AB 2782 Imposes New Licensing Requirements for Agents and Brokers

IBA West is working to persuade the California Department of Insurance to phase-in implementation of provisions of a new law (AB 2782) that will require property-casualty insurance agents and brokers starting next year to obtain a new license in order to sell health insurance and related products.  

The new requirement, which CDI introduced as part of its campaign to bring California insurance laws into conformity with “model” provisions adopted by the National Association of Insurance Commissioners, and otherwise with national norms, effectively repeals a provision—virtually unique to California—that has permitted fire and casualty insurance brokers and agents to sell “disability insurance,” a phrase the Insurance Code uses as a synonym for health insurance, without a separate health or life license.
IBA West and other producer groups did not oppose enactment of the new requirements for three reasons:  1) a desire to bolster state regulation—and stave off federal regulation—by bringing greater uniformity to insurance law; 2) a poll of IBA West members, conducted at the time the legislation was proposed, suggested that the vast majority of California producers who sell health insurance already have a health insurance license, which suggested the new law would have a minimal impact; and 3) the recognition that it is in the enlightened best interest of the industry and of consumers to ensure that professionals selling health insurance are appropriate trained and qualified.
The legislation takes effect Jan. 1, 2011, but neither the bill itself nor the history of legislative deliberations specifies whether the bill is intended to apply to licenses already issued, or only to licensees at renewal of their next licenses.
In notices emailed to all producers last week, CDI lawyers announced their intention to require all property-casualty producers needing a new license to sit for 20 hours of prelicensing education and take and pass a licensing examination—before the end of the year.
In meetings with CDI officials and legislative leaders, IBA West has strongly urged CDI to phase implementation in—enforcing the new requirement, if needed, only as existing fire-and-casualty licensees renew their licenses.  
“Initially,” said IBA West General Counsel Steve Young, “the Department’s lawyers were strongly opposed to this suggestion, but there are increasing signs that the Department understands that this strict construction of the requirement is not necessary or desirable.  We hope to be able to persuade CDI to make this change.”
AB 2782—and a more detailed report on the status of efforts to modify its implementation--is on the agenda for discussion in the IBA West Members-Only Town Hall Webinar, scheduled for Tuesday, Nov 16, at 8:30 a.m. Click HERE to register for the webinar. 

The following supplemental notice was sent to agents and brokers from the Department of Insurance earlier this week:

The California Department of Insurance (CDI) has received several inquiries regarding a notice that was emailed to you on Friday November 5, 2010 (click here to view) .  The notice, entitled “Licensing Changes,” discussed upcoming licensing changes as a result of the passage of AB 2782 that may affect current fire and casualty broker-agents and applicants.  One of these changes is that effective January 1, 2011 fire and casualty broker-agents must also hold an accident and health agent license to continue to transact disability insurance.
Several individuals contacted CDI requesting clarification for the term “disability insurance.”  “Disability insurance” as it applies to this requirement are those lines of insurance contained in Section 1626(a)(2) of the California Insurance Code (CIC) which defines accident and health insurance as insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income.  Consequently, effective January 1, 2011 fire and casualty broker-agents who transact the lines of insurance noted in CIC Section 1626(a)(2) must also be licensed as an accident and health agent.
As explained in the notice, current fire and casualty broker-agents need only complete a 20-hour prelicensing course on accident and health insurance (which is offered both online and in a classroom), pass a 75-question qualifying examination and pay a $128 application fee.  As current licensees, both the fingerprinting requirement and the 12-hour training requirement on ethics and the California Insurance Code will be waived.  CDI will be expediting the processing of license applications for accident and health agents until December 31, 2010.