BILL NUMBER: AB 2984 CHAPTERED
BILL TEXT
CHAPTER 203
FILED WITH SECRETARY OF STATE JULY 29, 2002
APPROVED BY GOVERNOR JULY 29, 2002
PASSED THE ASSEMBLY JULY 15, 2002
PASSED THE SENATE JUNE 27, 2002
AMENDED IN SENATE JUNE 13, 2002
AMENDED IN ASSEMBLY APRIL 11, 2002
INTRODUCED BY Committee on Insurance (Calderon (Chair), Chavez,
Dutra, Frommer, Havice, Horton, Kehoe, Nakano, Steinberg, and Vargas)
FEBRUARY 28, 2002
An act to amend Sections 1628, 1637, 1639, 1656, 1662, 1679, 1704,
1750.5, 1765.2, 1767, 1768, 1781.3, and 10234.93 of, to add Sections
1638.5 and 1639.1 to, to add Article 5.2 (commencing with Section
759) to Chapter 1 of Part 2 of Division 1 of, and to repeal Sections
1647, 1648, 1649, 1659, and 1714 of, the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2984, Committee on Insurance. Insurance: depository
institutions: production agencies: surplus line brokers:
reinsurance intermediaries.
(1) Existing law provides for the licensure and regulation of
insurers by the Insurance Commissioner and the Department of
Insurance.
This bill would establish provisions regulating retail sales
practices, solicitations, advertising, and offers of any insurance
product or annuity to a consumer by a depository institution, or any
person engaged in those activities at the office of a depository
institution or on behalf of a depository institution.
(2) Existing law contains provisions governing the licensing and
practice of production agencies, surplus line brokers, and
reinsurance intermediaries. A violation of certain provisions
regulating the duties of surplus line brokers is a crime.
This bill would revise licensing provisions with regard to
production agencies, surplus line brokers, and reinsurance
intermediaries, and would also revise requirements for certain
licensees within those categories. Because this bill would expand
the duties of a surplus line broker and thereby expand the
definitions of crimes associated with a violation of these duties,
the bill would impose a state-mandated local program.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares as follows:
(a) Pursuant to the federal government's Financial Services
Modernization Act of 1999 (the Gramm-Leach-Bliley Act), the
Comptroller of the Currency, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation, and the Board of Governors of
the Federal Reserve Bank adopted joint consumer protection
regulations. In order for California to retain jurisdiction to
regulate the insurance sales practices of depository institutions, or
persons who are engaged in those activities at an office of a
depository institution or on behalf of a depository institution,
California law must have similar or stronger consumer protections
than those of the four federal agencies. Consequently, it is
necessary to add language to the Insurance Code to provide California
with consumer protection laws that are uniform with the federal
regulations.
(b) The Gramm-Leach-Bliley Act authorizes the establishment of a
new organization named the National Association of Registered Agents
and Brokers (NARAB). NARAB comes into existence if 29 state and
territory insurance regulators do not implement uniform or reciprocal
laws for the licensing of nonresident insurance producers by
November 2002. NARAB would establish uniform producer licensing laws
and provide a mechanism for multistate licensing of insurance
producers, thereby preempting state-unique licensing procedures and
qualifications. In an effort to avoid the creation of NARAB and
preserve state regulation of producer licensing, California should
amend the Insurance Code as necessary to create reciprocal licensing
laws.
SEC. 2. Article 5.2 (commencing with Section 759) is added to
Chapter 1 of Part 2 of Division 1 of the Insurance Code, to read:
Article 5.2. Consumer Protection in Sales of Insurance by or
Through Depository Institutions
759. This article establishes consumer protections in connection
with retail sales practices, solicitations, advertising, or offers of
any insurance product or annuity to a consumer by either of the
following:
(a) Any depository institution, as defined in subdivision (b) of
Section 760.
(b) Any person who is engaged in those activities at an office of
a depository institution or on behalf of a depository institution.
760. As used in this article, the following terms have the
following meanings:
(a) "Affiliate" has the same meaning as defined in Section 1215.
(b) "Depository institution" means any of the following:
(1) National banks, operating subsidiaries of a national bank, and
federal branches or agencies of a foreign bank, as defined in
Section 1 of the International Banking Act of 1978 (12 U.S.C. Sec.
3101 et seq.), in the case of institutions supervised by the Office
of the Comptroller of the Currency.
(2) State member banks in the case of the Board of Governors of
the Federal Reserve System.
(3) State nonmember banks in the case of the Federal Deposit
Insurance Corporation (FDIC).
