BILL NUMBER: SB 599	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 14, 2011
	AMENDED IN SENATE  APRIL 4, 2011

INTRODUCED BY   Senator Kehoe

                        FEBRUARY 17, 2011

   An act to amend Section 10170 of the Insurance Code, relating to
life insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 599, as amended, Kehoe. Life insurance: retained-asset account.

   Existing law provides that life insurance may be made payable,
among other things, on the death of the insured, on his or her
surviving for a specified period of time, or periodically as long as
he or she lives. 
   This bill would prohibit an individual or group life insurance
policy delivered or issued for delivery in this state from containing
a provision that requires the beneficiary to take life insurance
proceeds in the form of a retained-asset account, as defined, or any
arrangement other than a lump-sum payment. The bill would require
that unless a policyholder or beneficiary has elected in writing that
the beneficiary be paid life insurance benefits in another form, all
life insurance benefits would be paid in the form of a lump-sum
payment to the beneficiary. Any life insurance benefits settlement
insurer recommendations and agreements, other than for a lump-sum
payment, would be required to conform to specified conditions. The
bill would authorize the Insurance Commissioner to adopt regulations
specifying reasonable requirements for the form of agreements entered
into and written disclosures provided by these provisions. 

   This bill would require that all life insurance benefits be paid
in the form of a lump-sum payment to the beneficiary or by another
settlement option that is clearly described in the claim form. If the
beneficiary does not choose one of the available settlement options,
a retained-asset account would be authorized to be the default
option only if the claim form provides a prominent disclosure, as
prescribed, that in the absence of a choice by the beneficiary,
payment of policy benefits would be made through establishment of a
retained-asset account on the beneficiary's behalf. Any life
insurance benefits settlement an insurer offers or recommends, other
than for a lump-sum payment, would be required to conform to
specified conditions. The bill would authorize the Insurance
Commissioner to adopt regulations specifying reasonable requirements
for the form of agreements entered into and written disclosures
provided by these provisions. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 10170 of the Insurance Code is amended to read:

   10170.  Life insurance may be made payable as follows:
   (a) On the death of the insured.
   (b) On his or her surviving a specified period.
   (c) Periodically as long as he or she lives.
   (d) Otherwise contingently on the continuance or determination of
life.
   (e) Upon those terms and conditions and subject to those
restrictions as to revocation by the policyholder and control by
beneficiaries as shall have been agreed to in writing by the insurer
and the policyholder. If no terms and conditions have been agreed to
by the insurer and the policyholder during the insured's lifetime
then upon those terms and conditions and subject to those
restrictions as may be agreed to in writing by the insurer and the
beneficiaries. Any agreement may be rescinded or amended by the
parties to the agreement without the consent of any designated
beneficiary unless the rights of any beneficiary have been expressly
declared to be irrevocable. No agreement hereafter made shall vest in
the insurer discretion as to the conditions, time, amount, manner,
or method of payment. The relationship between the insurer and the
policyholder or beneficiaries under any agreement shall be that of
debtor and creditor, and the insurer shall not be required to
segregate funds so held but shall hold them as a part of its general
corporate assets. 
   (f) An individual or group life insurance policy delivered or
issued for delivery in this state shall not contain a provision that
requires the beneficiary to take life insurance proceeds in the form
of a retained-asset account or any arrangement other than a lump-sum
payment. Notwithstanding subdivision (e), unless a policyholder or
beneficiary has elected in writing that the beneficiary shall be paid
life insurance benefits in another form, all life insurance benefits
shall be paid in the form of a lump-sum payment to the beneficiary.
If the life insurance policy provides for settlement options in
addition to a lump-sum payment to the beneficiary, a policyholder
shall have the option to choose how benefits are to be paid to the
beneficiary. Any choice by the policyholder shall be reflected in
writing. If no election as to how life insurance proceeds are to be
paid has been made by the policyholder during the insured's lifetime,
then the beneficiary, at the time the death claim is made, shall
choose how life insurance proceeds are paid and unless the
beneficiary agrees in writing to receive payment in a form other than
a lump-sum payment, the proceeds shall be paid in the form of a
lump-sum payment.  
   (f) Notwithstanding subdivision (e), all life insurance benefits
shall be paid in the form of a lump-sum payment to the beneficiary or
by another settlement option that is clearly described in the claim
form. If the beneficiary is provided settlement options in addition
to a lump-sum payment, the beneficiary shall have the option to
choose how benefits are to be paid to the beneficiary. If the
beneficiary does not choose one of the available settlement options,
a retained-asset account may be the default option only if the claim
form provides a prominent disclosure that, in the absence of a choice
by the beneficiary, payment of policy benefits shall be made through
establishment of a retained-asset account on the beneficiary's
behalf. This disclosure shall be provided in the portion of the claim
form where the beneficiary is offered the ability to select his or
her choice of payment method and shall be in bold 14-point font type.
In all such cases, whether by beneficiary choice or default, the
insurer shall provide to the beneficiary the disclosure provided for
in Section 10509.936. 
   (1) If an insurer  recommends   offers an
option or recommends the option  to a policyholder that the
beneficiary receive life insurance proceeds in the form of a
retained-asset account or any arrangement other than a lump-sum
payment, the insurer shall provide the policyholder, at the time the
 offer or  recommendation is made, written information
describing each of the settlement options available under the policy
and specific details relevant to those options. If an insurer 
offers or  recommends to a beneficiary that the beneficiary
receive life insurance proceeds in the form of a retained-asset
account or any arrangement other than a lump-sum payment  in
advance of the time the claim is made  , the insurer shall
provide the beneficiary  , at the time a claim is made,
 written information describing each of the settlement
options available under the policy and specific details relevant to
those options.  If an insurer offers or recommends to a
beneficiary that the beneficiary receive life insurance proceeds in
the form of a retained-asset account at the time a claim is being
made, the insurer shall comply with the procedures set forth in
Article 11 (commencing with Section 10509.930) of Chapter 5. 
   (2) For purposes of this subdivision, the following terms have the
following meanings:
   (A) "Lump-sum payment" means a single payment made directly to the
beneficiary that satisfies all of the benefits owed to the
beneficiary.
   (B) "Retained-asset account" means any mechanism whereby the
settlement of proceeds payable under a life insurance policy is
accomplished by the insurer, or an entity acting on behalf of the
insurer, by depositing those proceeds into or establishing an account
where those proceeds are retained by the insurer pursuant to a
 supplementary   supplemental  contract not
involving annuity benefits.
   (g) The commissioner may, from time to time and after notice and
public hearing, adopt regulations specifying reasonable requirements
for the form of agreements entered into and written disclosures
provided pursuant to subdivisions (e) and (f), and for compliance
with Section 10172.5.