BILL NUMBER: SB 620 AMENDED BILL TEXT AMENDED IN ASSEMBLY JULY 2, 2003 AMENDED IN SENATE MAY 13, 2003 AMENDED IN SENATE APRIL 29, 2003 AMENDED IN SENATE APRIL 21, 2003 INTRODUCED BY Senator Scott (Coauthors: Senators Bowen, Ortiz, and Romero) (Coauthors: Assembly Members Laird, Lieber, and Lowenthal) FEBRUARY 20, 2003 An act to amend Sections 787, 1725.5, 10127.10, 10127.13, and 10509.8 of, and to add Sections 789.9, 789.10, 1724, 1749.8,10127.17, and 10127.18and 10127.17 to, the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST SB 620, as amended, Scott. Annuities: life insurance: required disclosures and prohibited sales practices. Existing law imposes a special duty of honesty, good faith, and fair dealing on an insurer, broker, agent, and all others engaged in the transaction of insurance with a prospective insured who is 65 years of age or older, except for specified types of insurance transactions. Under existing law, the Insurance Commissioner is authorized to assess an administrative penalty for the violation of this duty and other provisions relating to senior insurance. Existing law establishes a 30-day period following the purchase of an individual life insurance policy or an individual annuity contract by a senior citizen, during which time the policy or contract may be canceled and all premiums and fees refunded, and requires certain disclosures in that regard. Existing law regulates viatical settlements, as defined, and imposes certain requirements on a person entering into or soliciting viatical settlements. This bill would enact additional restrictions on advertising practices that target senior citizens and would expand the scope of existing restrictions, currently applicable to disability insurance, to life insurance, annuity productsand annuities . The bill wouldrequire an issuer of annuities to develop a suitability plan for its agents to use in selling annuitiesprovide that insurers and life agents owe a special duty of suitability, as defined, to seniors who apply to purchase annuities . The bill would prohibit insurance agents, brokers, and solicitors who are not attorneys from sharing commissions or other compensation with attorneys. The bill would require , effective January 1, 2005, specific trainingand continuing educationforinsurancelife agents, brokers, and representativesin order for these producers to sell annuities. The bill would limit the investment of premiums during the 30-day cancellation period, would revise the disclosure requirements applicable to the sale of life insurance and annuity products to seniors, and would impose certain additional disclosure requirements applicable to life insurance policies and annuities. The bill would impose restrictions on the sale of life insurance policies and annuities in the home of a senior citizen. The bill would prohibit an agent or insurer from recommending the unnecessary replacement, as defined, of an annuity by a senior citizen. The bill would impose certain duties on the Insurance Commissioner in this regard, and enact other related provisions. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 787 of the Insurance Code is amended to read: 787. Any advertisement or other device designed to produce leads based on a response from a potential insured which is directed towards persons age 65 or older shall disclose that an agent may contact the applicant if that is the fact. In addition, an agent who makes contact with a person as a result of acquiring that person's name from a lead generating device shall disclose that fact in the initial contact with the person. (a) No insurer, agent, broker, solicitor, or other person or other entity shall solicit persons age 65 and older in this state for the purchase of disability insurance, life insurance, or annuities through the use of a true or fictitious name which is deceptive or misleading with regard to the status, character, or proprietary or representative capacity of the entity or person, or to the true purpose of the advertisement. (b) For the purposes of this section, an advertisement includes envelopes, stationery, business cards, or other materials designed to describe and encourage the purchase of a policy or certificate of disability insurance, life insurance, or an annuity. (c) Advertisements shall not employ words, letters, initials, symbols, or other devices which are so similar to those used by governmental agencies, a nonprofit or charitable institution, senior organization, or other insurer that they could have the capacity or tendency to mislead the public. Examples of misleading materials, include, but are not limited to, those which imply any of the following: (1) The advertised coverages are somehow provided by or are endorsed by any governmental agencies, nonprofit or charitable institution or senior organizations. (2) The advertiser is the same as, is connected with, or is endorsed by governmental agencies, nonprofit or charitable institutions or senior organizations. (d) No advertisement may use the name of a state or political subdivision thereof in a policy name or description. (e) No advertisement may use any name, service mark, slogan, symbol, or any device in any manner that implies that the insurer, or the policy or certificate advertised, or that any agency who