Chapter 326
2012 -- S 2749 SUBSTITUTE A
Enacted 06/20/12
A N A C T
RELATING TO
INSURANCE - LIFE INSURANCE AND ANNUITIES
Introduced By: Senators Gallo, and Miller
Date Introduced: March 08, 2012
It is enacted by the
General Assembly as follows:
SECTION 1. Chapter 27-4 of the General Laws entitled
"Life Insurance Policies and
Reserves" is hereby
amended by adding thereto the following section:
27-4-29.
Life insurance database. -- (a) The department of business regulation shall
maintain a central database of electronic contact information
for each life insurer having policies
in force in this state.
(b) On and after
January 1, 2013, any member of the immediate family of a decedent
searching for life insurance policies covering the decedent may
file a request with the department
for a search pursuant to this section, provided the
decedent was a resident or former resident of
this state. Any such request shall include a copy of the subject
decedent’s death certificate. The
right to file a request for a search pursuant to this
section may not be assigned.
(c) The department
shall transmit any such request to all life insurers having policies in
force in this state, along with information necessary for
responding directly to the person filing
the request. Each such insurer shall examine its books
and records to make a determination as to
the existence of coverage of the subject decedent, and
upon a finding that such coverage does
exist, shall directly notify the person filing the request.
(d) The department
may adopt such rules and regulations as may be necessary to
implement the provisions of this section.
(e) Insurers of
credit life insurance are exempt from inclusion in the central database and
shall not be subject to the requirements of section
27-4-28.
SECTION 2. Chapter 27-29 of the General Laws entitled
"Unfair Competition and
Practices" is hereby
amended by adding thereto the following section:
27-29-4.7.
Additional unfair methods of competition. – (a)
In addition to those listed in
section 27-29-4 the following are also defined as unfair
methods of competition and unfair and
deceptive acts or practices in the business of insurance:
(1) Twisting.
Knowingly making any misleading representations or incomplete or
fraudulent comparisons or fraudulent material omissions of or
with respect to any insurance
policies or insurers for the purpose of inducing, or tending
to induce, any person to lapse, forfeit,
surrender, terminate, retain, pledge, assign, borrow on, or
convert any insurance policy or to take
out a policy of insurance in another insurer.
(2) Churning. The practice
whereby policy values in an existing life insurance policy or
annuity contract, including, but not limited to, cash, loan
values, or dividend values, and in any
riders to that policy or contract, are directly or
indirectly used to purchase another insurance
policy or annuity contract with that same insurer for the
purpose of earning additional premiums,
fees, commissions, or other compensation:
(i)
Without an objectively reasonable basis for believing that the replacement or
extraction will result in an actual and demonstrable benefit to
the policyholder; or
(ii) In a fashion
that is fraudulent, deceptive, or otherwise misleading or that involves a
deceptive omission; or
(iii) When the
applicant is not informed that the policy values, including cash values,
dividends, and other assets of the existing policy or contract
will be reduced, forfeited, or used in
the purchase of the replacing or additional policy or
contract, if this is the case; or
(iv)
Without informing the applicant that the replacing or additional
policy or contract
will not be a paid-up policy or that additional premiums
will be due or that a new contestable
period will apply and explaining the impact of these
differences, if this is the case.
(b) Each insurer
shall comply with paragraphs (iii) and (iv) herein by
disclosing to the
applicant at the time of the offer if, how, and the extent to
which the policy or contract values
(including cash value,
dividends, and other assets) of a previously issued policy or contract will
be used to purchase a replacing or additional policy or
contract with the same insurer. The
disclosure must include the premium, the death benefit of the
proposed replacing or additional
policy, and the date on which the policy values of the
existing policy or contract will be
insufficient to pay the premiums of the replacing or additional
policy or contract.
(c) Each insurer
shall adopt written procedures sufficient to reasonably avoid twisting and
churning of policies or contracts that it has issued, and
failure to adopt written procedures
sufficient to reasonably avoid twisting and churning shall be an
unfair method of competition and
an unfair or deceptive act or practice.
SECTION 3. Sections 27-34.3-2, 27-34.3-6, 27-34.3-7 and
27-34.3-11 of the General
Laws in Chapter 27-34.3
entitled "Rhode Island Life and Health Insurance Guaranty Association
Act" are hereby amended to read as follows:
27-34.3-2.
Purpose. -- (a) The purpose
of this chapter is to protect, subject to certain
limitations, the persons specified in section 27-34.3-3(a)
against failure in the performance of
contractual obligations, under life and health insurance policies
and annuity contracts specified in
section 27-34.3-3(b), because of the impairment or insolvency
of the member insurer that issued
the policies or contracts.
(b) To provide this
protection, an association of insurers is created to pay benefits and to
continue coverages as limited in
this chapter, and members of the association are subject to
assessment to provide funds to carry out the purpose of this
chapter.
