BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 2717 (Skinner) Hearing Date: June 30, 2010
As Amended: June 3, 2010
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor.(05/20/10)72-0/Pass
Asm. Appr. (05/12/10)16-0/Pass
Asm. Ins. (04/21/10)12-0/Pass
Asm. RLS. (04/12/10)10-0/Pass
SUMMARY Would revise standards and procedures that apply to
Commissioner approval of special "senior designations" (used by
insurance producers in connection with sales of financial and
insurance products to seniors) to 1) enhance their credibility,
2) allow strengthened oversight by the Commissioner, and 3) to
make designation rules easier for producers to comply with.
DIGEST
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 Insurance Commissioner.
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.
This bill
AB
2717 (Skinner), Page 2
Would recast and clarifyprocedures 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.Would specify the Insurance Commissioner may only approve use
of a "senior designation" if the organization that issues it
satisfies all of the following requirements :
a. The organization applies for the designation on a
form approved by the Commissioner, provides such
supplementary documents and declarations as the
Commissioner deems necessary, and complies with a duty to
notify the Insurance Commissioner within 45 days of any
material changes to the information that was provided in
the organization's application for an a senior
designation;
b. Clarifies the accreditation requirements for private
entities that issue designations.
2.Would require the designation to be accredited by the National
Commission for Certifying Agencies, or the organization or the
designation is accredited by an agency that is on the United
States Department of Education's list entitled "Accrediting
Agencies Recognized for Title IV Purposes" and the agency is
clearly and convincingly qualified to accredit an organization
or designation involved with financial services provided to
seniors.
3.Would specify the organization must require California
candidates for designation to demonstrate superior expertise
in advising seniors in finance, insurance, or risk management
through examinations which are based on testing of applicants
who, with no prior insurance education or experience, have
completed at least 75 hours of study on:
a. Aspects of aging;
b. Health care coverage;
c. Long-term care insurance;
d. Financial planning for retirement;
AB
2717 (Skinner), Page 3
e. Investments, estate planning; and
f. Ethics.
The act specifies textbooks or other study materials may use
chapter and subchapter titles that differ from those general
topics as long as the essential content is the same.
4.Would specify the organization must maintain a code of ethics
for its California designees and must meet minimum standards
and procedures for discipline of designees, including, at a
minimum:
a. A written procedure to receive, log, and conduct a
preliminary review of complaints alleging improper,
illegal, or unethical conduct.
b. Written standards for determining when a complaint
warrants further investigation into the merits of the
allegations contained therein.
c. Written standards and procedures to ensure that,
once a complaint is determined to warrant further
investigation, the investigation is diligently conducted.
d. Written standards for determining when to file
disciplinary charges based on the results of an
investigation.
e. Written standards and procedures to ensure due
process in the adjudication of disciplinary charges by
adjudicators who are fair, knowledgeable, and otherwise
qualified.
f. Written standards and procedures for the
imposition of appropriate sanctions, including, when
warranted, revocation of the designation.
5.Would specify the Act's provisions regarding senior
designations shall apply to all types of insurance covered by
the Article in which this measure will reside, and also to the
lines of lines of Medicare supplement insurance, as defined,
and long-term care insurance, to which would otherwise be
excepted.
AB
2717 (Skinner), Page 4
6.Would authorize the Insurance Commissioner to confirm by a
letter in writing that an organization's designation is exempt
from this act, following the receipt by the Commissioner of a
petition requesting such a confirmation, where the
designation, according to its title or curriculum, or in its
actual use, concerns almost exclusively subject matters other
than insurance or financial services sold to seniors in
particular.
7.Would provide the Commissioner may rescind approval of a
designation whenever there has been a material change in the
management or operation of the organization that issues the
designation, or in the procedures or criteria for issuance of
the designation, such that if the organization were to apply
for approval of the designation subsequent to the change,
approval would be denied and provides any rescission shall be
after notice and a hearing conducted in accordance with
existing law applicable to loss of a license.
8.Would repeal redundant continuing education requirements.
9.Would also repeal provisions inconsistent with the redrafted
and clarified rules, above.
10. Would repeal obsolete language relevant only during the
initial phase-in of the senior designation law.
COMMENTS
1. Purpose of the bill To clarify 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 to make them easier for the
Commissioner to implement and for insurance agents and
brokers to comply with.
It does appear the bill provides appropriate and needed
clean-up to the existing statutory scheme.
2. Background According to the author, this bill is intended
to modify the senior designation statute to address
practical issues encountered as the Insurance Commissioner
implemented current law. The bill makes extensive changes
to the existing statute, and adds significant new
provisions. According to the Department and NAIFA, which
AB
2717 (Skinner), Page 5
has contributed its expertise to deliberations on this
measure, current law fails to provide sufficient detail to
enable the Commissioner to efficiently and effectively
implement the senior designations law in an efficient and
non-burdensome manner.
3. Support National Association of Insurance and Financial
Advisors (NAIFA) is not a sponsor but has worked with the
author and Department as a subject matter expert. states AB
2717 is a clean-up bill for AB 2150 (Berg) from 2008. NAIFA
notes that while working on implementing the senior
designation approval process, the Department of Insurance
discovered a few issues that needed to be addressed in law.
Therefore NAIFA agreed to work with the DOI on this bill so
the statute reflects the approval process that was
originally envisioned.
4. Opposition None
5. Questions On page 4, lines 8 and 9, where the bill
addresses how an organization will be determined to be
"qualified" to issue a designation, the measure refers to
determining whether an entity is " clearly and convincingly
qualified " to accredit an organization or designation
" involved with financial services provided to seniors " .
In this specialized "seniors designation" context, these
phrases are distinctively weak, as explained below, for the
purpose of giving guidance to the Insurance Commissioner.
While the phrase " clearly and convincingly qualified " sounds
as if it might be an evidentiary standard, it actually is
not a phrase in common parlance. Staff has identified no
occurrence of it -- either in California law or for that
matter on the Internet - other than within this bill. So
whatever the phrase means, it does not rise to that of a
known and recognized standard, and yet that is how it is
being used.
Similarly, the phrase" involved with financial services
provided to seniors " does sound on point for the training of
persons to assist seniors with their financial affairs -
until it is recognized in many jurisdictions, entities whose
training centers on sales and marketing to seniors are
excluded from receiving the distinction of a senior
designation. Against that backdrop, to permit designation of
AB
2717 (Skinner), Page 6
organizations " involved with financial services provided to
seniors " appears too broad.
To provide greater clarity in this bill as to the basis on
which a senior designation can be conferred, and also to
exclude training with an emphasis on sales and marketing, AB
2717 can be amended as indicated below.
6. Suggested Amendments To 1) vest in the Commissioner
determinations of whether an organization is qualified to
issue a senior designation and 2) to exclude designation for
training which is focused on sales and marketing of
finance, insurance, or risk management services or products,
amend AB 2717 as follows:
a. On page 4, line 8, after the first "and",
insert:
"it is established to the satisfaction of the Insurance
Commissioner that"
b. On page 4, line 8, strike the phrase:
"clearly and convincingly"
c. And on page 4, line 21, after the "."
(period), insert:
"No part of the exam, textbooks or other study
materials may concern techniques on how to increase
the amount' of insurance or financial products one
sells, nor recommend the selling of products offered
by specific companies."
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."
AB
2717 (Skinner), Page 7
POSITIONS
Support
Department of Insurance
National Association of Insurance and Financial Advisors (NAIFA)
Oppose
None
Consultant: (916) 651-4102