SSB 3090 (LSB 5409XD (11) 83)

SENATE/HOUSE FILE _____

BY  (PROPOSED DEPARTMENT OF COMMERCE/INSURANCE DIVISION BILL)

A BILL FOR

An Act relating to various matters under the purview of the insurance division of the department of commerce including the Iowa grain indemnity fund board, uniform securities Act, examination of insurance companies, life insurance companies and associations, external review of health care coverage decisions, insurance other than life, mortgage guaranty insurance, cemetery and funeral merchandise and funeral services, and regulation of cemeteries and making penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 20.4, Code Supplement 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  13.  Full-time nonclerical employees of the company regulation bureau of the insurance division of the department of commerce.
    Sec. 2.  Section 22.7, Code Supplement 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  65.  Information obtained by the commissioner of insurance in the course of an examination of a cemetery as provided in section 523I.213A, subsection 7.
    Sec. 3.  Section 203D.4, subsection 1, Code 2009, is amended to read as follows:
   1.  The Iowa grain indemnity fund board is established to advise the department on matters relating to the fund and to perform the duties provided it in this chapter. The board is composed of the secretary of agriculture or a designee who shall serve as president; the commissioner of insurance or a designee who shall serve as secretary; the state treasurer or a designee who shall serve as treasurer; and four representatives of the grain industry appointed by the governor, subject to confirmation by the senate, two of whom shall be representatives of producers and who shall be actively participating producers, and two of whom shall be representatives of licensed grain dealers and licensed warehouse operators and who shall be actively participating licensed grain dealers and licensed warehouse operators, each of whom shall be selected from a list of three nominations made by the secretary of agriculture. The term of membership of the grain industry representatives is three years, and the representatives are eligible for reappointment. However, only actively participating producers, and grain dealers and warehouse operators are eligible for reappointment. The grain industry representatives are entitled to a per diem as specified in section 7E.6 for each day spent in the performance of the duties of the board, plus actual expenses incurred in the performance of those duties. Four members of the board constitute a quorum, and the affirmative vote of four members is necessary for any action taken by the board, except that a lesser number may adjourn a meeting. A vacancy in the membership of the board does not impair the rights of a quorum to exercise all the rights and perform all the duties of the board.
    Sec. 4.  Section 502.305, subsection 2, Code Supplement 2009, is amended to read as follows:
   2.  Filing.  Except as provided in subsection 10 and section 502.304A, subsection 3, paragraph “g”, a person who files a registration statement or a notice filing shall pay a filing fee of one-tenth of one percent of the proposed aggregate sales price of the securities to be offered to persons in this state pursuant to the registration statement or notice filing. However, except as provided in subsection 10, section 502.302, subsection 1, paragraph “a”, and section 502.304A, subsection 3, paragraph “g”, the annual filing fee shall not be less than fifty dollars or more than one thousand dollars. The administrator shall retain the filing fee even if the notice filing is withdrawn or the registration is withdrawn, denied, suspended, revoked, or abandoned. The fees collected under this subsection shall be deposited as provided in section 505.7.  The administrator may adopt rules requiring a filing to be made electronically. The rules may provide for such electronic filing either directly with the administrator or with a designee of the administrator. The rules may require that the filer pay any reasonable costs charged by the designee of the administrator for processing the filings and that the filer submit any fees paid through the designee.
    Sec. 5.  Section 507.4, subsection 2, Code 2009, is amended to read as follows:
   2.  The commissioner may, when in the commissioner’s judgment it is advisable, appoint assistants to aid in conducting examinations. The commissioner shall employ rates of compensation consistent with current standards in the industry for certified public accountants, attorneys, and skilled insurance examiners. The commissioner may use compensation rates suggested by the national association of insurance commissioners. Insurance examiners employed under this section shall be exempt from the merit system provisions of chapter 8A, subchapter IV, under section 8A.412, subsection 17.  Pay plans which are substantially equivalent to those for examiners under section 524.208 shall be established for exempt company regulation bureau employees who examine the accounts and affairs of companies subject to the supervision and regulation of the commissioner. Compensation shall be paid from appropriations for such purposes upon certification of the commissioner, which shall be reimbursed as provided in sections 507.8 and 507.9.
