BILL ANALYSIS Ó
SB 590
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 590 (Calderon) - As Amended: July 1, 2011
SENATE VOTE : 28-9
SUBJECT : Life insurance: funeral and burial expenses
SUMMARY : Exempts the sale of certain life insurance policies
for funeral and burial expenses from the requirement that the
agent provide the senior with a notice at least 24 hours prior
to the initial meeting, provided a 60-day cancellation period is
allowed. Specifically, this bill :
1)Provides that a person selling life insurance to a senior does
not need to deliver a written notice 24 hours prior to the
initial meeting in the senior's home when the sale is for life
insurance to pay funeral and burial expenses, and the life
insurance policy has an initial face amount of $15,000 or
less. These policies are known as pre-need life insurance
policies.
2)Requires, within 14 days of the purchase of a policy, that the
issuer provide the senior by first-class mail a written notice
of the purchase and a 60-day right of cancellation, any family
member designated by the senior, and any financial, estate
planning, or other advisor of the senior's choosing at
addresses provided by the senior. The notice shall include
all of the following:
a) Information on the right of cancellation;
b) A statement that the notice recipient is authorized
to call the insurer to inquire about the policy on behalf
of the policyholder;
c) A cancellation form;
d) Information on how to contact the Department of
Insurance (DOI) for information or to file a complaint,
including the telephone number of DOI's customer
assistance office.
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1)Requires an agent when selling a pre-need life policy that is
exempt from the 24-hour advance notice requirement, at the
time of the meeting in the purchaser's home, to provide the
following statements:
a) During this visit or a follow-up visit, you will be
given a sales presentation on the following Ýindicate all
that apply]:
i. Life insurance, including annuities
ii. Other insurance products Ýspecify]:
____________________.
b) You have the right to have other persons present at
the meeting, including family members, financial
advisors, or attorneys.
c) You have the right to end the meeting at any time.
d) You have the right to contact the Department of
Insurance for information, or to file a complaint. ÝThe
notice shall include the consumer assistance telephone
number at the DOI.]
e) The following individuals will be coming to your
home: Ýlist all attendees, and insurance license
information, if applicable].
f) You have the right to postpone or reschedule the
meeting if you wish to have other persons present,
including family members, financial advisors, or
attorneys.
2)Specifies that an agent who sells a pre-need life insurance
policy to a senior in the senior's home may not sell any other
life insurance or annuities without first providing the
24-hour advance notice.
3)Requires policies of individual life insurance with a face
value of $15,000 or less to have a printed notice informing
the owner that the policy may be returned for cancellation.
The return period set forth by the insurer and stated in the
notice shall be between 10 and 30 days, however, if the life
insurance for funeral and burial expenses is sold without a
24-hour advance notice, the purchaser shall have 60 days to
return the policy.
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4)Provides that this bill applies to policies issued or renewed
after January 1, 2012.
EXISTING LAW :
1)Requires a person who meets with a senior in the senior's home
for the purpose of selling life insurance, including
annuities, to deliver to the senior a written notice at least
24 hours prior to the initial meeting. If the senior has an
existing insurance relationship with an agent and requests a
meeting with the agent in the senior's home the same day, the
agent must provide a notice prior to the meeting.
2)The written notice delivered to the senior shall include the
following information:
a) There will be a sales presentation on life
insurance, including annuities, and/or other insurance
products at the meeting;
b) The senior has the right to have other persons
present at the meeting, including family members,
financial advisors or attorneys;
c) The senior has the right to end the meeting at any
time;
d) The senior has the right to contact the Department
of Insurance, or to file a complaint;
e) The consumer assistance telephone numbers at the
department; and
f) A listing of the individuals who will attend the
meeting.
3)Requires each person attending a meeting with a senior, at the
senior's home, for the purpose of selling life insurance to
end all discussions and leave the senior's home immediately
after being asked to leave by the senior.
4)Prohibits a person from soliciting a sale of an annuity or
life insurance policy at the home of a senior, in person or by
telephone, by using any plan, scheme, or ruse that
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misrepresents the true status or mission of the contact.
5)Requires policies of individual life insurance with a face
value of less than $10,000 to have a printed notice informing
the owner that the policy may be returned for cancellation.
6)Specifies that the return period shall be no less than 10 days
nor more than 30 days on these life insurance policies.
