Life insurance: accelerated death benefits.

Existing law governs the business of insurance, and defines various types of insurance for these purposes, including life insurance and disability insurance. Existing law, except as provided, makes the requirements imposed on disability insurance contracts inapplicable to life insurance, endowment, and annuity contracts, or supplemental contracts thereto, that provide additional benefits in case of death or dismemberment or loss of sight by accident, or that operate to safeguard contracts against lapse, or give a special surrender benefit, or a special benefit, as specified. Existing law also provides the language required as part of a provision or supplemental contract governed by these provisions. This bill would delete the term "special benefit" and replace it with the defined term "accelerated death benefit." The bill would generally revise the phrase "provision or supplemental contract" and replace it with the term "supplemental benefit," as defined. The bill would also revise and recast the required language of the provision or supplemental contract, as prescribed. Existing law requires a licensed health care practitioner, independent of the insurer, to certify that an insured meets the definition of a "chronically ill individual," as specified by federal law, for purposes of establishing eligibility for benefits under a long-term care policy or certificate that provides home care benefits. This bill would prohibit an insurer, for purposes of long-term care insurance, from imposing a certification requirement of longer than 90 days. Existing law authorizes the Insurance Commissioner to adopt reasonable rules and regulations necessary to administer and carry out the purposes of certain provisions relating to the required language in a provision or supplemental contract. This bill would extend that authorization for the commissioner to adopt reasonable rules and regulations to those provisions relating to supplemental benefits that operate to safeguard life insurance contracts against lapse when the insured becomes totally disabled and those life insurance contracts with an accelerated death benefit. Existing law authorizes provisions or supplemental contracts that operate to safeguard life insurance contracts against lapse, in which the insurer waives the premium or monthly deduction for a life insurance contract when the insured becomes totally disabled, and where the waiver continues until the end of the insured's disability, or until the attainment of an age established by the insurer. This bill would delete the provision regarding attainment of age and would instead authorize the waiver of premiums to continue for a period of time specified in the supplemental benefit. The bill would define "accelerated death benefit" as a policy provision, endorsement, or rider added to a life insurance policy that provides for the advance payment of any part of the death proceeds, payable upon the occurrence of a qualifying event, as defined. The bill would require a life insurance policy with an accelerated death benefit provision to comply with and, if applicable, explain specified requirements, including payment of benefits, commissioner approval of forms and disclosures, and a free look period, and would place limits on advertising and marketing. The bill would prohibit an insurer, broker, agent, or other person from causing a policyholder to unnecessarily replace a long-term care insurance policy with an accelerated death benefit policy, and provide certain notices when a life insurance policy or long-term care insurance policy would be replaced. The bill would prohibit accelerated death benefits from limiting or excluding coverage by type of illness, treatment, medical condition, or accident, except as specified. This bill would also provide that an insurer that fails to conform to the requirements of the above provisions would be subject to the provisions of existing law that provide for the imposition of a penalty against any person who engages in any unfair method of competition or any unfair or deceptive act or practice in the business of insurance, as provided, including civil penalties as well as a misdemeanor for an insurer intentionally advertising insurance that it will not sell. Because the bill would create a new crime, it would impose a state-mandated local program. This bill would authorize the commissioner to disapprove any advertising that does not meet the requirements of these provisions, as specified. The bill would also require a policy, certificate, rider, or endorsement to include a provision giving the policyholder or certificate holder the right to appeal to the insurer a decision regarding benefit eligibility. This bill would delete obsolete provisions and make conforming changes. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.