(4) Savings associations and operating subsidiaries of savings
associations, in the case of the Office of Thrift Supervision.
(c) "Company" means any corporation, partnership, business trust,
association, or similar organization, or any other trust, other than
a trust that by its terms must terminate within 25 years or not later
than 21 years and 10 months after the death of individuals living on
the effective date of the trust. "Company" does not include any
corporation the majority of the shares of which are owned by the
United States or by any state, or a qualified family partnership, as
defined in paragraph (10) of subsection (o) of Section 2 of the
federal Bank Holding Company Act of 1956, as amended (12 U.S.C. Sec.
1841(o)(10)).
(d) "Consumer" means an individual who purchases, applies to
purchase, or is solicited to purchase from a covered person insurance
products or annuities primarily for personal, family, or household
purposes.
(e) "Control" has the same meaning as defined in Section 1215.
(f) (1) "Covered person" means either of the following:
(A) A depository institution.
(B) Another person only when the person sells, solicits,
advertises, or offers an insurance product or annuity to a consumer
at an office of a depository institution, or on behalf of a
depository institution.
(2) For purposes of this definition, activities on behalf of a
depository institution include activities pursuant to which a person,
whether at an office of the depository institution or at another
location, sells, solicits, advertises, or offers an insurance product
or annuity and where at least one of the following applies:
(A) The person represents to a consumer that the sale,
solicitation, advertisement, or offer of any insurance product or
annuity is by or on behalf of the depository institution.
(B) The depository institution refers a consumer to a seller of
insurance products or annuities and the institution has a contractual
arrangement to receive commissions or fees derived from a sale of an
insurance product or annuity resulting from that referral.
(C) Documents evidencing the sale, solicitation, advertising, or
offer of an insurance product or annuity identify or refer to the
depository institution.
(g) "Electronic media" includes any means for transmitting
messages electronically between a covered person and a consumer in a
format that allows visual text to be displayed on equipment such as a
personal computer monitor.
(h) "Office" means the premises of a depository institution where
retail deposits are accepted from the public.
(i) "Subsidiary" has the same meaning as defined in Section 1215.
761. (a) A covered person shall not engage in any practice that
would lead a consumer to believe that an extension of credit, in
violation of subsection (b) of Section 106 of the federal Bank
Holding Company Act Amendments of 1970 (12 U.S.C. Sec. 1972), is
conditional upon either of the following:
(1) The purchase of an insurance product or annuity from the
depository institution or any of its affiliates.
(2) An agreement by the consumer not to obtain, or a prohibition
on the consumer from obtaining, an insurance product or annuity from
an affiliated entity.
(b) A covered person shall not engage in any practice or use any
advertisement at any office of, or on behalf of, the depository
institution or a subsidiary of the depository institution that could
mislead any person or otherwise cause a reasonable person to reach an
erroneous belief with respect to any of the following:
(1) The fact that any insurance product or annuity sold or offered
for sale by a covered person or any subsidiary of the depository
institution is not backed by the federal government or the depository
institution, or the fact that the insurance product or annuity is
not insured by the Federal Deposit Insurance Corporation.
(2) In the case of an insurance product or annuity that involves
investment risk, the fact that there is an investment risk, including
the potential that principal may be lost and that the product may
decline in value.
(3) In the case of a depository institution or subsidiary of the
depository institution at which insurance products or annuities are
sold or offered for sale, the fact that:
(A) The approval of an extension of credit to the consumer by the
depository institution or subsidiary may not be conditioned on the
purchase of an insurance product or annuity by the consumer from the
depository institution or a subsidiary of the depository institution.
(B) The consumer is free to purchase the insurance product or
annuity from another source.
762. (a) In connection with the initial purchase of an insurance
product or annuity by a consumer from a covered person, a covered
person shall disclose to the consumer, except to the extent the
disclosure would not be accurate, all of the following:
(1) That the insurance product or annuity is not a deposit or
other obligation of, or guaranteed by, the depository institution or
an affiliate of the depository institution.
(2) That the insurance product or annuity is not insured by the
Federal Deposit Insurance Corporation or any other agency of the
United States, the depository institution, or, if applicable, an
affiliate of the depository institution.
(3) In the case of an insurance product or annuity that involves
an investment risk, that there is investment risk associated with the
product, including the possible loss of value.
(b) In the case of an application for credit in connection with
which an insurance product or annuity is solicited, offered, or sold,
a covered person shall disclose that the depository institution may
not condition an extension of credit on either of the following:
(1) The consumer's purchase of an insurance product or annuity
from the depository institution or any of its affiliates.
