BILL ANALYSIS
SB 397
Page 1
SENATE THIRD READING
SB 397 (Calderon)
As Amended July 9, 2009
Majority vote
SENATE VOTE :32-3
INSURANCE 9-0 APPROPRIATIONS 17-0
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|Ayes:|Solorio, Garrick, |Ayes:|De Leon, Conway, Ammiano, |
| |Anderson, | | |
| |Charles Calderon, Carter, | |Charles Calderon, Coto, |
| |Feuer, Hayashi, Niello, | |Davis, Duvall, Fuentes, |
| |Torres | |Hall, Harkey, Miller, |
| | | |John A. Perez, Skinner, |
| | | |Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Hill |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Exempts the sale of certain life insurance policies for
funeral and burial expenses from the requirement that the agent
provide the senior with a notice at least 24 hours prior to their
initial meeting when certain disclosures are made, and increases the
cancellation period for insurance policies with a face value of less
than $15,000. Specifically, this bill :
1)Specifies that the 24-hour prior notice requirement to seniors
shall not apply to the sale of life insurance policies that are
designated by the purchaser as payment for funeral and burial
expenses when the life insurance policy has an initial face amount
of $15,000 or less, and contains a "free look" period in which the
purchaser has 60 days to cancel the policy and be refunded
payments.
2)Requires the issuer of a policy for funeral and burial expenses,
meeting the conditions of 1) above, to mail a written notice
within 14 days to the senior, and any financial, estate planning,
or other advisor of the senior's choosing at addresses provided by
the senior. The notice shall include all of the following:
a) Information on the right of cancellation;
b) A statement that the recipient of the notice is authorized
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to call the insurer to inquire about the policy on behalf of
the policyholder;
c) A form suitable for the senior's use in exercising the right
to cancel the policy; and,
d) Information on how to contact the California Department of
Insurance (CDI) for information or to file a complaint,
including the telephone number of the department's customer
assistance office.
3)Specifies that the 24-hour prior notice requirement to seniors
shall be deemed satisfied with respect to life insurance policies
designated for payment of funeral and burial expenses, meeting the
conditions of 1) above, if both of the following requirements are
met:
a) The notice was provided at the time of the meeting to the
prospective purchaser by a licensee who holds a life-only
license or a life-only license limited to the payment of
funeral and burial expenses in which the policies are limited
to $15,000; and,
b) The licensee retains in his or her files a copy of the
notice signed by the purchaser.
4)Requires every policy of individual life insurance with a face
value of less than $15,000 that is issued after January 1, 2010,
to have a printed notice informing the owner that the policy may
be returned for cancellation. The return period shall be no less
than 60 days. The notice requirement does not apply to policies
issued in connection with a credit transaction or issued under a
contractual policy change or conversion privilege provision
contained in a policy.
EXISTING LAW :
1)Requires a person who meets with a senior in the senior's home for
the purpose of selling life insurance, including annuities, to
deliver to the senior a written notice at least 24 hours prior to
their initial meeting. If the senior has an existing insurance
relationship with an agent and requests a meeting with the agent
in the senior's home the same day, the agent must provide a notice
prior to the meeting.
2)The written notice delivered to the senior shall include the
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following information in 14-point type:
a) There will be a sales presentation on life insurance,
including annuities, and/or other insurance products at the
meeting;
b) The senior has the right to have other persons present at
the meeting, including family members, financial advisors or
attorneys;
c) The senior has the right to end the meeting at any time;
d) The senior has the right to contact the Department of
Insurance for information, or to file a complaint. The notice
shall include the consumer assistance telephone numbers at the
department; and,
e) A listing of the individuals who will attend the meeting.
1)Requires each person attending a meeting with a senior for the
purpose of selling life insurance at the senior's home to end all
discussions and leave the senior's home immediately after being
asked to leave by the senior.
2)Prohibits a person from soliciting a sale of an annuity or life
insurance policy at the residence of a senior, in person or by
telephone, by using any plan, scheme, or ruse that misrepresents
the true status or mission of the contact.
3)Requires every policy of individual life insurance with a face
value of less than $10,000 to have a printed notice informing the
owner that the policy may be returned for cancellation. The
return period shall be no less than 10 days nor more than 30 days.
The notice requirement does not apply to policies issued in
connection with a credit transaction or issued under a contractual
policy change or conversion privilege provision contained in a
policy.
FISCAL EFFECT : Minor absorbable workload to the California
Department of Insurance to continue oversight of the life insurance
market and policy notifications.
COMMENTS :
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1)The purpose of this bill is to allow the sale of small life
insurance policies to pay for funeral and burial expenses without
a 24-hour prior delivery of a notice concerning senior rights that
now applies across-the-board to all sales of individual life
insurance policies. The bill waives the 24-hour waiting period if
the following conditions are met:
a) The purchaser is informed he or she has the right to cancel
the policy;
b) The purchaser is given a 60-day "free-look" period during
which he or she can cancel the policy for a full refund;
c) A copy of the notice is provided to the senior in their home
and a signed copy is kept in the licensee's files;
d) A notice is mailed to the purchaser and any family member or
financial advisor whom the purchaser requests to provide advice
regarding funeral and burial insurance; and,
e) The purchaser is notified of the telephone number for the
Department of Insurance to obtain information or file a
complaint.
2)This bill is similar to AB 608 (Calderon) of the 2005-06 Session
and SB 739 (Calderon) of the 2007-08 Session. Both of those bills
were passed by the Legislature and vetoed by the Governor. In the
veto message of SB 739, the Governor stated: "Although this
measure provides additional notice requirements to attempt to
protect against fraud, I remain unconvinced of the need to deviate
from the current 24-hour notice requirement. Asking an agent to
wait one day before meeting in someone's home is a minor request
in order to protect seniors against fraud."
3)The author states that the 60-day "free look" is a significant
improvement over current law which can now be as short as 10 days
and not more than 30 days. This expanded "free look" plus the
notice that informs the purchaser and, at the buyer's option,
their family members and/or financial advisors of the right to
cancel and how to exercise that right are intended to establish a
new "bright line" for how door to door sales of funeral and burial
expense policies are to be conducted, and thus meet the Governor's
objections as stated in his veto message.
The American Bankers Insurance Company (ABIC) states that the
original law that established the 24-hour prior notice to seniors
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(SB 620, Chapter 547, Statutes of 2003) was based on 2,500
complaints received by the CDI indicating that seniors were losing
their life savings in investment schemes involving insurance.
However, pre-need funeral policies did not receive any complaints.
According to ABIC:
a) Pre-need policies are small face amount life policies sold
to address funeral expenses and these policies are purchased
for peace of mind to cover funeral expenses rather than as an
investment product; and,
b) This bill maintains the integrity of the law by requiring
that any agent selling pre-need funeral policies to deliver a
specified notice to the senior, prior to the start of the
meeting, and by increasing the free-look period to 60 days.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086FN:
0002488