IIABCal Opposes “Discriminatory” SB 263

SACRAMENTO, CA, April 4, 2023--The National Association of Insurance and Financial Advisors (NAIFA—California) this week joined IIABCal in officially opposing SB 263, a bill that would require agents selling annuities and similar products on commission to fully disclose all compensation but would not impose similar requirements on other sales channels.


SB 263 Would Have Imposed Radical Limitations


As originally introduced, SB 263 would have imposed radical new limitations on the sale of annuities and similar life insurance products. It would have created a “fiduciary relationship,” as a matter of law, and permitted private lawsuits whenever an agent or broker was accused of failing to act in a customer’s “best interests.”   


Amendments have been drafted, though not yet incorporated into the bill, that would remove much of the most objectionable provisions, except one:  requiring agents selling such products to disclose all compensation paid—but only if they are paid by commission. IIABCal supports an Annuity Suitability Model Act adopted by the National Association of Insurance Commissioners (NAIC) and enacted into law in over 30 states.


IIABCal's Letter of Opposition


“It recognizes that producer compensation is one relatively minor component in the overall cost of an insurance policy,” IIABCal wrote in its letter of opposition, “that the existence of multiple delivery systems and compensation models make an “apples-to-apples” comparison of producer compensation impossible, and that consumers should evaluate total premium cost, along with any number of other factors before purchasing any insurance policy or product.  As such, the Model Act requires disclosure of the fact of compensation and avoids discriminating against delivery systems.”


Compensation Disclosure Would Apply Only to Commissioned Agents


SB 263 only applies to insurance agents who are paid on commission. The bill thus appears to discriminate against independent agents who own their own businesses and pay all their own overhead and expenses. This is because independent agents are generally paid higher commissions to offset their cost of doing business, as compared with other sales systems.


SB 263 appears to ignore employee agents who are paid a salary, provided office overhead and support services, employee benefits, employee benefits, and sales bonuses or incentives. The bill also creates an unlevel playing field as compared to captive insurance agents because captive agents are generally paid a lower commission because of the financial support provided by the insurer.


IIABCal members in Senate Insurance Committee districts received a Grassroots Call to Action, urging them to email their Senator to express opposition to the bill, which is scheduled to be heard in that committee April 18.  To see a sample letter, click here.