2009 California Insurance Code - Section 10234.8-10234.97 :: Article 3.7. Consumer Protection

10234.8.  (a) With regard to long-term care insurance, all insurers,
brokers, agents, and others engaged in the business of insurance owe
a policyholder or a prospective policyholder a duty of honesty, and
a duty of good faith and fair dealing.
   (b) Conduct of an insurer, broker, or agent during the offer and
sale of a policy previous to the purchase is relevant to any action
alleging a breach of the duty of honesty, and a duty of good faith
and fair dealing.

10234.85.  No insurer, broker, agent, or other person shall cause a
policyholder to replace a long term care insurance policy
unnecessarily. Nothing in this section shall be construed to allow an
insurer, broker, agent, or other person to cause a policyholder to
replace a long term care insurance policy that will result in a
decrease in benefits and an increase in premium.
   It shall be presumed that any third or greater policy sold to a
policyholder in any 12-month period is unnecessary within the meaning
of this section. This section shall not apply to those instances in
which a policy is replaced solely for the purpose of consolidating
policies with a single insurer.

10234.86.  (a) Every insurer shall maintain records for each agent
of that agent's amount of replacement sales as a percent of the agent'
s total annual sales and the amount of lapses of long-term care
insurance policies sold by the agent as a percent of the agent's
total annual sales.
   (b) Every insurer shall report annually by June 30, the 10 percent
of its agents in the state with the greatest percentage of lapses
and replacements as measured by subdivision (a).
   (c) Every insurer shall report annually by June 30, the number of
lapsed policies as a percent of its total annual sales in the state,
as a percent of its total number of policies in force in the state,
and as a total number of each policy form in the state, as of the end
of the preceding calendar year.
   (d) Every insurer shall report annually by June 30, the number of
replacement policies sold as a percent of its total annual sales in
the state and as a percent of its total number of policies in force
in the state as of the end of the preceding calendar year.
   (e) Reported replacement and lapse rates do not alone constitute a
violation of insurance laws or necessarily imply wrongdoing. The
reports are for the purpose of reviewing more closely agent
activities regarding the sale of long-term care insurance.

10234.87.  (a) If an insurer replaces a policy or certificate that
it has previously issued, the insurer shall recognize past insured
status by granting premium credits toward the premiums for the
replacement policy or certificate. The premium credits shall equal
five percent of the annual premium of the prior policy or certificate
for each full year the prior policy or certificate was in force. The
premium credit shall be applied toward all future premium payments
for the replacement policy or certificate, but the cumulative credit
allowed need not exceed 50 percent. No credit need be provided if a
claim has been filed under the original policy or certificate.
   (b) The cumulative credits allowed need not reduce the premium for
the replacement policy or certificate to less than the premium of
the original policy or certificate.
   (c) This section shall not apply to life insurance policies that
accelerate benefits for long-term care.

10234.9.  (a) Every insurer providing long-term care coverage in
California shall provide a copy of any advertisement intended for use
in California to the commissioner for review at least 30 days before
dissemination. The advertisement shall comply with all laws in
California. In addition, the advertisement shall be retained by the
insurer in accordance with Section 10508 for at least three years.
   (b) An advertisement designed to produce leads must prominently
disclose that "an insurance agent will contact you" if that is the
case.
   (c) An agent, broker, or other person who contacts a consumer as a
result of receiving information generated by a cold lead device,
shall immediately disclose that fact to the consumer.

