What's happening
This bill requires insurance agents to fully explain and document in writing the terms of policy loans to policyholders.
Why it matters
Creates stronger protections for consumers. by requiring insurance agents to both fully explain and document, in writing, the terms of any policy loan—helping policyholders better understand potentially complex loan conditions and avoid misunderstandings.
Mandates clear, accessible documentation. by specifying that all terms must be in writing, in at least ten-point type, and signed by both the agent and the insured. This reduces the risk of verbal miscommunications and ensures that policyholders have a tangible record to reference.
Increases agent accountability. as agents must explicitly confirm they have explained all loan terms to the policyholder, which may help deter deceptive sales practices and promote more ethical interactions between agents and clients.
Applies to new, reviewed, or modified policies. , so it not only affects future customers but also provides protections for current policyholders if their policies are updated or changed, potentially benefiting a broader group.
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Who cares
Headline styles
Require Clear Policy Loan Terms
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 14
No co-sponsors yet.
History
- Referred to insurance
- 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.
Require Clear Policy Loan Terms
In Assembly Committee · Insurance · Sponsor Vivian Cook
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
5310
2019-2020 Regular Sessions
IN SENATE
April 24, 2019
Introduced by Sen. COMRIE -- 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 requirements for making of policy loans
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph 8 of subsection (a) of section 3203 of the insurance law is amended by adding two new subparagraphs (K) and (L) to read as follows:
(K) that the agent has fully explained all of the terms and conditions of the policy loan to the policyholder;
(L) all of the terms and conditions of any policy loan shall be in writing in at least ten point type and shall be signed by the insured and the agent of the insurer;
§ 2. This act shall take effect on the sixtieth day after it shall have become a law and shall apply to all policies issued, reviewed or modified on or after such effective date.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07988-01-9
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 requirements for making of policy loans
Purpose or general idea of bill
The practice of churning has become increasingly prevalent in the life insurance market. In this practice, policyholders are encouraged to purchase additional life insurance policies by borrowing from the cash value of, or turning in, existing policies. In many case s, consumers are not aware of the exact terms of these transactions. This bill seeks to rectify this problem by requiring that agents fully explain the terms of these policy loans to the consumer, and that both the agent and the insured sign a disclosure which state s that the agent has explained all of the terms of the loan agreement, and that to the best of their know- ledge, both parties are in full understanding of these terms.
Summary of provisions
Paragraph 8 of subsection (a) of section 3203 of the insurance law is amended by adding two new subparagraphs (K) and (L). Subparagraph (K) would require that the insurance agent must fully explain all of the terms and conditions of the policy loan to the policyholder. Subpara- graph (L) would require that all terms and conditions of the policy loan shall be in writing in at least ten point type, and that this disclosure must be signed by the insured and the agent of the insurer.
Justification
The practice of churning has become increasingly prevalent in the life insurance industry. Churning occurs when a consumer is persuaded to turn in, or borrow from the cash value of, an existing life insurance policy in order to purchase a new policy. In most cases, this practice benefits the agent and the company selling the policy, and is not in the best interest of the consumer. This practice is deceptive because the consum- er may be unwittingly acting against his own best interest, and the agent may not fully explain to him the origin of the funds used for the purchase of the new policy. This bill seeks to address this problem by requiring that agents who are involved in these transactions fully explain all of the terms and conditions of the policy loan to the poli- cyholder. In addition, both the agent and the policyholder must sign a disclosure, printed in at least ten point type, which describes the terms and conditions of these policy loans which are being made for the purchase of additional policies.
Prior legislative history
Previously Introduced; 2017/18 A.2366.
Fiscal implications
None.
Effective date
This act shall take effect on the sixtieth day after it shall have become a law and shall apply to all policies issued, reviewed or modi- fied on or after such effective date.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.