Proposed Committee Substitute by the Committee on Banking and

Insurance

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A bill to be entitled

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An act relating to insurance; providing a short title;

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amending s. 626.171, F.S.; requiring that an applicant for

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licensure as an insurance agent, customer representative,

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adjuster, service representative, managing general agent,

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or reinsurance intermediary provide to the Department of

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Financial Services his or her home and office telephone

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numbers and e-mail address; amending s. 626.2815, F.S.;

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requiring persons licensed to solicit or sell life

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insurance to complete a specified number of hours in

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continuing education on the subject of suitability in

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annuity and life insurance transactions; amending s.

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626.551, F.S.; requiring that a licensee notify the

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department within 60 days after a change in home or

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business telephone numbers or e-mail address; amending s.

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626.9521, F.S.; providing enhanced penalties for offenses

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involving misleading representations or fraudulent

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comparisons or omissions, the generation of unlawful fees

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and commissions, or the use of fraudulent signatures;

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providing for other enhanced penalties to supersede the

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penalties provided by the act under certain conditions;

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amending s. 626.9541, F.S.; revising the elements of the

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offense known as "churning" to include direct or indirect

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purchases made for the purpose of earning fees or

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commissions; providing that the submission of certain

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fraudulent signatures or the misrepresentation of a

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licensee's qualifications constitute an unfair method of

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competition and an unfair or deceptive act or practice;

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amending s. 626.99, F.S.; revising requirements for life

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insurance or annuity policies to increase the period of

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time allowed for obtaining an unconditional refund;

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requiring insurers for all types of annuities to provide a

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buyer's guide and a policy summary to the buyer; amending

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s. 627.4554, F.S.; providing for the regulation of

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recommendations relating to the sale of life insurance

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products to senior consumers; redefining the term

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"annuity" and defining the term "life insurance contract";

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requiring that an agent obtain financial and other

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information concerning the senior consumer before

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executing a purchase or exchange of an annuity or life

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insurance contract; requiring that the agent perform a

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suitability analysis relative to the investment he or she

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recommends and document the analysis in writing; requiring

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an agent to provide a comparison of current and

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recommended products if the transaction involves the

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replacement or exchange of an in-force insurance policy or

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annuity and document the comparison in writing; requiring

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an agent to provide information about any surrender

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charges and tax consequences; authorizing the department

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and office to adopt rules; amending s. 627.805, F.S.;

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revising who regulates and adopts rules relating to

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variable and indeterminate value contracts to include the

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Department of Financial Services and the Office of

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Financial Regulation; providing an effective date.

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Be It Enacted by the Legislature of the State of Florida:

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     Section 1. This act may be cited as the "John and Patricia

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Seibel Act."

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     Section 2.  Paragraph (a) of subsection (2) of section

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626.171, Florida Statutes, is amended to read:

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     626.171  Application for license as an agent, customer

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representative, adjuster, service representative, managing

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general agent, or reinsurance intermediary.--

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     (2)  In the application, the applicant shall set forth:

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     (a)  His or her full name, age, social security number,

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residence address, business address, and mailing address, home

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telephone number, business telephone number, and e-mail address.

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However, the application must contain a statement that an

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a

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ethnicity, gender, or native language, that he or she will not be

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penalized for not doing so, and that the department will use this

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information exclusively for research and statistical purposes and

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to improve the quality and fairness of the examinations.

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     Section 3.  Paragraph (k) is added to subsection (3) of

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section 626.2815, Florida Statutes, to read:

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     626.2815  Continuing education required; application;

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exceptions; requirements; penalties.--

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     (3)

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     (k) Effective January 1, 2009, and until January 1, 2010,

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any person who holds a license to solicit or sell life insurance

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in this state must complete a minimum of 3 hours in continuing

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education, approved by the department, on the subject of

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suitability in annuity and life insurance transactions. A

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licensee may use the hours obtained under this paragraph to

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satisfy the requirement for continuing education in ethics under

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paragraph (a).

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     Section 4.  Section 626.551, Florida Statutes, is amended to

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read:

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     626.551  Notice of change of address, name.--Every licensee

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s

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change of name, residence address, principal business street

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address, or mailing address, home telephone number, business

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telephone number, or e-mail address. A Any licensed agent who has

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moved his or her residence from this state shall have his or her

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license and all appointments immediately terminated by the

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department. Failure to notify the department within the required

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time period shall result in a fine not to exceed $250 for the

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first offense and, for subsequent offenses, a fine of at least

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not less than $500 or suspension or revocation of the license

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pursuant to s. 626.611 or s. 626.621.

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     Section 5.  Section 626.9521, Florida Statutes, is amended

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to read:

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     626.9521  Unfair methods of competition and unfair or

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deceptive acts or practices prohibited; penalties.--

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     (1)  No person shall engage in this state in any trade

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p

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to s. 626.951 or s. 626.9561 to be, an unfair method of

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competition or an unfair or deceptive act or practice involving

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the business of insurance.

