BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 76 (Yamada) Hearing Date: June 22, 2009
As Amended: March 9, 2009
Fiscal: yes
Urgency: no
SUMMARY Extends the sunset date of the Life and Annuity
Customer Protection Fund administered by the California
Department of Insurance from January 1, 2010 to January 1, 2015;
also requires the DOI to annually publish on its website a
report that consolidates designated statistics summarizing the
Department's life insurance and annuity consumer protection
activities and descriptions of departmental education programs
for educating consumers about such products, and their purchase,
use and related matters of consumer interest.
DIGEST
Existing law
1.Each insurer admitted to do business in this state is required
to pay a fee not to exceed one dollar ($1), for each
individual life insurance policy and each individual annuity
product that it issues to a resident of this state with a
value of fifteen thousand dollars ($15,000) or more.
2.This fee is assessed on all new individual life insurance
policies and annuity products issued during the prior 12
months, and is deposited into the Life and Annuity Consumer
Protection Fund.
3.This law sunsets on January 1st, 2010.
4.Funds in the Life and Annuity Consumer Protection Fund are
subject to distribution by the Insurance Commissioner and are
to be exclusively dedicated to protecting consumers of life
insurance and annuity products in this state. Moneys in the
fund shall not be used for any other purpose.
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5.This law directs the Insurance Commissioners distribution of
the funds as follows:
a. Fifty percent distributed within the department for
consumer protection functions related to individual life
insurance and annuity products, including, investigating
and prosecuting financial abuse by insurance licensees or
others, responding to consumer inquiries and complaints
related to life insurance or annuity products, educating
consumers, and regulating and overseeing life insurance
and annuity products and advertising for these products.
b. Fifty percent distributed to district attorneys upon
application and a showing of obtaining a likely positive
outcome for investigating and prosecuting individual life
insurance and annuity product financial abuse cases
involving insurance licensees, or persons holding
themselves out to be insurance licensees and others and
for other projects beneficial to insurance consumers.
This bill
1.Extends, until January 1, 2015, the sunset date on provisions
that authorize the imposition of an assessment to fund the
Life and Annuity Consumer Protection Program.
2. Requires the Insurance Commissioner, as fund Administrator,
to annually publish on its Internet Website a report that
includes, but is not limited to, the following information:
a. The number of opened consumer complaints related to
life insurance or annuity products.
b. The number of opened investigations related to life
insurance or annuity products.
c. The number of investigations related to life
insurance or annuity products referred to or reported by
prosecuting agencies.
d. The number of administrative or regulatory cases
related to life insurance or annuity products referred to
the Department of Insurance, Legal Division.
AB 76, Page 3
e. The number of administrative or regulatory
enforcement actions taken in cases related to life
insurance or annuity products.
f. Descriptions of education programs and efforts by
the department to educate consumers in all aspects of
life insurance and annuity products, consumer protection,
purchasing, and using insurance annuity products, claim
filing, benefit delivery, and dispute resolution.
COMMENTS
1. Purpose of the bill The purpose of the bill is to preserve
this program beyond the current sunset date so that ongoing
consumer protection efforts will be continued. The programs
are especially important to protect seniors from
unscrupulous life agents and purported agents as seniors are
the target market for many life and annuity products
2. Background Information provided to the committee indicates
that at the beginning of FY 08-09, the Life and Annuity
Consumer Protection Fund (LACPF) had a reserve balance of
$1,454,000, an amount that represents that portion of the
fund allocable to district attorneys through grants awarded
by CDI.
3. The CDI reports that as of the beginning of FY 08-09, there
was no reserve balance for the portion of the LACPF
allocated to the department. The revenues from the $1.00 fee
allocated to the Department do not fully fund all expenses
incurred by the Department to support the Life and Annuity
Consumer Protection Program (LACPP). Consequently, the LACPP
is also supported by the CDI Fees and License Fund.
4. The DOI reports there are a number of factors that make
investigating life and annuity cases difficult and lengthy.
Life and annuity products are investment products and
involve the payment of large sums of money either as premium
(in the case of life insurance), or depositing funds with a
company to be paid out over a period of time (in the case of
annuities). The policy provisions of life and annuity
policies are complex and require in-depth analysis --
sometimes requiring actuarial or other financial expertise
-- to determine if a particular transaction is
inappropriate. These products are sold primarily to people
in their later years, some in their 80s and 90s as has been
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seen in recent enforcement actions. Each investigation is
unique and for those investigations involving the very
elderly, it is likely they will not realize they were
victimized until long after they were sold the product.
Senior citizen victims often have poor recall and require
more time to interview, require multiple interviews, and
usually require additional evidence to supplement testimony.
The cases often hinge on verbal misrepresentations (he
said/she said) that are difficult to prove and require
locating and interviewing multiple victims to establish a
pattern of illegal activity.
Support The Department of Insurance which supports this bill
states that "(d)ue to the complexity of financial abuse cases
involving life insurance and annuity products and the age of
many of the victims- seniors are particularly targeted -0
investigations can be lengthy and difficult. Further the current
fiscal crisis may be making individuals more vulnerable to
pursue what they perceive as "safe" investments. This fee helps
provide CDI and district attorneys with needed resources to
effectively carry out their consumer protections
responsibilities."
5. Opposition none
6. Questions none
7. Suggested Amendments none
8. Prior Legislation This program was enacted by AB 2316
(Chan) as added by Chapter 835 of the Statutes of 2004
POSITIONS
Support
California Department of Insurance
L.A. District Attorneys
AB 76, Page 5
Association of California Life and Health Insurance Companies
The National Association of Insurance and Financial Advisors
California Advocates for Nursing Home Reform
California District Attorneys Association
California Alliance for Retired Americans
Council on Aging
American Federation of State, County and Municipal Employees
(AFSCME)
Professional Fiduciary Association of California
Oppose
none
Consultant: Kenneth Cooley (916) 651-4102