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 10127.18   and 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 products   and
annuities  .  The bill would  require an issuer of
annuities to develop a suitability plan for its agents to use in
selling annuities   provide 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
training  and continuing education for 
insurance   life  agents  , brokers, and
representatives  in 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 event  designed to promote the
sale of insurance products or settlements or to produce leads for
future sales of insurance products or settlements may use the terms
  where 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 apply  for
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 the
  to 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
Institutions  Code.   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 as  a
solicitor   solicitors  , working as  an
 exclusive  employee   employees 
of  a  motor  club   clubs
 , 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
satisfactorily  
   1749.8.  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 of   Effective January 1, 2005,
every life agent who sells  annuities shall satisfactorily
complete four hours of  continuing education  
training  every two years prior to license renewal.  
This   For resident agents, this  requirement shall
be part of, and not in addition to, the continuing education
requirements of Section 1749.3.
   (c) The training  and continuing education 
required 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 training  and
continuing education  requirement.  Any course or seminar
that is disapproved under the provisions of this section shall be
presumed invalid for credit towards the training  and
continuing education  requirement 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.  Return   During 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.