BILL ANALYSIS Ó
SB 1170
Page 1
Date of Hearing: June 20, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 1170 (Leno) - As Amended: May 1, 2012
SENATE VOTE : 38-0
SUBJECT : Insurance: Sale to Seniors and Senior Veterans
SUMMARY : Expands consumer protections governing the sale of
insurance to Seniors, and adds specific protections for Senior
Veterans. Specifically, this bill :
1)Makes it an unfair sales practice to fail to disclose to a
veteran, in connection with advertising for events, seminars,
workshops and related activities concerning veterans benefits,
that the promoters are not authorized to represent veterans in
the application for or appeal of the denial of veteran's
benefits.
2)Requires this disclosure to be made in at least the same size
type as the word "veteran" or similar words is used in the
advertising, and requires the disclosure to be repeated both
orally and in writing at the beginning of the event.
3)Makes it an unfair sales practice for any advertising for a
veterans event, seminar, workshop and related activities that
is not sponsored by the California Department of Veterans
Affairs or the United States Department of Veterans Affairs
(VA), or other Congressionally designated veterans
organization, to fail to contain a specific statement that the
event is not sponsored by these governmental agencies.
4)Prohibits an insurance agent who is not an attorney from
delivering to any person 65 years of age or older a living
trust or other legal document if the purpose is the sell the
senior an insurance product.
5)Prohibits an insurance agent who is an attorney from
delivering a living trust or other legal document to a person
65 years of age or older, if the purpose is to sell the senior
an insurance product, unless a detailed disclosure that is
currently required of attorneys is provided by the insurance
agent.
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6)Expands the definition of "advertisement" in the senior
insurance consumer protection law.
7)Adds veterans organizations to the list of entities whose
logos may not be copied or used, or similar images created, in
a manner that implies endorsement by or a connection with that
organization.
8)Prohibits use of terminology in written materials that is
similar to or could deceive the prospective senior purchaser
that the policy is offered by a veteran's organization.
9)Prohibits advertising for products intended to be sold to
seniors to imply that the sale is endorsed or associated with
the Social Security Administration or Department of Veterans
Affairs.
10)Requires a specified notice that current law requires to be
provided at least 24 hours before a visit to the home of a
senior to sell insurance be provided no earlier than 14 days
prior to the visit, and requires this notice to be in at least
16-point font in a stand-alone document.
11)Requires this notice to contain the agent's full name,
license number, telephone number and address, and contain
specific statements that "I am a licensed insurance agent" and
"My purpose for coming to your home is to sell, discuss, or
deliver" an insurance product.
EXISTING LAW :
1)Specifies 24 separate acts or practices that constitute unfair
practices in connection with the sale or lease of goods or
services.
2)Establishes a comprehensive regulatory system specific to the
sale of insurance products to seniors, but does not include
specific provisions addressing veterans, and issues unique to
veterans.
3)Prohibits an insurance agent from paying commissions to an
attorney for the referral of a policyholder.
4)Requires, at least 24 hours prior to a visit to a senior's
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home to sell insurance, that an agent provide a notice, in at
least 14-point font, that specifies a series of rights the
senior has, including the right to have other persons present,
to terminate the meeting at any time, and specifying who will
be attending and the Department of Insurance contact
information.
FISCAL EFFECT : Because the bill was referred directly from the
Senate Appropriations Committee to the Senate Floor pursuant to
Senate Rule 28.8, it appears that any costs would be minor and
absorbable by the Department of Insurance.
COMMENTS :
1)Purpose . According to the author, despite certain consumer
protections for veterans in connection with various Veterans'
benefits, insurance agents have been targeting higher wealth
veterans with misleading and abusive marketing strategies that
have less to do with legitimate financial management and more
to do with selling these veterans insurance products. In
addition, the bill is aimed at preventing inappropriate
charges for "assisting" veterans in the application for, or
appeal of the denial of, veterans benefits.
2)Background . The Aid and Attendance Program is a federal VA
program designed for low-wealth veterans who cannot afford
medical supplies or in-home care services. According to a
recent General Accounting Office (GAO) study, the program is
being abused by insurance agents and others who arrange with
wealthier veterans to have their assets placed in trusts or
deferred annuities, thereby qualifying them for benefits. The
GAO report also found that inappropriate fees were being
charged to these veterans despite the federal program's ban on
fees to assist a veteran to apply for benefits.
For the past decade, there has been an ongoing Legislative focus
on the financial abuse of seniors, but these efforts have not
focused specifically on some of the issues that directly
affect veterans. It appears that efforts to protect seniors
generally have focused some of the less scrupulous market
participants who find unique ways to take advantage of certain
seniors, in this case those who might be eligible for federal
benefits.
The GAO report also noted that the lack of a federal financial
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"look back" requirement is enabling the Aid and Attendance
Program's resources to be unwisely spent on veterans who may
not be the Program's target population. While this bill
cannot address that loophole in federal law, it can address
the tactics that enable to loophole to be exploited.
3)Support . Supporters argue that certain financial predators
manipulate seniors and veterans into believing that they
possess special knowledge or special connections to legitimate
organizations, and then charge exorbitant fees in connection
with transactions. In particular, supporters note the focus
on veterans, and the financial manipulations necessary to
"qualify" otherwise not qualified veterans for certain VA
benefits intended for the less wealthy veteran population.
Supporters also argue that these financial predators have
found ways to get around some of the existing protections for
seniors, such as "complying" with notice requirements for
in-home meetings so far in advance, or so buried in voluminous
documentation, that these laws need the updates provided by
the bill.
4)Past and Related legislation . SB 1184 (Corbett) would
prohibit an insurance agent from having a financial interest
in an entity to which he or she refers a client in connection
with veterans benefits. The bill is pending in the Assembly.
AB 689 (Blumenfield), Statutes 2011, Chapter 289, adopted
"suitability" standards with respect to the sale of annuities
to seniors.
SB 620 (Scott), Statutes 2004, Chapter 547, enacted a
comprehensive senior insurance protection law.
AB 2150 (Berg), Statutes 2008, Chapter 327, adopted restrictions
on the designations insurance agents may use to describe
themselves, where the designation suggests special expertise
or trust.
REGISTERED SUPPORT / OPPOSITION :
Support
California Advocates for Nursing Home Reform (sponsor)
AARP
AFSMCE
SB 1170
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American Legion, Department of California
AMVETS, Department of California
California Alliance for Retired Americans
California Association of County Veterans Service Officers
California Commission on Aging
California Senior Legislature
Consumer Federation of California
Department of Insurance
Vietnam Veterans of America, California State Council
Opposition
None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086