may call upon the consumer in response to the advertisement, is connected with a governmental agency, such as the Social Security Administration. (f) No advertisement may imply that the reader may lose a right, or privilege, or benefits under federal, state, or local law if he or she fails to respond to the advertisement. (g) An insurer, agent, broker, or other entity may not use an address so as to mislead or deceive as to the true identity, location, or licensing status of the insurer, agent, broker, or other entity. (h) No insurer may use, in the trade name of its insurance policy or certificate, any terminology or words so similar to the name of a governmental agency or governmental program as to have the capacity or the tendency to confuse, deceive, or mislead a prospective purchaser. (i) All advertisements used by agents, producers, brokers, solicitors, or other persons for a policy of an insurer shall have written approval of the insurer before they may be used. (j) No insurer, agent, broker, or other entity may solicit a particular class by use of advertisements which state or imply that the occupational or other status as members of the class entitles them to reduced rates on a group or other basis when, in fact, the policy or certificate being advertised is sold on an individual basis at regular rates. (k) No advertisement for an eventdesigned to promote the sale of insurance products or settlements or to produce leads for future sales of insurance products or settlements may use the termswhere insurance products will be offered for sale may use the terms "seminar," "class," "informational meeting," or substantially equivalent terms to characterize the purpose of the public gathering or event unless it adds the words "and insurance sales presentation" immediately following those terms in the same type size and font as those terms.(l) No agent, broker, solicitor, or other person or entity may use a professional designation unless that designation is conferred by an accredited college or university or conferred by a long-standing professional trade association that is nonprofit and not controlled by founding individuals. (m) License information in an advertisement shall be listed immediately prior to, and in the same font as, any professional designation.(l) No advertisement for a gathering or event where leads for future sales of insurance products will be solicited or gathered may use the terms "seminar," "class," "informational meeting," or substantially equivalent terms to characterize the purpose of the gathering or event unless it also states the following: "Information for future insurance sales will be gathered at this event." This statement shall appear in a prominent location on the advertisement in the same type size and font as the terms "seminar," "class," "informational meeting," or substantially equivalent term used to characterize the nature of the gathering or event. (m) A person or entity using a title or designation, other than the insurance license held by the person or entity, in the advertisement or sale of disability insurance, life insurance, or annuities shall act with the utmost good faith for the benefit of insureds and prospective insureds, and in a manner consistent with the level of expertise, care, and experience indicated by the title or designation. SEC. 2. Section 789.9 is added to the Insurance Code, to read: 789.9. (a) Insurers and life agents owe a special duty of suitability to seniors 65 years and older who applyfor or own annuity products. (b) If the senior's purpose in purchasing any annuity is to affect Medi-Cal eligibility, the issuance shall be unsuitable if theto purchase annuities. For purposes of this section, "duty of suitability" means a responsibility to recommend the purchase or replacement of an annuity only when the insurer or life agent has reasonable grounds to believe, based upon information provided by the senior to the insurer or life agent about the senior' s investments, insurance coverage, and financial situation, that the annuity meets the senior's financial objectives and insurance needs. This duty is in addition to any other duty, whether express or implied, that may exist. (b) Before issuing or delivering an annuity to a senior, the issuer shall make reasonable efforts to obtain relevant information from the senior about the senior's financial status, tax status, investment objectives, and any other information used or considered to be reasonable to ensure that the annuity meets the senior's insurance needs and financial objectives. No unsuitable annuity product shall be issued or delivered to a senior in this state. (c) In addition to any other reasons that an individual annuity may be determined to be unsuitable for a senior, an annuity shall be unsuitable in all of the following circumstances: (1) The senior's purpose in purchasing the annuity is to affect Medi-Cal eligibility and the purchaser's assets are equal to or less than the community spouse resource allowance,established annually by the State Department of Health Services pursuant to the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and InstitutionsCode.Code), or the senior would otherwise qualify for Medi-Cal. (2) The senior's purpose in purchasing the annuity is to affect Medi-Cal