BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1405|
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CONSENT
Bill No: SB 1405
Author: Senate Banking, Finance and Insurance Committee
Amended: As introduced
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 9-0, 4/21/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Lowenthal,
Padilla, Price, Runner
NO VOTE RECORDED: Cox, Liu
SUBJECT : Life insurance: premium refunds
SOURCE : Author
DIGEST : This bill provides that life insurance policies
sold in California with an initial face amount of less than
$10,000, which today have a right to cancellation and
refund like policies with a higher initial face amount, are
entitled to their refund within 30 days of notice of
cancellation to the insurer just as now applies to similar
policies valued at $10,000 dollars or more.
ANALYSIS :
Existing law:
1. Specifies that individual life insurance policies sold
in California, irrespective of their initial face value,
must contain or have attached a notice informing the
policy owner of their right to cancel the policy by
CONTINUED
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delivering it or mailing it to the insurer or their
agent within a specified period.
2. Provides that with respect to such policies with an
initial face value of $10,000 or more, that they carry
an express right to receive a refund within 30 days of
the owner giving notice of cancellation.
3. Under both of these provisions of law, insurers are
required to disclose how long the right of cancellation
is available to the new policy owner under the policy
they have purchased; the existing law permits the
insurer to specify this time period upon policy
issuance, subject to the requirement that it shall be
not less than 10 days nor more than 30 days.
This bill revises the law governing the sale of individual
life insurance policies to specify that for the sale of
policies with an initial face value of less than $10,000,
refunds are required to be provided within 30 days from the
date that the insurer is notified that the insured has
canceled the policy.
Comments
Purpose of the bill . Current law confers all buyers of a
life insurance policy to make a timely request to cancel
for a full refund and requires that refund to be provided
within 30 days of the notice to the insurer for policies
with an initial face amount of $10,000 or more. For
policies with an initial face amount of less than $10,000,
the timing of the refund is not specified. This bill will
make the "within 30 days from the date that the insurer is
notified" standard apply to all such policies without
regard to the initial face amount.
Prior and Related Legislation . This provision was added as
a "code clean-up" matter to SB 397 (Calderon), 2009-10
Session, which was vetoed for reasons unrelated to this
bill's subject matter. In his veto message of SB 397, the
Governor stated:
"During the previous two legislative sessions, I have
vetoed similar legislation that would have granted an
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exemption from the current requirement that seniors be
given 24-hour notice in advance of any attempt to meet in
a senior's home to discuss the sale of a burial or
funeral policy. I stated my belief that this notice
requirement creates an important 'bright line' test that
insurance agents know not to cross and is a sound
consumer protection practice.
"Although this measure provides additional notice
requirements to attempt to protect against fraud, I
remain unconvinced of the need to deviate from the
current 24-hour notice requirement. Asking an agent to
wait one day before meeting in someone's home is a minor
request in order to protect seniors against fraud."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
JJA:mw 4/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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