BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1170|
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THIRD READING
Bill No: SB 1170
Author: Leno (D), et al.
Amended: 5/1/12
Vote: 21
SENATE INSURANCE COMMITTEE : 7-0, 4/11/12
AYES: Calderon, Gaines, Anderson, Corbett, Correa,
Lowenthal, Wyland
NO VOTE RECORDED: Lieu, Price
SENATE JUDICIARY COMMITTEE : 5-0, 4/17/12
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Senior insurance
SOURCE : American Legion, Department of California
AMVETS-Department of California
California Advocates for Nursing Home Reform
California Association of County Veterans
Service Officers
Vietnam Veterans of America - California State
Council
DIGEST : This bill restricts marketing strategies used by
insurance agents on persons over the age of 65, requires
certain disclosures when advertising or marketing the
provision of assistance to veterans to obtain veterans
benefits from the Department of Veterans Affairs, and
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prohibits insurance agents from delivering legal documents,
including living trust agreements, as a pretext for selling
insurance products.
ANALYSIS :
Existing law:
1. Makes it unlawful to engage in specified practices,
unfair methods of competition, and unfair or deceptive
acts or practices in a transaction intended to result or
that results in the sale or lease of goods or services,
including making false or misleading statements
concerning the existence of price reductions, or the
home solicitation of a consumer who is a senior citizen
where a loan is made encumbering the primary residence
of that consumer for purposes of paying for home
improvements. A consumer who suffers damages as a
result of the use or employment of the prohibited acts
or practices may bring an action to recover civil
damages of at least $1,000, and, if the victim is a
senior citizen and the trier of fact makes specified
findings, including that the consumer has suffered
substantial physical, emotional, or economic damage
resulting from the defendant's conduct, to recover an
additional amount of up to $5,000.
2. Provides that all insurers, brokers, agents, and others
engaged in the transaction of insurance owe a
prospective insured who is 65 years of age or older, a
duty of honesty, good faith, and fair dealing. This
duty is in addition to any other duty, whether express
or implied, that may exist.
3. Requires any person who meets with a senior in the
senior's home to deliver a specified notice to the
senior in writing, in 14-point type, no less than 24
hours prior to that individual's initial meeting in the
senior's home.
4. Sets certain standards with regard to an advertisement,
as defined, or other device designed to produce leads
based on a response from a potential insured that is
directed to a person 65 years of age or older,
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including, but not limited to, disclosing certain
information, not using certain language, names, letters,
or symbols, and not using specified deceptive or
misleading practices and materials.
5. Provides that a broker or agent may not use a senior
designation unless he or she has met certain conditions,
including, but not limited to, that the broker or agent
has been granted the right and is currently authorized
to use the senior designation by the organization that
issues the designation, and the senior designation has
been approved by the Insurance Commissioner for use by
brokers and agents in the sale of insurance to seniors,
as provided. Existing law deems certain words, phrases,
acronyms, and logos as a senior designation.
This bill:
1. Expands that provision to include advertising or
promoting any event, presentation, seminar, workshop, or
other public gathering regarding veterans' benefits or
entitlements that does not include a statement that the
person disseminating the statement is not authorized to
file an initial application for veterans' benefits or
that the event is not sponsored by or affiliated with
specified veterans' organizations, including the United
States Department of Veterans Affairs (VA).
2. Prohibits an insurance agent who is not a licensed
attorney from delivering to a person who is 65 years of
age or older a living trust or other legal document,
other than an insurance contract or other insurance
product document, if a purpose of the delivery is to
sell an insurance product.
3. Prohibits an insurance agent who is a licensed attorney
from delivering to a person who is 65 years of age or
older a living trust or other legal document, other than
an insurance contract or other insurance product
document, unless the insurance agent complies with the
commission disclosure requirements.
