HB1488
To Amend The Standard Nonforfeiture Law For Life Insurance; And To Require An Insurer To Pay Interest On Deferred Payment Of Any Cash Surrender Value Under Certain Policies.
AI-Generated Summary
This bill, House Bill 1488, aims to amend the Standard Nonforfeiture Law for Life Insurance in Arkansas. The primary change proposed is to require life insurance companies to pay interest on any deferred payment of a cash surrender value under certain policies. Currently, insurers have the right to defer payment of a cash surrender value for up to six months after demand. This bill seeks to modify that provision. If payment of the cash surrender value is not made within thirty days of the demand, the insurer would be obligated to pay interest on that value. The interest rate would be based on the prime rate published in the Wall Street Journal on the day the demand is made. This interest would accrue from the date of surrender until the cash surrender value is paid in full, provided it is paid within the six-month deferral period. The policy's death benefit would remain in effect until the cash surrender value payment is made.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries of this bill would be life insurance policyholders in Arkansas who choose to surrender their policies for their cash value. Specifically, policyholders who experience a delay in receiving their cash surrender value beyond thirty days from their demand would benefit from the mandated interest payments. This would compensate them for the time their funds are held by the insurer, potentially at a rate tied to market conditions.
Who Might Suffer?
Life insurance companies operating in Arkansas would be the primary entities negatively impacted by this bill. They would be required to pay interest on deferred cash surrender values, which represents an additional cost. The administrative burden of tracking these payments and calculating the interest at the specified rate may also increase.