NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7838A
SPONSOR: Cusick TITLE OF BILL:
An act to amend the general business law, the insurance law and the
public health law, in relation to preneed insurance; and providing for
the repeal of such provisions upon expiration thereof
PURPOSE OR GENERAL IDEA OF BILL:
To permit the sale of preneed insurance in New York State.
SUMMARY OF PROVISIONS:
Section 1 of the bill would amend Subdivision 1 of section 453 of the
general business law to clarify that any and all money paid to a life
insurance company as premium for preneed life insurance as defined in
section 107 of the insurance law shall be considered as premium paid to
an insurer.
Section 2 of the bill would amend Subdivision (a) of section 107 of the
insurance law to add a new paragraph (55) to include a definition of
preened life insurance.
Section 3 of the bill would amend Subdivision (d) of section 3208 of the
insurance law to permit the assignment of a contract or policy to a
designated funeral home so long as the assignment is contingent upon the
provision of funeral goods and services by the assignee at the time of
death of the insured; to prohibit the seller or provider of the preneed
life insurance policy to be named as the owner or beneficiary of the
policy of preneed life insurance; and to prohibit the sale of a policy
of preneed life insurance with a face value greater than $20,000.
Section 4 of the bill would amend Section 3208 of the insurance law by
creating a new subdivision (e) to set forth the required consumer
disclosures to be provided at the time an application for preneed life
insurance is made.
Section 5 of the bill would amend Paragraph (I) of subdivision 1 of
section 3450 of the public health law to exclude from the prohibition on
the payment of consideration a commission authorized pursuant to article
twenty-one of the insurance law.
Section 6 is the effective date, which also provides that the amendments
set forth in this act shall expire, be deemed released and shall cease
to be of any force or effect after June 1, 2023.
JUSTIFICATION:
New York currently prohibits funeral directors who are licensed insur-
ance agents from receiving a commission for the sale of pre-need funeral
insurance. This is the only insurance product on the market for which a
commission cannot be paid. Forty-eight states across the country allow
commission-based sales of insurance by funeral directors who are also
licensed insurance agents. Life insurance companies domiciled in New
York are not able to offer their product within the state's borders; all
while offering similar products across the country.
The New York State Department of Financial Services (DFS) has a compre-
hensive system for approval and oversight of any insurance product sold
to consumers. Independent insurance agents are licensed by DFS only
after completing significant hours of course work and passing the state
licensing examination. Additionally, on-going continuing education is
required for agents to maintain their license.
This legislation promotes consumer choice in the marketplace, by allow-
ing consumers an alternative funding vehicle to fund their final
expenses. Similarly, this legislation allows funeral directors the
option to offer a variety of funding vehicles to their customers.
Currently, the only funding mechanism available to consumers is to put
their money into a trust. Experience across the country proves that
insurance is a viable funding alternative for which there are many
advantages. Unlike trust-funded accounts, which only provide as much
money as is in the account for funeral expenses, pre-need funeral insur-
ance provides the entire face value of the policy for funeral expenses
the moment the policy is issued. This legislation sets forth consumer
protection measures related to the sale of preneed funeral insurance,
including specific disclosures required at the time of policy applica-
tion, a prohibition on the seller of the preneed life insurance policy
being named as the owner or beneficiary of the policy of preneed life
insurance, and a cap on the face value of the policy of preneed life
insurance at $20,000.
