BILL ANALYSIS �
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THIRD READING
Bill No: AB 2347
Author: Gonzalez (D)
Amended: 6/19/14 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 10-0, 6/11/14
AYES: Monning, Gaines, Corbett, Correa, DeSaulnier, Mitchell,
Nielsen, Roth, Torres, Vidak
NO VOTE RECORDED: Lieu
ASSEMBLY FLOOR : 78-0, 5/15/14 (Consent) - See last page for
vote
SUBJECT : Insurance policies
SOURCE : Department of Insurance
DIGEST : This bill, beginning July 1, 2015, adds immediate
annuities to the requirement that life insurance policies and
annuity contracts delivered or issued to a senior citizen
include a notice of the right to return or cancel the policy or
contract within 30 days for a full refund; It also clarifies
that the 30-day free look period applies to group life insurance
policies; and requires the notice of the 30-day right to return,
and any surrender charges or penalties, be in 12-point bold
print on the policy jacket or cover page, and makes other
technical and clarifying changes to life insurance policies and
annuity contracts.
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AB 2347
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ANALYSIS :
Existing law:
1.Requires all disability and life insurance policies or
certificates offered for sale to individuals 65 and older to
include a 30-day "free look" period starting on receipt of the
policy or certificate.
2.Allows the senior to return the policy within that 30-day
period, including a full refund of any premiums paid and any
policy or membership fees in a timely manner; and specifies
that return of the policy voids the policy or certificate.
3.Requires each policy or certificate in #1 to have a notice in
no less than 10-point uppercase font prominently printed on
the cover page of the policy or certificate describing the
30-day right to return the policy.
4.Requires all individual life insurance policies to include a
right to return of not less than 10 days nor more than 30
days, specifies that return of the policy within the "free
look" period voids the policy and requires all premiums and
fees paid to be refunded; and requires a notice of that right
be printed on the policy or attached to it.
5.Requires every individual life insurance or individual annuity
contract issued to a "senior citizen" to include a right of
return of no less than 30 days; defines a "senior citizen" as
a person who is 60 years of age or older when the policy is
purchased; and requires a notice explaining the right of
return to be printed on the policy, or attached to it.
6.Requires individual life insurance policies and individual
annuity contracts issued or delivered to a senior citizen to
have a notice printed on the cover page or policy jacket
explaining the right to return, and any penalties or surrender
charges that may apply after the 30-day period, as specified;
provides for a modified notice for purposes of variable
annuity or modified guaranteed contracts.
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AB 2347
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This bill:
1.Specifies that existing requirements for a 30-day "free look"
period for disability insurance and life insurance policies
offered for sale to Californians age 65 and older apply to
individual and group life insurance products.
2.Requires the mandated notice explaining the 30-day "free look"
period be in 12-point bold print on the front of the policy
jacket or on the cover page of the policy, as specified.
3.Adds individual annuity contracts to the requirement that all
individual life insurance policies include a right to return
of not less than 10 days nor more than 30 days, as provided in
#4 above.
4.Requires the mandatory notice to a senior citizen describing
the 30-day "free look" required in #5 above to be on the front
of the policy jacket or the cover page.
5.Requires individual non-variable life insurance policies and
non-variable annuity contracts, individual variable life
insurance policies and annuity contracts, and immediate
annuity contracts sold to senior citizens to include a notice
on the front of the policy jacket or cover page in 12-point
bold print that describes the 30-day right to return and any
surrender charges or penalties, as specified.
6.Requires all individual life insurance policies and individual
annuity contracts sold to senior citizens that include any
surrender charges or withdrawal penalties to include a
description of those charges or penalties in 12-point bold
print on the policy jacket or cover page, and their location
in the policy or contract.
7.Specifies these provisions become effective July 1, 2015.
Background
Even when they are not in the highest tax brackets, seniors are
very tax sensitive and therefore interested in products that are
touted as being estate and tax-planning tools. Seniors want to
be self-sufficient, so may not always consult with friends or
reputable investment professionals who could offer reliable
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advice on these often complex products. They also may not have
the technological resources to research companies (i.e. on the
internet). Many also have time to attend seminars and
presentations, which are often used to gather financial and
personal information for later sales pitches. Not surprisingly,
seniors have been prime targets for scams and financial and
insurance products that are inappropriate for their needs.
As a result, seniors have been given special protections in the
Insurance Code, including the right to return life insurance and
annuity products for a full refund, no questions asked, within a
30-day time period. Existing law also requires a notice with
every life insurance and annuity product issued to seniors,
explaining their rights. This bill requires mandated notices to
be placed on the front or cover page of all life insurance
policies and annuity contracts clearly explaining the right to
return the policy for a full refund, and any penalties or
surrender charges that apply after that period.
Existing law also does not include immediate annuities in those
right-of-return and disclosure requirements. An immediate
annuity, also known as an immediate payment or fixed payment
annuity is an annuity contract that is purchased with a single
lump-sum payment and in exchange, pays a guaranteed income that
starts almost immediately. An immediate payment annuity is
suitable for retirees who are concerned about outliving their
savings. However, one disadvantage is that an immediate payment
annuity has zero liquidity and is irreversible once it has been
purchased. This may pose a problem should the annuitant need a
large sum to deal with an emergency. This bill adds immediate
annuities to the products requiring a mandated notice for
seniors explaining their right to return or cancel the contract
within 30 days, and explaining that after the 30-day period they
may not be able to get their money back.
Currently, individual life insurance policies, but not
individual annuity contracts issued or delivered to individuals
who are not 60 years of age or older are required to include a
right to return of no less than 10 or more than 30 days. This
bill gives purchasers of individual annuity contracts the same
right to return the policy, and require a notice on the cover
page of the contract.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
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No
SUPPORT : (Verified 6/19/14)
Department of Insurance (source)
California Advocates for Nursing Home Reform
Congress of California Seniors
Consumer Attorneys of California
ARGUMENTS IN SUPPORT : The Consumer Attorneys state,
"Annuities have become a significant part of the retirement and
investment plans for many individuals. According to the
Department of Insurance, most annuity consumers have limited
insurance knowledge.
"Under current law adults who are 65 or older are entitled to a
30-day 'free look' period when they purchase annuities. During
the 'free look' period the purchaser can return the policy and
receive a full refund of any premium paid without penalty.
Unfortunately, consumers who purchase immediate annuities are
often unaware of their right to revisit their decision to
purchase an immediate annuity. These annuities are frequently
marketed toward senior citizens.
Disclosure cover sheets are currently required for fixed,
indexed and variable annuity products, but they are not required
for immediate annuities. AB 2347 will require that immediate
annuity disclosure language be made available on the cover page
of these policies in order to ensure that seniors who purchase
these policies are made aware of their rights to revisit their
annuity decision during the risk-free window."
ASSEMBLY FLOOR : 78-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
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Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Vacancy
AL/JA:e 6/19/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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