Amended in Senate June 19, 2014

Amended in Senate June 3, 2014

Amended in Assembly April 30, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2347

Introduced by Assembly Member Gonzalez

February 21, 2014

An act to amend begin insert , repeal, and add end insert Sections 786, 10127.9, 10127.10, 10127.13, and 10509.6 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2347, as amended, Gonzalez. Insurance policies.

(1) Existing law requires that a disability insurance policy or life insurance policy and certificate offered for sale to individuals 65 years of age or older in California provide a 30-day examination period during which the applicant may return the contract and receive a refund of all premiums and any membership fee paid. This information is required to be disclosed on the cover sheet of the policy or certificate, in no less than 10-point uppercase type. Existing law allows the applicant to return the policy or certificate by regular mail.

This bill would specify that those requirements apply to individual and group disability and group life insurance policies and certificates. The bill would require that the notice be in 12-point bold type on the front of the policy jacket or on the cover sheet of the policy or certificate. The bill would allow the policyholder or certificate holder to return the policy or certificate by mail or other delivery method. The bill would also require an insurer, its agent, group master policyowner, or association that collects more than one month’s premium from an individual who is 60 years of age or older on the date he or she purchased the coverage to provide that person a prorated refund of the premium if the person delivers a cancellation request during the first 30 days of the policy period.

(2) Existing law requires a policy of individual life insurance that is initially delivered or issued for delivery in the state on and after January 1, 1990, to have printed thereon or attached thereto a specified notice of cancellation rights.

This bill would require that disclosure to be printed on the front of the policy jacket or on the cover page of every individual life insurance policy and individual annuity contract.

(3) Existing law requires specified disclosures, in all capital letters, pertaining to cancellation and refunds, to the consumers of variable individual life insurance policies and variable annuity contracts, and of consumers of individual life insurance policies other than variable contracts and modified guaranteed contracts. Existing law requires an insurer to include in those disclosures that the applicant may be charged a surrender charge or penalty if he or she cancels the policy after the 30-day period, unless the policy does not contain surrender charges or penalties.

This bill would additionally require that those disclosures be included with a modified guaranteed annuity contract, and would instead require that the disclosure be made in lowercase type. This bill would also require an insurer that calls a surrender charge a “withdrawal penalty” to disclose that fact, as specified.

(4) Existing law requires all individual life insurance policies and individual annuity contracts for senior citizens that contain a surrender charge period to either disclose the surrender period and all associated penalties in 12-point bold print on the cover sheet of the policy or disclose the location of the surrender information in bold 12-point print on the cover page of the policy or printed on a sticker that is affixed to the cover page or to the policy jacket.

This bill would instead require those policies and contracts that contain a charge upon surrender, partial surrender, excess withdrawal, or penalties upon surrender to contain a notice disclosing the location of the charge, the charge time period, the charge information, and any associated penalty information in bold 12-point print on the front of the policy jacket or on the single cover page of the policy. This bill would also require that notice and the statutorily required right to examine notice to appear on the same page if both notices are on the cover page.

The bill would also make conforming changes.

begin insert

(5) This bill would make its provisions operative on July 1, 2015.

end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 786 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

786.  

All disability insurance and life insurance policies and
certificates offered for sale to individuals age 65 or older in
California shall provide an examination period of 30 days after
the receipt of the policy or certificate for purposes of review of
the contract, at which time the applicant may return the contract.
The return shall void the policy or certificate from the beginning,
and the parties shall be in the same position as if no contract had
been issued. All premiums paid and any policy or membership fee
shall be fully refunded to the applicant by the insurer or entity in
a timely manner.

(a) For the purposes of this section a timely manner shall be no
later than 30 days after the insurer or entity issuing the policy or
certificate receives the returned policy or certificate.

(b) If the insurer or entity issuing the policy or certificate fails
to refund all of the premiums paid, in a timely manner, then the
applicant shall receive interest on the paid premium at the legal
rate of interest on judgments as provided in Section 685.010 of
the Code of Civil Procedure. The interest shall be paid from the
date the insurer or entity received the returned policy or certificate.

(c) Each policy or certificate shall have a notice prominently
printed in no less than 10-point uppercase type, on the cover page
of the policy or certificate and the outline of coverage, stating that
the applicant has the right to return the policy or certificate within
30 days after its receipt via regular mail, and to have the full
premium refunded.

(d) In the event of any conflict between this section and Section
10127.10 with respect to life insurance, the provisions of Section
10127.10 shall prevail.

begin insert

(e) This section shall become inoperative on July 1, 2015, and,
as of January 1, 2016, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2016, deletes or
extends the dates on which it becomes inoperative and is repealed.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 786 is added to the end insert begin insert Insurance Code end insert begin insert , to read: end insert

begin insert

begin insert 786. end insert   

All individual and group disability insurance policies and
certificates, and all group life insurance policies and certificates
offered for sale to individuals age 65 or older in California shall
provide an examination period of 30 days after the receipt of the
policy or certificate for purposes of review of the contract. If the
policyholder or certificate holder chooses to cancel the policy or
certificate and returns the policy or certificate for cancellation,
by mail or other delivery method, within the 30-day examination
period, the return shall void the policy or certificate from the
beginning, and the parties shall be in the same position as if a
policy or certificate had not been issued. All premiums paid and
any policy or membership fee paid shall be fully refunded to the
policyholder or certificate holder by the insurer or entity in a
timely manner.

(a) For the purposes of this section, a timely manner is no later
than 30 days after the insurer or entity issuing the policy or
certificate receives the returned policy or certificate.