PRIOR LEGISLATIVE HISTORY:
2017: S.6143-A - Referred to Consumer Protection / A.7838 - Referred to
Consumer Affairs & Protection
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
________________________________________________________________________
7838--A
2017-2018 Regular Sessions
IN ASSEMBLY
May 16, 2017
___________
Introduced by M. of A. CUSICK, MAGNARELLI, STIRPE, LUPARDO -- read once
and referred to the Committee on Consumer Affairs and Protection --
recommitted to the Committee on Consumer Affairs and Protection in
accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee
AN ACT to amend the general business law, the insurance law and the
public health law, in relation to preneed insurance; and providing for
the repeal of such provisions upon expiration thereof
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph (a) of subdivision 1 of section 453 of the gener-
2 al business law, as amended by chapter 557 of the laws of 2001, is
3 amended to read as follows:
4 (a) Any and all moneys paid to a funeral firm, funeral director,
5 undertaker, cemetery, or any other person, firm or corporation, under or
6 in connection with an agreement, or any option to enter into an agree-
7 ment, for the sale of merchandise to be used in connection with a funer-
8 al or burial, or for the furnishing of personal services of a funeral
9 director or undertaker, wherein the merchandise is not to be actually
10 physically delivered or the personal services are not to be rendered
11 until the occurrence of the death of the person for whose funeral or
12 burial such merchandise or services are to be furnished shall continue
13 to be the money of the person making such payment and shall be held in
14 trust for such person by the funeral firm, funeral director, undertaker,
15 cemetery or any other person, firm or corporation to whom such payment
16 is made and shall, within ten business days of receipt, be deposited in
17 an interest bearing account in a bank, national bank, federal savings
18 bank, federal savings and loan association, savings bank, savings and
19 loan association, credit union, or federal credit union within the state
20 and duly authorized to receive deposits in the state of New York and
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11595-02-8
A. 7838--A 2
1 which shall earn interest at a rate which shall be at not less than the
2 prevailing rate of interest earned by other such deposits in such banks,
3 savings banks, savings and loan associations, or credit unions under
4 this section, or shall be placed in a trust company in an investment
5 backed by the government of the United States and shall not be commin-
6 gled with other moneys of the funeral firm, funeral director, undertak-
7 er, cemetery, or other person, firm or corporation or become the funds
8 of the funeral firm, funeral director, undertaker, cemetery, or other
9 person, firm or corporation, and shall be so held on deposit, together
10 with any interest thereon, until said merchandise has been actually
11 physically delivered and said personal services have been rendered,
12 unless sooner repaid, in whole or in part; provided, however, that any
13 and all money paid to a life insurance company as premium for preneed
14 life insurance as defined in section one hundred seven of the insurance
15 law shall be considered as premium paid to an insurer. No funeral firm,
16 funeral director, undertaker, cemetery or any other person, firm or
17 corporation, shall discharge the obligation established under this
18 section to deposit or place money with a bank, national bank, federal
19 savings bank, federal savings and loan association, savings bank,
20 savings and loan association, credit union, federal credit union or
21 trust company within the state through a surety bond or other financial
22 instrument unless expressly provided under this section.
23 § 2. Subsection (a) of section 107 of the insurance law is amended by
24 adding a new paragraph 55 to read as follows:
25 (55) "Preneed life insurance" means any life insurance policy or
26 certificate that is issued in combination with, in support of, with an
27 assignment to, or as a guarantee for, a prearrangement agreement for
28 goods and services, or other benefits, to be provided at the time of and
29 immediately following the death of the insured. Goods and services may
30 include embalming, cremation, body preparation, viewing or visitation,
31 coffin or urn, memorial stone, and transportation of the deceased. The
32 status of the policy or certificate as preneed life insurance is deter-
33 mined at the time of issue in accordance with the policy form filing.
34 § 3. Subsection (d) of section 3208 of the insurance law is amended to
35 read as follows:
36 (d) No person, firm, association, society, or corporation engaged in
37 this state in the business of providing for the payment of funeral,
38 burial or other expenses of deceased members, whether or not it be
39 subject to the other provisions of this chapter, and no insurer shall:
40 (1) deliver or issue for delivery in this state any contract or policy
41 whereby the benefit or any part thereof accruing under such contract or
42 policy, upon the death of such member or of the person insured, shall be
43 payable to a designated or restricted funeral director or funeral
44 directing concern or other person engaged in such trade or business, or
45 to any official or designated group of them, provided, however, that the
46 insured may, pursuant to paragraph one of subsection (b) of section
47 three thousand two hundred five of this article, immediately assign a
48 contract or policy so procured or effectuated to a designated funeral
49 home so long as the assignment is contingent upon the provision of
50 funeral goods and services by the assignee at the time of death of the
51 insured; or
52 (2) pay any such benefit or any part thereof to any funeral director
53 or funeral directing concern or other person engaged in such trade or
54 business or to any official or designated group of them, without the
55 consent of the person or persons entitled to such benefits, subject
56 however, to any contingent assignment, the contingency of which has been
A. 7838--A 3
1 satisfied through the provision of funeral goods and services by the
2 assignee; or
3 (3) in any way deprive the personal representative or family of the
4 deceased of the advantages of competition in procuring and purchasing
5 supplies and services in connection with the burial of such deceased; or
6 (4) permit the seller or provider of the preneed life insurance policy
7 to be named as the owner or beneficiary of the policy of preneed life
8 insurance; or
9 (5) sell or offer to sell any contract or policy of preneed life
10 insurance with a face value greater than twenty thousand dollar, plus an
11 annual percentage increase based on the Annual Consumer Price Index
12 compiled by the United States Department of Labor, beginning with the
13 Annual Consumer Price Index announced by the United States Department of
14 Labor for two thousand nineteen.
15 § 4. Section 3208 of the insurance law is amended by adding a new
16 subsection (e) to read as follows:
17 (e) The following information shall be adequately disclosed at the
18 time an application is made, prior to accepting the applicant's initial
19 premium or deposit, for any contract or policy of preneed life insur-
20 ance:
21 (1) The fact that a life insurance policy is involved or be used to
22 fund a prearrangement;
23 (2) The nature of the relationship among the soliciting agent or
24 agents, the provider of the funeral or cemetery merchandise services,
25 the administrator and any other person;
26 (3) The relationship of the life insurance policy to the funding of
27 the prearrangement and the nature and existence of any guarantees relat-
28 ing to the prearrangement;
29 (4) The impact on the prearrangement of any:
30 (A) Changes in the life insurance policy including but not limited to,
31 changes in the assignment, beneficiary designation or use of the
32 proceeds;
33 (B) Penalties to be incurred by the policy holder as a result of fail-
34 ure to make premium payments;
35 (C) Penalties to be incurred or monies to be received as a result of
36 cancellation or surrender of the life insurance policy;
37 (5) A list of the merchandise and services which are applied or
38 contracted for in the prearrangement and all relevant information
39 concerning the price of the funeral services, including and indication
40 that the purchase price is either guaranteed at the time of purchase or
41 to be determined at the time of need;
42 (6) The fact that the applicant has the right to surrender the life
43 insurance policy, together with a written request for cancellation, to
44 the insurer during a period of not less than ten days nor more that
45 thirty days from the date the policy was delivered to the policy owner
46 for a refund of premium paid pursuant to paragraph eleven of subsection
47 (a) of section three thousand two hundred three of this article;
48 (7) All relevant information concerning what occurs and whether any
49 entitlements or obligations arise if there is a difference between the
50 proceeds of the life insurance policy and the amount actually needed to
51 fund the prearrangement;
52 (8) Any penalties or restrictions, including but not limited to
53 geographic restrictions or the inability of the provider to perform, on
54 the delivery of merchandise, services or the prearrangement guarantee;
A. 7838--A 4
1 (9) If so, the fact that a sales commission or other form of compen-
2 sation is being paid and the identity of the individuals or entities to
3 whom is it paid.
4 § 5. Paragraph (l) of subdivision 1 of section 3450 of the public
5 health law, as amended by chapter 560 of the laws of 1998, is amended to
6 read as follows:
7 (l) has paid, given, has caused to be paid or given or offered to pay
8 or to give to any person a commission, excluding a commission authorized
9 pursuant to article twenty-one of the insurance law, or other valuable
10 consideration for the solicitation or procurement, either directly or
11 indirectly, of funeral patronage, or has accepted any consideration
12 (including without limitation a commission, excluding a commission
13 authorized pursuant to article twenty-one of the insurance law, rebate,
14 or discount or direct or indirect price reduction on merchandise from
15 the current value thereof) from any financial institution or trust
16 company, or agent thereof, with whom the funeral director deposits funds
17 paid for funeral services in advance of need pursuant to subdivision one
18 of section four hundred fifty-three of the general business law;
19 § 6. This act shall take effect immediately and shall expire June 1,
20 2023 when upon such date the provisions of this act shall be deemed
21 repealed; provided, however, that:
22 a. the amendments to paragraphs 2 and 3 of subsection (d) of section
23 3208 of the insurance law made by section three of this act shall take
24 effect on the same date as the reversion of such paragraphs pursuant to
25 section 6 of chapter 557 of the laws of 2001, as amended;
26 b. the amendments to paragraph (l) of subdivision 1 of section 3450 of
27 the public health law made by section five of this act shall take effect
28 on the same date as the reversion of such paragraph pursuant to section
29 6 of chapter 557 of the laws of 2001, as amended; and
30 c. if such reversion pursuant to section 6 of chapter 557 of the laws
31 of 2001, as amended, shall have occurred prior to the effective date of
32 this act, section three and five of this act shall take effect imme-
33 diately.
