BILL ANALYSIS
SB 397
Page 1
SENATE THIRD READING
SB 397 (Ron Calderon)
As Amended September 1, 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.
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;
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b) A statement that the recipient of the notice is
authorized 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)Provides that in life insurance policies with a face value of
$15,000 or less there shall be a clear notice given to the
owner that the policy may be returned for cancellation in a
period set by the insurer that is not less than 10 days nor
more than 30 days, with one exception. The exception applies
when a life insurance policy has a face value of $15,000 or
less that is sold to a senior citizen to specifically pay for
funeral and burial expenses. In that instance, the senior
citizen shall have 60 days to return the policy for
cancellation unless he or she receives a set of disclosures at
least 24 hours prior to the meeting with the insurance agent.
5)The notice requirement, noted in 4 above, 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 :
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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
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
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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 :
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."
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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 (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) 319-2086
FN: 0002758