By: Ellis S.B. No. 1618
Substitute the following for S.B. No. 1618:
By: Gallego C.S.S.B. No. 1618
A BILL TO BE ENTITLED
AN ACT
relating to regulation of certain life insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1101, Insurance Code, as effective June
1, 2003, is amended by adding Subchapters E and F to read as
follows:
SUBCHAPTER E. CERTAIN POLICIES WITH SMALL FACE AMOUNT
Sec. 1101.201. APPLICABILITY. (a) This subchapter applies
to each insurer authorized to write life insurance under Chapter
841, 882, 884, or 982. This subchapter does not apply to an insurer
operating under Chapter 881, 885, 886, 887, or 888 or an insurer
exempt under Section 887.102.
(b) Except as provided herein, this subchapter applies to
any individual life insurance policy issued in this state,
including an industrial insurance policy offered under Chapter
1151. This subchapter does not apply to:
(1) group life insurance;
(2) credit life insurance;
(3) term life insurance with a coverage period of ten
years or less; or
(4) a life insurance policy issued to fund prepaid
funeral benefits as defined in Section 154.002(9), Finance Code.
Sec. 1101.202. FACE AMOUNT. (a) This subchapter applies
only to a life insurance policy issued in this state with a face
amount of $15,000 or less.
(b) For the purposes of this subchapter, the face amount of
a policy issued with an increasing graded death benefit is the face
amount at the end of the graded death benefit period.
Sec. 1101.203. REQUIRED INCREASE IN COVERAGE. (a) Except
as provided by Section 884.302, a life insurance policy with a face
amount of $2,000 or less must include an option for the insured to
increase the coverage under the policy to not more than $15,000.
(b) The insurer may require that the insured meet the
insurer's current evidence of insurability for the same or similar
policy forms the insurer currently offers in the market.
(c) The insurer must provide the additional coverage
required by this section at the insurer's current applicable
underwriting standards, rates, and contestability period for
issuance of a same or similar policy to the insured at the insured's
age at the time the option is exercised.
(d) The exercise of an option under Subsection (a) may not
result in a reduction of the cash value of the life insurance
policy.
Sec. 1101.204. PROHIBITION: ISSUANCE OF SUBSEQUENT POLICY.
An insurer that issues a life insurance policy that provides a face
amount of $2,000 or less and that includes the option to increase
coverage required by Section 1101.203 may not issue a subsequent
life insurance policy of the same type that provides a face amount
of $2,000 or less to the same insured unless:
(1) the insured has exercised the option required by
Sec. 1101.203 and has increased the coverage under the insured's
life insurance policy to $15,000 or more; or
(2) the policyowner rejects in writing additional
coverage under the original policy and opts for a different policy
type.
Sec. 1101.205. REQUIRED ALTERNATIVE PREMIUM PAYMENT
OPTIONS. (a) Unless otherwise prohibited by law, an insurer that
offers a life insurance policy that provides a face amount of
$15,000 or less must offer the applicant alternative premium
payment options if, at any point in time over the term of the
policy, the cumulative premiums paid, less estimated dividends,
might exceed 250 percent of the face amount of the policy.
(b) For purposes of this section, the insurer must offer
alternative premium payment options that include a payment schedule
that allows for shorter payment periods.
Sec. 1101.206. DISCLOSURE REQUIREMENTS--APPLICANT FOR
INSURANCE COVERAGE. (a) An insurer subject to this subchapter
shall disclose to an applicant, with respect to a life insurance
policy applied for:
(1) the face amount under the policy;
(2) the premium for the policy by selected mode of
payment, on an annualized basis;
(3) if applicable, the fact that the cumulative
premiums for the policy may exceed the face amount over the life of
the policy; and
(4) the fact that there may be advantages to a single
policy with a larger face amount rather than several policies with
lesser face amounts.
(b) For a guaranteed issue life insurance policy, the
insurer shall provide in the disclosure statement, in addition to
the information required under Subsection (a), a statement to the
applicant that there may be advantages under alternative insurance
policies, including the cost of coverage, if the applicant is in
good health.
Sec. 1101.207. POLICYOWNER'S RIGHT TO CANCEL. Each
policyowner of a life insurance policy has the right to cancel the
policy before the 31st day after the date of delivery of the policy
and obtain a refund of any premium paid. The insurer shall provide
each policyowner under such life insurance policy written notice of
the 30–day right to cancel.
Sec. 1101.208. TIMING OF DISCLOSURE TO APPLICANT. An
insurer that issues a life insurance policy shall provide the
disclosures and notice prescribed by Sections 1101.205 and 1101.206
at the time of the [on] application for coverage and the notice
prescribed by Section 1101.207 at the time of delivery of the
policy. If the application is received by the insurer directly from
the applicant and was not solicited by an agent, the insurer shall
give the disclosures and notices prescribed by Sections 1101.205,
1101.206 and 11.01.207 at the time of delivery of the policy.