eligibility and, after the purchase of the annuity, the senior or the senior's spouse would not qualify for Medi-Cal. (3) The annuity includes a surrender penalty that may be triggered by the annuitant's death. (d) Each issuer of annuity products shall make reasonable efforts to train its agents on how to recognize indicators that a prospective annuitant may lack the short-term memory or judgment to knowingly purchase an insurance product, and what to do if those indicators are observed. (e) In the event that an annuity specified in subdivision (c) is issued to a senior, the issuer shall rescind the contract, refund to the purchaser all premiums paid for the annuity, subject to the provisions of Section 10127.10, and refund to the purchaser all fees and costs plus interest at a rate of 10 percent per annum. (f) Every issuer of annuity products shall retain all records and documentation demonstrating the evaluation of the suitability of a particular product to an individual senior and shall make this documentation available to the commissioner upon request. SEC. 3. Section 789.10 is added to the Insurance Code, to read:789.10. (a) Each issuer of annuities shall develop a suitability plan applicable to seniors 65 years of age and older, and train its agents to use this plan. (b) The plan shall utilize criteria, including, but not limited to, the following: the age of purchaser, insured, or annuitant; his or her competence to contract; his or her purpose in purchasing the annuity product; the likelihood the senior will need access to cash for future needs such as health care, long-term care, or other emergencies; the likelihood that those needs may occur during the period surrender charges would be assessed; and the likelihood the senior may need access to the annuitized funds to meet those needs. (c) Each insurer who receives an application from a senior for a deferred annuity shall, before issuing the contract, mail the applicant a supplemental application requesting information necessary to make the determination of suitability. The supplemental application may be sent to the applicant at the same time as the disclosure required by Section 10127.10. (d) Each insurer shall develop and provide to all agents and other insurer representatives authorized to solicit individual consumers for the sale of annuities, a checklist, screening device, or other procedure to ensure that prospective clients have the mental capacity to enter into a contract. If a written instrument is used, it shall be retained by the insurer and made available to the commissioner upon request. (e) In the case that a presumptively unsuitable annuity is issued to a senior, the issuer shall retain all records and documentation supporting its rebuttal of the presumption of unsuitability and shall make this documentation available to the commissioner upon request. (f) Every insurer or entity marketing annuities shall establish auditable procedures for verifying compliance with this section. (g) In addition to other remedies available in this article, code, and in California law, the commissioner, upon a finding of unsuitability, shall order the insurer to rescind the contract and to refund the premium plus interest of 10 percent per annum, including all fees and costs. An additional administrative penalty equal to half the deposit amount may be ordered by the commissioner or by a court in actions brought under subdivision (e) of Section 789.789.10. (a) This section applies to the sale, offering for sale, or generation of leads for the sale of life insurance, including annuities, to senior insureds or prospective insureds by any person. (b) Any person who meets with a senior in the senior's home is required to deliver a notice in writing to the senior no less than 24 hours prior to that individual's initial meeting in the senior's home, unless the senior initiated contact with an agent with whom the senior has an existing insurance relationship and requested a meeting with the agent in his or her home that same day. In that case, a notice shall be delivered to the senior prior to the meeting. The notice shall be in substantially the following form, with the appropriate information inserted, in 14-point type: "(1) During this visit or a follow-up visit, you will be given a sales presentation on the following (indicate all that apply): ( ) Life insurance, including annuities ( ) Other insurance products (specify): _________________. (2) You have the right to have other persons present at the meeting, including family members, financial advisors or attorneys. (3) You have the right to end the meeting at any time. (4) You have the right to contact the Department of Insurance or the Department of Corporations for information, or to file a complaint. (The notice shall include the consumer assistance telephone numbers at those departments) (5) The following individuals will be coming to your home: (list all attendees, and insurance license information, if applicable)" (c) Upon contacting the senior in the senior's home, the person shall, before making any statement other than a greeting, or asking the senior any other questions, state that the purpose of the contact is to talk about insurance, or to gather information for a follow-up visit to sell insurance, if that