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