HOUSE BILL REPORT

HB 1321

BYRepresentatives Lux, Chandler, Nutley, Betrozoff, Meyers and Baugher; by request of Office of Insurance Commissioner

Requiring notice to certain life insurance policyowners of the nonforfeiture benefits available.

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (14)

      Signed by Representatives Lux, Chair; Zellinsky, Vice chair; Anderson, Betrozoff, Chandler, Crane, Day, Dellwo, Dorn, Ferguson, P. King, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

JANUARY 28, 1988

BACKGROUND:

Life insurance policies, other than most term life insurance policies, contain provisions offering the policyholder a choice of non-forfeiture values. Essentially, a non-forfeiture value is the worth of a policy if and when the policyholder decides to cancel or otherwise stop paying premiums on the policy.

The basic type of non-forfeiture value is the cash surrender value, the amount of money that will be paid to the policyholder if he or she stops paying premiums. Two other common non-forfeiture benefits are extended term insurance and reduced paid-up insurance. Extended term insurance provides continued life insurance up to the face amount of the policy for a limited period of time. Reduced paid-up insurance enables the policyholder to obtain a policy for a reduced amount of insurance for life without the necessity of paying any additional premiums.

Many types of insurance policies permit the policyholder to exercise non-forfeiture benefit options upon the attainment of a specified age.

SUMMARY:

SUBSTITUTE BILL:  Insurance companies must inform the policyowner at least once every five years in writing of the nonforfeiture options that may be available under the policy.  The information must generally describe nonforfeiture options and recommend that the policyowner contact his or her agent for further information.  The notice requirements do not apply to policies providing only term insurance.

SUBSTITUTE BILL COMPARED TO ORIGINAL: The original bill required life insurers to inform policyowners, in writing, on or before the policy anniversary date following an insured's attainment of age 60, of the non-forfeiture benefits available under the policy.

Fiscal Note:      Not Requested.

Effective Date:This act shall take effect January 1, 1989.

House Committee ‑ Testified For:    Richard Marquardt, Insurance Commissioner; E. G. Kroener, Puget Sound Council of Senior Citizens.

House Committee - Testified Against:      Basil Badley, American Council of Life Insurers.

House Committee - Testimony For:    This legislation will provide consumers with information needed to make informed decisions regarding their insurance needs, especially senior citizens who may be unaware of the value of old policies owned for many years.

House Committee - Testimony Against:      If life insurers are required to notify all policyholders who reach age 60 of their nonforfeiture values, insurers will duplicate the function of agents and will be faced with burdensome and costly notice that accomplishes little.