Updates to Trends in California and Iowa | Wolters Kluwer Financial Services
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  • Updates to Trends in California and Iowa

    Heidi Zibel

    by Heidi A. Zibel, Esq., Senior Insurance Compliance Analyst, Insurance Compliance Solutions

    Published April 06, 2015

    In a previous Compliance Corner post from December 2012, my colleague reported on the trend of the policyholder right to designate a third party to receive duplicate policy-related correspondence. California AB 1747, which became effective January 1, 2013, newly required an insurer to give the applicant for an individual life insurance policy the right to designate at least one person, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. (Insurance Code Sections 10113.71 and 10113.72) California has recently expanded this right to consumers by enacting AB 1804. This Assembly Bill adds Section 396 into the California Insurance Code and applies to private passenger automobile insurance, residential property insurance, and individual disability income insurance, for policies that are issued or are renewed on or after January 1, 2016. Under Section 396 insurers are required to maintain a verifiable process that allows a policyholder to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal or cancellation of a policy for nonpayment of premium. And, if a designee has been assigned, the insurer may not lapse or terminate a policy for nonpayment of premium unless the insurance company gives notice to the designee at least 10 days prior to the effective date of the lapse or termination. The law also states that the insurer must give notice by first class U.S. mail, postage prepaid, within 10 days after the premium is due and unpaid.

    Another interesting “trend update” is taking place in Iowa. As we have posted about in the past, across the nation there is the trend of state laws allowing insurers to deliver certain insurance documents to policyholders electronically in addition to the traditional “paper” methods of delivery and proof of mailing. Indeed in Iowa the new Insurance Code section that permits electronic delivery and posting of insurance notices and documents became effective last summer on July 1, 2014. (Insurance Code Section 505B.1) However, more recently, the Division of Insurance (the Division) put the brakes on the scope of this expansive law by issuing Bulletin 15-01 on February 16, 2015. In this bulletin the Division says that in other various Code Sections the legislature enacted numerous consumer protections for policyholders, such as postal service proof of mailing requirements in the event an insurer intends to cancel, nonrenew or terminate coverage. And, because the Division is not aware of any available electronic verification software that satisfy the “proof of receipt” requirements as set forth in those laws, the Division says that, despite Section 505B.1, insurers may not deliver notices of cancellation, nonrenewal or termination solely by electronic means until the Division is able to confirm that acceptable methods of electronic receipt verification exist. The Division clarifies that notice by electronic means may still be made as a service to policyholders, but, for the time being, this delivery must be combined with delivery through post office department certificate of mailing methods as provided by law. In the bulletin the Division says that it will issue rules consistent with this bulletin and, in the meantime, it encourages insurers to provide the Division information and examples of electronic receipt verification systems.

    Editor’s Recommendation: Keep current with state regulatory guidance regarding duplicate notice for assigned designees and mailing requirements for adverse actions in NILS INsource, the AuthenticWeb Adverse Decision Matrices and AuthenticWeb CNR Summary Matrices.

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