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. SB 1170 Page 2 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 SB 1170 Page 3 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 SB 1170 Page 4 "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 Page 5 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