BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 2717|
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                                 THIRD READING


          Bill No:  AB 2717
          Author:   Skinner (D)
          Amended:  7/15/10 in Senate
          Vote:     21

           
           SENATE BANKING, FINANCE, AND INS. COMM. :  10-0, 6/30/10
          AYES:  Calderon, Cogdill, Correa, Florez, Kehoe, Liu,  
            Lowenthal, Padilla, Price, Runner
          NO VOTE RECORDED:  Cox

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8 

          ASSEMBLY FLOOR  :  72-0, 5/20/10 - See last page for vote


           SUBJECT  :    Insurance agents and brokers:  senior  
          designation

          SOURCE  :     Author


           DIGEST  :    This bill revises standards and procedures that  
          apply to Insurance Commissioner (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. 

           ANALYSIS  :    Existing law:

          1.Prohibits the use of a "senior designation" in connection  
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            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 recasts and clarifies 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 Commissioner may only approve use of a  
             "senior designation" if the organization that issues it  
             satisfies all of the following requirements:
           
             ?    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;

             ?    Clarifies the accreditation requirements for  
               private entities that issue designations.

          1. Requires 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  

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             Education's list entitled "Accrediting Agencies  
             Recognized for Title IV Purposes" and the agency is  
             established to the satisfaction of the Commissioner that  
             the agency qualified to accredit an organization or  
             designation involved with financial services provided to  
             seniors.

          2. Specifies 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:

                  ?         Aspects of aging;
                  ?         Health care coverage; 
                  ?         Long-term care insurance;
                  ?         Financial planning for retirement;
                  ?         Investments, estate planning; and 
                  ?         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.

          1. Specifies 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 written procedure to receive, log, and  
                    conduct a preliminary review of complaints  
                    alleging improper, illegal, or unethical conduct.

                  ?         Written standards for determining when a  
                    complaint warrants further investigation into the  
                    merits of the allegations contained therein.

                  ?         Written standards and procedures to  
                    ensure that, once a complaint is determined to  
                    warrant further investigation, the investigation  
                    is diligently conducted.

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                  ?         Written standards for determining when to  
                    file disciplinary charges based on the results of  
                    an investigation.

                  ?         Written standards and procedures to  
                    ensure due process in the adjudication of  
                    disciplinary charges by adjudicators who are  
                    fair, knowledgeable, and otherwise qualified.

                  ?         Written standards and procedures for the  
                    imposition of appropriate sanctions, including,  
                    when warranted, revocation of the designation.

          1. Specifies 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.

          2. Authorizes the 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.

          3. Provides 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.

          4. Repeals redundant continuing education requirements.

          5. Repeals provisions inconsistent with the redrafted and  

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             clarified rules, above.

          6. Repeals obsolete language relevant only during the  
             initial phase-in of the senior designation law.

           Prior Legislation
           
          AB 2150 (Berg), Chapter 327, Statutes of 2008, 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."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT :   (Verified  8/3/10)

          Department of Insurance
          National Association of Insurance and Financial Advisors

           ARGUMENTS IN SUPPORT :    According to the author's office,  
          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 the National Association of Insurance and Financial  
          Advisors, which 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.


           ASSEMBLY FLOOR  :  
          AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill  
            Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,  

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            Bradford, Brownley, Buchanan, Caballero, Charles  
            Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De  
            Leon, DeVore, Emmerson, Eng, Feuer, Fong, Fuentes,  
            Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,  
            Hagman, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,  
            Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,  
            Ma, Mendoza, Miller, Monning, Nestande, Niello, Nielsen,  
            Norby, V. Manuel Perez, Portantino, Ruskin, Salas,  
            Saldana, Silva, Skinner, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Torrico, Tran,  
            Yamada
          NO VOTE RECORDED: De La Torre, Evans, Fletcher, Harkey,  
            Nava, Villines, John A. Perez, Vacancy


          JA:nl  8/3/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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