Why would a voter write to a state insurance commissioner? The Commissioner is an elected position, and he or she may not know that one of the most prolonged standing insurance codes is doing more harm and good. Insurance Commissioner Office does great things for consumers regulating auto, home, business insurance coverage to make sure people get paid for losses. I am happy to pay hefty insurance premiums for my house, automobiles, umbrella, and earthquake protection. But there is one code which led to my story in my book Fighting Powerful Interests that not only did not protect me, this particular code ensures that I got ripped off. The insurance agent and the insurance company are not only allowed but protected by this insurance code in question–770.3.
770.3 regulates the 403(b) because annuities are insurance products so these terrible products are regulated in the most obscene manner that very few people know. What in the world is so hideous about 770.3? 770.3 is ruthless, outdated and obscure from the hearts and minds of everyday teachers. 770.3 has been the target for reforming the 403(b) with k12 school districts for 15 long years. We failed, but it’s still fixable. If a handful of teachers started writing letters like the letter I wrote here to school boards, legal counsel, unions and their state representatives, the 403(b) retirement planning vehicle would improve immediately. Yeah, it’s a lot, but the appalling manner in which the current 403(b) system is carried out would make many salespeople in the 401(k) go to jail. We would simply like the 403(b) world with K12 to simulate the 401(k) world in the private sector in which fiduciary advice is required (fiduciary standards are binding by professionals to look after their clients best interests over their own). Insurance companies and their agents have no such requirements. They can say anything to get a sale.
There have been two efforts to update the insurance code that regulates insurance products that are overwhelmingly sold to our states K-12 Public school teachers. Both attempts were beaten back by a combination of the insurance industry which is expected, and California Teachers Association, which was not expected! Yeah, CTA thinks they can do a better job than CalSTRS Pension2. There will be more efforts in the future, but it’s going to take a lot of organizing and information to understand the problem that we 403(b) advocates are trying to do. This letter explains the problem in detail and lets the commissioner know that some of us are appalled at how the insurance code 770.3 is carried out in the classroom where insurance retirement products are sold. It is one of the most self-conflicted laws that ever was created which is so one-sided in the insurance industry advantage that it turns the storybook legend of David vs. Goliath upside down and glorifies Goliath.
