California Assembly Bill AB1747 Introduced / Bill

 BILL NUMBER: AB 1747INTRODUCED BILL TEXT INTRODUCED BY Assembly Member Feuer FEBRUARY 17, 2012 An act to amend Section 10173.2 of, and add Sections 10113.71 and 10113.72 to, the Insurance Code, relating to life insurance. LEGISLATIVE COUNSEL'S DIGEST AB 1747, as introduced, Feuer. Life insurance: nonpayment premium lapse: notice. Existing law 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. Existing law requires life insurers to provide certain notices to individual life insurance policyholders, including, but not limited to, a notice of premium increases. This bill would require 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 that provides that where the premium owed is paid fully within the grace period the policy remains in force and a provision that gives the applicant the right to designate at least one individual, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. The bill would require that every life insurance policy issued or delivered in this state, except group life insurance, contain a provision for the reinstatement of the policy at any time within 2 years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, and payment of amounts owed since the date of the default. The bill would prohibit a notice of cancellation from being effective unless mailed by the insurer to the named insured, a named designee, a known assignee, or additional interest at least 30 days prior to the effective date of cancellation where cancellation is for nonpayment of premium. 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 10113.71 is added to the Insurance Code, to read: 10113.71. (a) (1) Every life insurance policy issued or delivered in this state shall contain a provision for a grace period of not less than 60 days from the premium due date that provides that where the premium owed is fully paid within the grace period the policy shall remain in force. (2) Every life insurance policy issued or delivered in this state, except group life insurance, shall contain a provision that the policy shall be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, and payment of amounts owed since the date of the default. (b) (1) A notice of cancellation of a life insurance policy shall not be effective unless mailed by the insurer to the named insured, a designee named pursuant to Section 10113.72, a known assignee, or additional interest at least 30 days prior to the effective date of cancellation where cancellation is for nonpayment of premium. (2) This subdivision shall not apply to nonrenewal. (3) Notice shall be given by first-class United States mail, postage prepaid, not less than 30 days after a premium is due and unpaid. However, notices made to assignees pursuant to this section may be done electronically with consent of the assignee. (c) For purposes of this section, a life insurance policy includes, but is not limited to, an individual life insurance policy, an individual variable life insurance policy, and a group life insurance policy, except where otherwise provided. SEC. 2. Section 10113.72 is added to the Insurance Code, to read: 10113.72. (a) An individual life insurance policy shall not be issued or delivered in this state until the applicant has been given the right to designate at least one individual, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. The insurer shall receive from each applicant one of the following: (1) A written designation listing the name, address, and telephone number of at least one individual, in addition to the applicant, who is to receive notice of lapse or termination of the policy for nonpayment of premium. (2) A waiver signed and dated by the applicant electing not to designate additional persons to receive notice. The required waiver shall read as follows: "Protection Against Unintended Lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this life insurance policy for nonpayment of premium. I understand that notice will not be given until 30 days after a premium is due and unpaid. I elect not to designate a person to receive the notice. Signature of Applicant Date (b) The insurer shall notify the insured of the right to change the written designation, no less often than once every two years. (c) No individual life insurance policy shall lapse or be terminated for nonpayment of premium unless the insurer, at least 30 days prior to the effective date of the lapse or termination, gives notice to the insured and to the individual or individuals designated pursuant to subdivision (a), at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first-class United States mail, postage prepaid, not less than 30 days after a premium is due and unpaid. (d) Each individual life insurance policy shall include a provision that, in the event of lapse, provides for reinstatement of coverage, if the insurer is provided with proof of the insured's cognitive impairment or the loss of functional capacity. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of a past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy. SEC. 3. Section 10173.2 of the Insurance Code is amended to read: 10173.2. When a policy of life insurance is, after the effective date of this section, assigned in writing as security for an indebtedness, the insurer shall, in any case in which it has received written notice of the name and address of the assignee, mail to  such   the  assignee a written notice, postage prepaid and addressed to the assignee's address filed with the insurer, not less than  10   30  days prior to the final lapse of the policy, each time the insured has failed or refused to transmit a premium payment to the insurer before the commencement of the policy's grace period or before  such   the  notice is mailed. The insurer shall give  such   that  notice to the assignee in the proper case while  such   the  assignment remains in effect, unless the assignee has notified the insurer in writing that  such   the  notice is waived. The insurer shall be permitted to charge the insured directly or against the policy the reasonable cost of complying with this section, but in no event to exceed two dollars and fifty cents ($2.50) for each  such  notice. As used in this section, "final lapse of the policy" means the date after which the policy will not be reinstated by the insurer without requiring evidence of insurability or written application.