BILL ANALYSIS Ó
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
SB 1184 (Corbett) Hearing Date: April 11, 2012
As Amended: April 9, 2012
Fiscal: Yes
Urgency: No
SUMMARY Would prohibit an insurance agent from providing
assistance to a senior in obtaining veterans benefits through
government programs, unless the agent maintains procedural
safeguards designed to ensure that the agent or broker
transacting insurance has no direct financial incentive to refer
the policyholder or purchaser to any government benefits
program.
DIGEST
Existing law
1. Requires all insurers, brokers, agents, and others
engaged in the transaction of insurance to owe to a
prospective insured who is 65 years of age or older, a duty
of honesty, good faith, and fair dealing.
This bill
1. Would prohibit an insurance broker or agent from
participating in, being associated with, or employing any
party that participates in, or is associated with, the
obtaining of veterans benefits for a senior, unless the
insurance agent or broker maintains procedural safeguards
designed to ensure that the agent or broker transacting
insurance has no direct financial incentive to refer the
policyholder or prospective policyholder to any government
benefits program.
COMMENTS
1. Purpose of the bill
According to the CANHR, to protect veterans from bad acting
insurance agents who mislead seniors about the Veterans Aid
and Attendance benefits program.
SB 1184 (Corbett), Page 2
2. Background
Current federal law prohibits any individual from charging a
fee for helping a veteran file an initial application for
benefits with the U.S. Department of Veterans Affairs
(limited fees may be charged for prosecuting an appeal
before the Board of Veterans Appeals).
According to CANHR, some aggressive marketers selling
insurance products target senior veterans and charge fees to
"educate" veterans or help them prepare claims.
In particular, the CANHR points to the Veterans Aid and
Attendance program designed to provide low-wealth veterans
with financial support to pay for care and allow the veteran
to remain independent. Eligibility is based, in part, on
the applicant's income and net worth. An agent may advise a
senior to "hide" assets in an annuity or trust in order to
qualify for these benefits with intent to sell that product.
By requiring that agents and brokers "maintain procedural
safeguards" designed to avoid a conflict of interest, this
bill adopts a similar approach and language applied to
questionable practices related to reverse mortgages as
addressed in AB 793 (Chapter 223, Statutes of 2011) and AB
329 (Chapter 236, Statutes of 2009).
3. Summary Arguments in Support
a. CANHR supports this bill because it separates
licensed California insurance agents from profiteers who
are charging aged and disabled veterans to qualify for
the free veterans' benefits. SB 1184 makes sure
insurers do not deceptively peddle their products if
they are working with other groups or individuals who
are assisting veterans with benefits.
b. AFSCME supports this bill to avoid the confusion
created by agents that cross sell products - assisting
senior veterans with, or referring them to, Aid and
Attendance for a fee and then selling them policies,
such as annuities. This confuses senior veterans and
conflicts with the spirit of federal law.
SB 1184 (Corbett), Page 3
c. Consumer Attorneys of California supports this
bill because it safeguards veterans from bad acting
insurance agents who mislead seniors about the Veterans
Aid and Attendance benefits program and charge a fee for
services that the VA or veterans service organizations
offer for free.
4. Summary of Arguments in Opposition
None received
5. Questions
a. What safeguards are anticipated by the bill?
b. Should "procedural safeguards" be more precisely
defined? On the other hand, would more defined terms
also outline loopholes in the protections?
1. Suggested Amendments
None
2. Prior and Related Legislation
a. AB 329 (Feuer) (enacted as Chapter 236, Statutes of
2009) enacted the Reverse Mortgage Elder Protection Act
of 2009.
b. SB 180 (Corbett) (enacted as Chapter 79, Statutes of
2011) prohibits a person from charging or receiving an
unreasonable fee to prepare; aid; or advise certain
persons in procuring; maintaining; or securing public
social services, including activities and functions
administered or supervised by the United States
Department of Veterans Affairs or the California
Department of Veterans Affairs, including pension
benefits.
c. AB 793 (Eng) (enacted Chapter 223, Statutes of 2011)
prohibits an insurance broker or agent from participating
in the origination of a reverse mortgage, unless the
insurance agent or broker maintains procedural safeguards
designed to ensure that the agent or broker transacting
SB 1184 (Corbett), Page 4
insurance has no direct financial incentive to refer the
policyholder or prospective policyholder to a reverse
mortgage lender.
POSITIONS
Support
California Advocates for Nursing Home Reform (CANHR)/ Sponsor
American Federation of State, County and Municipal Employees
(AFSCME)
American Association of Retired Persons (AARP)
Consumer Attorneys of California
Oppose
None received
Consultant: Hugh Slayden, (916) 651-4773