(b) If the insurer or entity issuing the policy or certificate fails
to refund all of the premiums and any policy or membership fee
paid, in a timely manner, the policyholder or certificate holder
shall receive interest on the paid premium and policy or
membership fee at the legal rate of interest on judgments as
provided in Section 685.010 of the Code of Civil Procedure. The
interest shall be paid from the date the insurer or entity received
the returned policy or certificate.

(c) Each policy or certificate shall have a notice prominently
printed in no less than 12-point bold print, on the front of the policy
jacket or on the cover page of the policy or certificate and the
outline of coverage, stating that the policyholder or certificate
holder, as applicable, has the right to return the policy or
certificate, by mail or other delivery method, within 30 days after
its receipt, and to have the full premium and any policy or
membership fee paid refunded.

(d) If, at the time of application or at the time of delivery of a
group term life insurance policy or certificate, an insurer, its agent,
group master policyowner, or association collects more than one
month’s premium from an individual who is 60 years of age or
older on the date he or she purchased coverage, the insurer shall
provide the individual with a prorated refund of the premium if
the individual delivers a cancellation request to the insurer during
the first 30 days of the policy period.

(e) This section shall become operative on July 1, 2015.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 10127.9 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

10127.9.  

(a) Every policy of individual life insurance which
is initially delivered or issued for delivery in this state on and after
January 1, 1990, shall have printed thereon or attached thereto a
notice stating that, after receipt of the policy by the owner, the
policy may be returned by the owner for cancellation by delivering
it or mailing it to the insurer or to the agent through whom it was
purchased. The period of time set forth by the insurer for return
of the policy by the insured shall be clearly stated on the notice
and this period shall be not less than 10 days nor more than 30
days. The insured may return the policy to the insurer by mail or
otherwise at any time during the period specified in the notice. In
the case of individual life insurance policies (other than variable
contracts and modified guaranteed contracts), by delivering or
mailing the policy pursuant to this section during the cancellation
period, the owner shall void the policy from the beginning, and
the parties shall be in the same position as if no policy had been
issued. All premiums paid and any policy fee paid for the policy
shall be refunded by the insurer to the owner within 30 days from
the date that the insurer is notified that the insured has canceled
the policy. In the case of variable annuity contracts, variable life
insurance contracts, and modified guaranteed contracts, return of
the contract during the cancellation period shall entitle the owner
to a refund of account value and any policy fee paid for the policy.
The account value and policy fee shall be refunded by the insurer
to the owner within 30 days from the date that the insurer is notified
that the owner has canceled the policy.

(b) This section applies to all policies issued or delivered in this
state on or after January 1, 1990, but does not apply to any policy
subject to Section 10127.7. All policies subject to this section
which are in effect on January 1, 1990, shall be construed to be in
compliance with this section, and any provision in any policy
which is in conflict with this section shall be of no force or effect.

(c) This section does not apply to individual life insurance
policies issued in connection with a credit transaction or issued
under a contractual policy-change or conversion privilege provision
contained in a policy.

begin insert

(d) This section shall become inoperative on July 1, 2015, and,
as of January 1, 2016, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2016, deletes or
extends the dates on which it becomes inoperative and is repealed.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 10127.9 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10127.9. end insert   

(a) (1) Every individual life insurance policy and
every individual annuity contract that is initially delivered or issued
for delivery in this state on and after January 1, 1990, shall have
printed on the front of the policy jacket or on the cover page a
notice stating that, after receipt of the policy by the owner, the
policy may be returned by the owner for cancellation by mail or
other delivery method to the insurer or to the agent through whom
it was purchased. The period of time set forth by the insurer for
return of the policy by the owner shall be clearly stated and this
period shall be not less than 10 days nor more than 30 days.

(2) The owner may return the policy to the insurer by mail or
other delivery method at any time during the period specified in
the notice. In the case of individual nonvariable life insurance
policies and individual nonvariable annuity contracts, including
modified guaranteed contracts, by delivering or mailing the policy
pursuant to this section during the cancellation period, the owner
shall void the policy from the beginning, and the parties shall be
in the same position as if no policy had been issued. All premiums
paid and any policy fee paid for the policy shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the policy. In the
case of individual variable annuity contracts and individual
variable life insurance policies, return of the policy during the
cancellation period shall entitle the owner to a refund of the
account value and any policy fee paid for the policy. The account
value and policy fee shall be refunded by the insurer to the owner
within 30 days from the date that the insurer is notified that the
owner has canceled the policy.

(b) This section applies to all individual policies issued or
delivered in this state on or after January 1, 1990, but does not
apply to any policy subject to Section 10127.7. All policies subject
to this section which are in effect on January 1, 1990, shall be
construed to be in compliance with this section, and any provision
in any policy which is in conflict with this section shall be of no
force or effect.

(c) This section does not apply to individual life insurance
policies issued in connection with a credit transaction or issued
under a contractual policy-change or conversion privilege
provision contained in a policy.

(d) General references to “policy” or “policies” in this section
refer to both life insurance policies and annuity contracts.

(e) This section shall become operative on July 1, 2015.

end insert

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 10127.10 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10127.10.  

