BILL ANALYSIS Ó
SB 426
Page 1
Date of Hearing: June 24, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
SB
426 (Leyva) - As Amended June 16, 2015
SENATE VOTE: 36-0
SUBJECT: Annuities: cash surrender benefits.
SUMMARY: Requires the death benefit payable under annuities
contracts issued to persons 65 years of age or older to be at
least equal to the annuity value or accumulations value without
any surrender charges or penalties upon death.
EXISTING LAW:
1)Provides for the regulation of annuity contracts, including
minimum nonforfeiture amounts prior to maturity.
2)Requires all disability and life insurance policies or
certificates offered for sale to individuals 65 and older to
include a 30 day "free look" period starting on receipt of the
policy or certificate.
3)Provides that for annuities contracts that provide cash surrender
benefits prior to maturity, any death benefit payable shall be at
least equal to the cash surrender benefit.
SB 426
Page 2
4)Imposes a special duty of honesty, good faith, and fair dealing on
an insurer, broker, agent, and all others engaged in the
transaction of insurance with a prospective insured who is 65
years of age or older.
5)Requires individual life insurance policies and annuity contracts
issued to senior citizens to disclose information on, or the
location within the policy of, any charges for surrender, partial
surrender, excess withdrawal or penalties on the front of the
policy jacket or on the cover page.
FISCAL EFFECT: Undetermined
COMMENTS:
1) Purpose of the bill. According to the sponsor, this bill
would create a best practice for insurers by providing
additional protections for seniors who purchase fixed,
deferred annuities. It would prohibit companies from
charging a surrender penalty on the death benefit and
require the death benefit payment to be at least equal to
the annuity value upon death.
2) Background. Annuities are financial products designed to
convert premium paid by the purchaser (in either a lump sum
or periodic payments) into a stream of payments to the
purchaser. Annuities are designed to provide a stable cash
flow for the purchaser (most commonly for retirees) and
alleviate the risk of outliving one's assets. Annuities can
be structured so that annuity payments will continue so long
as either the purchaser or their spouse (if survivorship
benefit is elected) is alive or to pay out funds for a fixed
period of time. Annuities can be structured to provide
immediate payments or to defer payments to a later date.
REGISTERED SUPPORT / OPPOSITION:
SB 426
Page 3
Support
Department of Insurance (sponsor)
Elder Financial Protection Network (EFPN)
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916)
319-2086