(2) The consumer's agreement not to obtain, or a prohibition on
the consumer from obtaining, an insurance product or annuity from an
unaffiliated entity.
(c) (1) The disclosures required by subdivision (a) shall be
provided orally and in writing during any solicitation of an
insurance product or annuity to a consumer. The disclosures required
by subdivision (b) shall also be made orally and in writing at the
time the consumer applies for an extension of credit in connection
with which an insurance product or annuity will be solicited,
offered, or sold.
(2) If a sale of an insurance product or annuity is conducted by
mail, a covered person is not required to make the oral disclosures
required by subdivision (a). If a covered person takes an
application for credit by mail, the covered person is not required to
make the oral disclosures required by subdivision (b).
(3) If the sale of an insurance product or annuity is conducted by
telephone, a covered person shall provide the written disclosure
required by subdivision (a) by mail within three business days,
beginning on the first business day after the sale, but excluding
Sundays and the legal public holidays specified in subsection (a) of
Section 6103 of Title 5 of the United States Code.
(4) Subject to the requirements of subsection (c) of Section 101
of the federal Electronic Signatures in Global and National Commerce
Act (15 U.S.C. Sec. 7001(c)), a covered person may provide the
written disclosures required by subdivisions (a) and (b) through
electronic media instead of paper, if the consumer affirmatively
consents to receiving the disclosures electronically and if the
disclosures are provided in a format that the consumer may retain or
obtain later, for example, through printing or storing electronically
by downloading. Any disclosures required by subdivision (a) or (b)
that are provided by electronic media are not required to be provided
orally.
(5) The disclosures provided shall be conspicuous, simple, direct,
readily understandable, and designed to call attention to the nature
and significance of the information provided. For example, a
covered person may use the following disclosures in visual media,
including television, broadcasting, ATM screens, billboards, signs,
posters, and written advertisements and promotional materials, as
appropriate and consistent with subdivisions (a) and (b):
(A) "NOT A DEPOSIT."
(B) "NOT FDIC-INSURED."
(C) "NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY."
(D) "NOT GUARANTEED BY THE BANK (OR SAVINGS ASSOCIATION)."
(E) "MAY GO DOWN IN VALUE."
(6) (A) A covered person shall provide the disclosures required by
subdivisions (a) and (b) in a meaningful form. Examples of the
types of methods that could call attention to the nature and
significance of the information provided include all of the
following:
(i) A plain language heading to call attention to the disclosure.
(ii) A typeface and type size that are easy to read.
(iii) Wide margins and ample line spacing.
(iv) Boldface or italics for key words.
(v) Distinctive type style, and graphic devices, such as shading
or sidebars, when the disclosures are combined with other
information.
The disclosures required by subdivisions (a) and (b) shall be in
the same language as principally used in any oral solicitation
leading to the execution of the purchase by the consumer of the
insurance product or annuity.
(B) A covered person has not provided the disclosures in a
meaningful form if the covered person merely states to the consumer
that the required disclosures are available in printed material, but
does not provide the printed material when required and does not
orally disclose the information to the consumer when required.
(C) With respect to disclosures made through electronic media for
which paper or oral disclosures are not required, the disclosures are
not meaningfully provided if the consumer may bypass the visual text
of the disclosures before purchasing an insurance product or
annuity.
(7) A covered person shall obtain from the consumer, at the time
the consumer receives the disclosures required by subdivisions (a)
and (b), or at the time of initial purchase by the consumer of the
insurance product or annuity, a written acknowledgment by the
consumer that the consumer received the disclosures. A covered
person may permit a consumer to acknowledge receipt of the
disclosures electronically or in paper form. If the disclosures
required under subdivisions (a) and (b) are provided in connection
with a transaction that is conducted by telephone, a covered person
shall do the following:
(A) Obtain an oral acknowledgment of receipt of the disclosures
and maintain sufficient documentation to show that the acknowledgment
was given.
(B) Make reasonable efforts to obtain a written acknowledgment
from the consumer.
(d) The disclosures described in subdivision (a) are required in
advertisements and promotional material for insurance products or
annuities unless the advertisements or promotional material are of a
general nature describing or listing the services or products offered
by the depository institution.
763. (a) A depository institution shall, to the extent
practicable, keep the area where the depository institution conducts
transactions involving insurance products or annuities physically
segregated from areas where retail deposits are routinely accepted
from the general public, identify the areas where insurance products
or annuity sales activities occur, and clearly delineate and
distinguish, with appropriate signage, those areas from the areas
where the depository institution's retail deposit-taking activities
occur.
