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.