(c) In accordance
with this purpose, in determining the coverage limits to be applied in
section 27-34.3-3 in cases in which there were different
statutory limits at the time the insurer
was declared impaired and the time the insurer was
declared insolvent, the statute with the higher
limits shall be applied to the claim.
27-34.3-6.
Creation of the association. -- (a) There is created a nonprofit legal entity to
be known as the
shall be and remain members of the association as a
condition of their authority to transact
insurance in this state. The association shall perform its
functions under the plan of operation
established and approved under section 27-34.3-10, or as
previously established and approved
under section 27-34.1-11 [Repealed] and shall exercise its
powers through a board of directors
established under section 27-34.3-7 or as previously established
under section 27-34.1-8
[Repealed] For purposes of administration and
assessment, the association shall maintain two (2)
accounts:
(1) The life insurance
and annuity account which includes the following subaccounts:
(i)
Life insurance account;
(ii) Annuity account;
which shall include annuity contracts owned by a governmental
retirement plan (or its trustee) established under section 401, 403(b)
or 457 of the
Internal Revenue Code, 26 U.S.C. section 401, 403(b)
or 457, but shall otherwise exclude
unallocated annuities; and
(iii) Unallocated
annuity account which shall exclude contracts owned by a
governmental retirement benefit plan (or its trustee) established
under section 401, 403(b) or 457
of the United States Internal Revenue Code, 26 U.S.C.
section 401, 403(b) or 457.
(2) The health
insurance account.
(b) The association
shall come under the immediate supervision of the commissioner and
shall be subject to the applicable provisions of the
insurance laws of this state. Meetings or
records of the association may be open to the public upon
majority vote of the board of directors.
The commissioner or his or her designee shall have
full and complete access to all documents
received by, created by or otherwise obtained by the
association and shall be invited to be present
at all association meetings. The disclosure of
confidential or privileged association information,
documents, or records to the commissioner shall not change the
confidential or privileged status
of the information, documents or records.
27-34.3-7.
Board of directors. -- (a) The
board of directors of the association shall
consist of:
(1)
Not not less than five (5) nor more
than nine (9) member insurers serving terms as
established in the plan of operation; and
(2) The commissioner
or the commissioner’s designee. Only member insurers shall be
eligible to vote.
The insurer members of the board shall be selected by member insurers
subject to
the approval of the commissioner. The board of directors,
previously established under section
27-34.1-8 [Repealed] shall continue to operate in
accordance with the provision of this section.
Vacancies on the board shall be filled for the
remaining period of the term by a majority vote of
the remaining board members, subject to the approval of
the commissioner.
(b) In approving
selections to the board, the commissioner shall consider, among other
things, whether all member insurers are fairly represented.
(c) Members of the
board may be reimbursed from the assets of the association for
expenses incurred by them as members of the board of directors
but members of the board shall
not be compensated by the association for their services.
27-34.3-11.
Duties and powers of the commissioner. -- In
addition to the duties and
powers enumerated in this chapter,
(a) The commissioner
shall:
(1) Upon request of the
board of directors, provide the association with a statement of
the premiums in this and any other appropriate states for
each member insurer;
(2) When an impairment is declared and the amount of the impairment
is determined,
serve a demand upon the impaired insurer to make good the
impairment within a reasonable time;
notice to the impaired insurer shall constitute notice to
its shareholders, if any; the failure of the
insurer to promptly comply with a demand shall not excuse the
association from the performance
of its powers and duties under this chapter.
(3) Deleted by P.L.[2009, ch. 158, section 1 and by
P.L. 2009, ch. 169, section 1].
(4) Maintain the
confidentiality and privileged status of confidential association
information provided to the commissioner or department of
business regulation.
(b) The commissioner
may suspend or revoke, after notice and hearing, the certificate of
authority to transact insurance in this state of any member
insurer which fails to pay an
assessment when due or fails to comply with the plan of
operation. As an alternative the
commissioner may levy a forfeiture on any member insurer which
fails to pay an assessment
when due. The forfeiture shall not exceed five percent
(5%) of the unpaid assessment per month,
but no forfeiture shall be less than one hundred dollars
($100) per month.
(c) A final action of
the board of directors or the association may be appealed to the
commissioner by any member insurer if the appeal is taken within
sixty (60) days of its receipt of
notice of the final action being appealed. A final action or
order of the commissioner shall be
subject to judicial review.
(d) The liquidator,
rehabilitator, or conservator of any impaired or insolvent insurer may
notify all interested persons of the effect of this chapter.
(e) The commissioner
shall not participate in the association’s adjudication of a protest
by an insurer pursuant to paragraph 27-34.3-9(i).
SECTION 4. Sections 1 and 2 of this act shall take effect on
January 1, 2013. Section 3
shall take effect upon passage.
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LC01930/SUB A
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