(b) Any person who accepts deposits from the public in an area
where those transactions are routinely conducted in the depository
institution may refer a customer who seeks to purchase an insurance
product or an annuity to a qualified person who sells that product
only if the person making the referral receives no more than a
one-time nominal fee of a fixed dollar amount for each referral that
does not depend on whether the referral results in a transaction.
764. A depository institution may not permit any person to sell
or offer for sale any insurance product or annuity in any part of its
office or on its behalf, unless the person is at all times
appropriately qualified and licensed as required by this code with
regard to the specific products being sold or recommended.
765. The commissioner may adopt reasonable regulations necessary
to administer this article.
SEC. 3. Section 1628 of the Insurance Code is amended to read:
1628. As used in this chapter, an "organization" means any legal
entity other than a natural person. Where reference is made to a
natural person named on an organization license, the reference shall
be to a person who is named to exercise the power and perform the
duties under an organization license. The natural person named on
the organizational license shall meet the qualifications required for
the type of license sought by the organization.
SEC. 4. Section 1637 of the Insurance Code is amended to read:
1637. An organization may hold any license or licenses necessary
to act in the following capacities under this chapter and no others:
(a) A license to act as a life agent.
(b) A license to act as a fire and casualty broker-agent.
(c) A license to act as a cargo shipper's agent.
(d) A license to act as a personal lines licensee.
(e) A license to act as a credit insurance agent.
(f) A license to act as a rental car agent.
(g) A nonresident license to act as a limited lines licensee
pursuant to subdivision (i) of Section 1639.
SEC. 5. Section 1638.5 is added to the Insurance Code, to read:
1638.5. Unless denied licensure pursuant to Article 6 (commencing
with Section 1666), a nonresident person shall receive a production
agency license if he or she meets the following requirements:
(a) The person is currently licensed and in good standing in the
state, territory of the United States, or province of Canada in which
he or she is licensed as a resident producer.
(b) The person has submitted the proper request for licensure and
has paid the fees required by Section 1750.5.
(c) The person has submitted or transmitted to the Insurance
Commissioner the application for licensure that the person submitted
to the state, territory of the United States, or province of Canada
in which he or she is licensed as a resident, or submitted or
transmitted to the commissioner, a completed National Association of
Insurance Commissioners (NAIC) Uniform Nonresident Application.
(d) The state, territory of the United States, or province of
Canada in which the person holds a resident producer license awards
nonresident producer licenses to residents of this state on the same
basis.
SEC. 6. Section 1639 of the Insurance Code is amended to read:
1639. The following types of licenses under this chapter may be
issued to nonresidents:
(a) A fire and casualty broker-agent if the nonresident is duly
licensed to transact more than one class of insurance, other than
life insurance, disability insurance, title insurance, or life and
disability insurance, under the laws of the state or province of
Canada where he or she maintains a resident license to transact
insurance.
(b) A personal lines broker-agent if the nonresident is duly
licensed to transact those lines of insurance described in Section
1625.5, under the laws of the state, territory of the United States,
or province of Canada where the resident license is maintained.
(c) A life agent if the nonresident possesses a resident license
in another state, territory of the United States, or province of
Canada to transact life insurance or disability insurance.
(d) A nonresident life agent may be granted authority to transact
variable contracts if he or she has been granted that authority by
the state where the resident license is maintained.
(e) A surplus line broker and a special lines surplus broker if
the nonresident holds that type of license in the state or territory
of the United States where the resident license is maintained.
(f) A credit insurance agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(g) A rental car agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(h) A cargo shipper's agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(i) A limited lines license if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained. As used in this
section, "limited lines license" means any authority granted by the
resident state that restricts the authority of the license to less
than the total authority granted by any of the types of licenses
identified in this section.
SEC. 7. Section 1639.1 is added to the Insurance Code, to read:
1639.1. (a) The class or classes of insurance which a nonresident
person is licensed to transact under his or her resident license
shall be determined according to the definitions of classes of
insurance in Sections 101 to 120, inclusive. A certificate from the
insurance regulatory authority of the nonresident's home state may be
accepted as evidence of the applicant's license status and the
capacity or capacities in which he or she is licensed. The Insurance
Commissioner may also verify the producer's licensing status through
the Producer Database maintained by the National Association of
Insurance Commissioners, its affiliates or subsidiaries.
(b) A nonresident producer who moves from one state to another
state or a resident producer who moves from this state to another
state shall file a change of address and provide certification from
the new resident state within 30 days of the change of legal
residence. No fee or license application is required.