    Sec. 6.  NEW SECTION.  508.33A  Limited purpose subsidiary life insurance companies.
   1.  As used in this section unless the context otherwise requires:
   a.  “Affiliated company” means a domestic life insurance company that is a directly or indirectly wholly owned subsidiary of the same parent.
   b.  “Parent” means a person as defined in section 521A.1 who directly or indirectly through one or more intermediaries wholly owns the organizing life insurance company.
   c.  “Risks” means risks associated with the life insurance policies and contracts written by the ceding domestic life insurance company or assumed by the ceding domestic life insurance company from an affiliated company, which were written by the affiliated company and for which the ceding domestic life insurance company holds direct statutory reserves for those policies and contracts as required by section 508.36.
   2.  a.  A domestic life insurance company organized pursuant to the provisions of this chapter may organize a domestic limited purpose subsidiary life insurance company pursuant to the provisions of this chapter that is wholly owned by the organizing life insurance company. The limited purpose subsidiary life insurance company may reinsure risks of the organizing life insurance company, reinsure risks of affiliated companies, and access alternative forms of financing.
   b.  A limited purpose subsidiary life insurance company shall submit a plan of operation to the commissioner, and the commissioner shall approve the plan of operation with such amendments as the commissioner requires, before the limited purpose subsidiary life insurance company assumes any risks under a reinsurance contract. The plan of operation and any records, books, documents, reports, or other information that the commissioner requires a limited purpose subsidiary life insurance company to produce or disclose pursuant to rules adopted under subsection 6 or pursuant to an order of the commissioner shall be treated the same as information obtained by or disclosed to the commissioner pursuant to section 521A.6 and the commissioner shall have the powers enumerated in section 521A.6 as to that insurer.
   3.  The organizing life insurance company may invest funds from its surplus in a limited purpose subsidiary life insurance company organized pursuant to this section.
   4.  The organizing life insurance company’s officers and directors may serve as officers and directors of a limited purpose subsidiary life insurance company organized pursuant to this section.
   5.  A limited purpose subsidiary life insurance company organized pursuant to this section shall be deemed to be licensed to transact the business of reinsurance for the purposes of section 521B.2, subsection 1, but may only reinsure risks of its organizing life insurance company and of affiliated companies. A limited purpose subsidiary life insurance company organized pursuant to this section may, upon approval of the commissioner, purchase reinsurance to cede the reinsurance risks assumed by the limited purpose subsidiary life insurance company.
   6.  The commissioner shall adopt rules pursuant to chapter 17A concerning limited purpose subsidiary life insurance companies, including but not limited to the organization, plans of operation, capital requirements including risk-based capital requirements, reserves, authorized investments, reinsurance assumed, material transaction restrictions and requirements, dividends and distributions, operations, and the conditions, forms, and approval of financing of limited purpose subsidiary life insurance companies organized pursuant to this section.
   7.  Admitted assets of a limited purpose subsidiary life insurance company shall include assets approved by the commissioner which shall be deemed to be, and reported as, admitted assets of the limited purpose subsidiary life insurance company.
   8.  The provisions of sections 508.5, 508.6, and 511.8, section 521.2, subsection 4, sections 521A.4 and 521A.5, and chapter 521E shall not be applicable to a limited purpose subsidiary life insurance company organized pursuant to this section.
   9.  A limited purpose subsidiary life insurance company shall not be organized pursuant to this section prior to the effective date of rules adopted by the commissioner regulating the organization and operation of limited purpose subsidiary life insurance companies as provided in subsection 6.
    Sec. 7.  Section 511.8, subsection 5, Code Supplement 2009, is amended to read as follows:
   5.  Corporate obligations.  Subject to the restrictions contained in subsection 8 hereof, bonds or other evidences of indebtedness issued, assumed, or guaranteed by a corporation incorporated under the laws of the United States of America, or of any state, district, or insular or territorial possession thereof; or of the Dominion of Canada, or any province thereof; and which meet the following qualifications:
   a.  (1)  If fixed interest-bearing obligations, the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition of the obligations by such insurance company shall have averaged per year not less than one and one-half times such average annual fixed charges of the issuing, assuming, or guaranteeing corporation applicable to such period, and, during at least one of the last two years of such period, its net earnings shall have been not less than one and one-half times its fixed charges for such year; or if, at the date of acquisition, the obligations are adequately secured and have investment qualities and characteristics wherein the speculative elements are not predominant.