is the case, and state all of the following information: (1) The name and titles of all persons arriving at the senior's home. (2) The name of the insurer represented by the person, if known. (d) Each person attending a meeting with a senior shall provide the senior with a business card or other written identification stating the person's name, business address, telephone number, and any insurance license number. (e) The persons attending a meeting with a senior shall end all discussions and leave the home of the senior immediately after being asked to leave by the senior. (f) Any person attending a meeting with a senior shall immediately terminate the meeting if the person knows or should know that the senior lacks the short-term memory or judgment to knowingly purchase an insurance product. (g) A person may not solicit a sale or order for the sale of an annuity or life insurance policy at the residence of a senior, in person or by telephone, by using any plan, scheme, or ruse that misrepresents the true status or mission of the contact. SEC. 4. Section 1724 is added to the Insurance Code, to read: 1724. An agent, broker, or solicitor who is not an active member of the State Bar of California may not share a commission or other compensation with an active member of the State Bar of California. For purposes of this section, "commission or other compensation" means pecuniary or nonpecuniary compensation of any kind relating to the sale or renewal of an insurance policy or certificate or an annuity, including, but not limited to, a bonus, gift, prize, award, or finder's fee. SEC. 5. Section 1725.5 of the Insurance Code is amended to read: 1725.5. (a) For purposes of Sections 32.5, 1625, 1626, 1724.5, 1758.1, 1765, 1800, 14020, 14021, and 15006, every licensee shall prominently affix, type, or cause to be printed on business cards, written price quotations for insurance products, and print advertisements distributed exclusively in this state for insurance products its license number in type the same size as any indicated telephone number, address, or fax number. If the licensee maintains more than one organization license, one of the organization license numbers is sufficient for compliance with this section. (b) Effective January 1, 2005, for purposes of Sections 32.5, 1625, 1626, 1724.5, 1758.1, 1765, 1800, 14020, 14021, and 15006, every licensee shall prominently affix, type, or cause to be printed on business cards, written price quotations for insurance products, and print advertisements, distributed in this state for insurance products, the words "Insurance Agent," or "Insurance Broker-Agent," as applicable to the licensee, in type size no smaller than the largest indicated telephone number. If the licensee maintains more than one type of license, one of the types is sufficient for compliance with this section. If the licensee prominently uses the term "insurance" on the materials specified in this subdivision, the licensee may satisfy this requirement by using the terms "Insurance License" or "Insurance Lic." immediately prior to, and in type size no smaller than, its license number as required by subdivision (a). (c) In the case of transactors, or agent and broker licensees, who are classified for licensing purposes asa solicitorsolicitors , working asanexclusiveemployeeemployees ofamotorclubclubs , organizational licensee numbers shall be used.(c)(d) Any person in violation of this section shall be subject to a fine levied by the commissioner in the amount of two hundred dollars ($200) for the first offense, five hundred dollars ($500) for the second offense, and one thousand dollars ($1,000) for the third and subsequent offenses. The penalty shall not exceed one thousand dollars ($1,000) for any one offense. These fines shall be deposited into the Insurance Fund.(d)(e) A separate penalty shall not be imposed upon each piece of printed material that fails to conform to the requirements of this section.(e)(f) If the commissioner finds that the failure of a licensee to comply with the provisions of subdivision (a) or (b) is due to reasonable cause or circumstance beyond the licensee's control, and occurred notwithstanding the exercise of ordinary care and in the absence of willful neglect, the licensee may be relieved of the penalty in subdivision(c)(d) .(f)(g) A licensee seeking to be relieved of the penalty in subdivision(c)(d) shall file with the department a statement with supporting documents setting forth the facts upon which the licensee bases its claims for relief.(g)(h) This section does not apply to any person or entity that is not currently required to be licensed by the department or that is exempted from licensure.(h)(i) This section does not apply to general advertisements of motor clubs that merely list insurance products as one of several services offered by the motor club, and do not provide any details of the insurance products.(i)(j) This section does not apply to life insurance policy illustrations required by Chapter 5.5 (commencing with Section 10509.950) of Part 2 of Division 2 or to life insurance cost indexes required by Chapter 5.6 (commencing with Section 10509.970) of Part 2 of Division 2.