HCS SS SCS SB 1009 -- INSURANCE

SPONSOR:  Rohrbach (Luetkenhaus)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Insurance
by a vote of 15 to 0.

This substitute makes changes in the law regarding the types of
investments that insurance companies may make and revises the law
governing long-term care insurance.

In its provisions regarding investments, the substitute:

(1)  Allows insurance companies to invest in a wider assortment
of financial instruments, including derivative instruments.
These investments are limited to various percentages of the
insurance company's assets, depending on the type of financial
instrument, and must fall within guidelines established by the
National Association of Insurance Commissioners.  The Director of
the Department of Insurance may promulgate reasonable rules and
regulations to enforce the law, including financial solvency
standards, valuation standards, and reporting requirements;

(2)  Allows life insurance companies to use their most recent
annual statement of assets and capital in their filings with the
department regarding their investments and the assets and capital
supporting those investments.  Current law requires the insurer
to use the value of the asset in the year it was originally
obtained;

(3)  Limits the value of the insurer's real estate to an amount
not greater than 20% of the insurance company's capital and
surplus; and

(4)  Sets the annual interest rate at 1.5% when determining the
value of a minimum nonforfeiture amount in an annuity.

In its provisions regarding the Long-term Care Insurance Act, the
substitute:

(1)  Clarifies that the term "long-term care insurance" includes
any insurance policy that meets the requirements of a "qualified
long-term care insurance contract," as defined in section 7702B
of the Internal Revenue Code;

(2)  Requires the issuer of a long-term care contract to state
clearly in its enrollment materials whether the contract is
intended to be tax-qualified, pursuant to section 7702B;

(3)  Requires the issuer to deliver the certificate of insurance
to the applicant within 30 days of approval;

(4)  Requires the policy summary to state whether it includes
cost-inflation protection;

(5)  Requires issuers to provide a written explanation for a
denial of coverage within 60 days of receiving a written request
for an explanation from the applicant.  The issuer must provide
all information directly related to the denial;

(6)  Allows issuers to rescind long-term care contracts upon a
showing of misrepresentation.  The degree of misrepresentation
that must be proven will vary, depending on the length of time
the policy has been in effect;

(7)  Prohibits a long-term care contract to be field-issued based
on health status;

(8)  Prohibits an issuer from recovering benefits paid to the
policyholder when the issuer rescinds the policy;

(9)  Requires issuers to offer a policy that includes a
nonforfeiture benefit.  If that benefit is declined, the issuer
must then offer a contingent benefit upon lapse.  The contingent
benefit must be available for a specified period of time if the
issuer increases the premium substantially; and

(10)  Requires the department to promulgate rules creating the
standards for nonforfeiture benefits, contingent benefits upon
lapse, the length of time these benefits must run, and the extent
to which premiums may be increased.  The department must also
promulgate rules regarding marketing practices, agent
compensation, agent testing, penalties, and reporting practices
for long-term care insurance.

FISCAL NOTE:  Not available at time of printing.

PROPONENTS:  Supporters say that allowing insurance companies to
invest in derivative instruments simply enables those companies
to hedge their existing investments, thus reducing risk.  These
financial instruments must be approved by the Department of
Insurance.

Testifying for the bill were Senator Rohrbach; and General
American Life Insurance Company.

OPPONENTS:  There was no opposition voiced to the committee.

Richard Smreker, Senior Legislative Analyst

Missouri House of Representatives
Last Updated October 11, 2002 at 9:04 am