(a) Every policy of individual life insurance and
every individual annuity contract that is initially delivered or issued
for delivery to a senior citizen in this state on and after July 1,
2004, shall have printed thereon or attached thereto a notice stating
that, after receipt of the policy by the owner, the policy may be
returned by the owner for cancellation by delivering it or mailing
it to the insurer or agent from whom it was purchased. The period
of time set forth by the insurer for return of the policy by the owner
shall be clearly stated on the notice and this period shall be not
less than 30 days. The owner may return the policy to the insurer
by mail or otherwise at any time during the period specified in the
notice. During the 30-day cancellation period, the premium for a
variable annuity may be invested only in fixed-income investments
and money-market funds, unless the investor specifically directs
that the premium be invested in the mutual funds underlying the
variable annuity contract. Return of the policy within the 30-day
cancellation period shall have one of the following effects:

(1) In the case of individual life insurance policies and variable
annuity contracts for which the owner has not directed that the
premium be invested in the mutual funds underlying the contract
during the cancellation period, return of the policy during the
cancellation period shall have the effect of voiding the policy from
the beginning, and the parties shall be in the same position as if
no policy had been issued. All premiums paid and any policy fee
paid for the policy shall be refunded by the insurer to the owner
within 30 days from the date that the insurer is notified that the
owner has canceled the policy. The premium and policy fee shall
be refunded by the insurer to the owner within 30 days from the
date that the insurer is notified that the owner has canceled the
policy.

(2) In the case of a variable annuity for which the owner has
directed that the premium be invested in the mutual funds
underlying the contract during the 30-day cancellation period,
cancellation shall entitle the owner to a refund of the account value.
The account value shall be refunded by the insurer to the owner
within 30 days from the date that the insurer is notified that the
owner has canceled the contract.

(b) This section applies to all individual policies issued or
delivered to senior citizens in this state on or after January 1, 2004.
All policies subject to this section which are in effect on January
1, 2003, shall be construed to be in compliance with this section,
and any provision in any policy which is in conflict with this
section shall be of no force or effect.

(c) Every individual life insurance policy and every individual
annuity contract, other than variable contracts and modified
guaranteed contracts, subject to this section, that is delivered or
issued for delivery in this state shall have the following notice
either printed on the cover page or policy jacket in 12-point bold
print with one inch of space on all sides or printed on a sticker that
is affixed to the cover page or policy jacket:

“IMPORTANT

YOU HAVE PURCHASED A LIFE INSURANCE POLICY
OR ANNUITY CONTRACT. CAREFULLY REVIEW IT FOR
LIMITATIONS.

THIS POLICY MAY BE RETURNED WITHIN 30 DAYS
FROM THE DATE YOU RECEIVED IT FOR A FULL REFUND
BY RETURNING IT TO THE INSURANCE COMPANY OR
AGENT WHO SOLD YOU THIS POLICY. AFTER 30 DAYS,
CANCELLATION MAY RESULT IN A SUBSTANTIAL
PENALTY, KNOWN AS A SURRENDER CHARGE.”

The phrase “after 30 days, cancellation may result in a substantial
penalty, known as a surrender charge” may be deleted if the policy
does not contain those charges or penalties.

(d) Every individual variable annuity contract, variable life
insurance contract, or modified guaranteed contract subject to this
section, that is delivered or issued for delivery in this state, shall
have the following notice either printed on the cover page or policy
jacket in 12-point bold print with one inch of space on all sides or
printed on a sticker that is affixed to the cover page or policy
jacket:

“IMPORTANT

YOU HAVE PURCHASED A VARIABLE ANNUITY
CONTRACT (VARIABLE LIFE INSURANCE CONTRACT,
OR MODIFIED GUARANTEED CONTRACT). CAREFULLY
REVIEW IT FOR LIMITATIONS.

THIS POLICY MAY BE RETURNED WITHIN 30 DAYS
FROM THE DATE YOU RECEIVED IT. DURING THAT
30-DAY PERIOD, YOUR MONEY WILL BE PLACED IN A
FIXED ACCOUNT OR MONEY-MARKET FUND, UNLESS
YOU DIRECT THAT THE PREMIUM BE INVESTED IN A
STOCK OR BOND PORTFOLIO UNDERLYING THE
CONTRACT DURING THE 30-DAY PERIOD. IF YOU DO
NOT DIRECT THAT THE PREMIUM BE INVESTED IN A
STOCK OR BOND PORTFOLIO, AND IF YOU RETURN THE
POLICY WITHIN THE 30-DAY PERIOD, YOU WILL BE
ENTITLED TO A REFUND OF THE PREMIUM AND POLICY
FEES. IF YOU DIRECT THAT THE PREMIUM BE INVESTED
IN A STOCK OR BOND PORTFOLIO DURING THE 30-DAY
PERIOD, AND IF YOU RETURN THE POLICY DURING THAT
PERIOD, YOU WILL BE ENTITLED TO A REFUND OF THE
POLICY’S ACCOUNT VALUE ON THE DAY THE POLICY
IS RECEIVED BY THE INSURANCE COMPANY OR AGENT
WHO SOLD YOU THIS POLICY, WHICH COULD BE LESS
THAN THE PREMIUM YOU PAID FOR THE POLICY. A
RETURN OF THE POLICY AFTER 30 DAYS MAY RESULT
IN A SUBSTANTIAL PENALTY, KNOWN AS A SURRENDER
CHARGE.”

The words “known as a surrender charge” may be deleted if the
contract does not contain those charges.

(e) This section does not apply to life insurance policies issued
in connection with a credit transaction or issued under a contractual
policy-change or conversion privilege provision contained in a
policy. Additionally, this section shall not apply to contributory
and noncontributory employer group life insurance, contributory
and noncontributory employer group annuity contracts, and group
term life insurance, with the exception of subdivision (f).

(f) When an insurer, its agent, group master policyowner, or
association collects more than one month’s premium from a senior
citizen at the time of application or at the time of delivery of a
group term life insurance policy or certificate, the insurer must
provide the senior citizen a prorated refund of the premium if the
senior citizen delivers a cancellation request to the insurer during
the first 30 days of the policy period.

