BILL ANALYSIS Ó AB 1747 Page 1 ASSEMBLY THIRD READING AB 1747 (Feuer) As Amended May 9, 2012 Majority vote INSURANCE 8-3 ----------------------------------------------------------------- |Ayes:|Solorio, Bradford, | | | | |Carter, Feuer, Hayashi, | | | | |Skinner, Torres, | | | | |Wieckowski | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Beth Gaines, Miller, | | | | |Olsen | | | | | | | | ----------------------------------------------------------------- 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)Requires life insurers to provide an applicant for an individual life insurance policy with the form to designate additional persons to receive notices of lapse or termination. 4)Requires a life insurer to annually notify an insured of the 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 AB 1747 Page 2 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 : 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 : 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 this bill are intended to make sure that policyholders have sufficient warning that their premium may lapse due to nonpayment. Analysis Prepared by : Paul Riches / INS. / (916) 319-2086 FN: 0003612