What's happening
This bill requires anyone claiming a right under certain new or recently reinstated life insurance policies to assist insurers in investigating possible misrepresentations by the applicant.
Why it matters
Shifts responsibility to beneficiaries or claimants. Anyone seeking to claim a benefit from a new or recently reinstated life insurance policy must now actively assist the insurer in investigating whether the insured provided truthful information on their application. This could delay or complicate payouts for families and heirs.
Applies during the contestability period. The requirement specifically targets policies in force for less than two years (a typical contestability period), making it harder to quickly settle claims during this window if the insurer suspects misrepresentation.
Could limit fraudulent or mistaken claims. By requiring claimants' cooperation, insurers may be better able to detect and prevent payouts on policies obtained through false statements, potentially reducing fraud and keeping insurance costs lower for everyone.
Potentially increases burden and complexity for grieving families. The new rule means that claimants, who are often surviving family members, must participate in the investigation process, which could be stressful and intrusive at a difficult time.
Albany, before your first meeting.
Every bill that moved yesterday, summarized in a sentence and ranked by impact. The Albany Scorecard follows on Sundays.
Free. Unsubscribe in one click. Want alerts on specific bills? Create an account.
Who cares
Headline styles
Life Insurance Claims Cooperation
Plain English, a few words. Used as the page title.
Sponsors
2 Co-sponsors
History
- Vetoed memo.178
- Delivered to governor
- Returned to senate
- Passed assembly
- Ordered to third reading rules cal.402
- Substituted for A7664
- Referred to insurance
- Delivered to assembly
- Passed senateVote 61–1
- Advanced to third reading
- 2nd report cal.
- 1st report cal.665
Show 1 earlier action
- Referred to insurance
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Help Insurers Check Claims
Assembly Floor Calendar · Sponsor Albert A. Stirpe
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
3639
2019-2020 Regular Sessions
IN SENATE
February 11, 2019
Introduced by Sens. BRESLIN, SEWARD, AKSHAR -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to representations by an insured
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (a) of section 3105 of the insurance law is amended to read as follows:
(a) (1) A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof. A misrepresentation is a false representation, and the facts misrepresented are those facts which make the representation false.
(2) Any person having or claiming a right under a life insurance policy that (A) provides a death benefit and (B) has been in force fewer than two years following the date of issue or the date of reinstatement if evidence of insurability is requested, shall provide reasonable assistance to the insurer in obtaining the necessary information to determine whether a misrepresentation was made by the applicant for insurance or the prospective insured.
§ 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09812-01-9
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to representations by an insured
Purpose
This bill would clarify that the beneficiary or anyone claiming a right under a life insurance policy has a duty to cooperate with an insurer's investigation of a death occurring during the two-year contestability period.
Summary of provisions
Section one would amend Section 3105 of the Insurance Law to address a beneficiary or insured's obligation to assist the insurer in obtaining the necessary information to determine whether a misrepresentation was made by the applicant for insurance
Read the full memo (715 words)
Section two establishes the effective date.
Justification
Section 3203 (a) (3) of the insurance law creates what is commonly referred to as the "two year contestability period." This section, which provides that a life insurance policy is incontestable by the insurer after it has been in force for two years following its date of issue, was created by the Legislature to ensure that insurers are able to protect against the payment of fraudulent claims by fully investigating claims that occur within the two year period following issuance of the policy. When an insured's death occurs during the two year period following the issuance of the policy, an insurer has the ability to investigate the insured's death to ensure that the applicant did not make any material misstatements on his or her application for life insurance that led the insurer to issue a policy that they would not have otherwise issued if the insured had not made the material misstate- ment on the application. If the life insurer, as a result of the inves- tigation of the claim, does not find evidence that there was any materi- al misrepresentation made on the application, the insurer will pay the claim in full. However, if the insurer finds evidence that the applicant made a material misstatement on the application for life insuranc e the insurer is permitted, under current law, to take legal steps to return the premium paid to date and rescind the policy.
An insurer's ability to fully investigate a claim during the two year period following issuance is a vital tool for insurers to detect fraud and prevent the payment of fraudulent claims. Often as part of the investigation to determine whether fraud has occurred, an insurer will need to review the medical records of the deceased insured and will request the beneficiary's assistance in obtaining information necessary to complete the investigation. The Department of Financial Services, however, in recent guidance, has stated that beneficiaries who are able to provide access to the information necessary for an insurer to complete an investigation, have no obligation to comply with the insur- er's request. This proposal amends Section 3105 of the Insurance Law to clarify that the beneficiary or anyone claiming a right under a life insurance policy has a duty to cooperate with an insurer's investigation of a death occurring during the two-year contestability period, and would require these individuals to assist in obtaining information related to an insurer's reasonable request for information, including a request for medical records, to enable an insurer to appropriately investigate a claim regarding a death occurring within the two-year contestability period.
The ability to fully investigate a life insurance claim occurring within the two years following the date of issuance is of particular importance to life insurance companies who market and sell term life insurance policies to the middle market. Some of these policies are traditionally sold with limited medical underwriting, meaning that the insurer, in an effort to offer lower premium rates and avoid barriers to purchase, does not require full medical underwriting prior to issuance of the policy (e.g., does not require a full medical exam, bloodwork, etc. prior to issuance), but instead relies upon the truthfulness of an applicant's disclosures on their application for life insurance. If a beneficiary is able to refuse or block an insurer's reasonable request for information necessary for the insurer to complete an investigation following an insured's death during the two year contestability period, many carriers may face the difficult decision of whether they are able to continue to offer affordable and accessible products within the State.
Legislative history
S.8151 of 2017-18
Fiscal implications
None.
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.