California has enacted a law that will allow it to move promptly to bar a life insurance agent from selling variable products if the agent is no longer registered with federal regulatory authorities.
The law also clarifies that annuity training requirements must be complied with prior to license renewal.
The provision is amongst several changes in California insurance laws aimed at tightening and streamlining insurance industry oversight.
The changes are contained in A.B. 1416. The bill was signed into law by Gov. Jerry Brown Oct. 2; it passed the legislature with strong support Sept. 6.
One change for both the life and property and casualty industries is reciprocity for insurance companies licensed in other states or nations.
It does so by removing the need for state regulators to review the articles of incorporation for licensees that are incorporated in other states or nations.
However, the provision does not reflect a change in policy for reciprocal licensing of individual agents and brokers in California, as proposed in the National Association of Agents and Brokers Reform Act.
That bill was reintroduced in March by Rep. Randy Neugebauer, R-Tex., and Rep. David Scott, D-Ga.
Both life and property and casualty insurance agents support such legislation, which would create standardization of agent licensing. The issue has been around for more than 10 years.
Such a move toward uniformity was included in the Gramm-Leach-Bliley Act of 1999, but the effort failed because large states such as California declined to support it.
Industry officials declined to comment for the record, but stated privately that this new bill does not represent a change in position by California officials.
Regarding annuity licensing, the legislation permits the state Insurance Department to remove a life agent’s authority to transact variable life insurance contracts upon learning that the agent is no longer registered to transact securities with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority.
According to Dave Jones, state insurance commissioner, the current process is time-consuming, leaving the door open for a life agent to continue selling these insurance products when they are no longer authorized to do so.
“I am very pleased to have this new authority,” he said. “Timelier removal of a life agent’s variable contract authority helps me to better protect consumers from agents who are not authorized to sell annuities or the other complex variable life contract products,” Jones said.
He said the new provision is particularly important in light of the fact that another law just enacted, A.B. 689, establishes for the first time in California suitability requirements for sale of annuities.
Regarding training, every insurance agents selling annuities has been required since 2005 to complete an eight-hour training course. This law also required that every agent complete a four-hour annuity training course every two years prior to their license renewal.
However, according to an explanation provided the governor by the CDI to justify the provision, the clarification is needed even though the insurance department’s licensing bureau has made continuous efforts to notify agents and brokers of this requirement.