(c) The license authority granted to the nonresident shall not
exceed the class or classes of insurance granted by the license
issued under the laws of the state, territory of the United States,
or province of Canada where the resident license is maintained.
SEC. 8. Section 1647 of the Insurance Code is repealed.
SEC. 9. Section 1648 of the Insurance Code is repealed.
SEC. 10. Section 1649 of the Insurance Code is repealed.
SEC. 11. Section 1656 of the Insurance Code is amended to read:
1656. Every applicant for an organizational license shall provide
the names of all persons who may exercise the power and perform the
duties under the license.
SEC. 12. Section 1659 of the Insurance Code is repealed.
SEC. 13. Section 1662 of the Insurance Code is amended to read:
1662. A fire and casualty broker-agent shall, prior to acting in
the capacity of an insurance broker, file and continuously maintain
in force the bond required by this article. Any authority to act as
broker shall automatically terminate immediately upon there being no
bond in force.
SEC. 14. Section 1679 of the Insurance Code is amended to read:
1679. A nonresident applicant for a license shall be subject to
the same qualifying examination as is required of a resident
applicant. Such examination may be administered to an eligible
nonresident applicant through the insurance authority of the state,
territory of the United States, or province of Canada of his or her
residence; provided, however, that the commissioner may, in his or
her discretion, enter into a reciprocal arrangement with the officer
having supervision of the insurance business in any other state,
territory of the United States, or province of Canada whose
qualification standards for the applicant to be examined are
substantially the same as or in excess of those of this state, to
accept, in lieu of the examination of an applicant residing therein,
a certificate of such officer to the effect that the applicant is
licensed in that state, territory of the United States, or province
of Canada in a capacity similar to that for which a license is sought
in this state and has complied with its qualification standards in
respect to the following:
(a) Experience or training,
(b) Reasonable familiarity with the broad principles of insurance
licensing and regulatory laws and with the provisions, terms and
conditions of the insurance which the applicant proposes to transact,
and
(c) A fair and general understanding of the obligations and duties
of a holder of the license sought.
(d) The provisions of this section shall not apply to a
nonresident applicant who resides in a jurisdiction that grants
reciprocity to California residents in accordance with Section
1638.5.
SEC. 15. Section 1704 of the Insurance Code is amended to read:
1704. (a) Life agents, travel agents, and fire and casualty
insurance agents shall not act as an agent of an insurer unless the
insurer has filed with the commissioner a notice of appointment,
executed by the insurer, appointing the licensee as the insurer's
agent. Every fire and casualty broker-agent acting in the capacity
of an insurance solicitor shall have filed on his or her behalf with
the commissioner a notice executed by an insurance agent or insurance
broker appointing and agreeing to employ the solicitor as an
employee within this state. Additional notices of appointment may be
filed by other insurers before the license is issued and thereafter
as long as the license remains in force. The authority to transact
insurance given to a licensee by an insurer or fire and casualty
broker-agent, as the case may be, by appointment shall be effective
as of the date the notice of appointment is signed. That authority
to transact shall apply to transactions occurring after that date and
for the purpose of determining the insurer's or fire and casualty
broker-agent's liability for acts of the appointed licensee. No
notice of appointment of a life agent, fire and casualty
broker-agent, or travel insurance agent shall be filed under this
subdivision unless the licensee being appointed has consented to that
filing. Each appointment made under this subdivision shall by its
terms continue in force until:
(1) The cancellation or expiration of the license applied for or
held at the time the appointment was filed.
(2) The filing of a notice of termination by the insurer or
employing fire and casualty broker-agent, or by the appointed life
agent, fire and casualty broker-agent, travel insurance agent, or
insurance solicitor.
(b) Upon the termination of all appointments, or all endorsements
naming the licensee on the license of an organization licensee, and
the cancellation of the bond required pursuant to Section 1662 if
acting as a broker, the permanent license shall not be canceled, but
shall become inactive. It may be renewed pursuant to Section 1718.
It may be reactivated at any time prior to its expiration by the
filing of a new appointment pursuant to this section, Section 1707,
and Section 1751.3, or the filing of a new bond pursuant to Section
1662. An inactive license shall not permit its holder to transact
any insurance for which a valid, active license is required.
(c) Upon the termination of all appointments of a person licensed
under a certificate of convenience, such certificate shall be
canceled and shall be returned by its lawful custodian to the
commissioner.
