BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
SB 1405 (Comm. On Banking, Finance & Insurance) Hearing Date:
April 21, 2010
As Introduced: February 19, 2010
Fiscal: No
Urgency: No
1. SUMMARY Would provide that life insurance policies sold
in California with an initial face amount of less than
$10,000 dollars, which today have a right to cancellation
and refund like policies with a higher initial face amount,
are entitled to their refund within 30 days of notice of
cancellation to the insurer just as now applies to similar
policies valued at $10,000 dollars or more.
DIGEST
Existing law
1. Specifies that individual life insurance policies sold in
California, irrespective of their initial face value, 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.
2. Provides that with respect to such policies with an initial
face value of $10,000 dollars or more, that they carry an
express right to receive a refund within 30 days of the owner
giving notice of cancellation.
3. 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
SB
1405 (Comm. On B, F &I), Page 2
1. Revises the law governing the sale of individual life
insurance policies to specify that for the sale of policies
with an initial face value of less than $10,000 dollars,
refunds are required to be provided within 30 days from the
date that the insurer is notified that the insured has
canceled the policy.
COMMENTS
1. Purpose of the bill Current law confers all buyers of a
life insurance policy to make a timely request to cancel
for a full refund and requires that refund to be provided
within 30 days of the notice to the insurer for policies
with an initial face amount of $10,000 or more. For
policies with an initial face amount of less than $10,000
dollars, the timing of the refund is not specified. This
bill will make the "within 30 days from the date that the
insurer is notified" standard apply to all such policies
without regard to the initial face amount.
2. In effect, it is a code clean-up bill addressing an
issue identified during the drafting of last year's SB 397.
3. Opposition None
4. Prior and Related Legislation This provision was added
as a "code clean-up" matter to SB 397 of 2009 which was
vetoed for reasons unrelated to this bill's subject matter.
In the veto message of SB 397, the Governor stated:
"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
SB
1405 (Comm. On B, F &I), Page 3
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."
POSITIONS
Support
None
Oppose
None Received
Consultant: Kenneth Cooley (916) 651-4772