Bill Text: CA AB2347 | 2013-2014 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Insurance policies.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2014-07-21 - Chaptered by Secretary of State - Chapter 166, Statutes of 2014. [AB2347 Detail]

Download: California-2013-AB2347-Introduced.html

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BILL NUMBER: AB 2347	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Gonzalez

                        FEBRUARY 21, 2014

   An act to amend Sections 786, 10127.9, 10127.10, 10127.13, and
10509.6 of the Insurance Code, relating to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2347, as introduced, Gonzalez. Insurance policies.
   (1) Existing law requires that a disability insurance policy or
life insurance policy and certificate offered for sale to individuals
65 years of age or older in California provide a 30-day examination
period during which the applicant may return the contract and receive
a refund of all premiums and any membership fee paid. This
information is required to be disclosed on the cover sheet of the
policy or certificate, in no less than 10-point uppercase type.
Existing law allows the applicant to return the policy or certificate
by regular mail.
   This bill would specify that those requirements apply to
individual and group disability and group life insurance policies and
certificates. The bill would require that the notice be in 12-point
bold type. The bill would allow the policyholder or certificate
holder to return the policy or certificate by mail or other delivery
method. The bill would also require an insurer, its agent, group
master policyowner, or association that collects more than one month'
s premium from an individual who is 60 years of age or older on the
date he or she purchased the coverage to provide that person a
prorated refund of the premium if the person delivers a cancellation
request during the first 30 days of the policy period.
   (2) Existing law requires a policy of individual life insurance
that is initially delivered or issued for delivery in the state on
and after January 1, 1990, to have printed thereon or attached
thereto a specified notice of cancellation rights.
   This bill would require that disclosure to be printed on the cover
page of every individual life insurance policy and individual
annuity contract.
   (3) Existing law requires specified disclosures, in all capital
letters, pertaining to cancellation and refunds, to the consumers of
variable individual life insurance policies and variable annuity
contracts, and of consumers of individual life insurance policies
other than variable contracts and modified guaranteed contracts.
Existing law requires an insurer to include in those disclosures that
the applicant may be charged a surrender charge or penalty if he or
she cancels the policy after the 30-day period, unless the policy
does not contain surrender charges or penalties.
   This bill would additionally require that those disclosures be
included with a modified guaranteed annuity contract, and would
instead require that the disclosure be made in lowercase type. The
bill would instead require the disclosure pertaining to a surrender
charge or penalty to be included only if the policy contains a
penalty.
   (4) Existing law requires all individual life insurance policies
and individual annuity contracts for senior citizens that contain a
surrender charge period to either disclose the surrender period and
all associated penalties in 12-point bold print on the cover sheet of
the policy or disclose the location of the surrender information in
bold 12-point print on the cover page of the policy or printed on a
sticker that is affixed to the cover page or to the policy jacket.
   This bill would instead require those policies and contracts to
disclose the location of the surrender charge, surrender charge
period, and surrender charge information and associated penalty
information in bold 12-point print on the single cover page of the
policy that also contains any statutorily required notice regarding a
right to examine.
   The bill would also make conforming changes.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 786 of the Insurance Code is amended to read:
   786.  All  individual and group  disability insurance
 policies and certificates,  and  all group  life
insurance policies and certificates offered for sale to individuals
age 65 or older in California shall provide an examination period of
30 days after the receipt of the policy or certificate for purposes
of review of the  contract, at which time the applicant may
return the contract. The   contract. If the policyholder
or certificate holder chooses to cancel the policy or certificate
and returns the policy or certificate for cancellation, by mail or
other delivery method, within the 30-day examination period, the
 return shall void the policy or certificate from the beginning,
and the parties shall be in the same position as if  no
contract   a policy or certificate  had  not
 been issued. All premiums paid and any policy or membership fee
 paid  shall be fully refunded to the  applicant
  policyholder or certificate holder  by the
insurer or entity in a timely manner.
   (a) For the purposes of this section  ,  a timely manner
 shall be   is  no later than 30 days after
the insurer or entity issuing the policy or certificate receives the
returned policy or certificate.
   (b) If the insurer or entity issuing the policy or certificate
fails to refund all of the premiums and any policy or membership
fee  paid, in a timely manner,  then  the
 applicant   policyholder or certificate holder
 shall receive interest on the paid premium  and policy or
membership fee  at the legal rate of interest on judgments as
provided in Section 685.010 of the Code of Civil Procedure. The
interest shall be paid from the date the insurer or entity received
the returned policy or certificate.
   (c) Each policy or certificate shall have a notice prominently
printed in no less than  10-point uppercase type, 
 12-point bold print,  on the cover page of the policy or
certificate and the outline of coverage, stating that the 
applicant   policyholder or certificate holder, as
applicable,  has the right to return the policy or 
certificate   certificate, by mail or other delivery
method,  within 30 days after its  receipt via regular
mail,     receipt,  and to have the full
premium  and any policy or membership fee paid  refunded.

