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AB-1373 Insurance.(2017-2018)

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Date Published: 07/04/2018 04:00 AM
AB1373:v96#DOCUMENT

Amended  IN  Senate  July 03, 2018
Amended  IN  Senate  July 02, 2018
Amended  IN  Assembly  March 22, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 1373


Introduced by Assembly Member Daly

February 17, 2017


An act to amend Sections 10202, 10202.5, 10202.8, and 10509.915 and 10202.8 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 1373, as amended, Daly. Insurance.
Existing law provides that for purposes of specified group life insurance policies, the term “employee” may include, among others, the officers, managers, and employees of subsidiary or affiliated corporations, and the individual proprietors, partners, and employees of affiliated individuals and firms, as specified. Existing law requires a group life insurance policy to contain a certificate setting forth, among other things, specific information regarding the ability of the employee to retain insurance upon termination, to obtain additional insurance, and to receive benefits upon death.
This bill would also include within the definition of employees for those purposes classes of former employees, including retired employees, and would require these employees to also receive a certificate with those provisions.

Existing law prohibits an insurance producer from soliciting the sale of an annuity product unless the insurance producer has adequate knowledge of the product to recommend the annuity and the insurance producer is in compliance with the insurer’s standards for product training. Existing law requires insurance producers, who are otherwise entitled to engage in the sale of annuity products, to complete training approved by the Insurance Commissioner and provided by a commissioner-approved education provider consisting of specified topics, including, but not limited to, the types of annuities and various classifications of annuities and how fixed, variable, and indexed annuity contract provisions affect consumers.

This bill would require an insurance producer soliciting the sale of an annuity product to provide the applicant with the appropriate deferred annuities buyer’s guide, as defined, adopted by the National Association of Insurance Commissioners, and would add those buyer’s guides to the list of training topics.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 10202 of the Insurance Code is amended to read:

10202.
 Life insurance conforming to all the following conditions is one form of group life insurance:
(a) Written under a policy covering when issued not less than two public or private employees.
(b) Written under a policy issued to the employer, the premium on which is to be paid by the employer, by the employee, or by the employer and employees jointly, and insuring either all of the employees or all of any class or classes thereof, determined by conditions pertaining to the employment.
(c) For amounts of insurance based upon some plan which will preclude individual selection.
(d) For the benefit of persons other than the employer. That group insurance may be for the benefit of a trustee of a pension, welfare benefit plan, or trust established by an employer providing life, health, disability, retirement, or similar benefits to employees of the employer or its affiliates, and acting in a fiduciary capacity with respect to those employees, retired employees, or their dependents or beneficiaries, where the trustee has an insurable interest in the lives of the employees for whom those benefits are to be provided and where the employee has consented in writing to the coverage.
(e) When the premium is to be paid by the employer and employee jointly and the benefits of the policy are offered to all eligible employees.
(f) Terminating if, subsequent to issue, (1) the number of employees insured falls below two lives, and (2) the employee contributions, if the premiums for the insurance are on a renewable term insurance basis, exceed one dollar ($1) per month per one thousand dollars ($1,000) of insurance coverage plus an amount equal to any additional premium per one thousand dollars ($1,000) of insurance coverage charged to cover one or more hazardous occupations.
(g) The application period and the notice requirements shall be the same for classes of former employees and retired employees as those set forth in paragraphs (2) and (4) of subdivision (a) of, and subdivision (b) of, Section 10209.
That insurance may be issued either with or without medical examinations.

SEC. 2.

 Section 10202.5 of the Insurance Code is amended to read:

10202.5.
 (a) The term “employees” as used in Section 10202 may include the officers, managers, and employees of subsidiary or affiliated corporations, and the individual proprietors, partners, and employees of affiliated individuals and firms, when the business of such subsidiary or affiliated corporations, firms or individuals is controlled by the policyholder through stock ownership, contract or otherwise, or when the policyholder is controlled by affiliated corporations, firms or individuals through stock ownership, contract or otherwise. The policy may provide that the term “employees” as used in Section 10202 may include classes of former employees, including retired employees, and may also include the individual proprietors or partners who constitute the policyholder, but limited to such individual proprietors and partners who are actively engaged in the business the employees of which are covered by the group insurance.
(b) Nothing contained herein shall permit any person other than an officer, manager, or employee for compensation, or classes of former employees, including retired employees, of the policyholder or of one or more of the individuals, firms, or corporations or of the individual proprietors or partners specified in subdivision (a) to become insured under a group policy.

SEC. 3.

