California Tightens Regs on Variable Products Sales

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.