   (d) In the event of any conflict between this section and Section
10127.10 with respect to life insurance, the provisions of Section
10127.10 shall prevail.  
   (d) If, at the time of application or at the time of delivery of a
group term life insurance policy or certificate, an insurer, its
agent, group master policyowner, or association collects more than
one month's premium from an individual who is 60 years of age or
older on the date he or she purchased coverage, the insurer shall
provide the individual with a prorated refund of the premium if the
individual delivers a cancellation request to the insurer during the
first 30 days of the policy period. 
  SEC. 2.  Section 10127.9 of the Insurance Code is amended to read:
   10127.9.  (a)  (1)    Every  policy of
 individual life insurance    policy and every
individual annuity contract  which is initially delivered or
issued for delivery in this state on and after January 1, 1990, shall
have printed  thereon or attached thereto   on
the cover page a notice stating that, after receipt of the
policy by the owner, the policy may be returned by the owner for
cancellation by delivering it or mailing it to the insurer or to the
agent through whom it was purchased. The period of time set forth by
the insurer for return of the policy by the  insured
    owner  shall be clearly stated
 on the notice  and this period shall be not less
than 10 days nor more than 30 days.  The insured 
    (2)     The owner  may return the
policy to the insurer by mail or  otherwise  
other delivery method  at any time during the period specified
in the notice. In the case of individual  nonvariable  life
insurance policies  (other than variable contracts and
modified guaranteed contracts),     and 
 individual non   variable annuity contracts, including
modified guaranteed contracts,  by delivering or mailing the
policy pursuant to this section during the cancellation period, the
owner shall void the policy from the beginning, and the parties shall
be in the same position as if no policy had been issued. All
premiums paid and any policy fee paid for the policy shall be
refunded by the insurer to the owner within 30 days from the date
that the insurer is notified that the  insured  
owner  has canceled the policy. In the case of  individual
 variable annuity  contracts,   contracts
and individual  variable life insurance  contracts, and
modified guaranteed contracts,     policies,
 return of the  contract   policy 
during the cancellation period shall entitle the owner to a refund of
 the  account value and any policy fee paid for the policy.
The account value and policy fee shall be refunded by the insurer to
the owner within 30 days from the date that the insurer is notified
that the owner has canceled the policy.
   (b) This section applies to all  individual  policies
issued or delivered in this state on or after January 1, 1990, but
does not apply to any policy subject to Section 10127.7. All policies
subject to this section which are in effect on January 1, 1990,
shall be construed to be in compliance with this section, and any
provision in any policy which is in conflict with this section shall
be of no force or effect.
   (c) This section does not apply to individual life insurance
policies issued in connection with a credit transaction or issued
under a contractual policy-change or conversion privilege provision
contained in a policy. 
   (d) General references to "policy" or "policies" in this section
refer to both life insurance policies and annuity contracts. 
  SEC. 3.  Section 10127.10 of the Insurance Code is amended to read:

   10127.10.  (a) Every policy of individual life insurance and every
individual annuity contract that is initially delivered or issued
for delivery to a senior citizen in this state on and after July 1,
2004, shall have printed  thereon or attached thereto
    on the cover page  a notice stating
that, after receipt of the policy by the owner, the policy may be
returned by the owner for cancellation by delivering it or mailing it
to the insurer or agent from whom it was purchased. The period of
time set forth by the insurer for return of the policy by the owner
shall be clearly stated  on   in  the
notice and this period shall be not less than 30 days. The owner may
return the policy to the insurer by mail or otherwise at any time
during the period specified in the notice. During the 30-day
cancellation period, the premium for  a variable annuity
    an individual variable life insurance
policy or an individual variable annuity contract  may be
invested only in fixed-income investments and money-market funds,
unless the  investor   owner  specifically
directs that the premium be invested in the mutual funds underlying
the  variable life insurance policy or  variable annuity
contract. Return of the policy within the 30-day cancellation period
shall have one of the following effects:
   (1) In the case of individual    variable  life
insurance policies and  individual  variable annuity
contracts for which the owner has not directed that the premium be
invested in the mutual funds underlying the  contract
  policy  during the cancellation period, return of
the policy during the cancellation period shall have the effect of
voiding the policy from the beginning, and the parties shall be in
the same position as if no policy had been issued. All premiums paid
and any policy fee paid for the policy shall be refunded by the
insurer to the owner within 30 days from the date that the insurer is
notified that the owner has canceled the policy.  The
premium and policy fee shall be refunded by the insurer to the owner
within 30 days from the date that the insurer is notified that the
owner has canceled the policy. 
   (2) In the case of  a     individual
  variable life insurance policies and individual 
variable annuity    contracts  for which the owner
has directed that the premium be invested in the mutual funds
underlying the contract   policy  during
the 30-day cancellation period, cancellation shall entitle the owner
to a refund of the account value    and any policy fee
paid for the policy  . The account value shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the  contract
    policy  .
   (b) This section applies to all individual  policies
    life insurance policies and all individual
annuity contracts  issued or delivered to senior citizens in
this state on or after January 1, 2004. All policies subject to this
section which are in effect on January 1, 2003, shall be construed to
be in compliance with this section, and any provision in any policy
which is in conflict with this section shall be of no force or
effect.
   (c) Every individual  nonvariable  life insurance policy
and every individual  nonvariable  annuity contract,
 other than variable contracts and   including
 modified guaranteed  annuity  contracts, subject to
this section, that is delivered or issued for delivery in this state
shall have the following notice  either  printed on
the cover page  or policy jacket  in 12-point bold
print with one inch of space on all  sides or printed on a
sticker that is affixed to the cover page or policy jacket 
 sides, using the exact language in quotation marks below, with
whichever one of the three bracketed product descriptions that
applies to the product on which the notice appears  : 
      "IMPORTANT
    
   YOU HAVE PURCHASED A LIFE INSURANCE POLICY OR ANNUITY CONTRACT.
CAREFULLY REVIEW IT FOR LIMITATIONS.
 
   THIS POLICY MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU
RECEIVED IT FOR A FULL REFUND BY RETURNING IT TO THE INSURANCE
COMPANY OR AGENT WHO SOLD YOU THIS POLICY. AFTER 30 DAYS,
CANCELLATION MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A
SURRENDER CHARGE."
 
      "IMPORTANT!
    
   You have purchased a  life insurance policy or annuity contract
or modified guaranteed annuity contract]. Carefully review it for
limitations.  
   This policy may be returned within 30 days from the date you
received it for a full refund by returning it to the insurance
company or agent who sold you this policy. After 30 days,
cancellation may result in a substantial penalty, known as a
surrender charge." 

   The  phrase "after  sentence "After  30
days, cancellation may result in a substantial penalty, known as a
surrender charge" may be deleted if the policy does not contain
 those charges or penalties.   a surrender
charge. The phrase "known as a surrender charge" may be deleted if
the policy contains a penalty but no surrender charge. Whether a
charge constitutes a surrender charge or a penalty shall be
determined by the nature of the charge and not the name given to the
charge by the insurer. 
   (d) Every individual  variable life insurance policy and every
individual  variable annuity contract  , variable life
insurance contract, or modified guaranteed contract  subject
to this section, that is delivered or issued for delivery in this
state, shall have the following notice  either 
printed on the cover page  or policy jacket  in
12-point bold print with one inch of space on all  sides or
printed on a sticker that is affixed to the cover page or policy
jacket   sides, using the exact language in quotation
marks below, with whichever one of the two bracketed product
descriptions that applies to the product on which the notice appears
 : 
      "IMPORTANT
    
   YOU HAVE PURCHASED A VARIABLE ANNUITY CONTRACT (VARIABLE LIFE
INSURANCE CONTRACT, OR MODIFIED GUARANTEED CONTRACT). CAREFULLY
REVIEW IT FOR LIMITATIONS.
 