 Section 10202.8 of the Insurance Code is amended to read:

10202.8.
 A group life policy conforming to all the following conditions may be issued to the trustees of a fund established by employer members of a trade association, or by a trade association maintained by contributions of such members for the sole benefit of their employees or, by one employer, or by two or more employers in the same industry, or by an association of employers in the same industry, or by one or more labor unions, or by one or more employers and one or more labor unions, or by an association of employers and one or more labor unions, to insure employees of the employers or members of the unions for the benefit of persons other than the employers or the unions:
(a) The persons eligible for insurance shall be all of the employees of the employers or all of the members of the unions, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the unions, or to both. The policy may provide that the term “employees” may include classes of former employees, including retired employees, and the individual proprietor or partners if any employer is an individual proprietor or a partnership. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership. The policy may provide that the term “employees” shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship.
(b) The premium for the policy shall be paid by the trustees either: (a) wholly from funds contributed by the employer or employers of the insured persons, or by the union or unions, or by both; or (b) partly from such funds and partly from funds contributed by either all of the insured persons or by one or more classes thereof, or (c) wholly derived funds contributed by the insured persons.
(c) The policy must cover at the date of issue at least 50 persons.
(d) The amounts of insurance under the policy must be based upon some plan precluding individual selection by the insured persons or by the trustees, employers or unions.
That insurance shall be issued with or without medical examination. For the purpose of this section the word “industry” shall include licensed professions, such as medicine, dentistry, pharmacy, law, and accountancy.

SEC. 4.Section 10509.915 of the Insurance Code is amended to read:
10509.915.

(a)(1)An insurance producer shall not solicit the sale of an annuity product unless the insurance producer has adequate knowledge of the product to recommend the annuity, has provided the applicant with the appropriate buyer’s guide, and the insurance producer is in compliance with the insurer’s standards for product training. An insurance producer may rely on insurer-provided product-specific training standards and materials to comply with this subdivision.

(2)As used in this section, “buyer’s guide” means one of the following buyer’s guides adopted by the National Association of Insurance Commissioners:

(A)With respect to sales of fixed or fixed indexed annuities, either of the following:

(i)The Buyer’s Guide for Deferred Annuities (2013).

(ii)The Buyer’s Guide for Deferred Annuities Fixed (2013).

(B)With respect to sales of variable annuities, either of the following:

(i)The Buyer’s Guide for Deferred Annuities (2013).

(ii)The Buyer’s Guide for Deferred Annuities Variable (2013).

(b)(1)An insurance producer who is otherwise entitled to engage in the sale of annuity products shall complete a one-time eight credit-hour annuity training course approved by the commissioner and provided by a commissioner-approved education provider, prior to commencing the transaction of annuities, pursuant to subdivision (a) of Section 1749.8.

(2)In addition to the requirement set forth in paragraph (1), every producer who engages in this state in the sale of annuity products shall satisfactorily complete four continuing education credits prior to license renewal every two years, pursuant to subdivision (b) of Section 1749.8.

(3)The training required under this subdivision shall include information on all of the following topics:

(A)The types of annuities and various classifications of annuities.

(B)Identification of the parties to an annuity.

(C)How fixed, variable, and indexed annuity contract provisions affect consumers.

(D)The application of income taxation of qualified and nonqualified annuities.

(E)The primary uses of annuities.

(F)Prohibited sales practices, the recognition of indicators that a prospective insured may lack the short-term memory or judgment to knowingly purchase an insurance product, and fraudulent and unfair trade practices, as well as replacement and disclosure requirements for sales of annuities, all as provided under California law, including, but not limited to, this article.

(G)The buyer’s guides adopted by the National Association of Insurance Commissioners.

(4)Providers of courses intended to comply with this section shall cover all topics listed in the prescribed outline and shall not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer’s products. Additional topics may be offered in conjunction with and in addition to the required outline.

(5)A provider of an annuity training course intended to comply with this section shall register as a CE provider in this state and comply with the rules and guidelines applicable to insurance producer continuing education courses as set forth in subdivisions (d) and (e) of Section 1749.1, Section 1749.8, and in Sections 2188, 2188.1, 2188.2, 2188.3, 2188.4, 2188.50, 2188.6, 2188.7, 2188.8, and 2188.9 of Title 10 of the California Code of Regulations.

(6)Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with Sections 2188.2 and 2188.3 of Title 10 of the California Code of Regulations.

(7)Providers of annuity training shall comply with the reporting requirements and shall issue certificates of completion in accordance with Section 2188.8 of Title 10 of the California Code of Regulations.

(8)An insurer shall verify that an insurance producer has completed the annuity training required under this section before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy its responsibility under this paragraph by obtaining certificates of completion of the training course or obtaining reports provided by commissioner-sponsored database systems or vendors or from a reasonably reliable commercial database vendor that has a reporting arrangement with approved insurance education providers.