(d) A fire and casualty broker-agent appointing an insurance
solicitor pursuant to this section, if a natural person, must be the
holder of a permanent license to act as a fire and casualty
broker-agent or the holder of a certificate of convenience so to act
issued pursuant to either subdivision (a) or (b) of Section 1685. If
the fire and casualty broker-agent is an organization, it must be
the holder of a permanent license.
(e) The filing of an incomplete or deficient action notice with
the department shall require the filing of an amended, complete
action notice, together with the payment of the fee therefor
specified in subdivision (n) of Section 1751.
(f) No notice of appointment appointing a solicitor shall be filed
with the commissioner unless a notice of termination of appointment
has been filed with the commissioner for any previously filed notice
of appointment of solicitor.
SEC. 16. Section 1714 of the Insurance Code is repealed.
SEC. 17. Section 1750.5 of the Insurance Code is amended to read:
1750.5. The fee for filing an application for a nonresident
license described in Section 1639, and renewal thereof or changes in
outstanding licenses, shall be the same amount that is established in
this code for a resident license of the same type, except that if
the applicant's state, territory of the United States, commonwealth,
or Canadian province of residence has fees for any nonresident
insurance license greater than for a like resident license the fee
for filing an application for a nonresident license shall not be less
than the amount a California resident would be required to pay to
obtain a like license for a like term in the applicant's state,
territory of the United States, commonwealth, or Canadian province of
residence.
The fee for filing an application for a nonresident limited lines
license described in Section 1639, and renewal thereof or changes in
outstanding licenses, shall be the same amount that is established in
this code for a resident fire and casualty broker-agent license.
This section shall not be construed to require a countersignature on
a policy or contract, or the payment of a countersignature fee.
SEC. 18. Section 1765.2 of the Insurance Code is amended to read:
1765.2. (a) A license under this chapter may be issued to an
individual or any legal business entity. If issued to a business
entity or individual that maintains more than one surplus line office
in this state, it shall name the natural person or persons located
at each surplus line office maintained in this state by the licensee
who is or are to be responsible for the proper discharge at each
office of all duties placed upon the licensee acting as a surplus
line broker or who transacts insurance with the public as
distinguished from insurance producers. Each natural person shall
meet all of the requirements for the license.
(b) Every application for a license filed by a corporation shall
contain the names and addresses of all stockholders owning 10 percent
or more of the corporation's stock, and of all officers and
directors of the corporation. Every licensed corporation shall file
a written notice with the commissioner of all changes, except address
changes, of its stockholders who own 10 percent or more of the
corporation's stock and of all officers and directors of the
corporation.
SEC. 19. Section 1767 of the Insurance Code is amended to read:
1767. A resident surplus line broker at all times shall maintain
in good faith an office in this state and if he or she maintains more
than one surplus line office in this state, he or she shall
designate one of them as his or her principal surplus line office in
this state and shall notify the commissioner of that designation. He
or she shall report to the commissioner the addresses of all surplus
line offices maintained by him or her in this state and any change
in location of any of those offices. A nonresident surplus line
broker at all times shall maintain in good faith an office in the
state or territory of the United States in which he or she is
licensed as a resident surplus line broker, and if he or she
maintains more than one surplus line office in that state, he or she
shall designate one of them as his or her principal surplus line
office in that state and shall notify the commissioner of the
designation. A resident licensee shall report to the commissioner
the addresses of all surplus line offices maintained in this state
and any change in location of any of those offices. Nonresident
licensees shall report to the commissioner the addresses of all
surplus line offices maintained in the state or territory of the
United States in which the resident surplus line license is
maintained and any change in location of any of those offices.
SEC. 20. Section 1768 of the Insurance Code is amended to read:
1768. A resident surplus line broker shall keep in this state
complete records of the business transacted by him or her with
nonadmitted insurers under his or her license as a surplus line
broker. A nonresident surplus line broker shall keep in the state
where he or she is licensed as a resident surplus line broker
complete records of the business transacted by him or her with
nonadmitted insurers under his or her California nonresident surplus
line broker license. After notice and hearing, the commissioner
shall promulgate reasonable rules and regulations specifying the
manner and type of records to be maintained by surplus line brokers
and the location or locations where those records shall be kept.
SEC. 21. Section 1781.3 of the Insurance Code is amended to read:
1781.3. (a) No person, firm, association, or corporation shall
act as a reinsurance intermediary-broker in this state unless
licensed as follows:
(1) If the reinsurance intermediary-broker maintains an office,
(either directly or as a member or employee of a firm or association,
or an officer, director, or employee of a corporation) in this
state, the reinsurance intermediary-broker shall be a licensed
producer in this state.