10234.93.  (a) Every insurer of long-term care in California shall:
   (1) Establish marketing procedures to assure that any comparison
of policies by its agents or other producers will be fair and
accurate.
   (2) Establish marketing procedures to assure excessive insurance
is not sold or issued.
   (3) Submit to the commissioner within six months of the effective
date of this act, a list of all agents or other insurer
representatives authorized to solicit individual consumers for the
sale of long-term care insurance. These submissions shall be updated
at least semiannually.
   (4) Provide the following training and require that each agent or
other insurer representative authorized to solicit individual
consumers for the sale of long-term care insurance shall
satisfactorily complete the following training requirements that, for
resident licensees, shall count toward the licensee's continuing
education requirement, but may still result in completing more than
the minimum number of continuing education hours set forth in this
section:
   (A) For licensees issued a license after January 1, 1992, eight
hours of training in each of the first four 12-month periods
beginning from the date of original license issuance and thereafter
eight hours of training prior to each license renewal.
   (B) For licensees issued a license before January 1, 1992, eight
hours of training prior to each license renewal.
   (C) For nonresident licensees that are not otherwise subject to
the continuing education requirements set forth in Section 1749.3,
the evidence of training required by this section shall be filed with
and approved by the commissioner as provided in subdivision (g) of
Section 1749.4.
   Licensees shall complete the initial training requirements of this
section prior to being authorized to solicit individual consumers
for the sale of long-term care insurance.
   The training required by this section shall consist of topics
related to long-term care services and long-term care insurance,
including, but not limited to, California regulations and
requirements, available long-term care services and facilities,
changes or improvements in services or facilities, and alternatives
to the purchase of private long-term care insurance. On or before
July 1, 1998, the following additional training topics shall be
required: differences in eligibility for benefits and tax treatment
between policies intended to be federally qualified and those not
intended to be federally qualified, the effect of inflation in
eroding the value of benefits and the importance of inflation
protection, and NAIC consumer suitability standards and guidelines.
   (5) Display prominently on page one of the policy or certificate
and the outline of coverage: "Notice to buyer: This policy may not
cover all of the costs associated with long-term care incurred by the
buyer during the period of coverage. The buyer is advised to review
carefully all policy limitations."
   (6) Inquire and otherwise make every reasonable effort to identify
whether a prospective applicant or enrollee for long-term care
insurance already has accident and sickness or long-term care
insurance and the types and amounts of any such insurance.
   (7) Every insurer or entity marketing long-term care insurance
shall establish auditable procedures for verifying compliance with
this subdivision.
   (8) Every insurer shall provide to a prospective applicant, at the
time of solicitation, written notice that the Health Insurance
Counseling and Advocacy Program (HICAP) provides health insurance
counseling to senior California residents free of charge. Every agent
shall provide the name, address, and telephone number of the local
HICAP program and the statewide HICAP number, 1-800-434-0222.
   (9) Provide a copy of the long-term care insurance shoppers guide
developed by the California Department of Aging to each prospective
applicant prior to the presentation of an application or enrollment
form for insurance.
   (b) In addition to other unfair trade practices, including those
identified in this code, the following acts and practices are
prohibited:
   (1) Twisting. Knowingly making any misleading representation or
incomplete or fraudulent comparison of any insurance policies or
insurers for the purpose of inducing, or tending to induce, any
person to lapse, forfeit, surrender, terminate, retain, pledge,
assign, borrow on, or convert any insurance policy or to take out a
policy of insurance with another insurer.
   (2) High pressure tactics. Employing any method of marketing
having the effect of or tending to induce the purchase of insurance
through force, fright, threat, whether explicit or implied, or undue
pressure to purchase or recommend the purchase of insurance.
   (3) Cold lead advertising. Making use directly or indirectly of
any method of marketing which fails to disclose in a conspicuous
manner that a purpose of the method of marketing is solicitation of
insurance and that contact will be made by an insurance agent or
insurance company.