4. Additionally requires the notice to be delivered no more
than 14 days prior to the meeting. This bill also
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requires that the notice be a stand-alone document in
16-point bold type, rather than 14-point bold type, that
the notice include specified information regarding the
agent, including his/her full name and license number,
and that the notice include a specified statement.
5. Changes the definition of advertisement to also include
worksheets, questionnaires, or other materials designed
to collect personal or financial information about a
prospective insured or annuitant.
6. Adds veterans' organizations, veterans' agencies, and
the VA to the list of those entities that cannot be used
in specified deceptive or misleading advertising
practices and materials.
Background
The VA administers the Aid and Attendance Program as a
safety net program for low wealth veterans and their
spouses who cannot afford to pay for medical supplies or
in-home healthcare.
Federal law prohibits any individual or organization from
charging a fee for helping a veteran file an initial
application for benefits. (38 CFR § 14.636) Federal law
also prohibits any one from preparing or presenting any
claim under laws administered by the VA Secretary, unless
that individual has been recognized for such purposes by
the VA. (38 U.S.C. § 5901)
According to California Advocates for Nursing Home Reform,
predatory practices by some insurance sales agents target
seniors and senior veterans by appealing to the senior's
need for financial assistance or estate planning to gain
access to personal information or gain entrance into the
home of senior.
A sales agent may offer a "free lunch" seminar to educate
senior veterans about VA benefits. These seminars are
frequently advertised as if sponsored by non-profit
veterans' organizations or governmental agencies that
assist veterans. Related advertising materials usually
fail to disclose that the sponsor of the event intends to
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gather personal and financial data in order to sell
insurance products. At the seminars, an agent may review
senior veterans' investments, inform them that their
current investments are unsafe, and advise them that in
order to qualify for VA benefits, they must transfer their
assets into a living trust funded by a deferred annuity.
An agent or sales organization might work with an attorney
who drafts and sells living trust documents. Once the
personal information is gathered from a senior and a
"living trust document" is drafted, the agent will contact
the senior to notify the senior that he or she has been
"retained" to deliver the legal document to the senior's
home. The agent sets up a convenient time for the delivery
of the senior's pre-paid documents, and follows up with a
letter confirming the time the agent will be at the
senior's home. The purpose of the visit is not to deliver
and explain the trust documents, but to sell insurance
products that may be inappropriate for the senior's
financial needs.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/30/12)
American Legion, Department of California (co-source)
AMVETS-Department of California (co-source)
California Advocates for Nursing Home Reform (co-source)
California Association of County Veterans Service Officers
(co-source)
Vietnam Veterans of America - California State Council
(co-source)
American Association of Retired People
American Federation of State, County and Municipal
Employees
California Alliance for Retired Americans
California Commission on Aging
California Senior Legislature
Consumer Federation
Department of Insurance
ARGUMENTS IN SUPPORT : California Advocates for Nursing
Home Reform (CANHR) supports this bill because predators
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that manipulate seniors into believing they possess special
skills and knowledge and know the ins-and-outs of "getting
around the system" often charge exorbitant fees that are
out of proportion to the worth of their advice. The advice
provided may damage the seniors' estates or preexisting
estate plans and end up thwarting their testamentary
wishes. This bill requires notices designed to inform
interested parties about services provided and safeguards
to prevent misleading advertisements.
CANHR also states that some agents have found a way to work
around notice requirements intended to protect seniors from
aggressive sales pitches targeted in senior's homes. Some
agents have buried required declarations on back pages of
letters. On introductory or cover pages, some agents have
claimed to be experienced Retirement Planners licensed with
the CDI. Strengthened notification requirements clarify
the purpose of an agent's visit.
Additionally, CANHR expresses concern that an agent
delivering estate documents has access to invaluable
personal information and that delivery of prepaid legal
documents unjustifiably gives an annuity agent an
opportunity to gain entrance into the home and pressure a
senior into purchasing
unneeded or inappropriate products. This bill directly
prohibits that sales technique.
JJA:mw 5/1/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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