SRC-JEC S.B. 1610 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 1610
By: Ellis, Rodney
State Affairs
4/7/2003
As Filed


DIGEST AND PURPOSE 

Currently, there are no disclosure standards or requirements for small
face amount life insurance policies, which are whole life insurance
policies with a death benefit of less than $15,000.  These types of
insurance products have historically been sold to working-class and poor
people.  As proposed, S.B. 1610 establishes standards for the timing and
content of disclosures to both applicants for coverage and to
policyholders and insureds.  It also empowers the commissioner of
insurance to make rules as necessary to implement and enforce the
disclosure requirements. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION  1 (Section 1101.409, Insurance Code) of this bill.  

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 1101, Insurance Code, as effective June 1,
2003, by adding Subchapter I, as follows: 

SUBCHAPTER I.  DISCLOSURE REQUIREMENTS FOR SMALL FACE AMOUNT LIFE
INSURANCE POLICIES 

 Sec. 1101.401.  DEFINITION.  Defines "small face amount policy."

Sec. 1101.402.  APPLICABILITY.  (a)  Sets forth insurers to which this
subchapter applies. 

  (b)  Sets forth the type of insurance policies to which this subchapter
applies. 

(c)  Defines "cumulative premiums."  Provides that the face amount does
not include the benefit attributable to the riders. 

Sec. 1101.403.  MINIMUM DISCLOSURE REQUIREMENTS - APPLICANT FOR INSURANCE
COVERAGE.  (a)  Sets forth minimum requirements regarding information to
be disclosed by an insurer to an applicant for a small face amount policy. 

(b)  Requires the insurer, for a guaranteed issue small face amount
policy, to provide a statement to the applicant regarding the effect of
good health on the cost of the coverage provided under the policy and the
possible advantages of alternative insurance products. 

Sec. 1101.404.  APPLICANT'S RIGHT TO CANCEL.  Provides that each applicant
for insurance coverage under a small face amount policy has the right to
cancel the policy and obtain a refund of any premium paid before the 31st
day after the date of issuance of the policy.  Requires the insurer to
provide each applicant for insurance coverage under a small face amount
policy written notice of the 30-day right to cancel. 

Sec. 1101.405.  TIMING OF DISCLOSURE TO APPLICANT.  Requires an insurer
that issues a small face amount policy to provide the disclosure and
notice prescribed by  Sections 1101.403 and 1101.404 on receipt of the
application for coverage, and again not later than the date on which the
policy is delivered. 

Sec. 1101.406.  MINIMUM DISCLOSURE REQUIREMENTS - POLICYHOLDER AND
INSURED.  Sets forth minimum requirements regarding information to be
disclosed by the insurer to the holder of an insurance policy subject to
this subchapter and to each insured under the policy. 

Sec. 1101.407.  TIMING OF DISCLOSURE TO POLICYHOLDER AND INSURED. (a)
Requires an insurer that issues a small face amount policy to provide the
disclosure prescribed by Section 1101.406 at the time that, on payment of
the next premium under the policy, the cumulative premiums paid will
exceed the face amount of the policy. 

(b)  Requires the insurer to also provide the required disclosure to each
policyholder and insured on the first anniversary of the date of the
initial delivery of the policy, and every subsequent five-year anniversary
of the date of the initial delivery of the policy. 

Sec. 1101.408.  EFFECT OF RIDERS.  Provide that for purposes of this
subchapter, cumulative premiums include premiums paid for riders.
Provides that the face amount of a small face amount policy does not
include the benefit attributable to the riders. 

Sec. 1101.409.  RULES.  Requires the commissioner of insurance by rule to
prescribe the format of the disclosure statements and notice required
under this subchapter.  Authorizes the commissioner of insurance to adopt
other rules as necessary to implement this subchapter.  

SECTION 2.  Effective date:  September 1, 2003.
            Makes application of this Act prospective.