(g) For purposes of this chapter, a senior citizen means an
individual who is 60 years of age or older on the date of purchase
of the policy.

begin insert

(h) This section shall become inoperative on July 1, 2015, and,
as of January 1, 2016, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2016, deletes or
extends the dates on which it becomes inoperative and is repealed.

end insert

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 10127.10 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10127.10. end insert   

(a) Every policy of individual life insurance and
every individual annuity contract that is initially delivered or issued
for delivery to a senior citizen in this state on and after July 1,
2004, shall have printed on the front of the policy jacket or on the
cover page a notice stating that, after receipt of the policy by the
owner, the policy may be returned by the owner for cancellation
by mail or other delivery method to the insurer or agent from whom
it was purchased. The period of time set forth by the insurer for
return of the policy by the owner shall be clearly stated in the
notice and this period shall be not less than 30 days. The owner
may return the policy to the insurer by mail or other delivery
method at any time during the period specified in the notice. During
the 30-day cancellation period, the premium for an individual
variable life insurance policy or an individual variable annuity
contract may be invested only in fixed-income investments and
money-market funds, unless the owner specifically directs that the
premium be invested in the mutual funds underlying the variable
life insurance policy or variable annuity contract. Return of the
policy within the 30-day cancellation period shall have one of the
following effects:

(1) In the case of individual variable life insurance policies and
individual variable annuity contracts for which the owner has not
directed that the premium be invested in the mutual funds
underlying the policy during the cancellation period, return of the
policy during the cancellation period shall have the effect of
voiding the policy from the beginning, and the parties shall be in
the same position as if no policy had been issued. All premiums
paid and any policy fee paid for the policy shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the policy.

(2) In the case of individual variable life insurance policies and
individual variable annuity contracts for which the owner has
directed that the premium be invested in the mutual funds
underlying the policy during the 30-day cancellation period,
cancellation shall entitle the owner to a refund of the account value
and any policy fee paid for the policy. The account value shall be
refunded by the insurer to the owner within 30 days from the date
that the insurer is notified that the owner has canceled the policy.

(b) This section applies to all individual life insurance policies
and all individual annuity contracts issued or delivered to senior
citizens in this state on or after January 1, 2004. All policies subject
to this section which are in effect on January 1, 2003, shall be
construed to be in compliance with this section, and any provision
in any policy which is in conflict with this section shall be of no
force or effect.

(c) Every individual nonvariable life insurance policy and every
individual nonvariable annuity contract, including modified
guaranteed annuity contracts, subject to this section, that is
delivered or issued for delivery in this state shall have the following
notice printed on the front of the policy jacket or on the cover page
in 12-point bold print with one inch of space on all sides, using
the exact language in quotation marks below, with whichever one
of the three bracketed product descriptions that applies to the
product on which the notice appears:

“IMPORTANT!

You have purchased a [life insurance policy], [annuity contract],
[modified guaranteed annuity contract], referred to below as a
“policy.” Carefully review it for limitations.

This policy may be returned within 30 days from the date you
received it for a full refund by returning it to the insurance
company or agent who sold you this policy. After 30 days,
cancellation may result in a substantial penalty, known as a
surrender charge.”

The sentence “After 30 days, cancellation may result in a
substantial penalty, known as a surrender charge” may be deleted
if the policy does not contain a surrender charge. The phrase
“known as a surrender charge” may be deleted if the policy
contains a penalty but no surrender charge. If the policy contains
both a penalty, or penalties, and a surrender charge, the sentence
shall state that cancellation may result in “substantial penalties,
including a surrender charge.” Whether a charge constitutes a
surrender charge or a penalty shall be determined by the nature
of the charge and not the name given to the charge by the insurer.
If the surrender charge is called a “withdrawal charge” in the
policy, the insurer shall add the following sentence at the end of
the notice:

“In this policy the surrender charge is called a ‘withdrawal
charge.’”

(d) Every individual variable life insurance policy and every
individual variable annuity contract subject to this section, that
is delivered or issued for delivery in this state, shall have the
following notice printed on the front of the policy jacket or on the
cover page in 12-point bold print with one inch of space on all
sides, using the exact language in quotation marks below, with
whichever one of the two bracketed product descriptions that
applies to the product on which the notice appears:

“IMPORTANT!

You have purchased a [variable life insurance policy], [variable
annuity contract], referred to below as a “policy.” Carefully
review it for limitations.

This policy may be returned within 30 days from the date you
received it. During that 30-day period, your money will be placed
in a fixed account or money-market fund, unless you direct that
the premium be invested in a stock or bond portfolio underlying
the policy during the 30-day period. If you do not direct that the
premium be invested in a stock or bond portfolio, and if you return
the policy within the 30-day period, you will be entitled to a refund
of the premium and any policy fee paid. If you direct that the
premium be invested in a stock or bond portfolio during the 30-day
period, and if you return the policy during that period, you will
be entitled to a refund of the policy’s account value on the day the
policy is received by the insurance company or agent who sold
you this policy, which could be less than the premium you paid for
the policy, plus any policy fee paid. A return of the policy after 30
days may result in a substantial penalty, known as a surrender
charge.”

The sentence “A return of the policy after 30 days may result in
a substantial penalty, known as a surrender charge” may be
deleted if the policy does not contain a surrender charge. If the
policy contains both a penalty, or penalties, and a surrender
charge, the sentence shall state that cancellation may result in
“substantial penalties, including a surrender charge.” The phrase
“known as a surrender charge” may be deleted if the policy
contains a penalty but no surrender charge. Whether or not a
charge constitutes a surrender charge or a penalty will be
determined by the nature of the charge and not the name given to
the charge by the insurer. If the surrender charge is called a
“withdrawal charge” in the policy, the insurer shall add the
following sentence at the end of the notice:

“In this policy the surrender charge is called a ‘withdrawal
charge.’”

