S*66 Session 105 (1983-1984)
S*0066(Rat #0504, Act #0432 of 1984) General Bill, By Saleeby and R.C. Lake
Similar(H 2158)
A Bill to regulate interest rates on life insurance policy loans and to permit
insurers to include in such policies a provision for periodic adjustment of
policy loan interest rates.
01/11/83 Senate Introduced and read first time SJ-99
01/11/83 Senate Referred to Committee on Banking and Insurance SJ-9
03/07/84 Senate Committee report: Favorable Banking and Insurance
SJ-915
03/13/84 Senate Amended SJ-991
04/05/84 Senate Read second time SJ-1332
04/05/84 Senate Ordered to third reading with notice of
amendments SJ-1332
04/18/84 Senate Amended SJ-1445
04/18/84 Senate Read third time and sent to House SJ-1445
04/19/84 House Introduced, read first time, placed on calendar
without reference HJ-2522
04/26/84 House Objection by Rep. Griffin, Blackwell, Mitchell &
Holt HJ-2706
04/26/84 House Objection withdrawn by Rep. Mitchell & Blackwell
HJ-2737
05/01/84 House Objection by Rep. Kirsh HJ-2767
05/01/84 House Objection withdrawn by Rep. Griffin HJ-2781
05/01/84 House Objection by Rep. Woods HJ-2781
05/24/84 House Objection withdrawn by Rep. Holt, Kirsh & Woods
05/24/84 House Amended HJ-3330
05/24/84 House Read second time HJ-3332
05/25/84 House Read third time HJ-3362
05/25/84 House Returned HJ-3362
05/29/84 Senate House amendment amended SJ-2058
05/29/84 Senate Returned SJ-2058
05/30/84 House Concurred in Senate amendment and enrolled HJ-3457
05/31/84 Ratified R 504
06/06/84 Signed By Governor
06/06/84 Effective date 05/01/85
06/06/84 Act No. 432
06/18/84 Copies available
(A432, R504, S66)
AN ACT TO REGULATE INTEREST RATES ON LIFE INSURANCE POLICY LOANS AND TO PERMIT
INSURERS TO INCLUDE IN SUCH POLICIES A PROVISION FOR PERIODIC ADJUSTMENT OF
POLICY LOAN INTEREST RATES.
Be it enacted by the General Assembly of the State of South Carolina:
Findings
SECTION 1. The General Assembly finds that it is necessary to enact legislation
to permit and set guidelines for life insurers to include in life insurance
policies after the effective date of this act a provision for periodic adjustment
of policy loan interest rates.
Published monthly average
SECTION 2. Published Monthly Average means:
(a) Moody's Corporate Bond Yield Average - Monthly Average Corporates as
published by Moody's Investors Service, Inc., or any successor thereto; or
(b) In the event that Moody's Corporate Bond Yield Average - Monthly Average
Corporates is no longer published, a substantially similar average, established
by regulation issued by the Chief Insurance Commissioner.
Interest rate
SECTION 3. Life insurance policies issued after the effective date of this act
may provide for policy loan interest rates of not more than eight percent per
annum.
Adjustable maximum interest rate
SECTION 4. (a) In the alternative life insurers may issue policies that permit
an adjustable maximum interest rate established from time to time by the life
insurer as permitted by law. Such adjustable maximum interest rates shall not
exceed the higher of the following:
(1) The Published Monthly Average for the calendar month ending two months
before the date on which the rate is determined; or
(2) The rate used to compute the cash surrender values under the policy during
the applicable period plus one percent per annum.
(b) If the maximum rate of interest is determined pursuant to this section,
the policy shall contain a provision setting forth the frequency at which the
rate is to be determined for that policy.
(c) The maximum rate for each policy must be determined at regular intervals
but only once each twelve months.
(d) At the intervals specified in the policy:
(1) The rate being charged may be increased whenever such increase as
determined under subsection (a) would increase that rate by one-half percent or
more per annum, but not more than twice in any calendar year.
(2) The rate being charged must be reduced whenever such reduction as
determined under subsection (a) would decrease that rate by one-half percent or
more per annum.
(e) The life insurer must:
(1) Notify the policyholder at the time a cash loan is made of the initial
rate of interest on the loan.
(2) Notify the policyholder with respect to premium loans of the initial rate
of interest on the loan as soon as it is reasonably practical to do so, but in
no event later than sixty days after making the initial loan. Notice need not
be given to the policyholder when a further premium loan is added, except as
provided in item (3) below.
(3) Send to policyholders with loans at least thirty days advance notice of
any increase in the rate and within due course notify the policyholder of any
decrease in the interest rate.
(4) Include in the notices required above the substance of the pertinent
provisions of Section 3 or subsections (a) and (b) of this section.
(f) The loan value of the policy must be determined in accordance with the
provisions of this act but no policy shall terminate in a policy year as the sole
result of change in the interest rate during that policy year, and the life
insurer must maintain coverage during that policy year until the time at which
it would otherwise have terminated if there had been no change during that policy
year.
(g) The substance of the pertinent provisions of Section 3 or subsections (a)
and (b) of this section must be set forth in the policies to which they apply.
(h) For the purposes of this section:
(1) The rate of interest on policy loans hereunder shall include the interest
rate charged on reinstatement of policy loans for the period during and after any
lapse of a policy.
(2) Policy loan includes any premium loan made under a policy to pay one or
more premiums that were not paid to the life insurer as they fell due.
(3) Policyholder includes the owner of the policy or the person designated to
pay premiums, if different, as shown on the records of the life insurer.
(4) Policy includes certificates issued by a fraternal benefit society and
annuity contracts which provide for policy loans.
Provided, however, before May 1, 1986, no life insurer may issue policies that
permit such rates unless at the same time it also makes available policies
providing for a rate of interest under Section 3.
Policies with less than five thousand dollars face value
SECTION 5. Notwithstanding any other provision of this act, for life insurance
policies having a face value of less than five thousand dollars, life insurers
may issue policies with an adjustable maximum policy loan interest rate when the
policy loan is three hundred dollars or more, but if the policy loan is less than
three hundred dollars, a fixed policy loan interest rate of not more than eight
percent per annum shall be charged.
Applicability
SECTION 6. The provisions of this act shall not apply to any insurance contract
issued before the effective date of this act unless the policyholder requests in
writing the applicability of the provisions.
Written disclosure form
SECTION 7. At the time any insurance company makes a policy or premium loan that
provides for periodic adjustment of policy or premium loan interest rates, the
insurance company shall provide a separate written disclosure form to the
policyholder using plain understandable language that:
(a) provides an explanation of the dollar impact on policy or premium loans
when the adjustable interest rate moves up or down;
(b) provides an explanation of the impact of a policy or premium loan on the
benefits payable to the policyholder upon the death of the insured if a policy
or premium loan remains unpaid at the time of death of the insured.
Time effective
SECTION 8. This act shall take effect May 1, 1985. |