BILL ANALYSIS                                                                                                                                                                                                    



                                                                  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
                                                                  Page  2

            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