   (2)  However, with respect to fixed interest-bearing obligations which are issued, assumed, or guaranteed by a financial company, the net earnings by the financial company available for its fixed charges for the period of five fiscal years preceding the date of acquisition of the obligations by the insurance company shall have averaged per year not less than one and one-fourth times such average annual fixed charges of the issuing, assuming, or guaranteeing financial company applicable to such period, and, during at least one of the last two years of the period, its net earnings shall have been not less than one and one-fourth times its fixed charges for such year; or if, at the date of acquisition, the obligations are adequately secured and speculative elements are not predominant in their investment qualities and characteristics. As used in this paragraph subparagraph (2), “financial company” means a corporation which on the average over its last five fiscal years preceding the date of acquisition of its obligations by the insurer, has had at least fifty percent of its net income, including income derived from subsidiaries, derived from the business of wholesale, retail, installment, mortgage, commercial, industrial or consumer financing, or from banking or factoring, or from similar or related lines of business.
   b.  If adjustment, income, or other contingent interest obligations, the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition of the obligations by such insurance company shall have averaged per year not less than one and one-half times such average annual fixed charges of the issuing, assuming, or guaranteeing corporation and its average annual maximum contingent interest applicable to such period and, during at least one of the last two years of such period, its net earnings shall have been not less than one and one-half times the sum of its fixed charges and maximum contingent interest for such year, or if, at the date of acquisition, the obligations are adequately secure and have investment qualities and characteristics and speculative elements are not predominant.
   c.  Are securities that at the date of acquisition are rated three by the securities valuation office of the national association of insurance commissioners or have the equivalent rating by a rating organization that is approved by the national association of insurance commissioners as an acceptable rating organization and are listed or admitted to trading on a securities exchange in the United States or are publicly held and actively traded in the over-the-counter market and market quotations are readily available. If a security acquired under this paragraph is subsequently downgraded from a three rating by the securities valuation office of the national association of insurance commissioners or the equivalent by a national association of insurance commissioners’ acceptable rating organization, the security no longer qualifies as a legal reserve investment.
   d.  The term “net earnings available for fixed charges” as used herein shall mean in this section means the net income after deducting all operating and maintenance expenses, taxes other than any income taxes, depreciation, and depletion, but nonrecurring items of income or expense may be excluded.
   e.  The term “fixed charges” as used herein shall include in this section includes interest on unfunded debt and funded debt on a parity with or having a priority to the obligation under consideration.
   f.  The term “corporation” as used in this chapter includes a joint stock association, a limited liability company, a partnership, or a trust.
   g.  The securities, real estate, and mortgages described in this section include participations, which means instruments evidencing partial or undivided collective interests in such securities, real estate, and mortgages.
    Sec. 8.  Section 511.8, subsection 8, Code Supplement 2009, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  d.  In addition to the restrictions contained in paragraphs “a” and “b”, the investments of any company or association in securities included under subsection 5, paragraph “c”, are not eligible in excess of two percent of the legal reserve, but not more than one-eighth of one percent of the legal reserve shall be invested in the securities of any one corporation.
    Sec. 9.  Section 511.8, subsection 16, Code Supplement 2009, is amended to read as follows:
   16.  Deposit of securities.
   a.  Securities in an amount not less than the legal reserve as defined in this section shall be deposited and the deposit maintained with the commissioner of insurance or at such places as the commissioner may designate as will properly safeguard them. There may be included in the deposit an amount of cash on hand not in excess of five percent of the deposit required, that deposit to be evidenced by a certified check, certificate of deposit, or other evidence satisfactory to the commissioner of insurance. Deposits of securities may be made in excess of the amounts required by this section. A stock company organized under the laws of this state shall not be required to make a deposit until the legal reserve, as ascertained by the commissioner, exceeds the amount deposited by it as capital. Real estate may be made a part of the deposit by furnishing evidence of ownership satisfactory to the commissioner and by conveying the real estate to the commissioner or the commissioner’s successors in office by warranty deed. The commissioner and the successors in office shall hold the real estate in trust for the benefit of the policyholders of the company or members of the association. Real estate mortgage loans and policy loans may be made a part of the deposit by filing a verified statement of the loans with the commissioner, which statement is subject to check at the discretion of the commissioner.
