Long-term care insurance and accelerated death benefits.

Existing law provides for the regulation of insurers by the Department of Insurance, including insurers issuing policies of long-term care insurance and policies providing accelerated death benefits. Existing law requires every insurer or other entity marketing long-term care insurance to, among other things, develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant. Existing law also requires the agent and insurer, when determining whether the applicant meets those standards, to develop procedures that take into consideration, among other things, the applicant's ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage, and the applicant's goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet those goals or needs. Existing law makes these provisions inapplicable to life insurance policies that accelerate benefits for long-term care. This bill would remove that exclusion for life insurance policies that accelerate benefits for long-term care, and would, with respect to those policies, require the procedures to also take into consideration the applicant's goals or needs with respect to life insurance, and to take into consideration the advantages and disadvantages of the proposed insurance coverage compared to the advantages and disadvantages of a stand-alone long-term care insurance policy. The bill would require a written summary of the comparison to be presented to the applicant at the time of application and to be made part of the applicant's file. Under existing law, if an applicant for long-term care insurance declines to provide the financial information necessary to determine the applicant's financial suitability, the issuer is authorized to use some other method to verify the applicant's intent. This bill, instead, would require the issuer, if the applicant declines to provide the financial information and the issuer does not reject the application, to use some other method to determine if the proposed coverage is suitable for the applicant. Existing law requires an insurer to ensure that agents offering, marketing, or selling accelerated death benefits on their behalf are able to describe the differences between benefits provided under an accelerated death benefit and benefits provided under long-term care insurance, including, among other things, the benefits under the accelerated death benefit or long-term care insurance if benefits are never needed or if benefits are needed. Under existing law, completion of California agent education or continuing education for long-term care insurance meets this requirement. This bill, instead, would require an insurer to ensure that those agents complete California agent education or continuing education for long-term care insurance in order to meet the above requirement. The bill would require an insurer or other entity marketing accelerated death benefits to develop and use suitability standards, similar to the suitability standards described above for the purchase or replacement of long-term care insurance, to determine whether the purchase or replacement of an accelerated death benefit, or the replacement of long-term care insurance, is appropriate for the needs of the applicant. The bill would require an insurer to report annually to the commissioner the total number of applications for accelerated death benefits received from residents of this state, the number of applicants who declined to provide requested information, the number of applicants who did not meet the suitability standards, and the number of applicants who chose to purchase the proposed insurance coverage.