AN ACT Relating to insurance policy transactions; and adding new sections to chapter 48.18 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 48.18 RCW to read as follows:

(1) Any insurer shall have the power to hold under agreement the proceeds and unearned premiums of any contract issued by it, upon such terms and restrictions as to revocation by the contractholder and control by the beneficiaries, and with such exemptions from the claims of creditors of beneficiaries other than the contractholder as set forth in the contract or as agreed to in writing by the insurer and the contractholder. The insurer shall not be required to segregate funds so held but may hold them as part of its general assets.

(2) (a) An insurer shall pay interest on death benefits payable under the terms of a life insurance contract insuring the life of any person purchasing a contract issued for delivery in this state or who was a resident of this state at the time of death. The interest shall accrue commencing on the date of death at the highest rate then paid by the insurer on other withdrawable contract proceeds left with the company, but not less than eight percent.

(b) Benefits payable that have not been tendered by the company to the beneficiary within ninety days of the receipt of proof of death shall accrue interest, commencing on the ninety-first day, at the rate of interest, under (a) of this subsection, plus three percent.

(3) (a) Upon maturity of a contract, the insurer shall have the power to hold and shall hold the proceeds of the contract to accrue at the highest interest rate of other withdrawable proceeds of the contract left with the company, but not less than eight percent. This interest shall continue to accrue until the contractholder has been notified of all of the options available under the contract and the contractholder or beneficiary have been given the opportunity to choose an option of the contract. The contractholder or beneficiary shall be allowed at least sixty days from receipt of notice from the company to choose an option of the contract before the company pays the total accrued proceeds of the contract in a single lump sum to the beneficiary.

(b) Contract benefits not paid by the company within ninety days of the request by the contractholder or beneficiary shall accrue interest, commencing on the ninety-first day, at the rate of interest, under (a) of this subsection, plus three percent. A limited pay contract providing paid-up benefits shall not be considered as being matured on contracts paid up to date but the maturity date of the contract shall be used for purposes of this subsection. Automatic or preselected nonforfeiture or annuitization options of a contract, other than accrual of interest, must be confirmed in writing by the contractholder prior to actual inception or effective date, with accrual at the interest rate, under (a) of this subsection, during the interim period, prior to the company's receipt of written confirmation of an option by the contractholder or beneficiary.

(4) (a) Requests for cash surrenders, loans, and withdrawals shall be considered as claims against the contract. Notwithstanding the insurance company's right to delay disbursement of moneys associated with these types of transactions, undue disbursement delays should not benefit the company at the expense of the contractholder or beneficiary. A company that delays payment of these types of disbursement requests beyond thirty days from receipt of the written request shall credit interest to the amount requested from the contract at the highest rate then paid by the insurer on other withdrawable contract proceeds, but not less than eight percent.

(b) Withdrawable proceeds are those amounts accumulated within or to a contract and available for cash disbursement including but not limited to dividends, deposit funds, or premiums paid in advance left with or held by the company which are not part of basic required contract reserves. Loans shall be considered withdrawals from basic required contract reserves and subject to policy provisions such as reduction of death proceeds.

(c) Benefits payable that have not been tendered by the company to the beneficiary within ninety days shall accrue interest, commencing on the ninety-first day, at the rate of interest, under (a) of this subsection, plus three percent. Contracts that would be terminated by the disbursement of the requested withdrawal of contract benefits shall provide that all contract benefits stay in full force and effect until full disbursement of the requested benefit is actually made by the insurance company.

(5) The provisions of this section apply to: (a) Individual and group contracts; (b) insurers, health care service contractors, health maintenance organizations, and any other organization covered under this title; and (c) contracts, policies, certificates and any other documents of insurance-type coverage covered under this title.

NEW SECTION. Sec. 2. A new section is added to chapter 48.18 RCW to read as follows:

(1) When an existing contract, terminated for any reason, is replaced by the same type of contract within sixty days after the prior contract ceases, then the new contract shall provide for continuity as follows: (a) Waiting or limitation periods of the new contract shall credit time completed through all prior contracts, but only when continuous coverage as provided by this section can be shown by the contractholder; (b) benefits to be provided during the waiting or limitation period of the new contract subject only to benefits affected by such limitation shall be the lesser of the benefits of the previous contract or the benefits of the new contract until such limitation period of the new contract has expired; and (c) credit shall be provided by the new contract for deductibles and co-insurance limits discharged under the prior contract for the present calendar year.

(2) When a contract provides for its termination at the inception of a new, but same type of contract, then the original contract must provide for full reinstatement, as if no break in coverage had occurred, but without recovery of interim premiums or contributions when benefits were not provided or available, if reinstatement is requested within sixty days of termination of the subsequent contract.

(3) The provisions of this section shall apply to: (a) Individual and group contracts, (b) insurers, health care service contractors, health maintenance organizations, and any other organization covered under this title, and (c) contracts, policies, certificates, and any other documents of insurance-type coverage covered under this title.