BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1747
                                                                  Page  1

          Date of Hearing:   May 2, 2012

                           ASSEMBLY COMMITTEE ON INSURANCE
                                 Jose Solorio, Chair
                    AB 1747 (Feuer) - As Amended:  April 26, 2012
           
          SUBJECT  :   Life Insurance

           SUMMARY  :   Establishes notice requirements, reinstatement 
          options, and a grace period for premium payment for life 
          insurance policies.  Specifically,  this bill  :  

          1)Requires individual and group life insurance policies to 
            provide a 60 day grace period for payment of premium before 
            terminating the policy if the premium is fully paid within the 
            grace period.

          2)Requires insurers to mail a notice of pending lapse and 
            termination at least 30 days prior to the termination of an 
            individual or group life insurance policy for non-payment of 
            premium.

          3)Permits an applicant for, or owner of, an individual life 
            insurance policy to designate additional persons to receive 
            notices of lapse or termination.

          4)Requires a life insurer to notify an insured when a premium 
            payment is due and the insured did not make a designation at 
            the time the policy was issued of the insured's right to make 
            or change a designation.

          5)Provides that an insured may change the designation at any 
            time.

          6)Requires individual life insurance policies to include a 
            provision allowing reinstatement of a lapsed policy within 
            five months with payment of past due premium if the insured 
            can demonstrate cognitive impairment or loss of functional 
            capacity.

          7)Conforms existing notice requirements for assignees of life 
            insurance policies to the notice requirements in this bill.

           EXISTING LAW  :









                                                                  AB 1747
                                                                  Page  2

          1)Requires a notice of cancellation be mailed at least 20 days 
            prior to cancelling an automobile insurance policy.

          2)Requires a 60 day grace period for payment of premium for 
            individual variable life insurance policies.  

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   

           1)Purpose.   According to the author, the bill provides consumer 
            safeguards from which people who have purchased life insurance 
            coverage, especially seniors, would benefit.  Under existing 
            law, individuals can easily lose the critical protection of 
            life insurance if a single premium is accidentally missed 
            (even if they have been paying premiums on time for many 
            years).  If an insured individual loses coverage and wants it 
            reinstated, he or she may have to undergo a new physical exam 
            and be underwritten again, risking a significantly more 
            expensive, possibly unaffordable premium if his or her health 
            has changed in the years since purchasing the policy.  
            Therefore, the protections provided by AB 1747 are intended to 
            make sure that policyholders have sufficient warning that 
            their premium may lapse due to nonpayment.

           2)Designation Notices.   The bill requires insurers to provide a 
            notification of policyholders' right to designate another 
            recipient of lapse and termination notices when premium is 
            due.  Consumers have a range of options for how often (e.g., 
            monthly, quarterly, annually).  Providing a notice to the 
            insured with every premium billing notice when monthly or 
            quarterly payments are made creates an administrative burden 
            out of proportion with the value of the notice.  The author 
            may wish to consider an amendment requiring insurers to 
            provide the notice on an annual basis.  

            The author may also wish to consider an amendment requiring 
            that the applicant be provided with a designation form.
                
            REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Advocates for Nursing Home Reform (CANHR)
          California Alliance for Retired Americans








                                                                  AB 1747
                                                                  Page  3

          California Retired County Employees Association (CARA)
          Congress of California Seniors (CCS)
          Consumer Federation of California 

           Opposition 
           
          Association of California Life and Health Insurance Companies 
          (unless amended)
           
          Analysis Prepared by  :    Paul Riches / INS. / (916) 319-2086