(e) If the individual annuity contract is an immediate annuity
contract, the following sentence, using the exact language in
quotation marks below, in 12-point bold print, shall be added at
the end of the right to examine language required by this section
and before the one inch of space:

“After the 30-day period has expired, you may not be able to
get your purchase payment money back in any manner, or in any
manner other than in annuity payments made according to the
terms of your contract. The insurance company or agent who sold
you this contract can explain if your contract has these
restrictions.”

(f) This section does not apply to life insurance policies issued
in connection with a credit transaction or issued under a
contractual policy-change or conversion privilege provision
contained in a policy.

(g) For purposes of this chapter, a senior citizen means an
individual who is 60 years of age or older on the date of purchase
of the policy.

(h) General references to “policy” or “policies” in this section
refer to both life insurance policies and annuity contracts.

(i) This section shall become operative on July 1, 2015.

end insert

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 10127.13 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10127.13.  

begin insert (a) end insert begin insert   end insert All individual life insurance policies and
individual annuity contracts for senior citizens that contain a
surrender charge period shall either disclose the surrender period
and all associated penalties in 12-point bold print on the cover
sheet of the policy or disclose the location of the surrender
information in bold 12-point print on the cover page of the policy,
or printed on a sticker that is affixed to the cover page or to the
policy jacket. The notice required by this section may appear on
a cover sheet that also contains the disclosure required by
subdivision (d) of Section 10127.10.

begin insert

(b) This section shall become inoperative on July 1, 2015, and,
as of January 1, 2016, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2016, deletes or
extends the dates on which it becomes inoperative and is repealed.

end insert

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert Section 10127.13 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10127.13. end insert   

(a) All individual life insurance policies and
individual annuity contracts for senior citizens that contain a
charge upon surrender, partial surrender, excess withdrawal, or
penalties upon surrender shall contain a notice disclosing the
location of the charge, the charge time period, the charge
information, and any associated penalty information, in bold
12-point print on the front of the policy jacket or on the cover page
of the policy.

(b) A policy shall have just one cover page. If the notice required
by this section and the statutorily required right to examine notice
are both on the cover page, as opposed to the front cover of the
policy jacket, they shall appear on the same page.

(c) General references to “policy” in this section refer to both
life insurance policies and annuity contracts.

(d) This section shall become operative on July 1, 2015.

end insert

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 10509.6 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

10509.6.  

Every life insurer that uses an agent in a life insurance
or annuity sale shall do the following:

(a) Require with or as part of each completed application for
life insurance or annuity, a statement signed by the agent as to
whether he or she knows replacement is or may be involved in the
transaction.

(b) Where a replacement is involved:

(1) Require from the agent with the application for life insurance
or annuity: (i) a list of all of the applicant’s existing life insurance
or annuity to be replaced, and (ii) a copy of the replacement notice
provided the applicant pursuant to Section 10509.4. The existing
life insurance or annuity shall be identified by name of insurer,
insured, and contract number. If a number has not been assigned
by the existing insurer, alternative identification, such as an
application or receipt number shall be listed.

(2) Send to each existing life insurer a written communication
advising of the replacement or proposed replacement and the
identification information obtained pursuant to this section and a
policy summary, contract summary, or ledger statement containing
policy data on the proposed life insurance or annuity. Cost indices
and equivalent level annual dividend figures need not be included
in the policy summary or ledger statement. This written
communication shall be made within three working days of the
date the application is received in the replacing insurer’s home or
regional office, or the date the proposed policy or contract is issued,
whichever is sooner.

(3) Every existing life insurer or the insurer’s agent that
undertakes a conservation shall, within 20 days from the date the
written communication plus the materials required in subdivisions
(1) and (2) are received by the existing insurer, furnish the
policyowner with a policy summary for the existing life insurance
or ledger statement containing policy data on the existing policy
or annuity. Information relating to premiums, cash values, death
benefits, and dividends, if any, shall be computed from the current
policy year of the existing life insurance. The policy summary or
ledger statement shall include the amount of any outstanding
indebtedness, the sum of any dividend accumulations or additions,
and may include any other information that is not in violation of
any regulation or statute. Cost indices and equivalent level annual
dividend figures need not be included. When annuities are
involved, the disclosure information shall be that in the contract
summary.

The replacing insurer may request the existing insurer to furnish
it with a copy of the summaries or ledger statement, which shall
be within five working days of the receipt of the request.

(c) The replacing insurer shall maintain evidence of the “notice
regarding replacement,” the policy summary, the contract summary,
and any ledger statements used, and a replacement register,
cross-indexed by replacing agent and existing insurer to be
replaced. The existing insurer shall maintain evidence of policy
summaries, contract summaries, or ledger statements used in any
conservation. Evidence that all requirements were met shall be
maintained for at least three years.

(d) The replacing insurer shall provide in its policy or in a
separate written notice which is delivered with the policy that the
applicant has a right to an unconditional refund of all premiums
paid which right may be exercised within a period of 30 days
commencing from the date of delivery of the policy. In the case
of variable annuity contracts, variable life insurance contracts, and
modified guaranteed contracts, return of the contract during the
cancellation period shall entitle the owner to a refund of account
value and any policy fee paid for the policy. The account value
and policy fee shall be refunded by the insurer to the owner within
30 days from the date that the insurer is notified that the owner
has canceled the policy.

begin insert

(e) This section shall become inoperative on July 1, 2015, and,
as of January 1, 2016, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2016, deletes or
extends the dates on which it becomes inoperative and is repealed.

end insert

begin insert

begin insert SEC. 10. end insert   

end insert

begin insert Section 10509.6 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10509.6. end insert   

Every life insurer that uses an agent in a life insurance
or annuity sale shall do the following:

(a) Require with or as part of each completed application for
life insurance or annuity, a statement signed by the agent as to
whether he or she knows a replacement is or may be involved in
the transaction.