   b.  The securities comprising the deposit of a company or association against which proceedings are pending under section 508.18 shall vest in the state for the benefit of all policyholders of the company or association.
   c.  Securities or title to real estate on deposit may be withdrawn at any time and other eligible securities may be substituted, provided the amount maintained on deposit is equal to the sum of the legal reserve and twenty-five thousand dollars. In the case of real estate the commissioner shall execute and deliver to the company or association a quitclaim deed to the real estate. Any company or association shall, if requested by the commissioner, at the time of withdrawing any securities on deposit, designate for what purpose the same securities are being withdrawn.
   d.  Companies or associations having securities or title to real estate on deposit with the commissioner of insurance shall have the right to collect all dividends, interest, rent, or other income from the deposit unless proceedings against the company or association are pending under section 508.18, in which event the commissioner shall collect such interest, dividends, rent, or other income and add the same to the deposit.
   e.  Any company or association receiving payments or partial payments of principal on any securities deposited with the commissioner of insurance shall notify the commissioner of such fact at such times and in such manner as the commissioner may prescribe, giving the amount and date of payment.
   f.  The commissioner of insurance may receive on deposit securities or title to real estate of alien companies authorized to do business in the state of Iowa, for the purpose of securing its policyholders in the state of Iowa and the United States. The provisions hereof of this subsection not inconsistent with the deposit agreement shall apply to the deposits of such alien companies.
   g.  Common stocks or shares issued by any federal home loan bank eligible for inclusion in the legal reserve under subsection 18, paragraph “c”, may be made a part of a deposit by filing a verified statement of the common stocks or shares issued by a federal home loan bank that are held in the legal reserve. Attached to the statement shall be the annual capital stock statement of the respective federal home loan bank showing membership stock balance and activity-based stock balance.
    Sec. 10.  Section 511.8, subsection 23, paragraphs c and e, Code Supplement 2009, are amended to read as follows:
   c.  If the loan is collateralized by cash or cash equivalents, the cash or cash equivalent collateral may be reinvested by the life insurance company or association in either class one money market funds as defined in subsection 24, individual securities which are eligible for inclusion in the legal reserve of the life insurance company or association, or in repurchase agreements fully collateralized by such securities if the life insurance company or association takes delivery of the collateral either directly or through an authorized custodian or pooled fund comprised of individual securities which are eligible for inclusion in the legal reserve of the life insurance company or association. If such reinvestment is made in individual securities or in repurchase agreements, the individual securities or the securities which collateralize the repurchase agreements shall mature in less than two hundred seventy days. If such reinvestment is made in a pooled fund, the average maturity of the securities comprising such pooled fund must be less than two hundred seventy one hundred eighty days or less and the individual maturities of the securities comprising such pooled fund must be three hundred ninety-seven days or less. Individual securities and securities comprising the pooled fund shall be investment grade.  As used in this paragraph, “maturity” means the earlier of the fixed date on which the holder of the security is unconditionally entitled to receive principal and interest in full or the date on which the holder of the security is unconditionally entitled upon demand to receive principal and interest in full.
   e.  Securities loaned pursuant to this subsection are not eligible for inclusion in the legal reserve of the life insurance company or association in excess of twenty ten percent of the legal reserve.
    Sec. 11.  Section 511.8, subsection 23, Code Supplement 2009, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  f.  A life insurance company or association may continue to hold in the legal reserve of the life insurance company or association securities which are the subject of a reverse repurchase agreement. If such securities are held in the legal reserve of a life insurance company or association, the securities shall be subject to the limitations of paragraph “e” as if they were securities loaned pursuant to this subsection.
