BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 397|
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VETO
Bill No: SB 397
Author: Calderon (D)
Amended: 9/1/09
Vote: 21
SEN. BANKING, FINANCE, AND INS. COMMITTEE : 9-2, 4/29/09
AYES: Calderon, Cogdill, Correa, Cox, Florez, Harman, Liu,
Lowenthal, Padilla
NOES: Kehoe, Wolk
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 32-3, 6/1/09
AYES: Aanestad, Ashburn, Benoit, Calderon, Cogdill,
Correa, Cox, Denham, DeSaulnier, Dutton, Florez, Hancock,
Harman, Hollingsworth, Huff, Kehoe, Leno, Liu, Lowenthal,
Maldonado, Negrete McLeod, Oropeza, Padilla, Pavley,
Romero, Runner, Steinberg, Strickland, Walters, Wright,
Wyland, Yee
NOES: Alquist, Corbett, Wolk
NO VOTE RECORDED: Cedillo, Ducheny, Simitian, Wiggins,
Vacancy
SENATE FLOOR : 33-1, 9/10/09
AYES: Aanestad, Ashburn, Benoit, Calderon, Cedillo,
Cogdill, Corbett, Correa, Cox, Denham, DeSaulnier,
Ducheny, Dutton, Hancock, Harman, Hollingsworth, Huff,
Leno, Liu, Lowenthal, Maldonado, Negrete McLeod, Pavley,
Price, Romero, Runner, Simitian, Steinberg, Strickland,
Walters, Wright, Wyland, Yee
NOES: Alquist
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NO VOTE RECORDED: Florez, Kehoe, Oropeza, Padilla,
Wiggins, Wolk
ASSEMBLY FLOOR : 77-0, 9/8/09 - See last page for vote
SUBJECT : Life insurance
SOURCE : Author
DIGEST : This bill exempts the sale of certain life
insurance policies for funeral and burial expenses form the
requirement that the agent provide the senior with a notice
of at least 24 hours prior to their initial meeting when
certain disclosures are made.
Assembly Amendments provide that in life insurance policies
with a face value of $15,000 or less, 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. In addition, the
amendments made a number of technical and clarifying
changes..
ANALYSIS :
Existing Law
1.Provides special limited licensing procedures for life
insurance for funeral or burial expenses.
2.For sales of life insurance generally requires persons
who whish to meet with a senior in the senior's home to
sell or generate leads for life insurance sales to
deliver a written notice to the senior at least 24 hours
before the first meeting in that home.
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3.This notice informs the senior of their rights in such in
home meetings. The law:
A. Requires the notice to contain various matters
including the senior's rights to have other persons
present at the meeting, the right to end the meeting
at any time, the right to file a complaint with the
Department of Insurance (DOI) and the phone numbers
for use in reaching DOI's consumer assistance office,
and the right to know in advance the names of the
individuals who will be coming to the senior's home.
B. Provides that immediately upon contacting the
senior on the premises of their home, the person is
required, before making any statement other than a
greeting, to state that the purpose of the contract
is to talk about insurance and to state the names and
titles of all persons arriving at the senior's home
and the name of the insurer represented by the
person, if known.
C. Requires each person attending such a meeting with
a senior is required to provide the senior with
written identification.
D. Specifies that all persons attending a meeting
with a senior are required to immediately end all
discussions and leave the home of the senior after
being asked to leave by the senior.
E. Prohibits persons seeking to sell life insurance
at the home of the senior, whether in person or by
telephone, from using any plan, scheme, or ruse that
misrepresents the true status or mission of the
contract.
4.Additionally, other provisions of law applicable to the
sale of individual life insurance policies specify that
every such policy must contain or have attached a notice
informing the policy owner of their right to cancel the
policy by delivering it or mailing it to the insurer or
their agent within a specified period. Under current
law, such policies with an initial face value of less
than $10,000 are subject to a similar notice by means of
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a separate but related provision of law, although the
policies with a $10,000 or greater initial face amount
carry an express right to refund within 30 days of the
owner giving notice of cancellation.