(b) Where a replacement is involved:

(1) Require from the agent with the application for life insurance
or annuity: (i) a list of all of the applicant’s existing life insurance
or annuity to be replaced, and (ii) a copy of the replacement notice
provided the applicant pursuant to Section 10509.4. The existing
life insurance or annuity shall be identified by name of insurer,
insured, and contract number. If a number has not been assigned
by the existing insurer, alternative identification, such as an
application or receipt number, shall be listed.

(2) Send to each existing life insurer a written communication
advising of the replacement or proposed replacement and the
identification information obtained pursuant to this section and a
policy summary, contract summary, or ledger statement containing
policy data on the proposed life insurance or annuity. Cost indices
and equivalent level annual dividend figures need not be included
in the policy summary or ledger statement. This written
communication shall be made within three working days of the
date the application is received in the replacing insurer’s home
or regional office, or the date the proposed policy or contract is
issued, whichever is sooner.

(3) Every existing life insurer or the insurer’s agent that
undertakes a conservation shall, within 20 days from the date the
written communication plus the materials required in subdivisions
(1) and (2) are received by the existing insurer, furnish the
policyowner with a policy summary for the existing life insurance
or ledger statement containing policy data on the existing policy
or annuity. Information relating to premiums, cash values, death
benefits, and dividends, if any, shall be computed from the current
policy year of the existing life insurance. The policy summary or
ledger statement shall include the amount of any outstanding
indebtedness, the sum of any dividend accumulations or additions,
and may include any other information that is not in violation of
any regulation or statute. Cost indices and equivalent level annual
dividend figures need not be included. When annuities are involved,
the disclosure information shall be that in the contract summary.

The replacing insurer may request the existing insurer to furnish
it with a copy of the summaries or ledger statement, which shall
be within five working days of the receipt of the request.

(c) The replacing insurer shall maintain evidence of the “notice
regarding replacement,” the policy summary, the contract
summary, and any ledger statements used, and a replacement
register, cross-indexed by replacing agent and existing insurer to
be replaced. The existing insurer shall maintain evidence of policy
summaries, contract summaries, or ledger statements used in any
conservation. Evidence that all requirements were met shall be
maintained for at least three years.

(d) The replacing insurer shall provide on the front of the policy
jacket or on the cover page of its life insurance policy or annuity
contract or, alternatively, as a separate written document which
is delivered with the life insurance policy or annuity contract, a
notice stating that the owner has a right to an unconditional refund
of all premiums paid which right may be exercised within a period
of 30 days commencing from the date of delivery of the contract.
In the case of variable annuities, and variable life insurance, return
of the contract during the cancellation period shall entitle the
owner to a refund of the account value and any policy fee paid.
The account value and policy fee shall be refunded by the insurer
to the owner within 30 days from the date that the insurer is
notified that the owner has canceled the contract.

(e) This section shall become operative on July 1, 2015.

end insert

begin delete

SECTION 1.  

Section 786 of the Insurance Code is amended
to read:

786.  

All individual and group disability insurance policies and
certificates, and all group life insurance policies and certificates
offered for sale to individuals age 65 or older in California shall
provide an examination period of 30 days after the receipt of the
policy or certificate for purposes of review of the contract. If the
policyholder or certificate holder chooses to cancel the policy or
certificate and returns the policy or certificate for cancellation, by
mail or other delivery method, within the 30-day examination
period, the return shall void the policy or certificate from the
beginning, and the parties shall be in the same position as if a
policy or certificate had not been issued. All premiums paid and
any policy or membership fee paid shall be fully refunded to the
policyholder or certificate holder by the insurer or entity in a timely
manner.

(a) For the purposes of this section, a timely manner is no later
than 30 days after the insurer or entity issuing the policy or
certificate receives the returned policy or certificate.

(b) If the insurer or entity issuing the policy or certificate fails
to refund all of the premiums and any policy or membership fee
paid, in a timely manner, the policyholder or certificate holder
shall receive interest on the paid premium and policy or
membership fee at the legal rate of interest on judgments as
provided in Section 685.010 of the Code of Civil Procedure. The
interest shall be paid from the date the insurer or entity received
the returned policy or certificate.

(c) Each policy or certificate shall have a notice prominently
printed in no less than 12-point bold print, on the front of the policy
jacket or on the cover page of the policy or certificate and the
outline of coverage, stating that the policyholder or certificate
holder, as applicable, has the right to return the policy or certificate,
by mail or other delivery method, within 30 days after its receipt,
and to have the full premium and any policy or membership fee
paid refunded.

(d) If, at the time of application or at the time of delivery of a
group term life insurance policy or certificate, an insurer, its agent,
group master policyowner, or association collects more than one
month’s premium from an individual who is 60 years of age or
older on the date he or she purchased coverage, the insurer shall
provide the individual with a prorated refund of the premium if
the individual delivers a cancellation request to the insurer during
the first 30 days of the policy period.

SEC. 2.  

Section 10127.9 of the Insurance Code is amended to
read:

10127.9.  

(a) (1) Every individual life insurance policy and
every individual annuity contract that is initially delivered or issued
for delivery in this state on and after January 1, 1990, shall have
printed on the front of the policy jacket or on the cover page a
notice stating that, after receipt of the policy by the owner, the
policy may be returned by the owner for cancellation by mail or
other delivery method to the insurer or to the agent through whom
it was purchased. The period of time set forth by the insurer for
return of the policy by the owner shall be clearly stated and this
period shall be not less than 10 days nor more than 30 days.