(2) If the reinsurance intermediary-broker does not maintain an
office in this state, the reinsurance intermediary-broker shall be a
licensed producer in this state or another state having a law
substantially similar to this chapter or shall be licensed in this
state as a nonresident reinsurance intermediary.
(3) Unless denied licensure pursuant to subdivision (e), a
nonresident person shall receive a reinsurance intermediary-broker
license if all of the following requirements are met:
(A) The person is currently licensed and in good standing in the
state, territory of the United States, or province of Canada where he
or she is licensed as a resident reinsurance intermediary-broker.
(B) The person has submitted the proper request for licensure and
has paid the fees required by paragraph (3) of subdivision (d).
(C) The person has submitted or transmitted to the commissioner
the application for licensure that the person submitted to the state,
territory of the United States, or province of Canada where he or
she is licensed as a resident, or submitted or transmitted to the
commissioner a completed National Association of Insurance
Commissioners Uniform Nonresident Application.
(D) The state, territory of the United States, or province of
Canada where the person holds a resident reinsurance
intermediary-broker license awards nonresident reinsurance
intermediary-broker licenses to residents of this state on the same
basis.
(b) No person, firm, association, or corporation shall act as a
reinsurance intermediary-manager:
(1) For a reinsurer domiciled in this state, unless the
reinsurance intermediary-manager is a licensed producer in this
state.
(2) In this state, if the reinsurance intermediary-manager
maintains an office either directly or as a member or employee of a
firm or association, or as an officer, director, or employee of a
corporation in this state, unless the reinsurance
intermediary-manager is a licensed producer in this state.
(3) In another state for a nondomestic admitted insurer, unless
the reinsurance intermediary-manager is a licensed producer in this
state or in another state having a law substantially similar to this
chapter or the person is licensed in this state as a nonresident
reinsurance intermediary.
(4) Unless denied licensure pursuant to subdivision (e), a
nonresident person shall receive a reinsurance intermediary-manager
license if all of the following requirements are met:
(A) The person is currently licensed and in good standing in the
state, territory of the United States, or province of Canada where he
or she is licensed as a resident reinsurance intermediary-manager.
(B) The person has submitted the proper request for licensure and
has paid the fees required by paragraph (3) of subdivision (d).
(C) The person has submitted or transmitted to the commissioner
the application for licensure that the person submitted to the state,
territory of the United States, or province of Canada where he or
she is licensed as a resident, or submitted or transmitted to the
commissioner a completed National Association of Insurance
Commissioners Uniform Nonresident Application.
(D) The state, territory of the United States, or province of
Canada where the person holds a resident reinsurance
intermediary-manager license awards nonresident reinsurance
intermediary-manager licenses to residents of this state on the same
basis.
(c) The commissioner may require a reinsurance
intermediary-manager subject to subdivision (b) to do both of the
following:
(1) File a fidelity bond issued by an admitted surety in an amount
determined by the commissioner for the protection of the reinsurer.
(2) Maintain an errors and omissions policy in an amount
acceptable to the commissioner.
(d) (1) The commissioner may issue a reinsurance intermediary
license to any person, firm, association, or corporation that has
complied with the applicable requirements of this chapter. This
license, when issued to a firm or association, authorizes all the
members of the firm or association and any designated employees to
act as reinsurance intermediaries under the license, and all these
persons shall be named in the application and any supplements
thereto. This license, when issued to a corporation, authorizes all
of the officers, and any designated employees and directors thereof
to act as reinsurance intermediaries on behalf of the corporation,
and all these persons shall be named in the application and any
supplements thereto.
(2) If the applicant for a reinsurance intermediary license is a
nonresident, it shall be a condition precedent to receiving or
holding a license that (A) the applicant shall designate the
commissioner as his or her agent for service of process in the
manner, and with the same legal effect, provided for by this chapter
for designation of service of process upon unauthorized insurers and
(B) the applicant shall furnish the commissioner with the name and
address of a resident of this state upon whom notices or orders of
the commissioner or process affecting the applicant as a nonresident
reinsurance intermediary may be served. A licensee subject to this
paragraph shall promptly notify the commissioner in writing of every
change in its designated agent for service of process, and any change
shall not become effective until acknowledged by the commissioner.
(3) Any application for licensure as a reinsurance intermediary
under this subdivision shall be made on a form prescribed by the
commissioner and shall be accompanied by an application fee of two
hundred fifty dollars ($250).
