Hertzberg, Bonta Introduce Legislation to Shine Light on California Bail Insurers
SB 898 asks Department of Insurance to examine companies that provide coverage to California bail industry
SACRAMENTO – Sen. Bob Hertzberg, D-Van Nuys, introduced legislation this week to complement his ongoing examination of the state’s bail industry by asking the California Department of Insurance (CDI) to study the bail insurance market.
As Sen. Hertzberg and Assemblymember Rob Bonta (D-Oakland) continue to work with stakeholders to fine tune the details of their bail reform proposal in SB 10, it has become clear how little information is available about the insurers who underwrite bail bonds in California, and that there is a lack of consistency compared to how other financial institutions who lend money are regulated.
“This is about fairness,” said Sen. Hertzberg, who has co-authored the new legislation with Bonta. “Thanks to the skyrocketing price of bail, it seems as though bail insurers have become nothing more than payday lenders – except that they aren’t subject to the same regulations that payday lenders are.”
Where other insurers typically report average losses of up to 75 percent, bail bond insurers rarely report losses while their costly, non-refundable fees force many people to remain unnecessarily in jail. In fact, one large bail insurer has publicly boasted that it sustained no losses at all in 2014 or 2015, and another smaller bail insurer has publicly stated that it did not pay any losses for 17 years.
This fall, Chief Justice Tani Cantil-Sakauye commissioned a Pretrial Detention Reform Workgroup Report, which highlighted concerns about how much the industry makes, and what they are required to disclose.
The report found that, “Bail agents working for 13 of the 17 sureties licensed in California collected more than $924 million in total gross bail bond premiums, which amounted to an average of more than $308.2 million in nonrefundable premium fees collected from defendants, their families, and their friends per year.” Further, the report outlined concerns about what the industry is required to disclose: “Bail agents, bail agencies, and sureties are not required to collect or report data on who cosigns and repays bail loans, though the companies are acting as lenders when they arrange for installment payments for the fees…Little information is available on repayment plan structures, requirements, and collections processes used by bail bond companies.
The Workgroup’s report also reveals that the CDI received over 200 bail complaints in 2015, with violations ranging from minor violations of the Insurance Code to felony criminal activity. Unlike other sectors of the insurance industry – which are highly competitive or heavily regulated – bail bond insurers face little government oversight.
A UCLA School of Law study last year revealed that the industry enjoys unfettered power over their customers, who lack protections. According to the study, “We examined more than 400 bail bond company websites across the 58 counties to find that fewer than 15% of companies provide copies of their agreements online for review prior to signing. After analyzing the fine print in more than 100 contract documents online corresponding to 10 sureties, we identified 20 problems with bail bond contracts that violate common notions of fairness and justice.”
SB 898 calls on the state Department of Insurance to study the bail insurance market, particularly the relationship between the risk assumed by the insurer and the rates charged for coverage. The Department would also compare the risk and rates of bail insurance with the risk and rates of automobile insurance in California and make appropriate recommendations based on the Department’s analysis.
Media Contact: Katie Hanzlik
Senator Robert M. Hertzberg
Capitol Building, Room 4038