(2) The owner may return the policy to the insurer by mail or
other delivery method at any time during the period specified in
the notice. In the case of individual nonvariable life insurance
policies and individual nonvariable annuity contracts, including
modified guaranteed contracts, by delivering or mailing the policy
pursuant to this section during the cancellation period, the owner
shall void the policy from the beginning, and the parties shall be
in the same position as if no policy had been issued. All premiums
paid and any policy fee paid for the policy shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the policy. In the
case of individual variable annuity contracts and individual variable
life insurance policies, return of the policy during the cancellation
period shall entitle the owner to a refund of the account value and
any policy fee paid for the policy. The account value and policy
fee shall be refunded by the insurer to the owner within 30 days
from the date that the insurer is notified that the owner has canceled
the policy.

(b) This section applies to all individual policies issued or
delivered in this state on or after January 1, 1990, but does not
apply to any policy subject to Section 10127.7. All policies subject
to this section which are in effect on January 1, 1990, shall be
construed to be in compliance with this section, and any provision
in any policy which is in conflict with this section shall be of no
force or effect.

(c) This section does not apply to individual life insurance
policies issued in connection with a credit transaction or issued
under a contractual policy-change or conversion privilege provision
contained in a policy.

(d) General references to “policy” or “policies” in this section
refer to both life insurance policies and annuity contracts.

SEC. 3.  

Section 10127.10 of the Insurance Code is amended
to read:

10127.10.  

(a) Every policy of individual life insurance and
every individual annuity contract that is initially delivered or issued
for delivery to a senior citizen in this state on and after July 1,
2004, shall have printed on the front of the policy jacket or on the
cover page a notice stating that, after receipt of the policy by the
owner, the policy may be returned by the owner for cancellation
by mail or other delivery method to the insurer or agent from whom
it was purchased. The period of time set forth by the insurer for
return of the policy by the owner shall be clearly stated in the
notice and this period shall be not less than 30 days. The owner
may return the policy to the insurer by mail or other delivery
method at any time during the period specified in the notice. During
the 30-day cancellation period, the premium for an individual
variable life insurance policy or an individual variable annuity
contract may be invested only in fixed-income investments and
money-market funds, unless the owner specifically directs that the
premium be invested in the mutual funds underlying the variable
life insurance policy or variable annuity contract. Return of the
policy within the 30-day cancellation period shall have one of the
following effects:

(1) In the case of individual variable life insurance policies and
individual variable annuity contracts for which the owner has not
directed that the premium be invested in the mutual funds
underlying the policy during the cancellation period, return of the
policy during the cancellation period shall have the effect of
voiding the policy from the beginning, and the parties shall be in
the same position as if no policy had been issued. All premiums
paid and any policy fee paid for the policy shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the policy.

(2) In the case of individual variable life insurance policies and
individual variable annuity contracts for which the owner has
directed that the premium be invested in the mutual funds
underlying the policy during the 30-day cancellation period,
cancellation shall entitle the owner to a refund of the account value
and any policy fee paid for the policy. The account value shall be
refunded by the insurer to the owner within 30 days from the date
that the insurer is notified that the owner has canceled the policy.

(b) This section applies to all individual life insurance policies
and all individual annuity contracts issued or delivered to senior
citizens in this state on or after January 1, 2004. All policies subject
to this section which are in effect on January 1, 2003, shall be
construed to be in compliance with this section, and any provision
in any policy which is in conflict with this section shall be of no
force or effect.

(c) Every individual nonvariable life insurance policy and every
individual nonvariable annuity contract, including modified
guaranteed annuity contracts, subject to this section, that is
delivered or issued for delivery in this state shall have the following
notice printed on the front of the policy jacket or on the cover page
in 12-point bold print with one inch of space on all sides, using
the exact language in quotation marks below, with whichever one
of the three bracketed product descriptions that applies to the
product on which the notice appears:

“IMPORTANT!

You have purchased a [life insurance policy or annuity contract
or modified guaranteed annuity contract]. Carefully review it for
limitations.

This policy may be returned within 30 days from the date you
received it for a full refund by returning it to the insurance company
or agent who sold you this policy. After 30 days, cancellation may
result in a substantial penalty, known as a surrender charge.”

The sentence “After 30 days, cancellation may result in a
substantial penalty, known as a surrender charge” may be deleted
if the policy does not contain a surrender charge. The phrase
“known as a surrender charge” may be deleted if the policy contains
a penalty but no surrender charge. If the policy contains both a
penalty, or penalties, and a surrender charge, the sentence shall
state that cancellation may result in “substantial penalties, including
a surrender charge.” Whether a charge constitutes a surrender
charge or a penalty shall be determined by the nature of the charge
and not the name given to the charge by the insurer. If the surrender
charge is called a “withdrawal charge” in the policy, the insurer
shall add the following sentence at the end of the notice:

“In this policy the surrender charge is called a ‘withdrawal
charge.’”

(d) Every individual variable life insurance policy and every
individual variable annuity contract subject to this section, that is
delivered or issued for delivery in this state, shall have the
following notice printed on the front of the policy jacket or on the
cover page in 12-point bold print with one inch of space on all
sides, using the exact language in quotation marks below, with
whichever one of the two bracketed product descriptions that
applies to the product on which the notice appears:

“IMPORTANT!

You have purchased a [variable life insurance policy or variable
annuity contract]. Carefully review it for limitations.

This policy may be returned within 30 days from the date you
received it. During that 30-day period, your money will be placed
in a fixed account or money-market fund, unless you direct that
the premium be invested in a stock or bond portfolio underlying
the policy during the 30-day period. If you do not direct that the
premium be invested in a stock or bond portfolio, and if you return
the policy within the 30-day period, you will be entitled to a refund
of the premium and any policy fee paid. If you direct that the
premium be invested in a stock or bond portfolio during the 30-day
period, and if you return the policy during that period, you will be
entitled to a refund of the policy’s account value on the day the
policy is received by the insurance company or agent who sold
you this policy, which could be less than the premium you paid
for the policy, plus any policy fee paid. A return of the policy after
30 days may result in a substantial penalty, known as a surrender
charge.”

