Senate Bill No. 329
(By Senators Helmick and Ross)
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[Introduced February 8, 1996;
referred to the Committee on Banking and Insurance.]
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A BILL to amend article eleven, chapter thirty-three of the code
of West Virginia, one thousand nine hundred thirty-one, as
amended, by adding thereto a new section, designated section
five-b, relating to replacement of life insurance.
Be it enacted by the Legislature of West Virginia:
That article eleven, chapter thirty-three of the code of
West Virginia, one thousand nine hundred thirty-one, as amended,
be amended by adding thereto a new section, designated section
five-b, to read as follows:
ARTICLE 11. UNFAIR TRADE PRACTICES.
§33-11-5b. Replacement of life insurance.
(a) As used in this section:
(1) "Replacement" means any transaction in which new life insurance is to be purchased and by reason of such transaction
existing life insurance has been or is to be:
(A) Lapsed, forfeited, surrendered, or otherwise terminated;
(B) Converted to reduced paid-up insurance, continued as
extended term insurance, or otherwise reduced in value by the use
of nonforfeiture benefits or other policy values;
(C) Amended so as to effect either a reduction in benefits
or in the term for which coverage would otherwise remain in force
or for which benefits would be paid;
(D) Reissued with any reduction in cash value; or
(E) Pledged as collateral or subjected to borrowing, whether
in a single loan or under a schedule of borrowing over a period
of time for amounts in the aggregate exceeding twenty-five
percent of the loan value set forth in the policy;
(2) "Existing insurer" means the insurance company whose
existing life insurance policy is or will be terminated or
otherwise affected in a replacement transaction;
(3) "Replacing insurer" means the insurance company,
including the same insurer or an insurer in the same group of
affiliated insurers, that issues new life insurance in a
replacement transaction; and
(4) "Existing life insurance" means any life insurance in
force including life insurance under a binding or conditional
receipt or a life insurance policy that is within an
unconditional refund period, but excluding life insurance
obtained through the exercise of a dividend option.
(b) No replacing insurer may issue any life insurance in a
replacement transaction to replace existing life insurance unless
the replacing insurer agrees in writing with the insured that:
(1) The new life insurance issued by the replacing insurer
will not be contestable by it in the event of such insured's
death to any greater extent than the existing life insurance
would have been contestable by the existing insurer had such
replacement not taken place: Provided, That this paragraph does
not apply to that amount of insurance written and issued which
exceeds the amount of the existing life insurance; and
(2) The new life insurance issued by the replacing insurer
may be voluntarily surrendered by the insured at any time within
thirty days after its delivery to the insured in exchange for a
full refund of premiums paid by the replacing insurer to the
insured.
(c) Unless otherwise specifically included, subsection (b) of this section does not apply to:
(1) Annuities;
(2) Individual credit life insurance;
(3) Group life insurance, group credit life insurance, and
life insurance policies issued in connection with a pension,
profit-sharing or other benefit plan qualifying for tax
deductibility of premiums: Provided, That as to any plan
described in this subsection, full and complete disclosure of all
material facts shall be given to the administrator of any plan to
be replaced;
(4) Variable life insurance under which the death benefits
and cash values vary in accordance with unit values of
investments held in a separate account;
(5) An application to the existing insurer that issued the
existing life insurance and a contractual policy change or
conversion privilege or a privilege of policy change granted by
the insurer is being exercised;
(6) Existing life insurance that is a nonconvertible term
life insurance policy which will expire in five years or less and
cannot be renewed; or
(7) Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the
same company.
(d) No person may make or issue, or cause to be made or
issued, any written or oral statement of a material fact which is
untrue or omit to state a material fact necessary in order to
make the statements made, in the light of circumstances under
which they were made, not misleading with respect to comparisons
as to the terms, conditions, or benefits contained in any policy
for the purposes of inducing or attempting or tending to induce
the policyholder to lapse, forfeit, borrow against, surrender,
retain, exchange, modify, convert, or otherwise affect or dispose
of any insurance policy.
NOTE: The purpose of this bill is to provide that
replacement life insurance is contestable only to the extent the
existing life insurance would have been contestable.
This section is new; therefore, strike-throughs and
underscoring have been omitted.