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2014

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Further Detail

Background

Life Insurers May Offer Accelerated Death Benefit Rider to New and Existing Policies. Some life insurance companies offer accelerated death benefits riders to consumers that allow insured to receive death benefits upon becoming chronically ill. Previously, accelerated death benefit provisions were held to the same legal standards as applied to stand-alone long-term care insurance policies. Chapter 345, Statutes of 2013 (SB 281, Calderon), changed the legal standards regarding accelerated death benefits in a manner that CDI expects will lead to more life insurance companies offering this benefit to existing and new consumers. At the same time, the cost of long-term care insurance has been increasing. Consequently, CDI is concerned that complaints regarding how life insurance companies, agents, and brokers market and sell accelerated death benefits will increase.

Administration’s Budget Proposal

The administration’s 2014-15 budget plan proposes appropriating $370,000 from the Insurance Fund to CDI for 3 new permanent positions to regulate the new accelerated death benefit permitted by SB 281.

LAO Recommendation

Approve Positions on Limited-Term Basis. We recommend that the Legislature approve these positions on a two-year limited-term basis. This proposal implements a new law and no caseload history exists. While CDI has used reasonable assumptions in estimating the possible future number of complaints related to accelerated death benefits, the future number of complaints is uncertain. Approving these positions on a limited-term basis would allow the Legislature to reexamine CDI’s need for these 3 positions, or a smaller or greater number, on a permanent basis in several years once an actual caseload history has been established.

LAO analysis prepared by: Brian Weatherford. Reviewed by: Jason Sisney.