BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 590|
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THIRD READING
Bill No: SB 590
Author: Calderon (D)
Amended: 3/31/11
Vote: 21
SENATE INSURANCE COMMITTEE : 6-2, 3/23/11
AYES: Calderon, Gaines, Anderson, Lieu, Price, Wyland
NOES: Corbett, Lowenthal
NO VOTE RECORDED: Correa
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Life insurance
SOURCE : American Bankers Insurance Company
DIGEST : This bill, relating to specially licensed lines
of life insurance for funeral and burial expenses, exempts
sales in a senior's home from an advance notice requirement
(1) if the policy's initial face amount is $15,000 dollars
or less, (2) it includes a "free look" period of 60 days
during which the purchaser can cancel the policy and be
refunded all payments, (3) the seller provides an
equivalent notice at the time of the sales meeting, a
signed copy of which is retained, and (4) provides a
post-sale notice of the purchase, and a form suitable for
use in exercising the right of cancellation, to the buyer,
their family and other interested parties specified by the
buyer.
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ANALYSIS : Existing law regulates the sale of life
insurance to seniors, including annuities, as specified.
Existing law requires a person who meets with a senior in
the senior's home regarding the sale of life insurance to
deliver a notice in writing to the senior no less than 24
hours prior to that individual's meeting, and to abide by
other restrictions regarding contacting the senior in the
senior's home. Existing law provides that life insurance
policies with a face value of less than $10,000, issued
after July 1, 1974, shall contain a notice permitting the
return of the policy within a period of time designated in
the notice, which may not be less than 10 or 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:
Has an initial face amount of $15,000 or less; and
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 by
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:
Information on the right of cancellation;
A statement that the notice recipient is authorized
to contact the insurer to inquire about the policy on
behalf of the policyholder;
A form suitable for the senior's use in exercising
the right of cancellation; and
Information on how to contact the Department of
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Insurance (CDI) for information or to file a
complaint, including the telephone number of the
department's customer assistance office.
3. Authorizes, but does not require, the CDI to adopt, by
regulation, a standardized form for use in complying
with the requirements of #2 above.
4. Specifies that the 24-hour advance notice requirement
shall be deemed satisfied with respect to policies
exempt pursuant to this bill provided:
the licensee making an in-home sale to a senior
pursuant to this bill provides a copy of the 24-hour
advance notice otherwise required to the senior at the
time of the meeting in the senior's home; and
The licensee retains in his/her files a copy of the
notice signed by the purchaser.
5. Modifies current law applicable to sales of individual
life insurance policies of less than $10,000 by making
it applicable to policies with an initial face amount of
$15,000 dollars or less delivered or issued for delivery
in this state on or after January 1, 2012.
6. Revises the law governing the sale of individual life
insurance policies to specify that for the sale of small
face amount funeral and burial policies which are the
subject of this Act, 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
fees 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 date the insurer is notified that the insured has
cancelled the policy.
Prior legislation . This bill is similar to SB 397
(Calderon), 2009-10 Session, which was vetoed. In his veto
message, Governor Schwarzenegger stated:
"During the previous two legislative sessions, I have
vetoed similar legislation that would have granted an
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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."
During both the 2005-06 Session, and the 2007-08 Session,
related bills were passed and vetoed (AB 608 �Calderon] and
SB 739 �Calderon]). The current bill includes significant
new consumer protections not included in the earlier
measures.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/11/11)
American Bankers Insurance Company (source)
California Funeral Directors Association
Cemetery and Mortuary Association of California
SCI California Funeral Service
OPPOSITION : (Verified 4/11/11)
American Association of Retired Persons
California Advocates for Nursing Home Reform
ARGUMENTS IN SUPPORT : According to the author, "final
expense" and "pre-need" policies are distinctly different
from the insurance products targeted by California's
24-hour notice law. The author believes that today's law
protecting seniors from unscrupulous insurance agents
selling unneeded and ill-advised annuities and other
insurance products, because it captures every class of
annuity or life insurance policy regardless of size is
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overbroad. In the author's view, the average size of
burial and pre-need policy is such there is no chance that
a senior will lose their life savings with the purchase of
a final expense or pre-need policy and therefore a
different system of rules can reasonably protect the
interests of seniors and their loved ones.
According to the bill's sponsor, American Bankers Insurance
Company, pre-need insurance policies "provide seniors the
peace of mind that comes with knowing that their funeral
expenses will be paid and will not become a burden to their
loved ones when they die. ? Because pre-need policies are
so different from the investment products targeted (under
current law), SB 590 proposes to lift the 24 hour notice
requirements specifically for this narrow band of insurance
products. However, the bill maintains the integrity of the
law by requiring that any agent selling pre-need policies
deliver a notice to the senior prior to the start of the
meeting and if the senior purchases a policy, the notice
must be signed by the senior along with the application for
insurance coverage. Current law simply requires that the
notice be provided?. In addition, SB 650 actually expands
the scope of existing law by increasing the free look
period to 60 days during which a full refund is available.
The expansion of the free look period is important because
it will allow the consumer to go through at least 1 if not
2 premium payments; thus allowing them to determine if the
product really does fit into their monthly expenses."
DLW:mw 4/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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