By: Craddick (Senate Sponsor - Hancock) H.B. No. 3370
(In the Senate - Received from the House May 3, 2017;
May 10, 2017, read first time and referred to Committee on Business &
Commerce; May 22, 2017, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 8, Nays 0;
May 22, 2017, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR H.B. No. 3370 By: Hancock
A BILL TO BE ENTITLED
AN ACT
relating to certain disclosures and notices required for certain
life insurance policies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1101, Insurance Code, is amended by
adding Subchapter E to read as follows:
SUBCHAPTER E. DISCLOSURES AND NOTICES RELATING TO LIFE INSURANCE
POLICIES WITH NON-GUARANTEED ELEMENTS
Sec. 1101.201. PURPOSE. This subchapter is intended to
provide standards for disclosures relating to life insurance
policies subject to this subchapter and to recognize that a purpose
of those life insurance policies is to provide insurance coverage
at a lower initial premium than might otherwise be obtainable from
the insurer if the insurer were not allowed to change the premium
during the life of the policy.
Sec. 1101.202. APPLICABILITY. (a) This subchapter applies
to a life insurance policy issued by an insurer, as defined by
Section 1102.001, that contains non-guaranteed elements that may
change at the discretion of the insurer.
(b) This subchapter does not apply to:
(1) group life insurance without separately
identifiable accounts for insureds; or
(2) a life insurance policy in which the insurer
assumes all risk and contractually guarantees a death benefit in
exchange for a guaranteed premium set at the time of the policy's
issuance.
Sec. 1101.203. DISCLOSURES AFTER ISSUANCE OF POLICY. (a)
Subject to Section 1101.204, and unless the change is made pursuant
to a previously implemented current cost of insurance schedule, if
an insurer increases a non-guaranteed element in or decreases the
credited interest rate for a policy after the policy's issuance,
the insurer must provide a written notice to the policy owner
disclosing:
(1) the non-guaranteed element that is being changed;
(2) the value of the non-guaranteed element before and
after the proposed change;
(3) the maximum or minimum guaranteed value, as
applicable, of the non-guaranteed element stated in the policy, if
any;
(4) the effective date of the change;
(5) a comparison of the change to the current and
maximum or minimum guaranteed elements, as applicable, if any,
stated in the policy; and
(6) the options available to the policy owner under
the policy.
(b) The notice under Subsection (a) must include the
insurer's phone number and e-mail address and the following
statement in at least 12-point bold type:
"IMPORTANT NOTICE: An increase in a non-guaranteed element or
a decrease in the credited interest rate will have an adverse impact
on the longevity and value of your policy. You should request an
illustration of the impact of this change on your policy."
(c) Except as provided by this subsection, notice required
by Subsection (a) must be given not later than the 90th day before
the date the change is applied. For a decrease in the credited
interest rate for a policy, notice required by Subsection (a) may be
given at the time that the decrease is applied.
(d) If a policy owner affirmatively requests a loan, partial
surrender, or other action on the policy that might impact the
longevity of the policy, the insurer must provide to the policy
owner in writing, not later than the 10th day after the date the
owner makes the request, the insurer's phone number and e-mail
address and the following statement in at least 12-point bold type:
"IMPORTANT NOTICE: Your recent request will have an impact on
the longevity and value of your policy. You should request an
illustration of the impact of this change on your policy."
(e) Regardless of whether any non-guaranteed elements are
changed, an insurer that issues a policy subject to this subchapter
must provide to the policy owner at least annually an illustration
containing elements specified by the commissioner by rule.
Sec. 1101.204. NOTICE TO DEPARTMENT OF CERTAIN CHANGES TO
NON-GUARANTEED ELEMENTS. (a) Not later than the 180th day before
the effective date of an increase in a non-guaranteed element in an
individual's policy or certificate subject to this subchapter,
other than an increase pursuant to a previously implemented current
cost of insurance schedule, the insurer must provide notice to the
department if:
(1) except as provided by Subsection (b), the increase
in the non-guaranteed element will result in an aggregate increase
in the cost of insurance rate that is greater than 40 percent of the
cost of insurance rate for the preceding year; and
(2) the increase will be applied to a policy issued in
this state.
(b) The commissioner by rule may adopt a lower percentage
increase in a cost of insurance rate for which an insurer must
provide notice to the department under Subsection (a), but the
percentage adopted may not be lower than 20 percent.
(c) The notice under Subsection (a) must include:
(1) the specific approved policy form for which the
insurer will implement the increase;
(2) a copy of the disclosure to be provided under
Section 1101.203 to each owner whose policy was issued in this
state;
(3) information on the classes of owners who will
receive the disclosure;
(4) sufficient information for the department to
determine if the increase is actuarially justified;
(5) if applicable, sufficient information to
demonstrate compliance with the nonforfeiture values under Chapter
1105 for the increased premium; and
(6) any other information necessary to determine if
the increase will comply with the standards in this code.
(d) Not later than the 60th day after receipt of a notice
under this section, the commissioner may:
(1) disapprove the proposed increase if the
commissioner determines that the increase is not actuarially
justified or not in compliance with this code and provide the
insurer with a description in adequate detail of the changes
necessary to avoid disapproval; or
(2) withdraw approval under Section 1701.055 of the
applicable individual life insurance policy form.
(e) If the commissioner does not take action under
Subsection (d), the insurer may provide the disclosure required by
Section 1101.203 and apply the proposed increase in the
non-guaranteed element in the policy.
Sec. 1101.205. RULES. (a) The commissioner may adopt rules
as necessary to implement this subchapter.
(b) The commissioner by rule may exempt certain types of
life insurance policies from one or more of the requirements of this
subchapter.
SECTION 2. Subchapter E, Chapter 1101, Insurance Code, as
added by this Act, applies only to an increase in a non-guaranteed
element or a decrease in a credited interest rate that is applied to
an insurance policy on or after January 1, 2018.
SECTION 3. This Act takes effect September 1, 2017.
* * * * *