Senate Bill No. 476

Introduced by Senator Steinberg

February 21, 2013

An act to amend Section 10127.17 of the Insurance Code, relating to life insurance.

LEGISLATIVE COUNSEL’S DIGEST

SB 476, as introduced, Steinberg. Life insurance: consumer protection.

Existing law creates the Life and Annuity Consumer Protection Fund as a special account within the Insurance Fund. Existing law requires each insurer admitted to transact insurance in this state to pay a fee determined by the Insurance Commissioner, not to exceed $1, for each individual life insurance policy and each individual annuity product that it issues to a resident of this state with a value of $15,000 or more. If an insurer elects to charge the purchaser of a life insurance policy or annuity product this fee, the fee is required to be set forth as a separate charge in the contract schedule or premium notice. The moneys in the Life and Annuity Consumer Protection Fund are to be distributed, as provided, and are required to be used exclusively for the purpose of protecting consumers of life insurance and annuity products in this state.

This bill would make technical, nonsubstantive changes to those provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 10127.17 of the Insurance Code is
amended to read:

10127.17.  

(a) The Life and Annuity Consumer Protection
Fund is hereby created as a special account within the Insurance
Fund. Each insurer admitted to transact insurance in this state shall
pay a fee to be determined by the commissioner, not to exceed one
dollar ($1), for each individual life insurance policy and each
individual annuity product that it issues to a resident of this state
with a value of fifteen thousand dollars ($15,000) or more. If an
insurer elects to charge the purchaser of a life insurance policy or
annuity product this fee, the fee shall be set forth as a separate
charge in the contract schedule or premium notice. Life insurance
or annuity forms are not required to be filed again for review as a
consequence of this provision. This fee shall be assessed on all
new individual life insurance policies and annuity products issued
during the prior 12 months, and shall be deposited into the Life
and Annuity Consumer Protection Fund.

(b) Moneys in the Life and Annuity Consumer Protection Fund
shall be distributed by the commissioner and shall be exclusively
dedicated to protecting consumers of life insurance and annuity
products in this state. Moneys in the fund shall not be used for any
other purpose.

(c) Fifty percent of these funds shall be distributed within the
department for consumer protection functions related to individual
life insurance and annuity products, including, but not limited to:

(1) Investigating and prosecuting financial abuse by insurance
licensees, or persons holding themselves out to be insurance
licensees, or any person purporting to be engaged in the business
of insurance.

(2) Responding to consumer inquiries and complaints related
to life insurance or annuity products.

(3) Educating consumers in all aspects of life insurance and
annuity products, consumer protection, purchasing and using
insurance and annuity products, claim filing, benefit delivery, and
dispute resolution.

(4) Regulating and overseeing life insurance and annuity
products and advertising for these products directed toward
consumers.

(d) Fifty percent of the funds shall be distributed to district
attorneys for investigating and prosecuting individual life insurance
and annuity product financial abuse cases involving insurance
licensees, or persons holding themselves out to be insurance
licensees, or any person purporting to be engaged in the business
of insurance, and for other projects beneficial to insurance
consumers.

(1) The commissioner shall distribute funds to district attorneys
who are able to show a likely positive outcome that will benefit
consumers in the local jurisdiction based on specific criteria
begin delete promulgated end delete begin insert adopted end insert by the commissioner. Each local district
attorney desiring a portion of those funds shall submit begin delete to the
commissioner end delete an application begin insert to the commissioner end insert , including, at a
minimum:

(A) The proposed use of the moneys and the anticipated
outcome.

(B) A list of all prior relevant cases or projects and a copy of
the final accounting for each. If cases or projects are ongoing, the
most recent accounting shall be provided.

(C) A detailed budget, including salaries, and general expenses,
and specifically identifying the cost of purchase or rental of
equipment or supplies.

(2) Each district attorney that receives funds pursuant to this
section shall submit a final detailed accounting at the conclusion
or closure of each case or project. For cases or projects that
continue longer than six months, interim accountings shall be
submitted every six months, or as otherwise directed by the
commissioner.

(3) Each district attorney that receives funds pursuant to this
section shall submit a final report to the commissioner, that may
be made public, as to the success of the case or project conducted.
The report shall provide information and statistics on the number
of active investigations, arrests, indictments, and convictions. The
applications for moneys, the distribution of moneys, and the annual
reports shall be public documents.

(4) Notwithstanding any other provision of this section,
information submitted to the commissioner pursuant to this section
concerning criminal investigations, whether active or inactive,
shall be confidential.

(5) The commissioner may conduct a fiscal audit of the programs
administered under this subdivision. This fiscal audit shall be
conducted by an internal audit unit of the department. The cost of
any fiscal audits shall be paid for from the Life and Annuity
Consumer Protection Fund begin delete established by this section end delete .

(6) If the commissioner determines that a district attorney is
unable or unwilling to investigate or prosecute a relevant financial
abuse case, the commissioner may discontinue distribution of funds
allocated for that matter and may redistribute those funds to other
eligible district attorneys.

(e) The funds received under this section shall be deposited in
the Life and Annuity Consumer Protection Fund within the
Insurance Fund, and shall be expended and distributed begin delete as
appropriated end delete begin insert upon appropriation end insert by the Legislature for the
purposes of this section. The total amount contained in the Life
and Annuity Consumer Protection Fund shall not exceed five
million dollars ($5,000,000) annually. If, as of June 30 of any
calendar year, the moneys in the fund exceed this amount, the
commissioner shall adjust the amount of the assessment for the
following year. An insurer, upon receipt of an invoice, shall
transmit payment to the department for deposit in the Life and
Annuity Consumer Protection Fund. Any balance remaining in
the Life and Annuity Consumer Protection Fund at the end of the
fiscal year shall be retained in the account and carried forward to
the next fiscal year.

(f) The commissioner may develop guidelines for implementing
or clarifying these provisions, including guidelines for the
allocation, distribution, and potential return of unused funds. The
commissioner may, from time to time, issue regulations for
implementing or clarifying these provisions.

(g) The begin delete Commissioner end delete begin insert commissioner end insert shall provide a
consolidated report annually on the department’s Internet Web
site begin delete , which end delete begin insert that end insert shall include, but is not limited to, the following
information:

(1) The number of opened consumer complaints related to life
insurance or annuity products.

(2) The number of opened investigations related to life insurance
or annuity products.

(3) The number of investigations related to life insurance or
annuity products referred to and reported by prosecuting agencies.

(4) The number of administrative or regulatory cases related to
life insurance or annuity products referred to the department’s
legal division.

(5) The number of administrative or regulatory enforcement
actions taken in cases related to life insurance or annuity products.

(6) Descriptions of education programs and efforts by the
department to educate consumers in all aspects of life insurance
and annuity products, consumer protection, purchasing and using
insurance and annuity products, claim filing, benefit delivery, and
dispute resolution.

(h) This section shall remain in effect only until January 1, 2015,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2015, deletes or extends that date.