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H.B. 32






Chief Sponsor: James A. Dunnigan

Senate Sponsor: Curtis S. Bramble

             8      LONG TITLE
             9      General Description:
             10          This bill modifies the Insurance Code related to life insurance and annuities.
             11      Highlighted Provisions:
             12          This bill:
             13          .    grants rulemaking authority related to life insurance policies, annuity contracts, or
             14      certificates;
             15          .    modifies the amount of life insurance when conversions occur; and
             16          .    makes technical changes.
             17      Monies Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          None
             21      Utah Code Sections Affected:
             22      AMENDS:
             23          31A-22-425, as last amended by Chapter 125, Laws of Utah 2005
             24          31A-22-517, as last amended by Chapter 252, Laws of Utah 2003
             26      Be it enacted by the Legislature of the state of Utah:
             27          Section 1. Section 31A-22-425 is amended to read:

             28           31A-22-425. Rulemaking authority for standards related to life insurance and
             29      annuities.
             30          In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             31      commissioner may make rules to establish standards for any of the following:
             32          (1) if used in connection with the solicitation or sale of life insurance policies and
             33      contracts:
             34          [(1)] (a) a buyer's guide;
             35          [(2)] (b) a disclosure;
             36          [(3)] (c) an illustration;
             37          [(4)] (d) a policy summary; or
             38          [(5)] (e) a recommendation[.]; and
             39          (2) in a life insurance policy, annuity contract, or life insurance or annuity certificate:
             40          (a) a definition of a term;
             41          (b) a disclosure;
             42          (c) an exclusion; or
             43          (d) a limitation.
             44          Section 2. Section 31A-22-517 is amended to read:
             45           31A-22-517. Conversion on termination of eligibility.
             46          (1) A person is entitled to be issued by [the] an insurer, without evidence of insurability,
             47      an individual policy of life insurance without accident and health or other supplementary
             48      benefits, if:
             49          (a) any portion of insurance on a person covered by a policy ceases because of:
             50          (i) termination of employment; or
             51          (ii) termination of membership in the classes eligible for coverage;
             52          (b) an application for the individual policy is made; and
             53          (c) the first premium is paid to the insurer within 31 days after the termination
             54      described in Subsection (1)(a).
             55          (2) The individual policy described in Subsection (1) shall, at the option of the person
             56      entitled to the policy, be on any form then customarily provided by the insurer at the age and
             57      for the amount applied for, except that the group policy may exclude the option to elect:
             58          (a) term insurance; or

             59          (b) flexible premium insurance.
             60          (3) (a) The individual policy described in Subsection (1) shall be for an amount [not in
             61      excess of] equal to the life insurance [which] that ceases because of the termination, less the
             62      amount of any life insurance other than the individual policy described in Subsection (1) for
             63      which the person is eligible:
             64          (i) because of the termination; and
             65          (ii) within 30 days after the termination.
             66          (b) Any amount of insurance that matures on or before the termination, as an
             67      endowment payable to the person insured[, whether in one sum, in installments, or in the form
             68      of an annuity,] is not included in the amount that is considered to cease because of the
             69      termination[.] whether the endowment payment is in:
             70          (i) one sum;
             71          (ii) installments; or
             72          (iii) the form of an annuity.
             73          (4) The premium on the individual policy described in Subsection (1) shall be at the
             74      insurer's customary rate at the time of termination, which is applicable to:
             75          (a) the form and amount of the individual policy;
             76          (b) the class of risk to which the person belonged when terminated from the group
             77      policy; and
             78          (c) the age attained on the effective date of the individual policy.
             79          (5) Subject to the conditions of this section, the conversion privilege described in this
             80      section is available:
             81          (a) to a surviving dependent, if any, at the death of the employee or member, with
             82      respect to the survivor's coverage under the group policy that terminates by reason of the death;
             83      and
             84          (b) to the dependent of the employee or member upon termination of coverage of the
             85      dependent, while the employee or member remains insured, because the dependent ceases to be
             86      a qualified dependent under the group policy.

Legislative Review Note
    as of 11-9-05 2:45 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

Interim Committee Note
    as of 12-21-05 12:57 PM

The Business and Labor Interim Committee recommended this bill.

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