California Govenor Jerry Brown (D-CA) signed into law a bill on Wednesday that aims to prohibit inappropriate conduct by insurance professionals in the sale of reverse mortgages.
Authored by Assemblyman Mike Eng (D-CA), AB 793 is designed to prohibit unscrupulous insurance agents and brokers from participating with, employing, or making referrals to an individual involved in the sale of reverse mortgages with the sole purpose of cross-selling inappropriate products such as annuities.
“AB 793 provides another level of protection for seniors from being persuaded to use the proceeds of a reverse mortgage to purchase inappropriate insurance products, primarily annuities and long-term care insurance that may not be suitable for them,” Eng said in a statement.
The bill had the support of the Dave Jones, the California Insurance Commissioner, who asked the Governor to sign the bill last week.
“There is an increasing need for this bill as the growth of the reverse mortgage business has been accompanied by aggressive marketing and abuse, especially when reverse mortgages are marketed along with insurance products or financial investment vehicles,” said Commissioner Jones. “A reverse mortgage should be an option of last resort only for seniors with an immediate need for cash and have no other means.”
The Commissioner said the bill should stop insurance agents from making referrals to an individual involved in the sale of reverse mortgages.
“This new law will help return the concept of a reverse mortgage to its original form and protect seniors from being sold products they simply don’t need and, in fact, actually harm them financially,” he said.