BILL ANALYSIS
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THIRD READING
Bill No: AB 76
Author: Yamada (D)
Amended: 3/9/09 in Assembly
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMM : 11-0, 6/22/09
AYES: Calderon, Correa, Cox, Florez, Harman, Kehoe, Liu,
Lowenthal, Padilla, Runner, Wolk
NO VOTE RECORDED: Cogdill
SENATE APPROPRIATIONS COMMITTEE : 11-0, 6/29/09
AYES: Kehoe, Cox, Corbett, Leno, Oropeza, Price, Runner,
Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Denham, Hancock
ASSEMBLY FLOOR : 77-0, 6/1/09 - See last page for vote
SUBJECT : Life and Annuity Consumer Protection Fund
SOURCE : Los Angeles County District Attorneys Office
DIGEST : This bill extends the sunset date of the Life
and Annuity Customer Protection Fund administered by the
Department of Insurance (DOI) from January 1, 2010 to
January 1, 2015. This bill also requires the DOI to
annually publish on its website a report that consolidates
designated statistics summarizing DOI'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
CONTINUED
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matters of consumer interest.
ANALYSIS : 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.
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
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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.
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.
Background
Background Information provided to the Senate Banking,
Finance and Insurance Committee indicates that at the
beginning of FY 08-09, the Life and Annuity Consumer
Protection Fund (LACPF) had a reserve balance of
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$1,454,000, an amount that represents that portion of the
fund allocable to district attorneys through grants awarded
by DOI.
The DOI 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 DOI Fees and License
Fund.
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
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2009-10 2010-11
2011-12 Fund
$1 fee revenue approx.
$1 million - $1.5 million Special*
*Life and Annuity Consumer Protection Fund
SUPPORT : (Verified 6/30/09)
Los Angeles County District Attorney's Office (source)
Department of Insurance
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
Professional Fiduciary Association of California
ARGUMENTS IN SUPPORT : DOI supports this bill and states,
"(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 DOI and district
attorneys with needed resources to effectively carry out
their consumer protections responsibilities."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
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Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Price, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Block, Jeffries, Knight
JA:nl 6/30/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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