    Sec. 12.  Section 514J.7, subsection 2, Code 2009, is amended to read as follows:
   2.  The independent review entity, within three business days of receipt of the notice, shall select a person to perform the external review and shall provide notice to the enrollee and the carrier containing a brief description of the person including the reasons the person selected is an expert in the treatment of the medical condition under review. The independent review entity does not need to shall, upon request from the enrollee or the enrollee’s treating health care provider, disclose the name of the person. A copy of the notice shall be sent by facsimile to the commissioner. If the independent review entity does not have a person who is an expert in the treatment of the medical condition under review and certified by the commissioner to conduct an independent review, the independent review entity may either decline the review request or may request from the commissioner additional time to have such an expert certified. The independent review entity shall notify the commissioner by facsimile of its choice between these options within three business days of receipt of the notice from the carrier or organized delivery system. The commissioner shall provide a notice to the enrollee and carrier or organized delivery system of the independent review entity’s decision and of the commissioner’s decision as to how to proceed with the external review process within three business days of receipt of the independent review entity’s decision.
    Sec. 13.  Section 515.125, subsection 1, Code 2009, is amended to read as follows:
   1.  Unless otherwise provided in section 515.127, or 

515.128, 515.129A, 515.129B, or 515.129C, a policy or contract of insurance provided for in this chapter shall not be forfeited, suspended, or canceled except by notice to the insured as provided in this chapter. A notice of cancellation is not effective unless mailed or delivered by the insurer to the named insured at least thirty days before the effective date of cancellation, or, where cancellation is for nonpayment of a premium, assessment, or installment provided for in the policy, or in a note or contract for the payment thereof, at least ten days prior to the date of cancellation. The notice may be made in person, or by sending by mail a letter addressed to the insured at the insured’s address as given in or upon the policy, anything in the policy, application, or a separate agreement to the contrary notwithstanding.
    Sec. 14.  NEW SECTION.  515.129A  Cancellation of personal lines policies or contracts.
   1.  A personal lines policy or contract of insurance which has been in effect for more than sixty days shall not be canceled except by notice to the insured as provided in this chapter.
   2.  Notice of cancellation of a personal lines policy or contract of insurance is not effective unless the cancellation is based on one or more of the following reasons:
   a.  Nonpayment of premium.
   b.  Failure to pay dues or fees where payment of dues or fees is a prerequisite to obtaining or continuing insurance coverage in force.
   c.  Discovery of fraud or material misrepresentation made by or with the knowledge of the named insured in obtaining, continuing, or presenting a claim under the policy.
   d.  Actions by the insured which substantially change or increase the risk insured.
   e.  The insured has acted in a manner which the insured knew or should have known was in violation or breach of a term or condition of the insurance policy or contract.
   f.  The occurrence of a change in the risk that substantially increases a hazard insured against after insurance coverage has been issued or renewed.
    Sec. 15.  NEW SECTION.  515.129B  Nonrenewal of personal lines policies or contracts.
   1.  An insurer shall not refuse to renew a personal lines policy or contract of insurance unless at least thirty days before the end of the policy or contract period the insurer delivers or mails to the first named insured, at the last known address of the first named insured, written notice of the insurer’s intention not to renew the policy or contract upon expiration of the current policy or contract period as provided in section 515.129C.
   2.  The notice of intention not to renew shall include or be accompanied by a written explanation of the insurer’s specific reason or reasons for the nonrenewal.
    Sec. 16.  NEW SECTION.  515.129C  Notice of renewal or nonrenewal of personal lines policies of contracts.
   1.  At least thirty days before the end of the policy or contract term, an insurer shall mail or deliver to the last known address of the first named insured a renewal policy or contract, an offer to renew the current policy or contract, or a notice of nonrenewal of the policy or contract. Information concerning the renewal policy or contract, the offer to renew the policy or contract, or the notice of nonrenewal of the policy or contract shall also be mailed, delivered, or transmitted electronically to the last known address of the producer of record of the policy or contract. Proof of such mailing or delivery to the first named insured’s last known address shall be maintained by the insurer.
   a.  An offer to renew the policy or contract shall state the renewal premium and the date that the premium is due. The renewal premium shall be based on the known exposure as of the date of the offer to renew.
   b.  If the renewal premium is not received by the due date or the policy or contract expiration date, whichever is later, the policy or contract lapses.