(j)(k) This section shall become operative January 1, 1997. SEC. 6. Section 1749.8 is added to the Insurance Code, to read:1749.8. (a) Every insurance agent, broker, or insurer representative licensed for the sale of annuities shall satisfactorily1749.8. Effective January 1, 2005, every life agent who sells annuities shall satisfactorily complete eight hours of training prior to soliciting individual consumers in order to sell annuities.(b) Every insurance agent, broker, or insurer representative licensed for the sale ofEffective January 1, 2005, every life agent who sells annuities shall satisfactorily complete four hours ofcontinuing educationtraining every two years prior to license renewal.ThisFor resident agents, this requirement shall be part of, and not in addition to, the continuing education requirements of Section 1749.3. (c) The trainingand continuing educationrequired by this section shall be approved by the commissioner and shall consist of topics related to annuities, and California law, regulations, and requirements related to annuities, prohibited sales practices, and fraudulent and unfair trade practices. Subject matter determined by the commissioner to be primarily intended to promote the sale or marketing of annuities shall not qualify for credit towards the trainingand continuing educationrequirement. Any course or seminar that is disapproved under the provisions of this section shall be presumed invalid for credit towards the trainingand continuing educationrequirement of this section unless it is approved in writing by the commissioner.SEC. 6.SEC. 7. Section 10127.10 of the Insurance Code is amended to read: 10127.10. (a) Every policy of individual life insurance and every individual annuity contract that is initially delivered or issued for delivery to a senior citizen in this state on and after January 1, 2004, shall have printed thereon or attached thereto a notice stating that, after receipt of the policy by the owner, the policy may be returned by the owner for cancellation by delivering it or mailing it to the insurer or agent from whom it was purchased. The period of time set forth by the insurer for return of the policy by the insured shall be clearly stated on the notice and this period shall be not less than 30 days. The insured may return the policy to the insurer by mail or otherwise at any time during the period specified in the notice. In the case of individual life insurance policies and individual annuity contracts (other than certain variable contracts and modified guaranteed contracts), return of the policy during the cancellation period shall have the effect of voiding the policy from the beginning, and the parties shall be in the same position as if no policy had been issued. All premiums paid and any policy fee paid for the policy shall be refunded by the insurer to the owner within 30 days from the date that the insurer is notified that the owner has canceled the policy.In the case of variable annuity contracts, variable life insurance contracts, and modified guaranteed contracts, the premium shall not be invested until after the expiration of the 30-day cancellation period. ReturnDuring the 30-day cancellation period, the premium may be invested only in fixed-income investments and money-market funds. Return of the contract during the cancellation period shall void the policy from the beginning, and the parties shall be in the same position as if no policy had been issued, unless the insured knowingly signed a written waiver allowing the premium to be invested during the 30-day cancellation period. After executing a valid waiver, cancellation during the 30-day period shall entitle the owner to a refund of account value and any policy fee paid for the policy. The account value or premium and policy fee shall be refunded by the insurer to the owner within 30 days from the date that the insurer is notified that the owner has canceled the policy. (b) This section applies to all individual policies issued or delivered to senior citizens in this state on or after January 1, 2004. All policies subject to this section which are in effect on January 1, 2003, shall be construed to be in compliance with this section, and any provision in any policy which is in conflict with this section shall be of no force or effect. (c) Every individual life insurance policy and every individual annuity contract, other than variable contracts and modified guaranteed contracts, subject to this section, that is delivered or issued for delivery in this state shall have the following notice either printed on the cover page or policy jacket in 12-point bold print with one inch of space on all sides or printed on a sticker that is affixed to the cover page or policy jacket: "IMPORTANT YOU HAVE PURCHASED A LIFE INSURANCE POLICY OR ANNUITY CONTRACT. CAREFULLY REVIEW IT FOR LIMITATIONS. THIS POLICY MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU RECEIVED IT FOR A FULL REFUND BY RETURNING IT TO THE INSURANCE COMPANY OR AGENT WHO SOLD YOU THIS POLICY. AFTER 30 DAYS, CANCELLATION MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A SURRENDER CHARGE." The phrase "after 30 days, cancellation may result in a substantial penalty, known as a surrender charge" may be deleted if the policy does not contain those charges or penalties. (d) Every individual variable annuity contract, variable life insurance contract, or