BILL NUMBER: AB 1252 CHAPTERED 08/11/03 CHAPTER 217 FILED WITH SECRETARY OF STATE AUGUST 11, 2003 APPROVED BY GOVERNOR AUGUST 9, 2003 PASSED THE SENATE JULY 24, 2003 PASSED THE ASSEMBLY JUNE 5, 2003 AMENDED IN ASSEMBLY APRIL 7, 2003 INTRODUCED BY Assembly Member Jackson FEBRUARY 21, 2003 An act to amend Sections 1639, 1679, 1781.3, and 10234.93 of the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST AB 1252, Jackson. Insurance. Existing law provides that a fire and casualty broker-agent license may be issued to a nonresident of this state if the nonresident is duly licensed to transact more than one class of insurance, with certain exceptions, under the laws of the state or province of Canada where he or she maintains a resident license to transact insurance. This bill would, in addition, apply this provision to a nonresident who maintains a resident license to transact insurance in a territory of the United States. Under existing law, a nonresident applicant for a license to transact insurance is subject to the same qualifying examination as is required of a resident applicant, except in specified circumstances. Existing law exempts from this requirement a nonresident applicant who resides in a jurisdiction that grants reciprocity to California residents, as specified. This bill would, instead, exempt from this requirement a nonresident applicant who maintains a license in a jurisdiction that grants this reciprocity. Existing law allows the Insurance Commissioner to issue a license to act as a reinsurance intermediary, as defined, to a person who has complied with the applicable requirements. Existing law imposes on nonresident applicants for reinsurance intermediary licenses additional requirements involving designation of service of process and information and notifications to be provided to the commissioner, as specified. This bill would eliminate the additional requirements applicable to nonresident applicants for reinsurance intermediary licenses. Existing law requires an insurer of long-term care in California to provide specified continuing education to agents and insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. This bill would rename various continuing education requirements as training. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. 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, territory of the United States, 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. 2. Section 1679 of the Insurance Code is amended to read: 1679. (a) A nonresident applicant for a license shall be subject to the same qualifying examination as is required of a resident applicant. The 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 the 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: (1) Experience or training, (2) 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 (3) A fair and general understanding of the obligations and duties of a holder of the license sought. (b) The provisions of this section shall not apply to a nonresident applicant who maintains a license in a jurisdiction that grants reciprocity to California residents in accordance with Section 1638.5. SEC. 3. 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) 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. 4. 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 that, for resident licensees, 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. (C) For nonresident licensees that are not otherwise subject to the continuing education requirements set forth in Section 1749.3, the evidence of training required by this section shall be filed with and approved by the commissioner as provided in subdivision (g) of Section 1749.4. 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.