BILL NUMBER: SB 599 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 29, 2011
AMENDED IN ASSEMBLY JUNE 28, 2011
AMENDED IN ASSEMBLY JUNE 16, 2011
AMENDED IN SENATE APRIL 25, 2011
AMENDED IN SENATE APRIL 14, 2011
AMENDED IN SENATE APRIL 4, 2011
INTRODUCED BY Senator Kehoe
(Coauthors: Senators Calderon, Lieu, Lowenthal, and Price)
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 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.
The bill would only become operative if SB 713 of the
2011-12 Regular Session is enacted and becomes effective.
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) 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 or if a settlement option
is selected by the policyholder, 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 easy-to-understand language and in bold and at least
12-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 10509.937.
(1) If an insurer offers an option or recommends the option to a
policyholder of an individual or group life insurance policy 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 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 an account with check or
draft writing privileges, and where those proceeds are retained by
the insurer pursuant to a supplemental contract not involving annuity
benefits.
(g) An insurer that fails to conform to the requirements provided
under this section shall be subject to Article 6.5 (commencing with
Section 790) of Chapter 1 of Part 2 of Division 1.
(h) 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.
SEC. 2. This act shall only become operative if Senate Bill 713 of
the 2011-12 Regular Session of the Legislature is enacted and
becomes effective.