BILL ANALYSIS SB 1405 Page 1 Date of Hearing: June 23, 2010 ASSEMBLY COMMITTEE ON INSURANCE Jose Solorio, Chair SB 1405 (Committee on Banking, Finance and Insurance) - As Introduced: February 19, 2010 SENATE VOTE : 33-0 SUBJECT : Life insurance: premium refunds SUMMARY : Requires insurers to refund premiums and fees within 30 days of the cancellation of an individual life insurance policy of less than $10,000. Specifically, this bill : 1)Requires all premiums and policy fees paid in connection with the purchase of an individual life insurance policy with a face value of less than $10,000 to be refunded to the owner within 30 days from the date that the insurer is notified of the cancellation of the policy. EXISTING LAW : 1)Requires life insurers selling individual life insurance policies of less than $10,000 to place a notice stating that the policy may be cancelled by delivering or mailing it to the insurer or agent not less than 10 days nor more than 30 days of the delivery or receipt of the policy. The time allowed within that time range is at the discretion of the insurer. 2)Requires all premiums and policy fees paid in connection with an individual life insurance policy with a face value of less than $10,000 to be refunded to the owner, but does not specify a time deadline to make these refunds. 3)Requires all premiums and policy fees paid in connection with an individual life insurance policy with a face value of $10,000 or more to be refunded to the owner within 30 days from the date the insurer is notified of the cancellation of the policy. FISCAL EFFECT : None. COMMENTS : SB 1405 Page 2 1)Purpose. The purpose of this bill is to apply the same 30-day deadline to refund premiums and policy fees paid on individual life insurance policies of less than $10,000 when cancelled during the notification period, as presently applies to individual life insurance policies with a face value of $10,000 or more. 2)Background. This is a committee bill of the Senate Banking, Finance and Insurance Committee. It has been drafted as a "clean-up" measure to a provision contained in last year's SB 397 (Calderon) which was vetoed for an unrelated reason. 3)Clarification recommended. One provision of this bill states that it applies to policies of individual life insurance of less than $10,000 delivered or issued on and after July 1, 1974. Another provision, however, states that this bill applies to all policies issued, amended, or delivered on and after January 1, 1981, but prior to January 1, 1990 . These provisions need to be reconciled, and it is recommended that the bill be clarified to state that it applies to all individual life insurance policies issued, amended, renewed, or delivered on and after January 1, 2011. The following suggested amendments would accomplish this purpose: On page 2, lines 17 and 18, strike out "1981, but prior to January 1, 1990" and insert "2011". On page 2, line 19, strike out "1981" and insert "2011". REGISTERED SUPPORT / OPPOSITION : Support None received. Opposition None received. Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086