BILL ANALYSIS Ó
SB 281
Page 1
Date of Hearing: August 21, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 281 (Calderon) - As Amended: August 5, 2013
Policy Committee: InsuranceVote:12 -
0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the sale of life insurance with accelerated
death benefits features that allow policy owners to access death
benefits when they experience a catastrophic or chronic illness.
FISCAL EFFECT
On-going special fund costs will likely be between $200,000 and
$300,000 to the California Department of Insurance's (CDI) for
additional attorneys to review insurer filings for accelerated
death benefit riders and policies, an actuary to certify that
any rider or policy is sound, and additional personnel in their
Consumer Services Division to handle questions and complaints,
(Insurance Fund).
COMMENTS
1)Rationale . Generally, life insurance is a component of estate
and tax planning. Historically, it has provided resources,
known as a death benefit, to beneficiaries upon the death of
the insured. According to the author, however, consumers have
been requesting life insurance options that provide additional
resources while the insured is still living. The purpose of
this bill is to establish streamlined standards for
accelerated death benefits, life insurance products that offer
a living benefit by paying all or a portion of the death
benefit when the insured develops specified catastrophic
conditions, such as a life-threatening medical condition or
long-term chronic illness.
2)Background . Accelerated death benefits are a life insurance
SB 281
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benefit that allows a policy holder to access all or a portion
of a death benefit based on the occurrence of a qualifying
event. These benefits can be incorporated into the original
policy or added as a rider. Currently, at least 42 other
states, 41 of which are members of the Interstate Insurance
Product Regulation Commission (IIPRC) and New York, offer some
form of accelerated death benefits.
Existing law requires life insurance contracts to be submitted
to the Insurance Commissioner for approval before the
contracts are delivered or issued for delivery in this state.
Life insurance provides a cash benefit to beneficiaries when
the insured dies. According to the American Council of Life
Insurers (ACLI), in 2011, total life insurance coverage in the
United States amounted to over $19.2 trillion dollars.
Although life insurance may be sold as group policies,
individual life insurance accounts for over 57% of the life
insurance market. Individual life insurance policies are
commonly bought as either permanent or term policies.
An accelerated death benefit permits the owner of a life
insurance policy to access a portion or all of the death
benefit prior to the death of the insured (the measuring life
of the policy) on the occurrence of a qualifying event while
the insured is still alive. California law does not currently
recognize most of the common triggers for accelerated death
benefits
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081