The sentence “A return of the policy after 30 days may result in
a substantial penalty, known as a surrender charge” may be deleted
if the policy does not contain a surrender charge. If the policy
contains both a penalty, or penalties, and a surrender charge, the
sentence shall state that cancellation may result in “substantial
penalties, including a surrender charge.” The phrase “known as a
surrender charge” may be deleted if the policy contains a penalty
but no surrender charge. Whether or not a charge constitutes a
surrender charge or a penalty will be determined by the nature of
the charge and not the name given to the charge by the insurer. If
the surrender charge is called a “withdrawal charge” in the policy,
the insurer shall add the following sentence at the end of the notice:

“In this policy the surrender charge is called a ‘withdrawal
charge.’”

(e) If the individual annuity contract is an immediate annuity
contract, the following sentence, using the exact language in
quotation marks below, in 12-point bold print, shall be added at
the end of the right to examine language required by this section
and before the one inch of space:

“After the 30-day period has expired, you may not be able to
get your purchase payment money back in any manner, or in any
manner other than in annuity payments made according to the
terms of your contract. The insurance company or agent who sold
you this contract can explain if your contract has these restrictions.”

(f) This section does not apply to life insurance policies issued
in connection with a credit transaction or issued under a contractual
policy-change or conversion privilege provision contained in a
policy.

(g) For purposes of this chapter, a senior citizen means an
individual who is 60 years of age or older on the date of purchase
of the policy.

(h) General references to “policy” or “policies” in this section
refer to both life insurance policies and annuity contracts.

SEC. 4.  

Section 10127.13 of the Insurance Code is amended
to read:

10127.13.  

(a) All individual life insurance policies and
individual annuity contracts for senior citizens that contain a charge
upon surrender, partial surrender, excess withdrawal, or penalties
upon surrender shall contain a notice disclosing the location of the
charge, the charge time period, the charge information, and any
associated penalty information, in bold 12-point print on the front
of the policy jacket or on the cover page of the policy.

(b) A policy shall have just one cover page. If the notice required
by this section and the statutorily required right to examine notice
are both on the cover page, as opposed to the front cover of the
policy jacket, they shall appear on the same page.

(c) General references to “policy” in this section refer to both
life insurance policies and annuity contracts.

SEC. 5.  

Section 10509.6 of the Insurance Code is amended to
read:

10509.6.  

Every life insurer that uses an agent in a life insurance
or annuity sale shall do the following:

(a) Require with or as part of each completed application for
life insurance or annuity, a statement signed by the agent as to
whether he or she knows a replacement is or may be involved in
the transaction.

(b) Where a replacement is involved:

(1) Require from the agent with the application for life insurance
or annuity: (i) a list of all of the applicant’s existing life insurance
or annuity to be replaced, and (ii) a copy of the replacement notice
provided the applicant pursuant to Section 10509.4. The existing
life insurance or annuity shall be identified by name of insurer,
insured, and contract number. If a number has not been assigned
by the existing insurer, alternative identification, such as an
application or receipt number shall be listed.

(2) Send to each existing life insurer a written communication
advising of the replacement or proposed replacement and the
identification information obtained pursuant to this section and a
policy summary, contract summary, or ledger statement containing
policy data on the proposed life insurance or annuity. Cost indices
and equivalent level annual dividend figures need not be included
in the policy summary or ledger statement. This written
communication shall be made within three working days of the
date the application is received in the replacing insurer’s home or
regional office, or the date the proposed policy or contract is issued,
whichever is sooner.

(3) Every existing life insurer or the insurer’s agent that
undertakes a conservation shall, within 20 days from the date the
written communication plus the materials required in subdivisions
(1) and (2) are received by the existing insurer, furnish the
policyowner with a policy summary for the existing life insurance
or ledger statement containing policy data on the existing policy
or annuity. Information relating to premiums, cash values, death
benefits, and dividends, if any, shall be computed from the current
policy year of the existing life insurance. The policy summary or
ledger statement shall include the amount of any outstanding
indebtedness, the sum of any dividend accumulations or additions,
and may include any other information that is not in violation of
any regulation or statute. Cost indices and equivalent level annual
dividend figures need not be included. When annuities are
involved, the disclosure information shall be that in the contract
summary.

The replacing insurer may request the existing insurer to furnish
it with a copy of the summaries or ledger statement, which shall
be within five working days of the receipt of the request.

(c) The replacing insurer shall maintain evidence of the “notice
regarding replacement,” the policy summary, the contract summary,
and any ledger statements used, and a replacement register,
cross-indexed by replacing agent and existing insurer to be
replaced. The existing insurer shall maintain evidence of policy
summaries, contract summaries, or ledger statements used in any
conservation. Evidence that all requirements were met shall be
maintained for at least three years.

(d) The replacing insurer shall provide on the front of the policy
jacket or on the cover page of its life insurance policy or annuity
contract or, alternatively, as a separate written document which is
delivered with the life insurance policy or annuity contract, a notice
stating that the owner has a right to an unconditional refund of all
premiums paid which right may be exercised within a period of
30 days commencing from the date of delivery of the contract. In
the case of variable annuities, and variable life insurance, return
of the contract during the cancellation period shall entitle the owner
to a refund of the account value and any policy fee paid. The
account value and policy fee shall be refunded by the insurer to
the owner within 30 days from the date that the insurer is notified
that the owner has canceled the contract.

end delete