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SB-898 Bail: surety insurers.(2017-2018)

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Date Published: 01/12/2018 09:00 PM


Senate Bill No. 898

Introduced by Senator Hertzberg
(Principal coauthor: Assembly Member Bonta)

January 12, 2018

An act to add and repeal Section 1824 of the Insurance Code, relating to bail.


SB 898, as introduced, Hertzberg. Bail: surety insurers.
Existing law generally regulates the undertaking of bail and the licensing of bail agents, bail permittees, and bail solicitors. Existing law requires an insurer executing an undertaking of bail to do so through a person holding a bail license.
This bill would require the Department of Insurance to conduct a study and make recommendations no later than July 1, 2019, regarding insurers who provide coverage to bail licensees, as specified. The bill would also make related legislative findings and declarations.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


 The Legislature finds and declares all of the following:
(a) The for-profit money bail system is a global anomaly, used only in the Philippines and the United States.
(b) Commercial money bail requires people to pay nonrefundable deposits to private companies in order to secure release from jail, often leaving working Californians at risk of losing their jobs, housing, and even their children.
(c) The commercial money bail system does not improve rates of appearance in court or enhance public safety. It has a coercive effect on people unable to make bail, who are more likely to plead guilty to crimes that they may not have committed in order to get out of jail.
(d) Fewer than 10 insurance companies are behind the vast majority of bail bonds being issued by bail bond agents in the United States. Bail insurers are increasingly part of larger global companies. They collect hundreds of millions of dollars a year and face virtually no risk. By comparison, auto insurers in California average losses of 74 percent. Unlike auto insurance, the risk for bail insurers is completely disconnected from the losses they cover.
(e) For-profit bail insurers are surety companies, but their profits are different than other types of surety insurance. In 2015, the top 100 general surety bond writers had direct losses averaging 13.2 percent. But surety insurers who cover bail bonds have losses that are minimal, sometimes almost nonexistent, and according to industry sources often recouped.
(f) One large bail insurer has publicly boasted that it sustained no losses at all in 2014 or 2015. Another smaller bail insurer has publicly stated that it has not paid on any losses for 17 years.
(g) In 2015, 63 percent of people in California jails were either awaiting trial or sentencing. In 2016, that climbed to 66 percent. As compared with the rest of the country, California has relied on pretrial detention at much higher rates than other states.
(h) California’s existing pretrial detention practices allow a person’s wealth, rather than the person’s likelihood success on pretrial release, determine whether the person will remain in jail before the person’s case is resolved.
(i) While unnecessary pretrial detention has been found to increase the likelihood that some defendants will commit new crimes, appropriate pretrial release can reduce recidivism.

SEC. 2.

 Section 1824 is added to the Insurance Code, to read:

 (a) The Department of Insurance shall conduct a study and, no later than July 1, 2019, make recommendations regarding insurers who provide coverage to bail licensees. Specifically, the report shall provide an analysis of both of the following:
(1) The relationship between risk to insurers and rates charged.
(2) A comparison of the risk and rates analyzed pursuant to paragraph (1) and the risk and rates of automobile insurers in California.
(b) (1) A report to be submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this section is repealed on January 1, 2023.