BILL ANALYSIS Ó
SB 590
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SENATE THIRD READING
SB 590 (Ron Calderon)
As Amended August 29, 2011
Majority vote
SENATE VOTE : 28-9
INSURANCE 11-0 APPROPRIATIONS 17-0
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|Ayes:|Solorio, Hagman, Carter, |Ayes:|Fuentes, Harkey, |
| |Feuer, Grove, Hayashi, | |Blumenfield, Bradford, |
| |Miller, Olsen, Skinner, | |Charles Calderon, Campos, |
| |Torres, Wieckowski | |Davis, Donnelly, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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 such a pre-need
life insurance policy, that the issuer provide the senior by
first-class mail a written notice 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;
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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; and,
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.
3)Requires an agent when selling such 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 life insurance, including
annuities;
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]; and,
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.
4)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
insurance or annuities without first providing the 24-hour
advance notice.
5)Requires, generally, that policies of individual life
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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 between 10 and 30 days after receipt
of the policy by the owner.
6)Specifies that a senior who meets with an insurance agent in
the senior's home shall have 60 days to cancel a life
insurance policy of $15,000 or less that is designated to pay
for funeral and burial expenses when the senior does not
receive a specified notice 24 hours in advance.
7)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.
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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
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 : According to the Assembly Appropriations
Committee, expected minor absorbable workload to the Department
of Insurance to continue oversight of the life insurance market
and policy notifications.
COMMENTS :
1)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)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
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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)This bill is similar to SB 397 (Calderon) 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)The American Bankers Insurance Company states that the
original law that established the 24-hour prior notice to
seniors ÝSB 620 (Scott), 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.
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.
5)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.
Analysis Prepared by : Manny Hernández / INS. / (916) 319-2086
FN: 0002110
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