(e) The commissioner may refuse to issue a reinsurance
intermediary license if, in his or her judgment, the applicant, any
person named on the application, or any member, principal, officer,
or director of the applicant, is determined by the commissioner not
to be trustworthy, or that any controlling person of the applicant is
not trustworthy to act as a reinsurance intermediary, or that any of
the foregoing has given cause for revocation or suspension of a
reinsurance intermediary license, or has failed to comply with any
prerequisite for the issuance of such a license. Upon written
request therefor, the commissioner shall furnish the applicant with a
summary of the basis for refusal to issue a reinsurance intermediary
license, which document shall not be subject to inspection as a
public record.
(f) Licensed attorneys at law when acting in their professional
capacity as such shall be exempt from this section.
(g) A reinsurance intermediary-manager, when acting in that
capacity and in compliance with this chapter, shall not be required
to separately comply with Article 5.4 (commencing with Section
769.80) of Chapter 1 (if added by Senate Bill 1039 of the 1991-92
Regular Session) in order to engage in conduct authorized by both
this chapter and that article.
SEC. 22. Section 10234.93 of the Insurance Code is amended to
read:
10234.93. (a) Every insurer of long-term care in California
shall:
(1) Establish marketing procedures to assure that any comparison
of policies by its agents or other producers will be fair and
accurate.
(2) Establish marketing procedures to assure excessive insurance
is not sold or issued.
(3) Submit to the commissioner within six months of the effective
date of this act, a list of all agents or other insurer
representatives authorized to solicit individual consumers for the
sale of long-term care insurance. These submissions shall be updated
at least semiannually.
(4) Provide the following training and require that each agent or
other insurer representative authorized to solicit individual
consumers for the sale of long-term care insurance shall
satisfactorily complete the following training requirements which
shall be part of, and not in addition to, the continuing education
requirements in Section 1749.3:
(A) For licensees issued a license after January 1, 1992, eight
hours of training in each of the first four 12-month periods
beginning from the date of original license issuance and thereafter
and eight hours of training prior to each license renewal.
(B) For licensees issued a license before January 1, 1992, eight
hours of training prior to each license renewal.
Licensees shall complete the initial training requirements of this
section prior to being authorized to solicit individual consumers
for the sale of long-term care insurance.
The training required by this section shall consist of topics
related to long-term care services and long-term care insurance,
including, but not limited to, California regulations and
requirements, available long-term care services and facilities,
changes or improvements in services or facilities, and alternatives
to the purchase of private long-term care insurance. On or before
July 1, 1998, the following additional training topics shall be
required: differences in eligibility for benefits and tax treatment
between policies intended to be federally qualified and those not
intended to be federally qualified, the effect of inflation in
eroding the value of benefits and the importance of inflation
protection, and NAIC consumer suitability standards and guidelines.
(5) Display prominently on page one of the policy or certificate
and the outline of coverage: "Notice to buyer: This policy may not
cover all of the costs associated with long-term care incurred by the
buyer during the period of coverage. The buyer is advised to review
carefully all policy limitations."
(6) Inquire and otherwise make every reasonable effort to identify
whether a prospective applicant or enrollee for long-term care
insurance already has accident and sickness or long-term care
insurance and the types and amounts of any such insurance.
(7) Every insurer or entity marketing long-term care insurance
shall establish auditable procedures for verifying compliance with
this subdivision.
(8) Every insurer shall provide to a prospective applicant, at the
time of solicitation, written notice that the Health Insurance
Counseling and Advocacy Program (HICAP) provides health insurance
counseling to senior California residents free of charge. Every
agent shall provide the name, address, and telephone number of the
local HICAP program and the statewide HICAP number, 1-800-434-0222.
(9) Provide a copy of the long-term care insurance shoppers guide
developed by the California Department of Aging to each prospective
applicant prior to the presentation of an application or enrollment
form for insurance.
(b) In addition to other unfair trade practices, including those
identified in this code, the following acts and practices are
prohibited:
(1) Twisting. Knowingly making any misleading representation or
incomplete or fraudulent comparison of any insurance policies or
insurers for the purpose of inducing, or tending to induce, any
person to lapse, forfeit, surrender, terminate, retain, pledge,
assign, borrow on, or convert any insurance policy or to take out a
policy of insurance with another insurer.
(2) High pressure tactics. Employing any method of marketing
having the effect of or tending to induce the purchase of insurance
through force, fright, threat, whether explicit or implied, or undue
pressure to purchase or recommend the purchase of insurance.
(3) Cold lead advertising. Making use directly or indirectly of
any method of marketing which fails to disclose in a conspicuous
manner that a purpose of the method of marketing is solicitation of
insurance and that contact will be made by an insurance agent or
insurance company.
SEC. 23. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.