of receipt within 10 business days to an electronic content submission or communication from the insured or the insured’s authorized representative.
39. Allows electronic content submissions and communications to include time-sensitive documents and demands.
40. Allows a motor vehicle insurer to accept a fax as a form of communication if another form of electronic communication is also available.
Miscellaneous
41. Removes the requirement for the medical director who made the direct denial of a prior authorization for a service requested by a health care provider on the basis of medical necessity to sign the written denial.
42. 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.
43. 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.
44. Removes references to the repealed Continuing Education Review Committee.
45. Makes technical and conforming changes.
46. 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.
Amendments Adopted by Committee of the Whole
1. Removes the requirement for homeowners insurers in Arizona to file with the Director the insurer's fire loss risk underwriting guidelines and removes the associated criteria and requirements.
2. Removes the authorization for a property and casualty insurer that issues homeowners insurance or motor vehicle insurance policies in Arizona to file for approval with the Director a service contract to be marketed, offered or issued as a rider or endorsement to the insurer's homeowners or motor vehicle insurance policies.
3. Removes the requirement for the medical director who made the direct denial of a prior authorization for a service requested by a health care provider on the basis of medical necessity to sign the written denial.
4. Modifies the information that must be included in an insurer’s homeowners insurance policy annual report submitted to DIFI.
5. Requires the Director, if a subpoena is issued by the AG, a county attorney or any other law enforcement agency for homeowners insurance policy information that was reported to the Director, to provide notice to the insurer of the subpoena, unless otherwise prohibited by law.
6. Requires, for motor vehicle insurance claims communications, an insurer that conducts business in Arizona to accept electronic content submissions and communications through a method designated by the insurer as an acceptable form of communication between the insurer and the claimant or the claimant's authorized representative.
7. Requires an insurer to respond with an acknowledgement of receipt within 10 business days to an electronic content submission or communication from the insured or the insured’s authorized representative.
8. Allows electronic content submissions and communications to include time-sensitive documents and demands.
9. Allows a motor vehicle insurer to accept a fax as a form of communication if another form of electronic communication is also available.
10. Modifies the Director-appointed membership of the Task Force by removing the requirement that the insurance company employee member be employed by an insurance company that represents the commercial property insurance industry.
11. Modifies the duties of the Task Force, and requires DIFI to provide the Task Force with:
a) the annual aggregated and deidentified insurance premium and policy coverage data reported by homeowners insurers; and
b) the total number of consumer complaints for the calendar year that is related to nonrenewal or cancellation of homeowners policies due to risk of fire loss and related to increases in homeowners insurance premiums.
12. Adds DIFI as a recipient of the Task Force’s annual report.
13. Repeals the Task Force and the requirement for insurers to submit an annual homeowners insurance policy information report on January 1, 2028.
14. Makes technical and conforming changes.
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
June 19, 2025
MG/ci