   2.  If an insurer fails to comply with the notice requirements of this section, the policy or contract shall be extended on the same terms and conditions for another policy or contract term or until the effective date of similar insurance procured by the insured, whichever is earlier. The insurer may make continued coverage contingent upon the payment of premium.
   3.  Renewal of a policy or contract does not constitute a waiver or estoppel with respect to grounds for cancellation that existed before the effective date of the renewal.
    Sec. 17.  Section 515C.5, Code 2009, is amended to read as follows:
   515C.5  Limit of outstanding liability.
   1.  A Unless a request to suspend the requirements of this section is granted by the commissioner as set forth in subsection 2, a mortgage guaranty insurer shall not at any time have outstanding a total liability, net of reinsurance, in excess of twenty-five times its capital, unassigned funds and contingency reserve. It A mortgage guaranty insurer shall not insure loans secured by properties in a single housing tract or in a contiguous tract (not which is not separated by more than one-half mile) mile in excess of ten percent of its capital, unassigned funds, and contingency reserve. Coverage may be provided only if the properties in such tract are residential buildings, buildings designed for occupancy by not more than four families, or owner-occupied mobile homes.
   2.  Upon request of a mortgage guaranty insurer, the commissioner may suspend the requirements contained in subsection 1 for such time and under such conditions as the commissioner may order. The commissioner may adopt rules as necessary relating to the consideration of such requests for suspension of those requirements.
    Sec. 18.  Section 523A.102, Code 2009, is amended by adding the following new subsections:
   NEW SUBSECTION.  16A.  “Irrevocable purchase agreement” means a purchase agreement that does not allow a distribution of trust assets, including insurance or annuity proceeds, to the purchaser or beneficiary prior to the death of the beneficiary, other than the ability of the purchaser to direct the transfer of the trust assets to another licensed seller.
   NEW SUBSECTION.  25A.  “Revocable purchase agreement” means a purchase agreement that allows the purchaser to cancel the purchase agreement and direct a distribution or refund of the trust assets.
    Sec. 19.  Section 523A.204, subsection 4, Code Supplement 2009, is amended to read as follows:
   4.  The commissioner shall levy an administrative penalty in the amount of up to five hundred dollars against a preneed seller that fails to file the annual report when due, payable to the state for deposit as provided in section 505.7. However, the commissioner may waive the administrative penalty upon a showing of good cause or financial hardship.
    Sec. 20.  Section 523A.207, Code 2009, is amended to read as follows:
   523A.207  Audits by certified public accountants.
   1.  A purchase agreement shall not be sold or transferred, as part of the sale of a business or the assets of a business, until an audit has been performed by a certified public accountant and filed with the commissioner that expresses the auditor’s opinion of the adequacy of funding related to the purchase agreements to be sold or transferred.
   2.  If the person selling or transferring a purchase agreement fails to comply with the requirements of subsection 1, the obligation to file an audit report shall be shared by any preneed seller who assumes the obligations of the purchase agreement. In addition, the person selling or transferring the purchase agreement shall remain jointly and severally liable to perform the terms of the purchase agreement until the audit report is received by the commissioner.
    Sec. 21.  Section 523A.401, subsection 5, paragraph a, Code 2009, is amended to read as follows:
   a.  Except as necessary and appropriate to satisfy the requirements regarding burial trust funds under Title XIX of the federal Social Security Act, the The policy shall not be owned by the seller, the policy shall not be irrevocably assigned to the seller, and the assignment of proceeds from the insurance policy to the seller shall be limited to the seller’s interests as they appear in the purchase agreement, and conditioned on the seller’s delivery of cemetery merchandise, funeral merchandise, and funeral services pursuant to a purchase agreement.
    Sec. 22.  Section 523A.401, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  9.  The commissioner, by rule, may require written trust agreements and establish terms and conditions for trusts holding insurance policies. The seller or any officer, director, agent, employee, or affiliate of the seller shall not serve as a trustee. The commissioner may require amendments to a trust agreement that is not in accord with the provisions of this chapter or rules adopted under this chapter.