   THIS POLICY MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU
RECEIVED IT. DURING THAT 30-DAY PERIOD, YOUR MONEY WILL BE PLACED IN
A FIXED ACCOUNT OR MONEY-MARKET FUND, UNLESS YOU DIRECT THAT THE
PREMIUM BE INVESTED IN A STOCK OR BOND PORTFOLIO UNDERLYING THE
CONTRACT DURING THE 30-DAY PERIOD. IF YOU DO NOT DIRECT THAT THE
PREMIUM BE INVESTED IN A STOCK OR BOND PORTFOLIO, AND IF YOU RETURN
THE POLICY WITHIN THE 30-DAY PERIOD, YOU WILL BE ENTITLED TO A REFUND
OF THE PREMIUM AND POLICY FEES. IF YOU DIRECT THAT THE PREMIUM BE
INVESTED IN A STOCK OR BOND PORTFOLIO DURING THE 30-DAY PERIOD, AND
IF YOU RETURN THE POLICY DURING THAT PERIOD, YOU WILL BE ENTITLED TO
A REFUND OF THE POLICY'S ACCOUNT VALUE ON THE DAY THE POLICY IS
RECEIVED BY THE INSURANCE COMPANY OR AGENT WHO SOLD YOU THIS POLICY,
WHICH COULD BE LESS THAN THE PREMIUM YOU PAID FOR THE POLICY. A
RETURN OF THE POLICY AFTER 30 DAYS MAY RESULT IN A SUBSTANTIAL
PENALTY, KNOWN AS A SURRENDER CHARGE."
 
      "IMPORTANT!
    
   You have purchased a variable life insurance policy or variable
annuity contract]. Carefully review it for limitations.  
   This policy may be returned within 30 days from the date you
received it. During that 30-day period, your money will be placed in
a fixed account or money-market fund, unless you direct that the
premium be invested in a stock or bond portfolio underlying the
policy during the 30-day period. If you do not direct that the
premium be invested in a stock or bond portfolio, and if you return
the policy within the 30-day period, you will be entitled to a refund
of the premium and any policy fee paid. If you direct that the
premium be invested in a stock or bond portfolio during the 30-day
period, and if you return the policy during that period, you will be
entitled to a refund of the policy's account value on the day the
policy is received by the insurance company or agent who sold you
this policy, which could be less than the premium you paid for the
policy, plus any policy fee paid. A return of the policy after 30
days may result in a substantial penalty, known as a surrender
charge." 

   The  words "known  sentence "A return of the
policy after 30 days may result in a substantial penalty, known 
as a surrender charge" may be deleted if the  contract
  policy  does not contain  those charges
  a surrender charge. The phrase "known as a surrender
charge" may be deleted if the policy contains a penalty but no
surrender charge. Whether or not a charge constitutes a surrender
charge or a penalty will be determined by the nature of the charge
and not the name given to the charge by the insurer  . 
   (e) If the individual annuity contract is an immediate annuity
contract, the following sentence, using the exact language in
quotation marks below, in 12-point bold print, shall be added at the
end of the right to examine language required by this section and
before the one inch of space: 

   "After the 30-day period has expired, you may not be able to get
your purchase payment money back in any manner, or in any manner
other than in annuity payments made according to the terms of your
contract. The insurance company or agent who sold you this contract
can explain if your contract has these restrictions." 

   (e) 
    (f)  This section does not apply to life insurance
policies issued in connection with a credit transaction or issued
under a contractual policy-change or conversion privilege provision
contained in a policy.  Additionally, this section shall not
apply to contributory and noncontributory employer group life
insurance, contributory and noncontributory employer group annuity
contracts, and group term life insurance, with the exception of
subdivision (f).  
   (f) When an insurer, its agent, group master policyowner, or
association collects more than one month's premium from a senior
citizen at the time of application or at the time of delivery of a
group term life insurance policy or certificate, the insurer must
provide the senior citizen a prorated refund of the premium if the
senior citizen delivers a cancellation request to the insurer during
the first 30 days of the policy period. 
   (g) For purposes of this chapter, a senior citizen means an
individual who is 60 years of age or older on the date of purchase of
the policy. 
   (h) General references to "policy" or "policies" in this section
refer to both life insurance policies and annuity contracts. 
  SEC. 4.  Section 10127.13 of the Insurance Code is amended to read:

