BILL NUMBER: AB 1747	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Feuer

                        FEBRUARY 17, 2012

   An act to amend Section 10173.2 of, and add Sections 10113.71 and
10113.72 to, the Insurance Code, relating to life insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1747, as introduced, Feuer. Life insurance: nonpayment premium
lapse: notice.
   Existing law requires that life insurance policies contain certain
provisions, including, but not limited to, an individual life
insurance policy notice of the right to cancel a policy. Existing law
requires life insurers to provide certain notices to individual life
insurance policyholders, including, but not limited to, a notice of
premium increases.
   This bill would require that every life insurance policy issued or
delivered in this state contain a provision for a grace period of
not less than 60 days from the premium due date that provides that
where the premium owed is paid fully within the grace period the
policy remains in force and a provision that gives the applicant the
right to designate at least one individual, in addition to the
applicant, to receive notice of lapse or termination of a policy for
nonpayment of premium. The bill would require that every life
insurance policy issued or delivered in this state, except group life
insurance, contain a provision for the reinstatement of the policy
at any time within 2 years from the date of default upon the written
application of the insured and evidence of insurability, including
good health, satisfactory to the insurer, and payment of amounts owed
since the date of the default. The bill would prohibit a notice of
cancellation from being effective unless mailed by the insurer to the
named insured, a named designee, a known assignee, or additional
interest at least 30 days prior to the effective date of cancellation
where cancellation is for nonpayment of premium. The bill would also
make conforming changes.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 10113.71 is added to the Insurance Code, to
read:
   10113.71.  (a) (1) Every life insurance policy issued or delivered
in this state shall contain a provision for a grace period of not
less than 60 days from the premium due date that provides that where
the premium owed is fully paid within the grace period the policy
shall remain in force.
   (2) Every life insurance policy issued or delivered in this state,
except group life insurance, shall contain a provision that the
policy shall be reinstated at any time within two years from the date
of default upon the written application of the insured and evidence
of insurability, including good health, satisfactory to the insurer,
and payment of amounts owed since the date of the default.
   (b) (1) A notice of cancellation of a life insurance policy shall
not be effective unless mailed by the insurer to the named insured, a
designee named pursuant to Section 10113.72, a known assignee, or
additional interest at least 30 days prior to the effective date of
cancellation where cancellation is for nonpayment of premium.
   (2) This subdivision shall not apply to nonrenewal.
   (3) Notice shall be given by first-class United States mail,
postage prepaid, not less than 30 days after a premium is due and
unpaid. However, notices made to assignees pursuant to this section
may be done electronically with consent of the assignee.
   (c) For purposes of this section, a life insurance policy
includes, but is not limited to, an individual life insurance policy,
an individual variable life insurance policy, and a group life
insurance policy, except where otherwise provided.
  SEC. 2.  Section 10113.72 is added to the Insurance Code, to read:
   10113.72.  (a) An individual life insurance policy shall not be
issued or delivered in this state until the applicant has been given
the right to designate at least one individual, in addition to the
applicant, to receive notice of lapse or termination of a policy for
nonpayment of premium. The insurer shall receive from each applicant
one of the following:
   (1) A written designation listing the name, address, and telephone
number of at least one individual, in addition to the applicant, who
is to receive notice of lapse or termination of the policy for
nonpayment of premium.
   (2) A waiver signed and dated by the applicant electing not to
designate additional persons to receive notice. The required waiver
shall read as follows:


   "Protection Against Unintended Lapse.

   I understand that I have the right to designate at least one
person other than myself to receive notice of lapse or termination of
this life insurance policy for nonpayment of premium. I understand
that notice will not be given until 30 days after a premium is due
and unpaid. I elect not to designate a person to receive the notice.

   Signature of Applicant
   Date


   (b) The insurer shall notify the insured of the right to change
the written designation, no less often than once every two years.
   (c) No individual life insurance policy shall lapse or be
terminated for nonpayment of premium unless the insurer, at least 30
days prior to the effective date of the lapse or termination, gives
notice to the insured and to the individual or individuals designated
pursuant to subdivision (a), at the address provided by the insured
for purposes of receiving notice of lapse or termination. Notice
shall be given by first-class United States mail, postage prepaid,
not less than 30 days after a premium is due and unpaid.
   (d) Each individual life insurance policy shall include a
provision that, in the event of lapse, provides for reinstatement of
coverage, if the insurer is provided with proof of the insured's
cognitive impairment or the loss of functional capacity. This option
shall be available to the insured if requested within five months
after termination and shall allow for the collection of a past due
premium, where appropriate. The standard of proof of cognitive
impairment or loss of functional capacity shall not be more stringent
than the benefit eligibility criteria on cognitive impairment or the
loss of functional capacity contained in the policy.
  SEC. 3.  Section 10173.2 of the Insurance Code is amended to read:
   10173.2.  When a policy of life insurance is, after the effective
date of this section, assigned in writing as security for an
indebtedness, the insurer shall, in any case in which it has received
written notice of the name and address of the assignee, mail to
 such   the  assignee a written notice,
postage prepaid and addressed to the assignee's address filed with
the insurer, not less than  10   30  days
prior to the final lapse of the policy, each time the insured has
failed or refused to transmit a premium payment to the insurer before
the commencement of the policy's grace period or before 
such   the  notice is mailed. The insurer shall
give  such   that  notice to the assignee
in the proper case while  such   the 
assignment remains in effect, unless the assignee has notified the
insurer in writing that  such   the  notice
is waived. The insurer shall be permitted to charge the insured
directly or against the policy the reasonable cost of complying with
this section, but in no event to exceed two dollars and fifty cents
($2.50) for each  such  notice.
   As used in this section, "final lapse of the policy" means the
date after which the policy will not be reinstated by the insurer
without requiring evidence of insurability or written application.