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     (2) Except as provided in subsection (3), any person who

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violates any provision of this part is shall be subject to a fine

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in an amount not greater than $2,500 for each nonwillful

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violation and not greater than $20,000 for each willful

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violation. Fines under this subsection may not exceed an

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aggregate amount of $10,000 for all nonwillful violations arising

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out of the same action or an aggregate amount of $100,000 for all

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willful violations arising out of the same action. The fines

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authorized by this subsection may be imposed in addition to any

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other applicable penalty.

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     (3)(a) If a person violates s. 626.9541(1)(l), the offense

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known as "twisting," or violates s. 626.9541(1)(aa), the offense

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known as "churning," the person commits a felony of the third

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degree, punishable as provided in s. 775.082, and a fine not

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greater than $5,000 shall be imposed for each nonwillful

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violation or a fine not greater than $30,000 shall be imposed for

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each willful violation. However, if the victim of such offense is

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65 years of age or older or is mentally disabled, the person

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commits a felony of the second degree, punishable as provided in

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s. 775.082, and a fine not greater than $5,000 shall be imposed

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for each nonwillful violation or a fine not greater than $30,000

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shall be imposed for each willful violation.

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     (b) If a person violates s. 626.9541(1)(ee) by submitting

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fraudulent signatures on an application or policy-related

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document, the person commits a felony of the third degree,

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punishable as provided in s. 775.082, and a fine not greater than

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$5,000 shall be imposed for each nonwillful violation or a fine

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not greater than $30,000 shall be imposed for each willful

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violation.

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     (c) Fines under this subsection may not exceed an aggregate

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amount of $20,000 for all nonwillful violations arising out of

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the same action or an aggregate amount of $150,000 for all

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willful violations arising out of the same action.

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     Section 6. Any increase in the fines imposed under s.

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626.9521, Florida Statutes, which exceeds the increase provided

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by this act shall supersede the amendments made to that section

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by this act if such increase is enacted during the 2008

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legislative session and becomes law, and the amendments to s.

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626.9521, Florida Statutes, made by this act shall not take

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effect.

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     Section 7.  Paragraph (aa) of subsection (1) of section

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626.9541, Florida Statutes, is amended, and paragraphs (ee) and

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(ff) are added to that subsection, to read:

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     626.9541  Unfair methods of competition and unfair or

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deceptive acts or practices defined.--

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     (1)  UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE

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ACTS.--The following are defined as unfair methods of competition

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and unfair or deceptive acts or practices:

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     (aa)  Churning.--

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     1.  Churning is the practice whereby policy values in an

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existing life insurance policy or annuity contract, including,

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but not limited to, cash, loan values, or dividend values, and in

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a

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used utilized to purchase another insurance policy or annuity

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contract with that same insurer for the purpose of earning

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additional premiums, fees, commissions, or other compensation:

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     a.  Without an objectively reasonable basis for believing

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that the replacement or extraction will result in an actual and

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demonstrable benefit to the policyholder;

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     b.  In a fashion that is fraudulent, deceptive, or otherwise

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misleading or that involves a deceptive omission;

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     c.  When the applicant is not informed that the policy

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values including cash values, dividends, and other assets of the

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existing policy or contract will be reduced, forfeited, or used

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utilized in the purchase of the replacing or additional policy or

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contract, if this is the case; or

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     d.  Without informing the applicant that the replacing or

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additional policy or contract will not be a paid-up policy or

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that additional premiums will be due, if this is the case.

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Churning by an insurer or an agent is an unfair method of

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competition and an unfair or deceptive act or practice.

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     2.  Each insurer shall comply with sub-subparagraphs 1.c.

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and 1.d. by disclosing to the applicant at the time of the offer

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on a form designed and adopted by rule by the commission if, how,

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and the extent to which the policy or contract values (including

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cash value, dividends, and other assets) of a previously issued

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policy or contract will be used to purchase a replacing or

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additional policy or contract with the same insurer. The form

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must shall include disclosure of the premium, the death benefit

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of the proposed replacing or additional policy, and the date when

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the policy values of the existing policy or contract will be

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insufficient to pay the premiums of the replacing or additional

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policy or contract.

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     3.  Each insurer shall adopt written procedures to

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reasonably avoid churning of policies or contracts that it has

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issued, and failure to adopt written procedures sufficient to

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reasonably avoid churning shall be an unfair method of

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competition and an unfair or deceptive act or practice.

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     (ee) Fraudulent signatures on an application or policy-

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related document.--Willfully submitting to an insurer on behalf

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of a consumer an insurance application or policy-related document

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bearing a false or fraudulent signature.

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     (ff) Unlawful use of designations; misrepresentation of

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agent qualifications.--

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     1. A licensee may not, in any sales presentation or

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solicitation for insurance, use a designation or title in such a

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way as to falsely imply that the licensee:

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     a. Possesses special financial knowledge or has obtained

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specialized financial training; or

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     b. Is certified or qualified to provide specialized

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financial advice to senior citizens.

