BILL ANALYSIS Ó
SENATE COMMITTEE ON INSURANCE
Senator Richard Roth, Chair
2015 - 2016 Regular
Bill No: AB 1512 Hearing Date: June 10,
2015
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|Author: |Committee on Insurance |
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|Version: |June 1, 2015 Amended |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Hugh Slayden |
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Subject: Insurance: notice of lapse.
SUMMARY Clarifies the rules related to an insurer's obligation to
provide a policyholder with the opportunity to designate a
third-party recipient to receive an additional lapse notice in
connection with employer-provided individual disability income
insurance.
DIGEST
Existing law
1.Requires an insurer, commencing January 1, 2016, to maintain a
process that allows policyholders of individual disability
income insurance policies (insurance that partially replaces
lost income due to disability) to designate one additional
person to receive a notice of pending termination of the
policy for nonpayment of premium ("designation process").
2.Requires an insurer to notify policyholders of the designation
process within 30 days of the inception date of a policy and
at least every two years thereafter.
3.Suspends the designation process requirement when the premium
is paid through a payroll or pension deduction plan until 60
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days after the policyholder is no longer on the deduction
plan.
4.Requires the application form for an insurance policy to
clearly indicate the deduction plan selected by the applicant.
This bill
1.Clarifies that policies of individual disability income
insurance are not subject to the designation process
requirement when payments are made entirely by an employer.
2.Eliminates the requirement that the application form clearly
indicate the deduction plan selected by the applicant.
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COMMENTS
1. Purpose of the bill AB 1512 is a cleanup measure to AB 1804
(Perea), Chapter 380, Statutes 2014.
2. Background Beginning January 1, 2016, AB 1804 requires
carriers of auto, homeowner's, or individual disability
income insurance to provide policyholders with the
opportunity to designate a third party to receive an
additional notice when the policy will terminate due to
nonpayment. The extra notice is intended to provide a
failsafe against unintentional lapse, including
circumstances when a policyholder may be unable to manage or
monitor his or her own affairs due to cognitive impairment,
travel, etc. However, some individual disability income
policies are paid by or through the insured's employer, so
the designation would serve little, if any, purpose.
Last year, the author of AB 1804 included an exemption for
policies paid through a payroll or pension deduction but
some stakeholders remained concerned that the existing
language could still cause unwarranted problems. This bill
reflects an agreement to clarify that language before AB
1804 takes effect.
Support The Association of California Life and Health
Insurance Companies and the American Council of Life
Insurers explain that this bill represents a minor
clarification needed to ensure that additional lapse
notifications are not required in a group context where the
premiums are entirely paid by the employer.
3. Opposition None received.
POSITIONS
Support
Association of California Life and Health Insurance Companies
AB 1512 (Committee on Insurance)
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(Sponsor)
American Council of Life Insurers
Oppose
None received
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