BILL ANALYSIS AB 2717 Page 1 Date of Hearing: April 21, 2010 ASSEMBLY COMMITTEE ON INSURANCE Jose Solorio, Chair AB 2717 (Skinner) - As Amended: April 7, 2010 SUBJECT : Insurance agents and brokers: senior designations SUMMARY : Recasts and clarifies the laws that govern the procedures and criteria that determine the titles or designations that insurance agents and brokers may use to describe themselves in connection with the sale of insurance products to senior citizens. Specifically, this bill : 1)Specifies the procedures that an applicant for approval of a senior designation must use, and authorizes the Insurance Commissioner (IC) to reject an incomplete application. 2)Requires the IC to approve an application within 90 days, unless it is determined that investigation into the applicant is necessary. 3)Provides that, if after investigation the IC refers the application for further legal proceedings, a written statement of issues is required within 45 days of the completion of the investigation. 4)Requires an organization that confers a senior designation to notify the IC within 45 days of any material changes to the information that was provided in the application. 5)Clarifies the accreditation requirements for private entities that issue designations. 6)Establishes the topics that must be taught in the required 75 hours of education necessary for a training program to qualify to issue senior designations. 7)Establishes the conditions under which an organization that does not otherwise meet the eligibility criteria may nonetheless be approved to confer a senior designation. 8)Specifies the minimum standards and procedures an organization must have concerning discipline of people on whom it has conferred a senior designation. AB 2717 Page 2 9)Clarifies the types of insurance to which the rules governing senior designations apply. 10)Authorizes the IC to issue a letter, in response to a petition, to an organization seeking exemption from the approval requirement, where the use of the title or designation concerns matters unrelated to the sale of insurance to seniors. 11)Repeals redundant continuing education requirements. 12)Repeals provisions inconsistent with the redrafted and clarified rules, above. 13)Repeals obsolete language relevant only during the initial phase-in of the senior designation law. EXISTING LAW : 1)Prohibits the use of a "senior designation" in connection with the sale of insurance to senior citizens, unless the designation has been approved by the IC. 2)Defines "senior designation" as any degree, title, credential, certificate, certification, accreditation, or approval that expresses or implies that an insurance agent or broker possesses expertise, training, competence, honesty, or reliability with regard to advising seniors on finance, insurance, or risk management. 3)Requires that an agent or broker have been licensed in a United States jurisdiction for at least four years before using a senior designation. FISCAL EFFECT : Undetermined COMMENTS : 1)Purpose . According to the author, the purpose of this bill is to clarifiy the laws that govern the procedures and criteria that determine the titles or designations that insurance agents and brokers may use to describe themselves in connection with the sale of insurance products to senior AB 2717 Page 3 citizens to make them easier for the IC to implement and for insurance agents and brokers to comply with. 2)Background . According to the author, this bill is intended to enact modifications to the senior designation statute the have been identified as the IC has gone through the process of attempting to implement this law. The bill contains changes to the existing statute, and the addition of language that would otherwise have to be adopted by regulation. Existing law fails to provide sufficient detail to enable the IC to efficiently and effectively implement the senior designations law in a manner that is reasonable for both the IC and the insurance agents and brokers seeking to use designations. By incorporating all of these changes in one bill, the implementation of this program can proceed more efficiently and effectively. 3)Prior legislation . AB 2150 (Berg) of 2008 (Statutes 2008, chapter 327) enacted the law that restricts the use of senior designations. According to the Assembly Insurance Committee analysis of AB 2150, former Assemblymember Berg introduced the bill to address "unscrupulous sales people who convince older adults to obtain annuities or other financial products inappropriate to their circumstances often using misleading designations as a way of gaining trust, and giving the impression that they have special knowledge that will allow them to help protect assets that they actually intend to plunder." 4)Need to clarify how qualified individuals must be to obtain a designation . The basic educational requirement in both current law and in the bill essentially requires a person to complete a 75-hour course of study, but little more. The Department of Insurance (DOI) has been concerned that this is too low for a person who, as provided in the statute, has "no prior insurance education or experience." However, the 75-hour figure was part of the AB 2150 negotiations, and this bill is designed to clarify and improve AB 2150, but not re-open the overall agreement. The DOI has suggested compromise language providing that the organizations seeking approval to issue designations must evaluate their candidates as demonstrating "superior expertise in advising seniors in particular in finance, insurance, or risk management by passing an exam or exams" after completing at least 75 hours of instruction. The sponsor has agreed to this language (page AB 2717 Page 4 4, lines 28-30) and it is recommended that the author accept this amendment as an author's amendment when the bill is heard. 5)Superfluous provisions . There is language in the bill that both the DOI and the sponsor agree was unintentionally left from an earlier draft, and should be deleted. The language appears on page 4, line 37 through page 5, line 6. It is recommended that the author accept this amendment as an author's amendment when the bill is heard. 6)Unnecessary strikeout . One of the provisions of AB 2150 listed words that would be deemed a senior designation when used in connection with other listed terms. One of the listed words is the word "retire," and the bill proposes to delete this word from the list. However, there are a number of ways the word "retire" could be used in connection with the other listed terms and cause a misleading implication, contrary to the purposes of the law. It is recommended that the author accept an author's amendment removing the strikethrough on the word "retire" where it appears on page 7, line 3. REGISTERED SUPPORT / OPPOSITION : Support National Association of Insurance and Financial Advisers of California (sponsor) California Department of Insurance (CDI) Opposition None received. Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086