   10127.13.   (a)    All individual life insurance
policies and individual annuity contracts for senior citizens that
contain a surrender charge  period  shall 
either disclose the surrender period and all associated penalties in
12-point bold print on the cover sheet of the policy or 
disclose the location of the surrender  information 
 charge, surrender charge period, and surrender charge
information, as well as any associated penalty information,  in
bold 12-point print on the cover page of the  policy, or
printed on a sticker that is affixed to the cover page or to the
policy jacket.   policy.  The notice required by
this section may appear on a cover sheet that also contains the
disclosure required by subdivision (d) of Section 10127.10. 
   (b) The notice required by subdivision (a) shall be set forth on
the single cover page of the policy that also contains any
statutorily required notice regarding a right to examine.  
   (c) General references to "policy" in this section refer to both
life insurance policies and annuity contracts. 
  SEC. 5.  Section 10509.6 of the Insurance Code is amended to read:
   10509.6.  Every life insurer that uses an agent in a life
insurance or annuity sale shall do the following:
   (a) Require with or as part of each completed application for life
insurance or annuity, a statement signed by the agent as to whether
he or she knows replacement is or may be involved in the transaction.

   (b) Where a replacement is involved:
   (1) Require from the agent with the application for life insurance
or annuity: (i) a list of all of the applicant's existing life
insurance or annuity to be replaced, and (ii) a copy of the
replacement notice provided the applicant pursuant to Section
10509.4. The existing life insurance or annuity shall be identified
by name of insurer, insured, and contract number. If a number has not
been assigned by the existing insurer, alternative identification,
such as an application or receipt number shall be listed.
   (2) Send to each existing life insurer a written communication
advising of the replacement or proposed replacement and the
identification information obtained pursuant to this section and a
policy summary, contract summary, or ledger statement containing
policy data on the proposed life insurance or annuity. Cost indices
and equivalent level annual dividend figures need not be included in
the policy summary or ledger statement. This written communication
shall be made within three working days of the date the application
is received in the replacing insurer's home or regional office, or
the date the proposed policy or contract is issued, whichever is
sooner.
   (3) Every existing life insurer or the insurer's agent that
undertakes a conservation shall, within 20 days from the date the
written communication plus the materials required in subdivisions (1)
and (2) are received by the existing insurer, furnish the
policyowner with a policy summary for the existing life insurance or
ledger statement containing policy data on the existing policy or
annuity. Information relating to premiums, cash values, death
benefits, and dividends, if any, shall be computed from the current
policy year of the existing life insurance. The policy summary or
ledger statement shall include the amount of any outstanding
indebtedness, the sum of any dividend accumulations or additions, and
may include any other information that is not in violation of any
regulation or statute. Cost indices and equivalent level annual
dividend figures need not be included. When annuities are involved,
the disclosure information shall be that in the contract summary.
   The replacing insurer may request the existing insurer to furnish
it with a copy of the summaries or ledger statement, which shall be
within five working days of the receipt of the request.
   (c) The replacing insurer shall maintain evidence of the "notice
regarding replacement," the policy summary, the contract summary, and
any ledger statements used, and a replacement register,
cross-indexed by replacing agent and existing insurer to be replaced.
The existing insurer shall maintain evidence of policy summaries,
contract summaries, or ledger statements used in any conservation.
Evidence that all requirements were met shall be maintained for at
least three years.
   (d) The replacing insurer shall provide  in its policy or
in   on the cover page of its life insurance policy or
annuity contract or, alternatively, as  a separate written
 notice   document  which is delivered with
the  life insurance  policy  or annuity contract, a
notice stating  that the  applicant   owner
 has a right to an unconditional refund of all premiums paid
which right may be exercised within a period of 30 days commencing
from the date of delivery of the  policy  
contract  . In the case of variable  annuity contracts,
  annuities, and  variable life  insurance
contracts, and modified guaranteed contracts,  
insurance,  return of the contract during the cancellation
period shall entitle the owner to a refund of  the  account
value and any policy fee  paid for the policy.  
paid.  The account value and policy fee shall be refunded by
the insurer to the owner within 30 days from the date that the
insurer is notified that the owner has canceled the  policy.
  contract.