BILL ANALYSIS �
AB 1747
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Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1747 (Feuer) - As Amended: April 26, 2012
SUBJECT : Life Insurance
SUMMARY : Establishes notice requirements, reinstatement
options, and a grace period for premium payment for life
insurance policies. Specifically, this bill :
1)Requires individual and group life insurance policies to
provide a 60 day grace period for payment of premium before
terminating the policy if the premium is fully paid within the
grace period.
2)Requires insurers to mail a notice of pending lapse and
termination at least 30 days prior to the termination of an
individual or group life insurance policy for non-payment of
premium.
3)Permits an applicant for, or owner of, an individual life
insurance policy to designate additional persons to receive
notices of lapse or termination.
4)Requires a life insurer to notify an insured when a premium
payment is due and the insured did not make a designation at
the time the policy was issued of the insured's right to make
or change a designation.
5)Provides that an insured may change the designation at any
time.
6)Requires individual life insurance policies to include a
provision allowing reinstatement of a lapsed policy within
five months with payment of past due premium if the insured
can demonstrate cognitive impairment or loss of functional
capacity.
7)Conforms existing notice requirements for assignees of life
insurance policies to the notice requirements in this bill.
EXISTING LAW :
AB 1747
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1)Requires a notice of cancellation be mailed at least 20 days
prior to cancelling an automobile insurance policy.
2)Requires a 60 day grace period for payment of premium for
individual variable life insurance policies.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Purpose. According to the author, the bill provides consumer
safeguards from which people who have purchased life insurance
coverage, especially seniors, would benefit. Under existing
law, individuals can easily lose the critical protection of
life insurance if a single premium is accidentally missed
(even if they have been paying premiums on time for many
years). If an insured individual loses coverage and wants it
reinstated, he or she may have to undergo a new physical exam
and be underwritten again, risking a significantly more
expensive, possibly unaffordable premium if his or her health
has changed in the years since purchasing the policy.
Therefore, the protections provided by AB 1747 are intended to
make sure that policyholders have sufficient warning that
their premium may lapse due to nonpayment.
2)Designation Notices. The bill requires insurers to provide a
notification of policyholders' right to designate another
recipient of lapse and termination notices when premium is
due. Consumers have a range of options for how often (e.g.,
monthly, quarterly, annually). Providing a notice to the
insured with every premium billing notice when monthly or
quarterly payments are made creates an administrative burden
out of proportion with the value of the notice. The author
may wish to consider an amendment requiring insurers to
provide the notice on an annual basis.
The author may also wish to consider an amendment requiring
that the applicant be provided with a designation form.
REGISTERED SUPPORT / OPPOSITION :
Support
California Advocates for Nursing Home Reform (CANHR)
California Alliance for Retired Americans
AB 1747
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California Retired County Employees Association (CARA)
Congress of California Seniors (CCS)
Consumer Federation of California
Opposition
Association of California Life and Health Insurance Companies
(unless amended)
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086