5.Under both of these provisions of law, insurers are
required to disclose how long the right of cancellation
is available to the new policy owner under the policy
they have purchased; the existing law permits the insurer
to specify this time period upon policy issuance, subject
to the requirement that it shall be not less than 10 days
nor more than 30 days.
This bill:
1.Exempts from the above pre-notification law and its
accompanying duties the in-home sale to a senior of
policies of life insurance designated by the purchaser
for funeral or burial expense, if the life insurance
policy:
A. Has an initial face amount of $15,000 or less.
B. Provides a "free look" period in which the
purchaser has 60 days to cancel the policy and be
refunded payments made to the insurer prior to the
cancellation of the policy.
2.Requires that within 14 days of a transaction of the type
described above, the issuer shall provide a first-class
mail written notice of the purchase and the 60-day right
of cancellation to the senior, any family member
designated by 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 form suitable for the senior's use in exercising
the right to cancel the policy.
C. Information on how to contact DOI for information
or to file a complaint, including the telephone
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number of DOI's customer assistance office.
D. A statement that the recipient of the notice is
authorized to call the insurer to inquire about the
policy on behalf of the policyholder.
3.Authorizes, but does not require, DOI to adopt, by
regulation, a standardized form for use in complying with
the requirements of paragraph #3 above.
4.Specifies that the 24 hour advance notice requirement
shall be deemed satisfied with respect to policies exempt
pursuant to this bill provided:
A. The licensee making an in-home sale to a senior
pursuant to this bill provides a copy of the 24-hour
notice otherwise required to the senior at the time
of the meeting in the senior's home.
B. The licensee retains in his or her files a copy of
the notice singed by the purchaser.
5.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.
6.Revises the law governing the sale of individual life
insurance policies to specify that for the sale of small
face amount policies (less than $10,000 policy in current
law, revised to $15,000 by this bill) policy owners have
a statutory right to 60 days in which to return a policy
for cancellation and a refund of all premiums and policy
fee paid, rather than the 10 to 30 day time frame current
law allows their insurer to specify. Refunds are
required to be provided not later than 30 days after the
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date the insurer is notified that the insured has
cancelled the policy.
Prior Legislation
This bill's subject matter is closely related 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 subsequently vetoed. In the veto
message of SB 739, the Governor stated:
"Last year, I vetoed similar legislation that would
have granted an exemption from the current requirement
that seniors be given 24-hour notice in advance of any
attempt to meet in a senior's home to discuss the sale
of a burial or funeral policy. I stated my belief that
this notice requirement creates an important 'bright
line' test that insurance agents know not to cross and
is a sound consumer protection practice.
"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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 9/9/09)
The Cemetery and Mortuary Association of California
American Bankers Insurance Company
ARGUMENTS IN SUPPORT : The Cemetery and Mortuary
Association of California supports this bill to strengthen
the consumer protections that apply to the purchases of
final expense and preneed insurance policies. The
Association states such policies "provide consumers with
beneficial peace of mind through the funding of funeral
services and merchandise selections in advance". They note
the face amount of such life insurance sales is typically
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$15,000 or less. Finally, the Association notes that
"these policies are quite different than the annuity sales
which were subject to 2,500 complaints and were addressed"
by existing law. They note that such final expense and
preneed insurance policies are not purchased as an
investment product and they do no involve high premiums,
whereas the application of the 24-hour notice requirement
to the sale of such policies has a detrimental impact to
the planning that takes place in a customer's home for
final and funeral expenses.
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 397 without my signature.
During the previous two legislative sessions, I have
vetoed similar legislation that would have granted an
exemption from the current requirement that seniors
be given 24-hour notice in advance of any attempt to
meet in a senior's home to discuss the sale of a
burial or funeral policy. I stated my belief that
this notice requirement creates an important "bright
line" test that insurance agents know not to cross
and is a sound consumer protection practice.
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.
For these reasons, I am unable to sign this bill."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Carter, Chesbro, Conway,
Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
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Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Ruskin, Salas, Saldana, Silva, Skinner,
Smyth, Solorio, Audra Strickland, Swanson, Torlakson,
Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Charles Calderon, Nava, Vacancy
JJA:cm 1/7/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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