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OLR Bill Analysis
SB 841
AN ACT CONCERNING THE INSURANCE DEPARTMENT'S
RECOMMENDED CHANGES TO THE INSURANCE STATUTES.
SUMMARY
This bill makes a number of unrelated changes to the insurance
statutes concerning (1) insurers’ use of genetic testing results, (2) the
cancellation of homeowners insurance policies, (3) loss ratio
requirements for credit insurance policies, and (4) insurance producer
prelicensure education requirements.
The bill prohibits certain insurance entities from requesting,
requiring, purchasing, or using direct-to-consumer genetic testing
results without the tested individual’s written consent. It also prohibits
the entities from conditioning rates, coverage, or other insurance terms
on (1) an individual undergoing genetic testing or (2) the genetic
testing results of the individual’s family members unless the results are
in his or her medical records. The bill makes a violation of these
provisions a Connecticut Unfair Insurance Practices Act (CUIPA)
violation (see BACKGROUND) (§§ 1-3).
The bill codifies existing Insurance Department administrative
policy for homeowners insurance policy cancellations. It requires
insurers to notify consumers of a cancellation, establishes the
cancellation process and timeframes, and specifies permissible
cancellation reasons (§ 4).
The bill establishes a loss ratio requirement for credit life and credit
accident and health insurance policies of at least 50% (§§ 5 & 6). Under
the bill, “loss ratio” means annual incurred claims divided by earned
premiums.
Lastly, the bill reduces the number of hours of course study an
insurance producer license applicant must complete before sitting for a 2021SB-00841-R000356-BA.DOCX
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license examination from 40 hours to 20 hours (§ 7). This conforms
with the National Association of Insurance Commissioners’ uniform
licensing standards.
EFFECTIVE DATE: October 1, 2021, except the provisions on the
cancellation of homeowners insurance policies are effective July 1,
2021.
§§ 1-3 – GENETIC TESTING RESU LTS
The bill prohibits insurers, health care centers (i.e., HMOs), and
fraternal benefit societies from requesting, requiring, purchasing, or
using direct-to-consumer genetic testing results without the tested
individual’s written consent. This applies with respect to the issuance,
withholding, extension, or renewal of annuities and life, credit life or
accident, disability, long-term care, accidental injury, specified disease,
and hospital indemnity insurance policies.
The bill also prohibits insurers, HMOs, and fraternal benefit
societies from conditioning rates, the issuance or renewal of coverage
or benefits, or other insurance terms on (1) a requirement or agreement
that an individual undergo genetic testing or (2) the genetic testing
results of the individual’s family members unless the results are in his
or her medical records.
The bill makes a violation of the above a CUIPA violation (see
BACKGROUND) .
CUIPA already prohibits insurers, HMOs, and fraternal benefit
societies that issue health insurance policies from refusing to insure,
limiting coverage, or charging a different rate based on genetic
information (CGS § 38a-816(19)).
§ 4 – HOMEOWNERS INSURANCE CANCELLATION
The bill codifies existing Insurance Department administrative
policy for homeowners insurance policy cancellations. It outlines the
process and timeframes for insurers to notify consumers of a
cancellation and specifies the permissible cancellation reasons. 2021SB-00841-R000356-BA.DOCX
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Cancellation Process, Timeframes, and Reasons
Under the bill, if the insurer wants to cancel a policy for premium
nonpayment, the insurer must send a written cancellation notice to the
named insured at least 10 days before the cancellation effective date.
The notice must disclose that the insured can avoid cancellation by
paying the premium before the cancellation effective date and that any
excess premium will be refunded to the insured upon request.
If a policy is not a renewal policy and has been in effect for fewer
than 60 days, and the insurer wants to cancel it for a reason other than
premium nonpayment, the insurer must send a written cancellation
notice to the named insured at least 30 days before the cancellation
effective date. The notice must disclose the cancellation reason, the
cancellation effective date, and that any excess premium will be
refunded to the insured upon request.
If a policy is not a renewal policy and has been in effect for at least
60 days or is a renewal policy, and the insurer wants to cancel it for
either (1) fraud or misrepresentation of a material fact by the insured
in obtaining the insurance that would have caused the insurer to not
issue or renew the policy or (2) any physical change in the covered
property that materially increases a hazard insured against, then the
insurer must send a written cancellation notice to the named insured at
least 30 days before the cancellation effective date. The notice must
include the cancellation effective date and that any excess premium
will be refunded to the insured upon request. (Under the bill, an
insurer may only cancel such a policy for these specified reasons or
premium nonpayment.)
Cancellation Method
Under the bill, a homeowners insurance policy cancellation notice is
effective only if the insurer sends it to the named insured by registered
or certified mail or mail evidenced by a certificate of mailing. But if the
insured agrees, the insurer may send a cancellation notice
electronically and evidenced by a delivery receipt.
Policy Transfer to Affiliate 2021SB-00841-R000356-BA.DOCX
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Under the bill, an insurer does not have to issue a cancellation
notice if it transfers a policy to an affiliate with no interruption of
coverage and no changes in coverage terms. However, the new insurer
may apply its rates and rating plans at renewal.
Insured May Cancel Anytime in Writing
The bill specifies that a named insured under a homeowners
insurance policy may cancel the policy anytime by sending the insurer
a written notice with the cancellation effective date.
§§ 5 & 6 – LOSS RATIO REQUIREME NT FOR CREDIT INSURANCE
The bill establishes a loss ratio requirement for credit life and credit
accident and health insurance policies of at least 50%.
Under current law, the insurance commissioner must disapprove a
credit insurance policy form (e.g., policy, certificate, application, rider)
if the rates charged, by reasonable assumptions, are excessive in
relation to the benefits provided. The bill instead requires him to
disapprove a policy form if the rates charged, by reasonable
assumptions and as determined according to benchmark loss ratio
calculations, are excessive in relation to the benefits provided.
The bill also requires the commissioner to disapprove a policy form
that does not comply with the loss ratio requirement. However, he
may approve a premium rate deviation for a policy, presumably
resulting in a lower loss ratio.
The bill requires the commissioner to adopt regulations that reflect
the above requirements.
BACKGROUND
Connecticut Unfair Insurance Practices Act
The law prohibits engaging in unfair or deceptive acts or practices
in the business of insurance. It authorizes the insurance commissioner
to conduct investigations and hearings, issue cease and desist orders,
impose fines, revoke or suspend licenses, and order restitution for per
se violations (i.e., violations specifically listed in statute). The law also 2021SB-00841-R000356-BA.DOCX
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allows the commissioner to ask the attorney general to seek injunctive
relief in Superior Court if he believes someone is engaging in other
unfair or deceptive acts not specifically defined in statute.
Fines may be up to (1) $5,000 per violation to a $50,000 maximum or
(2) $25,000 per violation to a $250,000 maximum in any six-month
period if the violation was knowingly committed. The law also
imposes a fine of up to $50,000, in addition to or in lieu of a license
suspension or revocation, for violating a cease and desist order.
COMMITTEE ACTION
Insurance and Real Estate Committee
Joint Favorable
Yea 18 Nay 0 (03/22/2021)