Sec. 1101.209. DISCLOSURE REQUIREMENTS--POLICYOWNER. At a
minimum, an insurer shall disclose to the owner of a life insurance
policy, as of the date the policy is issued:
(1) the face amount under the policy;
(2) the premium for the policy by selected payment
mode, on an annualized basis;
(3) the estimated cumulative premiums to be paid for
the policy at the end of five, ten, 15, and 25 years from the date
the policy is issued;
(4) the estimated cash value of the policy, if any, at
the end of five, ten, 15 and 25 years from the date the policy is
issued; and
(5) the year in which it is estimated that cumulative
premiums will exceed the face amount.
Sec. 1101.210. TIMING OF DISCLOSURE TO POLICYOWNER. (a) An
insurer that issues a life insurance policy shall provide the
disclosure prescribed by Section 1101.209 on delivery of the
policy.
(b) In the year in which the estimated cumulative premiums
paid will exceed the face amount of the policy, and every fifth year
thereafter, the same disclosure shall be provided to the
policyowner of each policy for which premium is then being paid.
Sec. 1101.211. EFFECT OF RIDERS. (a) For purposes of this
subchapter, cumulative premiums include premiums paid for riders
that increase the face amount of the policy for the insured, but do
not include premiums for riders issued to the insured for:
(1) accidental death benefits;
(2) permanent disability benefits; and
(3) any other benefit similar to accidental death
benefits and permanent disability benefits.
(b) Cumulative premiums do not include premiums paid for
riders on persons other than the insured.
Sec. 1101.212. RULES. (a) The commissioner may adopt rules
necessary to implement this subchapter.
(b) The commissioner by rule shall require that the
disclosure statements required under Sections 1101.206 and
1101.209 and the notice required under Section 1101.207 shall be
substantially in the form prescribed by the commissioner.
(c) The commissioner may adopt rules to allow an insurer to
include the disclosure statement required under Section 1101.209
with any other mailing to the policyowner.
[Sections 1101.213-1101.250 reserved for expansion]
SUBCHAPTER F. UNCLAIMED BENEFITS UNDER CERTAIN POLICIES
Sec. 1101.251. APPLICABILITY. (a) This subchapter applies
to each insurer authorized to write life insurance in this state
operating under Chapter 841, 881, 882, 884, 885, 886, 887, 888, or
982, including an insurer exempt under Section 887.102.
(b) This subchapter applies to any individual or group life
insurance policy issued in this state, including an industrial
insurance policy offered under Chapter 1151.
Sec. 1101.252. DUE DILIGENCE STANDARDS. (a) As provided by
this section, an insurer shall exercise due diligence relating to
the payment of unclaimed benefits payable on the death of an insured
who may be covered under more than one life insurance policy issued
by the insurer.
(b) On submission of a death claim form under an insurance
policy, an insurer shall conduct a reasonable search for other
policies on the decedent's life. For purposes of this subsection, a
reasonable search does not require a search of group life insurance
policy records or credit life insurance policy records for which
the insurer does not maintain identification records of the
individual certificate holders.
(c) The insurer shall investigate additional policy files
identified by the search, for which liability is not immediately
verified, and complete a determination of liability not later than
the 180th day after the date on which the claim is filed.
(d) If other policies exist, the insurer shall notify the
policyowner, if different than the insured, and the beneficiary and
shall arrange for payment under the policies.
(e) Each insurer shall adopt a written claim processing
standard and methodology that will allow the insurer to process a
death claim, endowment claim, or other claim presented against a
life insurance policy or an accidental death or dismemberment
policy.
(f) The insurer, as a part of the claim processing standard
and methodology adopted under Subsection (e), shall inquire, for
each claim filed with the insurer for death benefits, about other
names by which the insured may have been known, such as a maiden
name, a hyphenated name, a nickname, a derivative form of first and
middle name, or an alias, and the date of birth of the insured. If
the filer of the claim form includes that additional name
information on the claim form or if the insurer otherwise knows
about other names by which the insured may have been known, the
insurer shall include that information and the date of birth, if
available, as a part of its search criteria to determine whether
additional policies exist.
(g) Each insurer shall maintain claim records in a manner
that demonstrates that the insurer has followed the written claim
processing standard and methodology required by this section.
SECTION 2. Not later than January 1, 2004, the commissioner
of insurance shall adopt rules as required by Subsection (b),
Section 1101.212, Insurance Code, as added by this Act.
SECTION 3. This Act takes effect September 1, 2003, and
applies only to an insurance policy that is delivered on or after
July 1, 2004. A policy that is delivered before July 1, 2004, is
governed by the law as it existed immediately before the effective
date of this Act, and that law is continued in effect for that
purpose.