FISCAL EFFECT : Expected minor absorbable workload to the
Department of Insurance to continue oversight of the life
insurance market and policy notifications.
COMMENTS :
1)Purpose . The purpose of this bill is to allow the sale of
small-amount life insurance policies to pay for funeral and
burial expenses without a 24-hour advance notice to seniors
when certain notices are provided and seniors receive an
expanded cancellation period.
2)Background . According to the author, life insurance policies
to pay for burial expenses were not targeted by California's
24-hour notice law. The author believes that today's laws
protecting seniors from unscrupulous insurance agents selling
unneeded insurance and annuities is overbroad as it hits every
class of insurance. Accordingly, the average size of burial
and pre-need policies is such that a senior will not lose
their life savings with the purchase of pre-need or burial
policy, especially if the senior is provided a set of
disclosures and an increased right to cancel the policy.
Pre-need policies are small face amount life insurance
policies sold to address funeral expenses and these policies
are purchased for peace of mind to cover funeral expenses
rather than as an investment product.
This bill presents the question of whether for funeral and
burial expense insurance, a specialized life insurance vehicle
for a specific family need, a mandatory post-purchase notice
to family and advisors might constitute a more apt and
effective consumer protection than that which is currently
mandated.
3)Prior legislation . This bill is similar to SB 397 (Calderon)
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of the 2009-10 Session which was approved by the Legislature
and vetoed by Governor Schwarzenegger. Earlier similar bills
were also vetoed: AB 608 (Calderon) of the 2005-06 Session
and SB 739 (Calderon) of the 2007-08 Session.
4)Support . The American Bankers Insurance Company states that
the original law that established the 24-hour prior notice to
seniors (SB 620, Chapter 547, Statutes of 2003) was based on
2,500 complaints received by the Department of Insurance
indicating that seniors were losing their life savings in
investment schemes involving insurance. However, pre-need
funeral policies did not receive any complaints.
5)Supporters state that this bill's 60-day period to cancel life
policies for funeral and burial expenses is an improvement
over current law which presently allows the cancellation
period to be limited to as few as 10 days. Additionally, the
bill would require the buyer, his or her family members, and
financial advisors to receive information about the 60-day
cancellation right.
6)Opposition . The California Advocates for Nursing Home Reform
state that the 24-hour notification is a unique protection for
the prospective purchaser and it protects seniors before they
become contractually bound. The consumer protections proposed
by this bill occur after the purchase.
7)Suggested technical or clarifying amendments . The following
amendments are suggested:
a) Notice . In one paragraph the bill refers to a
"notice" while in an adjoining paragraph the bill refers
to a "notice form". In order to become consistent, it is
suggested that the bill refer to the "notice form" in
both provisions (in subdivision (i) of Section 1 of the
bill).
b) Other types of insurance . The bill provides that
when an agent meets in a senior's home without a 24-hour
advance notice to sell pre-need life insurance, that he
or she cannot sell any other life insurance or annuities .
This could allow the sale of auto insurance, homeowner's
insurance, and other lines of insurance to be sold. This
is not the author's intent. In order to assure that no
other lines of insurance could be sold to a senior
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without a 24-hour advance notice, the word "life" should
be deleted from subdivision (j) in Section 1 of the bill.
c) Time to cancel a pre-need life insurance policy .
The bill specifies that if a senior purchases a pre-need
insurance policy as a result of a meeting, without a
24-hour advance notice, then he or she shall have 60 days
to return the policy. However, if the senior purchases
this type of policy after receiving a 24-hour advance
notice, then the existing law would apply: anywhere from
10 days to 30 days to return the policy. The author
agrees with the recommendation to apply the 60-day return
policy to all pre-need insurance policies sold to
seniors, whether they received a 24-hour advance notice
or not. Accordingly, it is suggested that subdivision
(c) of Section 2 of the bill, be rewritten as follows:
"(c) The period of time set forth by the insurer for the
return of the policy type described in subdivision (c) of
Section 1676 for payment of funeral and burial expenses
shall be clearly stated on the notice and this period
shall be not less than 60 days when the policy is sold to
a senior."
REGISTERED SUPPORT / OPPOSITION :
Support
American Bankers Insurance Company
The California Funeral Directors Association
Cemetery and Mortuary Association of California
Opposition
California Advocates for Nursing Home Reform
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086