Senate BillNo. 924


Introduced by Senator Roth

January 28, 2016


An act to amend Section 10509.913 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

SB 924, as introduced, Roth. Insurance: annuity transactions.

Under existing law, the Insurance Commissioner, who controls the California Department of Insurance, regulates the insurance industry. Existing law requires insurers and insurance producers, as defined, to comply with specified requirements regarding the purchase, exchange, or replacement of an annuity recommended to a consumer, including, but not limited to, having reasonable grounds for the insurance producer believing the annuity transaction would be suitable for the consumer based on “suitability information,” including, among other factors, age, annual income, and whether the consumer has a reverse mortgage. Existing law authorizes the commissioner to require certain actions by, and impose sanctions and penalties on, insurers and their agents for a violation of these provisions.

This bill would add to the suitability information whether the consumer intends to apply for government benefits.

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

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

P1    1

SECTION 1.  

Section 10509.913 of the Insurance Code is
2amended to read:

P2    1

10509.913.  

(a) “Annuity” means an annuity that is an insurance
2product under California law that is individually solicited,
3begin insert regardless ofend insert whether the product is classified as an individual or
4group annuity.

5(b) “Commissioner” means the Insurance Commissioner.

6(c) “Continuing education credit” or “CE credit” means one
7continuing education credit hour as defined in Section 2188.2(i)
8of Title 10 of the California Code of Regulations.

9(d) “Continuing education provider” or “CE provider” means
10an individual or entity that is certified to offer continuing education
11courses pursuant to Section 2186.1(b) and Section 2188 of Title
1210 of the California Code of Regulations.

13(e) “Insurance producer” means a person required to be licensed
14under California law to sell, solicit, or negotiate insurance,
15including annuities. An insurance producer is also referred to in
16this article as a “producer.”

17(f) “Insurer” means a company required to be licensed or to
18hold a certificate of authority, or both, under California law to
19provide insurance products, including annuities.

20(g) “Recommendation” means advice or guidance provided or
21begin delete made,end deletebegin insert madeend insert by an insurance producer or by anbegin delete insurer,end deletebegin insert insurerend insert to
22an individual consumer that results in a purchase, exchange, or
23replacement of an annuity in accordance with that advice or
24guidance.

25(h) “Replacement” means a transaction in which a new policy
26or contract is to be purchased, and it is known or should be known
27to the proposing producer, or to the proposing insurer,begin insert regardless
28ofend insert
whetherbegin delete or notend delete there is a producer, that by reason of the
29transaction, an existing policy or contract has been or is to be any
30of the following:

31(1) Lapsed, forfeited, surrendered or partially surrendered,
32assigned to the replacing insurer, or otherwise terminated.

33(2) Converted to reduced paid-up insurance, continued as
34extended term insurance, or otherwise reduced in value by the use
35of nonforfeiture benefits or other policy values.

36(3) Amended so as to effect either a reduction in benefits or a
37reduction in the term for which coverage would otherwise remain
38in force or for which benefits would be paid.

39(4) Reissued with any reduction in cash value.

40(5) Used in a financed purchase.

P3    1(i) “Suitability information” means information that is
2reasonably appropriate to determine the suitability of a
3recommendation, including all of the following:

4(1) Age.

5(2) Annual income.

6(3) Financial situation and needs, including the financial
7resources used for the funding of the annuity.

8(4) Financial experience.

9(5) Financial objectives.

10(6) Intended use of the annuity.

11(7) Financial time horizon.

12(8) Existing assets, including investment and life insurance
13holdings.

14(9) Liquidity needs.

15(10) Liquid net worth.

16(11) Risk tolerance.

17(12) Tax status.

18(13) Whetherbegin delete or notend delete the consumer has a reverse mortgage.

begin insert

19(14) Whether the consumer intends to apply for government
20benefits.

end insert


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