BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1747|
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THIRD READING
Bill No: AB 1747
Author: Feuer (D)
Amended: 8/14/12 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 6/13/12
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland
ASSEMBLY FLOOR : 51-24, 5/14/12 - See last page for vote
SUBJECT : Life insurance: nonpayment premium lapse
SOURCE : Author
DIGEST : This bill establishes a statutory minimum 60-day
grace period for nonpayment of premium on life insurance
policies. Also, requires that life insurers permit policy
owners to designate at least one other person to receive
notice of a missed payment and prohibits termination of an
individual life insurance policy until that notice has been
mailed 30 days prior to the effective date of termination
for nonpayment of premium.
Senate Floor Amendments of 8/14/12 clarify that the
requirement that the insurer send a notice of pending lapse
and termination of a life insurance policy for nonpayment
of premium applies to individual, and not group, life
insurance policies.
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AB 1747
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ANALYSIS :
Existing law:
1. Requires that life insurance policies contain certain
provisions, including, but not limited to, an individual
life insurance policy notice of the right to cancel a
policy.
2. Requires life insurers to provide certain notices to
individual life insurance policy holders, including, but
not limited to, a notice of premium increases.
This bill:
1. Requires that every life insurance policy issued or
delivered in this state contain a provision for a grace
period of not less than 60 days from the premium due
date. Prohibits the 60-day grace period from running
concurrently with the period of paid coverage, and
requires the provision provide the policy remain in
force during the grace period.
2. Requires an insurer to give the applicant for an
individual life insurance policy the opportunity to
designate at least one person, in addition to the
applicant, to receive notice of lapse or termination of
a policy for nonpayment of premium.
3. Requires an insurer to provide each applicant with a
form, as specified, to make the designation and to
notify the policy owner annually of the right to change
the designation.
4. Prohibits a notice of pending lapse and termination
from being effective unless mailed by the insurer to the
named policy owner, a named designee, and a known
assignee or other person having an interest in the
policy at least 30 days prior to the effective date of
termination if termination is for nonpayment of premium.
5. Makes conforming changes.
Background
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AB 1747
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An insurer may not terminate a life insurance policy for
nonpayment until 31 days from the date the payment is due.
This 30 day grace period is set in regulation, but not in
statute. This bill intends to add additional procedural
protections to a policy owner in order to avoid lapse.
Insured vs. Policy Owner . The insured and the policy owner
(or policy holder) is frequently, but not always, the same
person. If Spouse A purchases a policy measured by the
life of Spouse B, than Spouse A is the policy owner and
Spouse B is the insured. The author's office has explained
that the intent of this bill is to provide policy owners
additional protections.
Sixty Day Grace Period . This bill provides for a minimum
grace period of 60 days after the date the premium was due.
Option to Provide Additional Notice of Nonpayment to
Designated Recipient and Separate 30 Day Grace Period
Triggered by Notice . This bill is based on a long-term
care insurance statute and requires insurers to provide a
notification of a policy owner's right to designate at
least one other person to receive a notice of nonpayment.
An insurer will not be able to terminate the policy for
nonpayment until 30 days after a notice of nonpayment has
been mailed to the insured and a designee (if named) and
other person having an interest in the policy (such as an
assignee). The insurer will have to notify the insured
annually of the right to designate or change the
designation of the additional recipient.
Extends Period of Notice Required to Assignees . Existing
law provides protections to assignees, such as creditors
who are to receive the benefits of life insurance policy to
ensure the debt is covered. An insurer must notify the
assignee at least 10 days before the final lapse of the
policy. This bill requires that the creditor be notified
not less than 30 days prior to the final lapse of the
policy.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/14/12)
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AB 1747
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California Department of Insurance
California Alliance of Retired Americans
California Advocates for Nursing Home Reform
Congress of California Seniors
California Retired County Employees Association
Consumer Federation of California
National Association of Insurance and Financial Advisors of
California
ASSEMBLY FLOOR : 51-24, 5/14/12
AYES: Alejo, Allen, Ammiano, Beall, Block, Blumenfield,
Bonilla, Bradford, Brownley, Buchanan, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani,
Gatto, Gordon, Hall, Hayashi, Roger Hern�ndez, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma,
Mendoza, Mitchell, Monning, Nielsen, Pan, V. Manuel
P�rez, Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Beth Gaines, Garrick, Gorell, Grove, Hagman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell,
Nestande, Norby, Olsen, Silva, Smyth, Wagner
NO VOTE RECORDED: Atkins, Fletcher, Halderman, Perea,
Valadao
JJA:d 8/15/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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