BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1747
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1747 (Feuer)
          As Amended  August 14, 2012
          Majority vote
           
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          |ASSEMBLY:  |51-24|(May 14, 2012)  |SENATE: |39-0 |(August 20,    |
          |           |     |                |        |     |2012)          |
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           Original Committee Reference:    INS.

          SUMMARY  :  Establishes notice requirements and a grace period for 
          payment of life insurance premiums.  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 life insurance policy for nonpayment 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)Conforms existing notice requirements for assignees of life 
            insurance policies to the notice requirements in this bill.

           The Senate amendments  delete a provision granting reinstatement 
          rights when a life insurance policy lapses for nonpayment of 
          premium due to the cognitive impairment of the policy owner and 
          make a number of technical, clarifying changes to the bill as 
          passed by the Assembly.
            
           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.  

           AS PASSED BY THE ASSEMBLY , this bill included the current 
          elements as well as a provision requiring the reinstatement of a 
          policy that terminated due to the cognitive impairment of the 
          policy owner.  

           FISCAL EFFECT  :  Unknown.  This bill is keyed non-fiscal by the 
          Legislative Counsel.
           
          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 


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