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     2. A licensee may not use terms such as "financial advisor"

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in such a way as to falsely imply that the licensee is licensed

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or qualified to discuss, sell, or recommend financial products

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other than insurance products.

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     3. A licensee may not, in any sales presentation or

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solicitation for insurance, falsely imply that he or she is

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qualified to discuss, recommend, or sell securities or other

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investment products in addition to insurance products.

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     Section 8.  Paragraph (a) of subsection (4) of section

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626.99, Florida Statutes, is amended to read:

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     626.99  Life insurance solicitation.--

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     (4)  DISCLOSURE REQUIREMENTS.--

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     (a)  The insurer shall provide to each prospective purchaser

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a buyer's guide and a policy summary prior to accepting the any

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applicant's initial premium or premium deposit, unless the policy

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for which application is made provides contains a provision for

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an unconditional refund for a period of at least 14 10 days, or

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unless the policy summary contains an offer of such an

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unconditional refund, in which event the buyer's guide and policy

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summary must be delivered with the policy or prior to delivery of

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the policy. With respect to fixed annuities, the insurer shall

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provide to each prospective purchaser a buyer's guide to

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annuities and a contract summary as provided in the National

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A

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Deposit Fund Regulation and the policy must provide shall contain

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a provision for an unconditional refund for a period of at least

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14 10 days.

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     Section 9.  Section 627.4554, Florida Statutes, is amended

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to read:

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     627.4554 Annuity and life insurance investments by

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seniors.--

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     (1)  PURPOSE; CONSTRUCTION.--

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     (a)  The purpose of this section is to set forth standards

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and procedures for making recommendations to senior consumers

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which result in a transaction involving life insurance or annuity

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products to appropriately address the insurance needs and

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financial objectives of senior consumers at the time of the

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t

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     (b) A violation of Nothing in this section does not shall

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be construed to create or imply a private cause of action for a

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violation of this section.

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     (2)  APPLICATION.--This section applies to any

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recommendation to purchase or exchange an annuity or life

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insurance product which is made to a senior consumer by an

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insurance agent, or an insurer where no agent is involved, and

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which, that results in the purchase or exchange recommended.

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     (3) DEFINITIONS.--For purposes of this section, the term:

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     (a) "Annuity contract" means a fixed annuity, fixed equity

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indexed annuity, or variable annuity that is individually

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solicited, whether the product is classified as an individual

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annuity or a group annuity.

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     (b) "Life insurance contract" means life insurance of human

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lives.

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     (c)(b) "Recommendation" means advice provided by an

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insurance agent, or an insurer if no insurance agent is involved,

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to an individual senior consumer which results in a purchase or

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exchange of an annuity or life insurance contract in accordance

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with that advice.

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     (d)(c) "Senior consumer" means a person 65 years of age or

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older. In the event of a joint purchase by more than one party, a

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purchaser is considered to be a senior consumer if any of the

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parties is age 65 or older.

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     (4)  DUTIES OF INSURERS AND INSURANCE AGENTS.--

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     (a) In recommending to a senior consumer the purchase or

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exchange of an annuity or life insurance contract which or the

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exchange of an annuity that results in another insurance

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transaction or series of insurance transactions, an insurance

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agent, or an insurer if no insurance agent is involved, must

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shall have an objectively reasonable basis grounds for believing

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that the recommendation is suitable for the senior consumer based

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on the basis of the facts disclosed by the senior consumer as to

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his or her investments and other insurance products and as to his

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or her financial situation and needs.

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     (b)  Before executing a purchase or exchange of an annuity

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o

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senior consumer, an insurance agent, or an insurer if no

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insurance agent is involved, shall make reasonable efforts to

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obtain information concerning the suitability of senior

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consumer's financial status, tax status, and investment

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objectives and such other information used or considered to be

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reasonable by the insurance agent, or the insurer if no agent is

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involved, in making the recommendation. The information shall

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include, at a minimum:

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     1. Personal information, including the age and gender of

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the parties to the annuity or life insurance and ages and number

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of any dependents;

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     2. Sources and amounts of income, including employment and

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salary details or other compensation applicable to the parties to

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the annuity or life insurance;

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     3. Financial information applicable to the parties to the

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annuity or life insurance, including, at a minimum, specific

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assets and liabilities to determine net worth and long-term and

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short-term debt;

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     4. Other in-force insurance and annuities and retirement or

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savings plans;

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     5. Tax status of the consumer;

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     6. Current and foreseeable living and health-related

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expenses;

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     7. Investment experience of the consumer;

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     8. Savings and investment goals relative to investment and

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income time horizons and need for liquidity;

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     9. Individual objectives, anticipated changes in needs, and

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investment preferences, including risk tolerance;

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     10. The source of the funds that will be used to purchase

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the annuity; and

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     11. Such other information used or considered to be

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relevant by the insurance agent or insurer in making

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recommendations to the consumer regarding the purchase or

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exchange of an annuity or life insurance contract.

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