modified guaranteed contract subject to this section, that is delivered or issued for delivery in this state, shall have the following notice either printed on the cover page or policy jacket in 12-point bold print with one inch of space on all sides or printed on a sticker that is affixed to the cover page or policy jacket: "IMPORTANT YOU HAVE PURCHASED A VARIABLE ANNUITY CONTRACT (VARIABLE LIFE INSURANCE CONTRACT, OR MODIFIED GUARANTEED CONTRACT). CAREFULLY REVIEW IT FOR LIMITATIONS. THIS POLICY MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU RECEIVED IT FOR A REFUND OF THE POLICY'S ACCOUNT VALUE ON THE DAY THE POLICY IS RECEIVED BY THE INSURANCE COMPANY OR AGENT WHO SOLD YOU THIS POLICY. A RETURN OF THE POLICY AFTER 30 DAYS MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A SURRENDER CHARGE." The words "known as a surrender charge" may be deleted if the contract does not contain those charges. (e) This section does not apply to life insurance policies issued in connection with a credit transaction or issued under a contractual policy-change or conversion privilege provision contained in a policy. Additionally, this section shall not apply to contributory and noncontributory employer group life insurance, contributory and noncontributory employer group annuity contracts, and group term life insurance, with the exception of subdivision (f). (f) When an insurer, its agent, group master policyowner, or association collects more than one month's premium from a senior citizen at the time of application or at the time of delivery of a group term life insurance policy or certificate, the insurer must provide the senior citizen a prorated refund of the premium if the senior citizen delivers a cancellation request to the insurer during the first 30 days of the policy period. (g) For purposes of this chapter, a senior citizen means an individual who is 60 years of age or older on the date of purchase of the policy.SEC. 7.SEC. 8. Section 10127.13 of the Insurance Code is amended to read: 10127.13. (a) Prior to the sale of any life insurance policy or annuity contract to a senior citizen, or the replacement of any life insurance policy or annuity contract held by a senior citizen, the life insurer and life agent shall either disclose the surrender period, all associated penalties, and the length of the deferral period, if any, in 12-point bold print on the cover sheet of the policy or disclose the location of the surrender information in bold 12-point print on the cover page of the policy, or printed on a sticker that is affixed to the cover page or to the policy jacket. The notice required by this section may appear on a cover sheet that also contains the disclosure required by subdivision (d) of Section 10127.10. (b) Within 10 business days after an annuity has been issued to a senior citizen, the insurer shall send to the senior citizen by pre-paid first class mail a statement in 14-point type showing the account as it will be or is anticipated to be immediately after termination of the 30-day period in which the annuity may be canceled without penalty, or any longer period during which the insurer allows cancellation without penalty. The statement shall set forth the dollar amounts of the initial premium paid, the account value, the surrender value, the surrender penalty amount and the death benefit lump sum amount. The statement shall be titled "Account Statement Estimated as of (date immediately after expected termination of the period during which the annuity may be canceled without penalty)" The statement shall also state that the purchaser has 30 days from the date the annuity is delivered to cancel the annuity without penalty and shall refer the purchaser to the documents provided with the annuity for more information. The statement shall also prominently identify the name, address, and customer service telephone number of the insurer, and information, such as the name of the annuitant and policy number, to identify the account.SEC. 8.SEC. 9. Section 10127.17 is added to the Insurance Code, to read: 10127.17. (a) In addition to the disclosure required pursuant to Section 10127.10, every policy of life insurance and every annuity that is proposed to be sold and issued to a senior citizen shall be accompanied by a one-page outline disclosure, to be completed by the agent and presented to the purchaser, consisting of the following information: (1) Relevant information about any surrender charges that would be paid by the purchaser if the purchaser were to replace or revoke the insurance contract before its maturity, including, but not limited to, the amount, whether the charge is incurred at the death of the annuitant or at some other time, and if there is an annual surrender charge-free withdrawal available. (2) The length of the deferral period, if any. (3) The fact that the agent will receive a payment or commission from the insurer issuing the policy, if that is the case, and a statement that the amount of the payment or commission may be affected by the price of the policy and the length of the deferral period, if any. (4) The fact that the sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of the product may have tax consequences, result in early withdrawal penalties, or result in other costs or