SACRAMENTO, CA, May 5, 2023--In a major victory for insurance agents and brokers, the Senate Insurance Committee on April 26 approved SB 263, an annuity regulation bill, only after accepting several amendments urged by IIABCal and other producer groups.
As originally introduced, SB 263 would have imposed radical new limitations on the sale of annuities and other 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.” The bill would also have required agents to disclose all sales commissions and other compensation.
IIABCal Grassroots Opposition Worked
Following a grassroots campaign—in which IIABCal members in districts represented by Senate Insurance Committee members wrote to express their opposition—and excellent lobbying by IIABCal Legislative Advocate John Norwood, the sponsor and author of SB 263 agreed to amendments eliminating the objectionable provisions.
As amended, the bill will apply only to annuities and largely conform to the Annuity Suitability Model Act adopted by the National Association of Insurance Commissioners (NAIC), and enacted into law in over 30 states. That act recognizes that producer compensation is one relatively minor component in the overall cost of an insurance policy, and that consumers most need to evaluate total premium cost, and other factors, before purchasing any insurance policy or product. The Model Act simply requires disclosure of the fact of compensation.
A Dangerous Precedent Avoided
“Requiring commission disclosure does nothing to benefit consumers, so long as total premium cost is made clear, and the major advantages of one policy over another are explained,” IIABCal General Counsel Steve Young said. “Although our members do not concentrate in annuity sales, we do not want to see any bad precedent established.”
Joining IIABCal in opposing SB 263 as originally proposed were the National Association of Insurance and Financial Advisors (NAIFA)—California, and the Association of California Life and Health Insurance Companies (ACLHIC). Additional amendments, regarding technical issues related to annuities, are expected as the bill continues through the legislative process.