Filed House Conference Committee Report, House Bill 1191

HB 1191-1_ Filed 03/14/2002, 11:20

CONFERENCE COMMITTEE REPORT

DIGEST FOR EHB 1191

Citations Affected: IC 27-1; IC 27-4; IC 27-9; IC 28-1; IC 28-5; IC 28-6.1.

Synopsis: Insurance activities of depository institutions. Conference committee report for EHB 1191. Amends the interest rate upon which the minimum forfeiture amount for annuity contracts issued from July 1, 2002, through June 30, 2004, is based. Imposes certain requirements on depository institutions that sell, solicit, advertise, or offer insurance. Makes a violation of the requirements an unfair and deceptive act and practice in the business of insurance. (THIS CONFERENCE COMMITTEE REPORT: (1) amends the interest rate upon which the minimum forfeiture amount for annuity contracts issued from July 1, 2002, through June 30, 2004, is based; (2) provides for treatment of a segregated investment account in the event of liquidation of an insurer; and (3) allows a depository institution or an affiliate to require of an insurance producer or an insurer a procedure that is not customarily required of an insurance producer or insurer that is connected with the depository institution or affiliate.)

Effective: Upon passage; July 1, 2002.

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CONFERENCE COMMITTEE REPORT

MR. SPEAKER:
Your Conference Committee appointed to confer with a like committee from the Senate upon Engrossed Senate Amendments to Engrossed House Bill No. 1191 respectfully reports that said two committees have conferred and agreed as follows to wit:

that the House recede from its dissent from all Senate amendments and that the House now concur in all Senate amendments to the bill and that the bill be further amended as follows:

SOURCE: IC 27-1-12.5-3; (02)CC119102.1. -->     "SECTION 1. IC 27-1-12.5-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 3. (a) The minimum values as specified in sections 4, 5, 6, 7, and 9 of this chapter of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this section.
    (b) With respect to any annuity contract providing for flexible considerations, the minimum nonforfeiture amounts at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest of three percent (3%) per annum of percentages of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of:
        (1) any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of three percent (3%) per annum; and
        (2) the amount of any indebtedness to the company on the contract, including interest due and accrued;
and increased by any existing additional amounts credited by the

company to the contract. The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less than an annual contract charge of thirty dollars ~~($30.00)~~ ($30) and less a collection charge of one dollar and twenty-five cents ($1.25) per consideration credited to the contract during that contract year. The percentages of net considerations shall be sixty-five percent (65%) of the net consideration for the first contract year and eighty-seven and one-half percent (87.5%) of the net considerations for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be sixty-five percent (65%) of the portion of the total net consideration for any renewal contract year which exceeds by not more than two (2) times the sum of those portions of the net considerations in all prior contract years for which the percentage was sixty-five percent (65%).
    (c) With respect to any annuity contract providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations which are paid annually with two (2) exceptions:
        (1) The portion of the net consideration for the first contract year to be accumulated shall be the sum of sixty-five percent (65%) of the net consideration for the first contract year plus twenty-two and one-half percent (22.5%) of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years.
        (2) The annual contract charge shall be the lesser of (i) thirty dollars ~~($30.00)~~ ($30) or (ii) ten percent (10%) of the gross annual consideration.
    (d) With respect to any annuity contract providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to ninety percent (90%) and the net consideration shall be the gross consideration less a contract charge of seventy-five dollars ~~($75.00).~~ ($75).
     (e) Notwithstanding any other provision of this section, the minimum nonforfeiture amount for any contract issued on or after July 1, 2002, and before July 1, 2004, shall be based on a rate of interest of one and one-half percent (1.5%) per annum.".

SOURCE: IC 27-9-3-40.5; (02)CC119102.4. --> "SECTION 4. IC 27-9-3-40.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 40.5. (a) A claim under a contract that is funded by an account established under IC 27-1-5-1 as a segregated investment account must be satisfied from the assets maintained in the account. The segregated investment account is not chargeable with a liability arising out of other business that the

insurer conducts that has no specific relation to or dependence on the account.
(b) Surplus remaining in a segregated investment account by virtue of a guarantee by the insurer as described in IC 27-1-5-1 must be included in the assets of the insurer's estate.
(c) A deficit in a segregated investment account by virtue of a guarantee by an insurer as described in IC 27-1-5-1 must be treated as a Class 2 claim under section 40 of this chapter.".

igned by:

    ____________________________    ____________________________
    Representative Bodiker Senator Nugent
    Chairperson

____________________________ ____________________________
Representative Yount Senator Mrvan

House Conferees Senate Conferees