    Sec. 23.  Section 523A.402, subsection 5, paragraph a, Code 2009, is amended to read as follows:
   a.  Except as necessary and appropriate to satisfy the requirements regarding burial trust funds under Title XIX of the federal Social Security Act, the The annuity shall not be owned by the seller or irrevocably assigned to the seller and any designation of the seller as a beneficiary shall not be made irrevocable.
    Sec. 24.  Section 523A.402, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  9.  The commissioner, by rule, may require written trust agreements and establish terms and conditions for trusts holding annuities. The seller or any officer, director, agent, employee, or affiliate of the seller shall not serve as a trustee. The commissioner may require amendments to a trust agreement that is not in accord with the provisions of this chapter or rules adopted under this chapter.
    Sec. 25.  Section 523A.502A, subsection 3, Code Supplement 2009, is amended to read as follows:
   3.  The commissioner shall levy an administrative penalty in the amount of up to five hundred dollars against a sales agent who fails to file an annual report when due, payable to the state for deposit as provided in section 505.7. However, the commissioner may waive the administrative penalty upon a showing of good cause or financial hardship.
    Sec. 26.  Section 523A.601, subsection 1, paragraph b, Code 2009, is amended to read as follows:
   b.  Specify the cemetery merchandise, funeral merchandise, funeral services, or a combination thereof to be provided, and the cost of each merchandise item or service, if selected.
    Sec. 27.  Section 523A.601, subsection 1, paragraphs f and g, Code 2009, are amended to read as follows:
   f.  State Unless the purchaser or beneficiary is receiving or has applied to receive Medicaid or supplemental security income benefits, state that the purchase of the cemetery merchandise, funeral merchandise, and funeral services is revocable and specify the damages for cancellation, if any.  The purchase agreement may provide that if the purchaser or beneficiary is receiving or has applied to receive Medicaid or supplemental security income benefits, the purchase agreement may be an irrevocable purchase agreement, subject to the requirements of section 523A.602, subsection 4.
   g.  State clearly who has the authority to cancel, amend, or revoke the purchase agreement to purchase cemetery merchandise, funeral merchandise, and funeral services and specify the penalties for cancellation, if any.
    Sec. 28.  Section 523A.602, subsection 3, Code 2009, is amended to read as follows:
   3.  This section does not prohibit a purchaser who is or may become eligible for receiving or has applied to receive benefits under Title Tit. XIX of the federal Social Security Act from making a guaranteed price purchase agreement irrevocable, subject to the requirements of subsection 4, to the extent that federal law or regulations require that such an agreement be irrevocable for purposes of a purchaser’s eligibility for benefits under Title Tit. XIX of the federal Social Security Act, as permitted under federal law. The seller of credit sale agreements shall comply with the requirements of chapter 537, the Iowa consumer credit code, and is subject to the remedies and penalties provided in that chapter for noncompliance.
    Sec. 29.  Section 523A.602, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  4.  An irrevocable purchase agreement is subject to the following restrictions as a matter of law:
   a.  The purchase agreement must include a selection of the cemetery merchandise, funeral merchandise, funeral services, or a combination thereof to be provided and the cost of each merchandise item or service.
   b.  A life insurance policy or annuity funding the purchase agreement, if any, must be held in trust by the preneed seller and titled appropriately pursuant to the purchaser’s irrevocable assignment of ownership to the trust. The preneed seller may be named a nominal owner of the life insurance policy or annuity only for such time as it takes to immediately transfer the policy or annuity into trust.
   c.  Any transfer of trust assets must be to another licensed preneed seller in connection with an assumption of the existing purchase agreement or a new purchase agreement for the same selection of cemetery merchandise, funeral merchandise, funeral services, or a combination thereof to be provided and specifying the cost of each merchandise item or service selected.
