78R4959 PB-D
By: Ellis 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 VALUE
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) This subchapter applies to any individual or group life
insurance policy, other than a term life insurance policy, issued
in this state, including an industrial insurance policy offered
under Chapter 1151.
Sec. 1101.202. FACE AMOUNT. This subchapter applies only
to a life insurance policy issued in this state with an initial face
amount of $15,000 or less.
Sec. 1101.203. REQUIRED INCREASE IN DEATH BENEFIT. (a) A
life insurance policy that provides a death benefit of $2,000 or
less must include an option for the insured to increase the death
benefit to not more than $15,000.
(b) The insurer must provide the additional death benefit
required by this section:
(1) without evidence of insurability; and
(2) at the insurer's current applicable rates for
issuance of a new policy to the insured at the insured's age at the
time the option is exercised.
(c) 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 death benefit 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 that provides a death
benefit of $2,000 or less to the same insured.
Sec. 1101.205. PAYMENT PERIOD FOR CERTAIN LIFE INSURANCE
POLICIES. (a) For a life insurance policy on which the total
amount of premiums paid under payment terms offered for the policy,
minus cash dividends received under the policy, could exceed 150
percent of the policy's face value, the insurer shall also offer the
applicant for the policy a payment period established by the
commissioner under Subsection (b).
(b) The commissioner by rule shall establish periods for the
payment of premiums on a policy described by Subsection (a) at the
end of which the policy is paid up.
Sec. 1101.206. MAXIMUM AMOUNT OF PREMIUMS PAID. (a) An
insurer may not charge or collect premiums for a life insurance
policy that in the aggregate, less dividends paid in cash, exceed
the amount computed under this section by multiplying the amount of
the maximum death benefit available under the policy by the
appropriate numerical factor associated with the age of the insured
at the time the policy is issued.
(b) If the policy is issued before the insured reaches the
insured's 21st birthday, the numerical factor is 1.5.
(c) If the policy is issued on or after the insured's 21st
birthday but before the insured reaches the insured's 46th
birthday, the numerical factor is computed by:
(1) subtracting 20 from the age of the insured in whole
years as of the insured's most recent birthday;
(2) multiplying the result computed under Subdivision
(1) by 0.04; and
(3) adding 1.5 to the result computed under
Subdivision (2).
(d) If the policy is issued on or after the insured's 46th
birthday but before the insured reaches the insured's 65th
birthday, the numerical factor is computed by:
(1) subtracting 45 from the age of the insured in whole
years as of the insured's most recent birthday;
(2) multiplying the result computed under Subdivision
(1) by 0.05; and
(3) adding 2.5 to the result computed under
Subdivision (2).
(e) If the policy is issued on or after the insured's 65th
birthday but before the insured reaches the insured's 86th
birthday, the numerical factor is 3.5.
(f) If the policy is issued on or after the insured's 86th
birthday but before the insured reaches the insured's 89th
birthday, the numerical factor is computed by:
(1) subtracting 85 from the age of the insured in whole
years as of the insured's most recent birthday;
(2) multiplying the result computed under Subdivision
(1) by 0.18; and
(3) subtracting the result computed under Subdivision
(2) from 3.5.
(g) If the policy is issued on or after the insured's 89th
birthday but before the insured reaches the insured's 96th
birthday, the numerical factor is computed by:
(1) subtracting 85 from the age of the insured in whole
years as of the insured's most recent birthday;
(2) multiplying the result computed under Subdivision
(1) by 0.18; and
(3) subtracting the result computed under Subdivision
(2) from 3.51.
(h) If the policy is issued on or after the insured's 96th
birthday but before the insured reaches the insured's 99th
birthday, the numerical factor is computed by:
(1) subtracting 85 from the age of the insured in whole
years as of the insured's most recent birthday;
(2) multiplying the result computed under Subdivision
(1) by 0.18; and
(3) subtracting the result computed under Subdivision
(2) from 3.52.
(i) If the policy is issued on or after the insured's 99th
birthday, the numerical factor is 1.
Sec. 1101.207. EFFECT OF PAYING MAXIMUM PREMIUMS. When the
aggregate premiums paid for a life insurance policy reach the
maximum amount computed under Section 1101.206, the life insurance
policy becomes a paid-up policy.
Sec. 1101.208. MINIMUM DISCLOSURE REQUIREMENTS--APPLICANT
FOR INSURANCE COVERAGE. (a) At a minimum, an insurer subject to
this subchapter shall disclose to an applicant for a life insurance
policy:
(1) the death benefit under the policy;
(2) the annual premium for the policy;
(3) the cumulative premium for the policy paid at
intervals of 5, 10, and 20 years;
(4) the year in which cumulative premiums will exceed
the death benefit; and
(5) the possible advantages to the applicant of
coverage under a single policy with a larger face amount rather than
several smaller policies.
(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 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. 1101.209. APPLICANT'S RIGHT TO CANCEL. Each
applicant for coverage under a life insurance 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. The insurer
shall provide each applicant for insurance coverage under a life
insurance policy written notice of the 30-day right to cancel.
Sec. 1101.210. TIMING OF DISCLOSURE TO APPLICANT. An
insurer that issues a life insurance policy shall provide the
disclosure and notice prescribed by Sections 1101.208 and 1101.209
on receipt of the application for coverage, and again not later than
the date on which the policy is delivered.
Sec. 1101.211. MINIMUM DISCLOSURE
REQUIREMENTS--POLICYHOLDER AND INSURED. At a minimum, an insurer
shall disclose to the holder of a life insurance policy and to each
insured under the policy:
(1) the death benefit under the policy;
(2) the annual premium for the policy;
(3) the cumulative premium for the policy paid as of
the date of the disclosure;
(4) the cash value of the policy, if any; and
(5) the year in which cumulative premiums will exceed
the death benefit.
Sec. 1101.212. TIMING OF DISCLOSURE TO POLICYHOLDER AND
INSURED. (a) An insurer that issues a life insurance policy shall
provide the disclosure prescribed by Section 1101.211 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) The insurer shall also provide the required disclosure
to each policyholder and insured on:
(1) the first anniversary of the date of the initial
delivery of the policy; and
(2) every subsequent five-year anniversary of the date
of the initial delivery of the policy.
Sec. 1101.213. EFFECT OF RIDERS. For purposes of Sections
1101.208-1101.212, cumulative premiums include premiums paid for
riders. However, the face amount of a life insurance policy does
not include the benefit attributable to the riders.
Sec. 1101.214. RULES. (a) The commissioner may adopt rules
necessary to implement this subchapter.
(b) The commissioner by rule shall prescribe the format of
the disclosure statements required under Sections 1101.208 and
1101.211 and the notice required under Section 1101.209.
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, 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) This subchapter applies to any individual or group life
insurance policy, other than a term life insurance policy, issued
in this state, including an industrial insurance policy offered
under Chapter 1151.
Sec. 1101.252. DUE DILIGENCE STANDARDS. The commissioner
shall adopt rules as necessary to define minimum standards of due
diligence that an insurer must exercise relating to the payment of
unclaimed benefits payable on the death of an insured who is covered
under more than one life insurance policy issued by the insurer.
SECTION 2. Not later than January 1, 2004, the commissioner
of insurance shall adopt rules as required by Sections 1101.214(b)
and 1101.252, 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
that date. A policy that is delivered before September 1, 2003, 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.