penalties as a result of the sale or liquidation. (5) A statement that the applicant should consult with an independent advisor other than an insurance representative, such as an attorney, accountant, or other professional, regarding the legal and tax consequences of purchasing the annuity or using the annuity to qualify for programs such as Medi-Cal. (6) The right to return the policy within 30 days of its issuance for a full refund. (7) A statement that if the applicant has an existing annuity, that he or she should contact the issuer of that annuity or the applicable agent for an explanation of the surrender charges and the ramifications of surrendering the existing annuity. (b) The senior citizen receiving the one-page outline disclosure shall acknowledge receipt of the document by signing a copy and returning it to the agent.SEC. 9. Section 10127.18 is added to the Insurance Code, to read: 10127.18. (a) This section applies to the sale or offering for sale of life insurance policies and annuities. (b) An insurer, agent, or broker is required to deliver a notice in writing to all clients and prospective clients 65 years of age or older with whom a meeting is scheduled in the client's or prospective client's home. The notice shall be delivered no less than 24 hours before the meeting is scheduled to begin. The notice shall include all of the following information: (1) The right of the client or prospective client to terminate the meeting at any time. (2) The right of the client or prospective client to have other persons present at the meeting, including family members, financial advisors, or attorneys. (3) The right of the client or prospective client to contact the Department of Insurance or the Department of Corporations for information or to make a complaint, with the notice to include the telephone numbers for the consumer complaint lines for those departments. (c) Upon contacting a client or prospective client who is 65 years of age or older at his or her home, an insurer, agent, or broker shall, before making any other statement except a greeting, or asking the client or prospective client any other questions, state that the purpose of the contact is to effect a sale, and state all of the following information: (1) The identity of the person making the solicitation. (2) The name of the insurer, broker, or agent making the solicitation or represented by the person making the solicitation, if known. (3) That a life insurance policy or an annuity may be offered for sale. (d) The agent or assistants of life agents shall, also show or display identification that states the information required by subdivision (c) as well as the address of the place of business and the insurance license number of the licensee. (e) An insurer, agent, or broker shall leave the home of a client or prospective client as soon as reasonably possible after being asked to leave by the client or prospective client. (f) An insurer, agent, or broker may not solicit a sale or order for the sale of an annuity or life insurance policy at the residence of a client or prospective client, in person or by telephone, by using any plan, scheme, or ruse that misrepresents the true status or mission of the contact. (g) An insurer, agent, or broker has an affirmative duty to verify that the client or prospective client has the capacity to enter into a contract, and shall terminate any meeting in which the client's or prospective client's capacity to enter into a contract is not clear. (h) The provisions of this section also apply to individuals who are not insurers, agents, or brokers but who facilitate, arrange, or participate in the sales presentation of an annuity or life insurance policy and receive any money, gift, value, or other consideration from the insurer, broker, or agent for the services rendered to assist in the sales presentation.SEC. 10. Section 10509.8 of the Insurance Code is amended to read: 10509.8. (a) A violation of this article shall occur if an agent or insurer recommends the replacement or conservation of an existing policy by use of a materially inaccurate presentation or comparison of an existing contract's premiums and benefits or dividends and values, if any, or recommends that an insured 65 years of age or older purchase an unnecessary replacement annuity. (b) For purposes of this section, "unnecessary replacement" means the sale of an annuity to replace an existing annuity that requires that the insured will pay a surrender charge for the annuity that is being replaced and that does not confer a substantial financial benefit over the life of the policy to the purchaser so that a reasonable person would believe that the purchase is unnecessary. (c) Patterns of action by policyowners who purchase replacement policies from the same agent after indicating on applications that replacement is not involved, shall constitute a rebuttable presumption of the agent's knowledge that replacement was intended in connection with the sale of those policies, and such patterns of action shall constitute a rebuttable presumption of the agent's intent to violate this article. (d) This article does not prohibit the use of additional material other than that which is required that is not in violation of this article or any other statute or regulation.