BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
SB 396 (Calderon) Hearing Date: April 29, 2009
As Amended April, 23, 2009
Fiscal: Yes
Urgency: No
SUMMARY Would require an existing report on agent licensure
activity (within the Department of Insurance's Annual Report) to
include information on the number of first-time examinees who
passed the exam and their overall pass rate by category of
license and also the total number of examinations and mean
examination score for all examinees by license category.
DIGEST
Existing law
1. California's Insurance Commissioner is required, on or
before the first day of August each year, to submit an
Annual Report to the Governor, the Legislature, and to the
Senate and Assembly committees with jurisdiction over
insurance that reports on the activities of that office and
which shows, generally, the condition of the insurance
business and interests in this state;
2. Effective 2008, California began issuing 3 new classes of
insurance agent licenses. The new license classes are:
a. a limited lines auto-only agent license;
b. a life-only agent license; and
c. an accident and health agent license;
3. These three new limited classes of license are subject to
licensure and continuing education requirements appropriate
to the limited scope of the license, with the aim of
facilitating entry of qualified personnel into the agency
profession to better ensure that the insurance needs of
SB 396 (Calderon), Page 2
Californians are met;
4. To facilitate monitoring the results of this revised
approach to licensing, the Insurance Commissioner, for a 5
year period, is required to include in that office's Annual
Report information for the previous calendar year
summarizing:
a. The total number of applications filed for a
fire and casualty broker-agent license, a personal
lines broker-agent license, a limited lines auto-only
agent license, a life-only agent license, and an
accident and health agent license;
b. The total number of licensees issued a fire
and casualty license, a personal lines license, a
limited lines automobile license, a life-only license,
and an accident and health license;
c. The total number of licensees with both a
life-only agent license and an accident and health
agent license.
This bill
1. Would require that the Insurance Commissioner's Annual
Report include information on the overall pass rate for
first time examinees, for the following classes of
applicants:
a. fire and casualty broker-agent license;
b. personal lines broker-agent license;
c. auto-only agent license;
d. life-only agent license; and
e. accident and health agent license;
2. Would also require the report to include the total number
of examinations administered and the mean examination score
of all examinees for each of the license categories reported
upon.
SB 396 (Calderon), Page 3
COMMENTS
1. Purpose of the bill To, during the 5 year period of
reporting on applications for the new limited lines of agent
licensing, require that data be obtained regarding the
number and pass rate of first time examines for each of the
licenses covered by the current reporting requirement as
well as the mean examination score for all examinees by
license type.
2. Background The American Council of Life Insurers (ACLI) and
the National Association of Insurance and Financial Advisors
(NAIFA) are embarking on a multi-faceted project to improve
the way in which the states test and license life insurance
agents. ACLI and NAIFA have concluded that comprehensive
reform of the life agent testing and licensing processes are
necessary to attract new entrants to the field of career
life agent, and to grow delivery of needed life and income
protection products to the middle market.
3. Material provided by the sponsor indicates that while the
ACLI and NAIFA believe insurance products are available to
all Americans, the presence of traditional, career insurance
agents in all communities is vital to the education of
consumers about insurance products and to the continued
availability of such products into the future. These
materials indicate several recent studies identify a
persistent decline in the number of career insurance agents
available to serve the public. The studies report 77% of
Americans do not have a personal life agent to assist them
with their insurance needs and since 1975 there has been a
46% decline in the number of new recruits. It is argued the
decline in the number of new agents has led to fewer
Americans having the protection they need to secure their
families future. The ACLI and NAIFA believe it is
important that the insurance agent licensing process
recognize the changing demographics of our country and be
flexible to ensure that every community is served by
qualified life agents.
4. The bill is designed, during the 5 year period of heightened
reporting on applications for licensure under the newly
instituted limited lines licenses, to provide data that
allows comparing the overall pass rate of first time
examinees with the overall pass rate for all examinees by
SB 396 (Calderon), Page 4
covered license category.
5. The licensing examination process, as administered by the
Department of Insurance, relies on a computer based exam,
except for examinations administered in Clovis. According
to the DOI website, the Clovis exam remains a paper-based
exam. At all computer-based examination sites (Sacramento,
San Diego, San Francisco and Los Angeles) tests are
administered two times daily on weekdays. The Clovis site
administers its paper-based examination on the 1st and 3rd
Saturday of each month.
In addition to these examinations administered on site at
California DOI locations, applicants have the option of
taking an online version of the test from a computer
terminal located at any setting of their choice.
SB 396 (Calderon), Page 5
6. Questions None
7. Suggested Amendments . None
8. Prior Legislation
a. AB 720 (De Leon) of 2007 and AB 797 (Coto) of
2007 established the limited lines which are the
subject of this bill, including the 5 year long
reporting process for monitoring licensing activity in
the affected lines which this measure would modify.
POSITIONS
Support
American Council of Life Insurers (ACLI)
Association of California Life & Health Insurance Companies
(ACLHIC)
Oppose
None
Consultant: Kenneth Cooley (916) 651-4772