2018 -- S 2048

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LC003500

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO INSURANCE - LIFE INSURANCE

     

     Introduced By: Senator Roger Picard

     Date Introduced: January 18, 2018

     Referred To: Senate Commerce

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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CHAPTER 4.10

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MANDATORY DISCLOSURE OF ALTERNATIVES TO LAPSE OR SURRENDER

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     27-4.10-1. Definitions.

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     (a) As used in this chapter, the term:

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     (1) "Agent" means a person who is the agent of record of a policy or who has a business

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relationship with the policyholder or insured.

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     (2) "Commissioner" means the director of the department of business regulation and any

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assistant to the director.

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     (3) "Insured" means an individual who is covered by a policy.

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     (4) "Insurer" means the insurance company that issued or currently insures the policy.

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     (5) "Policy" means an individual life insurance policy owned by an individual who is a

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resident of this state, regardless of whether such policy has been issued, delivered, or renewed in

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this state.

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     27-4.10-2. Notice.

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     (a) The commissioner shall develop, and adopt by rule, a written notice to inform a

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policyholder of alternatives to the lapse or surrender of a policy, and of the policyholder's rights,

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as an owner of the policy, which are related to the disposition of a policy. The notice must be

 

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developed at no cost to insurers, agents, or other licensees and must be written in lay terms.

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     (b) The written notice must contain all of the following:

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     (1) A statement explaining that life insurance is a critical part of a broader financial plan.

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     (2) A statement explaining that there are alternatives to the lapse or surrender of a policy.

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     (3) A general description of the following alternatives to the lapse or surrender of a

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policy:

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     (i) Accelerated death benefits available under the policy or as a rider to the policy;

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     (ii) The assignment of the policy as a gift;

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     (iii) The sale and assignment of the policy pursuant to a life settlement contract, including

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that a life settlement is a regulated transaction in this state pursuant to chapter 72 of title 27;

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     (iv) The replacement of the policy;

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     (v) The maintenance of the policy pursuant to the terms of the policy or a rider to the

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policy, or through a life settlement contract;

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     (vi) The maintenance of the policy through loans issued by an insurer or a third party,

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using the policy or the cash surrender value of the policy as collateral for the loan;

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     (vii) Conversion of the policy from a term policy to a permanent policy;

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     (viii) Conversion of the policy in order to obtain long-term care health insurance

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coverage or a long-term care benefit plan; and

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     (4) A statement explaining that life insurance, life settlements, or other alternatives to the

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lapse or surrender of the policy described in the notice may not be available to a particular

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policyholder depending on a number of circumstances, including the age and health status of the

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insured or the terms of a life insurance policy, and that the policyholder should contact their

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financial advisor, insurance agent, broker, or attorney to obtain further advice and assistance.

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     (c) An insurer, an agent, or an insurer and its agent must provide the written notice

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required to a policyholder if an insured under the policy is sixty (60) years of age or older or is

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known by the insurer or agent to be terminally ill or chronically ill, and:

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     (1) If the policyholder requests the surrender, in whole or in part, of the policy;

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     (2) If the policyholder requests an accelerated death benefit, nursing home benefit,

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critical illness benefit, or any other living benefit under the policy;

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     (3) If the insurer sends a notice to the policyholder that the policy may lapse; provided,

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however, the insurer is not required to send such notice more than once within the twelve (12)

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month period after the date of the first notice of lapse of the policy; or

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     (4) At any other time that the commission may prescribe by rule.

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     (d) A violation of this section is deemed an unfair trade practice under chapter 13.1 of

 

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title 6.

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     SECTION 2. This act shall take effect on October 1, 2018.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE - LIFE INSURANCE

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     This act would require that the department of business regulation provide a mandatory

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disclosure notice, at no cost to insurers, to certain life insurance policy holders regarding their

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rights and alternatives to lapse or surrender.

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     This act would take effect on October 1, 2018.

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