Department of Insurance Violation Letter February 1998

CALIFORNIA DEPARTMENT OF INSURANCE

February 3, 1998

On July 30, 1997, a discussion concerning the life and disability insurance analyst license was held between the California Department of Insurance (CDI) and members of the financial planning industry. As you participated in this dialog, I am writing to communicate CDI's policy on this matter.

The focal point for this issue is consumer protection, not the interests of the individual factions. With all parties based in customer service, it is sad that this detail has been lost in much of the discussion. As defined by insurance code Section 32.5, a life and disability insurance analyst is

"... a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than the insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or have any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto."

The fact that there are only 46 life and disability analyst in California is not a valid argument for repealing this code. In fact, the limited number of licensees and population in noncompliance begs for increased education and enforcement. While the easy solution for those in noncompliance may be to repeal this law, consumers who pay for fee advise on insurance matters deserve an analyst educated in insurance per CDI standards. The current licensing requirements ensure that relationship. Any legislative effort to repeal this law will likely be opposed, on the basis that such action is harmful to consumers, by consumer groups, insurers, agents and brokers, and the California Department of Insurance.

At the July 30, 1997 meeting, representatives from the financial planning industry raised two additional suggestions concerning CDI's examination requirement. The first seeks to allow issuance of a Life and Disability Analyst license to Certified Financial Planners and Certified Public Accountants following the successful completion of their own professional examinations. Again, this is an idea that requires legislation and will certainly face opposition. CDI's position remains at only those individuals who pass CDI's exam are to be issued a life and disability analyst license. CDI is the agency charged with enforcing this license and will remain, via its examination and related or regulatory functions, the authorizing agency for this license.

The final suggestion request a waiver of the requirement than an examinee must have five (5) years experience as a life licensee, or employment experience under said licensee, to sit for CDI's examination. Again, this is an idea that requires legislation. CDI will reserve judgment until the full breadth of this proposal has been introduced to the state legislature.

Despite some groups interest in changing current law, there is an existing law which is, and has always been, quite clear. While a financial planner may be illegally engaging in insurance analyst activities and may not be aware of their violation, it is my hope that this the explanation of policy will provide them with the impetus to come into compliance or cease the illegal activity immediately. Per insurance code Section 1844, " any person who acts, offers to acts, assumes to act, as a life and disability insurance analyst when not licensed by the commissioner per this article...... is guilty of a misdemeanor." Consistent with current practice, information obtained on individuals in noncompliance will be aggressively pursued.

Jeffrey Kenny, Assistant Ombudsman and Legislative Liaison