Chapter 196

2018 -- S 2048 SUBSTITUTE A Enacted 07/02/2018

A N   A C T

RELATING TO INSURANCE - LIFE INSURANCE

Introduced By: Senator Roger Picard

Date Introduced: January 18, 2018

It is enacted by the General Assembly as follows:

SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

by adding thereto the following chapter:

CHAPTER 4.10

MANDATORY DISCLOSURE OF ALTERNATIVES TO LAPSE OR SURRENDER

27-4.10-1. Definitions.

(a) As used in this chapter, the term:

(1) "Agent" means a person who is the agent of record of a policy or who has a business

relationship with the policyholder or insured.

(2) "Commissioner" means the director of the department of business regulation and any

assistant to the director.

(3) "Insured" means an individual who is covered by a policy.

(4) "Insurer" means the insurance company that issued or currently insures the policy.

(5) "Policy" means an individual life insurance policy owned by an individual who is a

resident of this state, regardless of whether such the policy has been issued, delivered, or renewed

in this state.

27-4.10-2. Notice.

(a) The commissioner shall develop, and post on its website, a written notice to inform a

policyholder of alternatives to the lapse or surrender of a policy, and of the policyholder's rights,

as an owner of the policy, which that are related to the disposition of a policy. The notice must be

developed at no cost to insurers, agents, or other licensees and must be written in lay terms.

(b) The written notice must contain all of the following:

(1) A statement explaining that life insurance is a critical part of a broader financial plan.;

(2) A statement explaining that there are alternatives to the lapse or surrender of a

policy.;

(3) A general description of the following alternatives to the lapse or surrender of a

policy:

(i) Accelerated death benefits available under the policy or as a rider to the policy;

(ii) The assignment of the policy as a gift;

(iii) The sale and assignment of the policy pursuant to a life settlement contract, including

that a life settlement is a regulated transaction in this state pursuant to chapter 72 of title 27;

(iv) The replacement of the policy;

(v) The maintenance of the policy pursuant to the terms of the policy or a rider to the

policy, or through a life settlement contract;

(vi) The maintenance of the policy through loans issued by an insurer or a third party,

using the policy or the cash surrender value of the policy as collateral for the loan;

(vii) Conversion of the policy from a term policy to a permanent policy;

(viii) Conversion of the policy in order to obtain long-term-care health insurance

coverage or a long-term-care benefit plan; and

(4) A statement explaining that life insurance, life settlements, or other alternatives to the

lapse or surrender of the policy described in the notice may not be available to a particular

policyholder depending on a number of circumstances, including the age and health status of the

insured or the terms of a life insurance policy, and that the policyholder should contact their his

or her financial advisor, insurance agent, broker, or attorney to obtain further advice and

assistance.

(c) An insurer, an agent, or an insurer and its agent must advise a policyholder with the

annual benefit statement or otherwise that policy holders policyholders considering making

changes in the status of the policy should consult a licensed insurance agent or financial advisor

and that important information related to policy options, including information about an

accelerated death benefit, nursing home benefit, critical illness benefit, and additional benefits

may be found on the department of business regulation (DBR) website.

SECTION 2. This act shall take effect on January 1, 2019.

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LC003500/SUB A

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