10234.95.  (a) Every insurer or other entity marketing long-term
care insurance shall:
   (1) Develop and use suitability standards to determine whether the
purchase or replacement of long-term care insurance is appropriate
for the needs of the applicant.
   (2) Train its agents in the use of its suitability standards.
   (3) Maintain a copy of its suitability standards and make them
available for inspection upon request by the commissioner.
   (b) The agent and insurer shall develop procedures that take into
consideration, when determining whether the applicant meets the
standards developed by the insurer, the following:
   (1) The ability to pay for the proposed coverage and other
pertinent financial information related to the purchase of the
coverage.
   (2) The applicant's goals or needs with respect to long-term care
and the advantages and disadvantages of insurance to meet these goals
or needs.
   (3) The value, benefits, and costs of the applicant's existing
insurance, if any, when compared to the values, benefits, and costs
of the recommended purchase or replacement.
   (c) (1) The issuer, and where an agent is involved, the agent,
shall make reasonable efforts to obtain the information set out in
subdivision (b). The efforts shall include presentation to the
applicant, at or prior to application, of the "Long-Term Care
Insurance Personal Worksheet," contained in the Long-Term Care
Insurance Model Regulations of the National Association of Insurance
Commissioners. The personal worksheet used by the insurer shall
contain, at a minimum, the information in the NAIC worksheet in not
less than 12-point type. The insurer may request the applicant to
provide additional information to comply with its suitability
standards.
   (2) In the premium section of the personal worksheet, the insurer
shall disclose all rate increases and rate increase requests for all
policies, whether issued by the insurer or purchased or acquired from
another insurer, in the United States on or after January 1, 1990.
   (3) The premium section shall include a statement that reads as
follows: "A rate guide is available that compares the policies sold
by different insurers, the benefits provided in those policies, and
sample premiums. The rate guide also provides a history of the rate
increases, if any, for the policies issued by different insurers in
each state in which they do business, since January 1, 1990. You can
obtain a copy of this rate guide by calling the Department of
Insurance's consumer toll-free telephone number (1-800-927-HELP), by
calling the Health Insurance Counseling and Advocacy Program (HICAP)
toll-free telephone number (1-800-434-0222), or by accessing the
Department of Insurance's Internet web site (www.insurance.ca.gov)."
If the personal worksheet is approved prior to the availability of
the rate guide, the worksheet shall indicate that the rate guide will
be available beginning December 1, 2000.
   (4) A copy of the issuer's personal worksheet shall be filed and
approved by the commissioner. A new personal worksheet shall be filed
and approved by the commissioner each time a rate is increased in
California and each time a new policy is filed for approval by the
commissioner. The new personal worksheet shall disclose the amount of
the rate increase in California and all prior rate increases in
California as well as all prior rate increases and rate increase
requests or filings in any other state. The new personal worksheet
shall be used by the insurer within 60 days of approval by the
commissioner in place of the previously approved personal worksheet.
   (d) A completed personal worksheet shall be returned to the issuer
prior to the issuer's consideration of the applicant for coverage,
except the personal worksheet need not be returned for sale of
employer group long-term care insurance to employees and their
spouses and dependents.
   (e) The sale or dissemination outside the company or agency by the
issuer or agent of information obtained through the personal
worksheet is prohibited.
   (f) The issuer shall use the suitability standards it has
developed pursuant to this section in determining whether issuing
long-term care insurance coverage to an applicant is appropriate.
   (g) Agents shall use the suitability standards developed by the
insurer in marketing long-term care insurance.
   (h) If the issuer determines that the applicant does not meet its
financial suitability standards, or if the applicant has declined to
provide the information, the issuer may reject the application.
Alternatively, the issuers shall send the applicant a letter similar
to the "Long-Term Care Insurance Suitability Letter" contained in the
Long-Term Care Model Regulations of the National Association of
Insurance Commissioners. However, if the applicant has declined to
provide financial information, the issuer may use some other method
to verify the applicant's intent. Either the applicant's returned
letter or a record of the alternative method of verification shall be
made part of the applicant's file.
   (i) The insurer shall report annually to the commissioner the
total number of applications received from residents of this state,
the number of those who declined to provide information on the
personal worksheet, the number of applicants who did not meet the
suitability standards, and the number who chose to conform after
receiving a suitability letter.
   (j) This section shall not apply to life insurance policies that
accelerate benefits for long-term care.

10234.97.  (a) Any time long-term care coverage is replaced, the
sales commission that is paid by the insurer and that represents the
percentage of the sale normally paid for first year sales of
long-term care policies or certificates shall be calculated based on
the difference between the annual premium of the replacement coverage
and that of the original coverage. If the premium on the replacement
product is less than or equal to the premium for the product being
replaced, the sales commission shall be limited to the percentage of
sale normally paid for renewal of long-term care policies or
certificates. Replacement shall be contingent upon the insurer's
declaration that the replacement policy materially improves the
position of the insured, pursuant to Section 10235.16. This provision
does not apply to replacement coverage which is group insurance as
described in subdivision (a) of Section 10231.6.
   (b) For purposes of this section, "commission or other
compensation" includes pecuniary or nonpecuniary remuneration of any
kind relating to the sale or renewal of the policy or certificate
including, but not limited to, bonuses, gifts, prizes, awards, and
finder's fees.
   (c) Every long-term care insurer shall file with the commissioner
within six months of the effective date of this section, its
commission structure or an explanation of the insurer's compensation
plan. Any amendments to the commission structure shall be filed with
the commissioner before implementation.