BILL NUMBER: SB 713 CHAPTERED
BILL TEXT
CHAPTER 130
FILED WITH SECRETARY OF STATE JULY 26, 2011
APPROVED BY GOVERNOR JULY 26, 2011
PASSED THE SENATE JULY 11, 2011
PASSED THE ASSEMBLY JULY 1, 2011
AMENDED IN ASSEMBLY JUNE 15, 2011
AMENDED IN SENATE MAY 17, 2011
AMENDED IN SENATE APRIL 28, 2011
AMENDED IN SENATE APRIL 13, 2011
AMENDED IN SENATE APRIL 4, 2011
AMENDED IN SENATE MARCH 31, 2011
INTRODUCED BY Senator Calderon
(Coauthors: Senators Anderson, Corbett, Correa, Gaines, Lowenthal,
and Wyland)
FEBRUARY 18, 2011
An act to add Article 11 (commencing with Section 10509.930) to
Chapter 5 of Part 2 of Division 2 of the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 713, Calderon. Insurance: proceeds: disclosure.
Existing law requires insurers to fulfill certain requirements
with regard to life insurance policies.
This bill, the Life Insurance Proceeds Disclosure Act of 2011,
would require insurers to provide written disclosures to life
insurance beneficiaries, as specified, at the time a claim is made
and before a retained asset account, as defined, is selected or
established as the benefit payment. The bill would require an insurer
that settles life insurance benefits through a retained asset
account to provide the beneficiary with a supplemental contract that
clearly discloses the rights of the beneficiary and the obligations
of the insurer under the supplemental contract. The bill would also
require, if the life insurance benefits are placed in a retained
asset account, the insurer to send the beneficiary at least one
statement per quarter, and a statement for any month in which there
has been any account activity other than the crediting of interest.
The bill would provide that an insurer that fails to conform to
the requirements of the above provisions would be subject to
provisions of existing law that provide for the imposition of a civil
penalty against any person who engages in any unfair method of
competition or any unfair or deceptive act or practice in the
business of insurance, as provided.
The bill would become operative only if SB 599 of the 2011-12
Regular Session is enacted and becomes effective.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 11 (commencing with Section 10509.930) is added
to Chapter 5 of Part 2 of Division 2 of the Insurance Code, to read:
Article 11. Life Insurance Proceeds Disclosure Act of 2011
10509.930. This act shall be known and may be cited as the Life
Insurance Proceeds Disclosure Act of 2011.
10509.931. The Legislature finds and declares all of the
following:
(a) The occasion of the death of a spouse, parent, child, partner,
or other loved one is a difficult time, accompanied by severe
emotional stress, and is frequently a time of important and often
difficult financial decisions.
(b) Life insurance is intended to provide an important resource to
support and ease financial decisions at such a time.
(c) While life insurance policies may provide for a single payment
of the death benefit, policies may also offer alternative payout
options, including the use of a retained asset account.
(d) The inherent difficulty of financial decisions at such a time
may be eased if consumers know what their available payment options
are so they can receive the benefit of available life insurance
policy proceeds in the form best suited to their circumstances and
needs.
10509.932. The purpose of this act is to establish disclosure
standards regarding the payment of life insurance benefits to a
beneficiary by means of a retained asset account if a life insurance
company offers consumers a retained asset account or establishes such
an account as an alternative to the receipt of insurance proceeds by
a single payment made directly to the beneficiary that satisfies all
of the benefits owed to the beneficiary.
10509.933. For the purposes of this article, the following terms
have the following definitions:
(a) "Insurer" means an insurance company that delivers or issues
for delivery in this state any policy of individual or group life
insurance.
(b) "Retained asset account" means any mechanism where the
settlement of proceeds payable under a life insurance policy is
accomplished by the insurer, or an entity acting on behalf of the
insurer, by depositing the proceeds into an account with check or
draft writing privileges, and where those proceeds are retained by
the insurer, pursuant to a supplemental contract not involving
annuity benefits.
10509.934. The insurer shall provide the beneficiary of life
insurance proceeds, at the time a claim is made, written information
describing the settlement options available under the policy and any
other option available to the beneficiary for the receipt of
proceeds, including retained asset accounts, and how to obtain
specific details relevant to those options. If a retained asset
account is one of the available options, the written information
shall include all of the disclosures required by Section 10509.937.
10509.935. If the insurer settles life insurance benefits through
a retained asset account, the insurer shall provide the beneficiary
with a supplemental contract that clearly discloses the rights of the
beneficiary and the obligations of the insurer under the
supplemental contract.
10509.936. If the life insurance benefits are placed in a
retained asset account, the insurer shall send the beneficiary at
least one statement per quarter, and a statement for any month in
which there has been account activity other than just the crediting
of interest.
10509.937. The insurer shall provide the following written
disclosures to the beneficiary before the retained asset account is
established, unless the insurer has already provided these
disclosures pursuant to Section 10509.934:
(a) Payment of the full benefit is accomplished by delivery of the
draft book or checkbook.
(b) One draft or check may be written to access the entire amount,
including interest, of the retained asset account at any time.
(c) Whether the available settlement options are preserved until
the entire balance is withdrawn or the balance drops below the
insurer's minimum balance requirements.
(d) A statement identifying the account as either a checking or
draft account and an explanation of how the account works, including,
but not limited to, any minimum check or draft amount requirements.
(e) Information about the account services provided and contact
information where the beneficiary may request and obtain more details
about those services.
(f) A description of any fees charged, if applicable.
(g) The frequency of statements showing the current account
balance, the interest credited, drafts or checks written, and any
other account activity. The insurer shall send the beneficiary at
least one statement per quarter, and a statement for any month in
which there has been account activity other than just the crediting
of interest.
(h) The guaranteed minimum interest rate to be credited to the
account, how the actual interest rate will be determined, and the
actual interest rate that would be credited to a newly opened account
as of the date the disclosure is issued. The actual interest rate
may be disclosed by the insurer with the disclosures provided with
the claim documents sent to the beneficiary, through a toll-free
telephone number established by the insurer, or through the insurer's
Internet Web site.
(i) That the interest earned on the account may be taxable.
(j) Retained asset account funds held by insurance companies are
not guaranteed by the Federal Deposit Insurance Corporation (FDIC),
but are guaranteed by State Guaranty Associations, and that the State
Guaranty Association coverage limits vary by state.
(k) A statement that advises the beneficiary to contact the
National Organization of Life and Health Insurance Guaranty
Associations (NOLHGA) to learn more about the coverage limitations
applicable to his or her account, and that provides the beneficiary
with the current Internet Web site address and telephone number for
NOLHGA.
(l) A description of the insurer's policy regarding retained asset
accounts that become inactive, including the policy with respect to
inactive accounts that are at risk of escheating to the state
pursuant to the California Unclaimed Property Law (Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure).
10509.938. An insurer that fails to conform to the requirements
provided under this article shall be subject to Article 6.5
(commencing with Section 790) of Chapter 1 of Part 2 of Division 1.
SEC. 2. This act shall become operative if Senate Bill 599 of the
2011-12 Regular Session of the Legislature is enacted and becomes
effective.