    Sec. 30.  Section 523A.807, subsection 3, unnumbered paragraph 1, Code Supplement 2009, is amended to read as follows:
   If the commissioner finds that a person has violated section 523A.201, 523A.202, 523A.203, 523A.207, 523A.401, 523A.402, 523A.403, 523A.404, 523A.405, 523A.501, or 523A.502, or 523A.504 or any rule adopted pursuant thereto, the commissioner may order any or all of the following:
    Sec. 31.  Section 523I.213A, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  7.  Notwithstanding chapter 22, the commissioner shall not make information obtained in the course of an examination public, except when a duty under this chapter requires the commissioner to take action against a cemetery or to cooperate with another law enforcement agency, or when the commissioner is called as a witness in a civil or criminal proceeding.
EXPLANATION
   This bill relates to various matters under the purview of the insurance division of the department of commerce.
   IOWA GRAIN INDEMNITY BOARD. Code section 203D.4(1) is amended to remove the commissioner of insurance or a designee as a member of the Iowa grain indemnity fund board. 
   UNIFORM SECURITIES ACT. Code section 502.305(2) is amended to allow the administrator of the Iowa uniform securities Act to adopt rules that require certain filings to be made electronically either with the administrator or a designee of the administrator and that require filers to submit filings and pay processing fees to such a designee.
   EXAMINATION OF INSURANCE COMPANIES. Code section 507.4(2) is amended to allow the commissioner of insurance to employ insurance examiners who are exempt from the state merit system and to pay those examiners pursuant to a pay plan that is substantially equivalent to that used for bank examiners. A coordinating amendment is made to Code section 20.4 exempting such insurance examiners from the state merit system. 
   LIFE INSURANCE COMPANIES AND ASSOCIATIONS. New Code section 508.33A authorizes Iowa life insurance companies to organize wholly owned limited purpose subsidiary life insurance companies to reinsure the risks of the organizing company and its affiliated companies. Before assuming any risks under a reinsurance contract, a new limited purpose subsidiary life insurance company must submit and receive approval of its plan of operation from the commissioner. The commissioner is required to adopt rules to regulate such limited purpose insurers and no limited purpose insurer can be organized prior to the effective date of such rules. 
   Code section 5l1.8(5) is amended to allow life insurance companies to invest in certain securities that are rated three for legal reserve purposes. New Code section 511.8(8)(d) is a coordinating amendment that provides that such securities are not eligible investments in excess of 2 percent of the legal reserve and not more than one-eighth of 1 percent of the legal reserve can be invested in the securities of any one corporation. 
   Code section 5l1.8(16) is amended to provide that common stocks or shares issued by any federal home loan bank that are eligible common stocks or shares for inclusion in a life insurance company’s legal reserve may be deposited as securities with the commissioner.
   Code section 5l1.8(23)(c) and (e) are amended to provide that if a security loan made by a life insurance company to a specified entity is collateralized by cash, the insurer may reinvest the cash in class one money market funds, among other things. If such reinvestments are made in a pooled fund, the average maturity of the securities in the pooled fund must be 180 days or less and the individual maturities of the securities must be 397 days or less. “Maturity” is defined to mean the earlier of the fixed date on which the holder of the security is unconditionally entitled to receive principal and interest in full or the date on which the holder of the security is unconditionally entitled upon demand to receive principal and interest in full. Such securities loaned in this manner cannot be included in the legal reserve of a life insurance company in excess of 10, formerly 20, percent of the legal reserve. 
   New Code section 5l1.8(23)(f) is added to allow a life insurance company or association to hold securities which are the subject of a reverse repurchase agreement in its legal reserve, subject to the limitation that such securities are treated as securities loaned and cannot be included in legal reserve in excess of l0 percent of the reserve.
   EXTERNAL REVIEW OF HEALTH CARE COVERAGE DECISIONS. Code section 514J.7(2) is amended to provide that an enrollee or a treating health care provider who seeks external review of a health care coverage decision is entitled to be told the name of the expert person selected to perform the external review. 
   INSURANCE OTHER THAN LIFE. Code section 515.125(1) is amended to except new provisions in the bill pertaining to personal lines insurance policies or contracts from the forfeiture and notice requirements of this section.
   New Code section 515.129A provides that personal lines policies or contracts of insurance that have been in effect for more than 60 days cannot be canceled without notice and that such notice is not effective unless it is based on one or more of the specified reasons.
   New Code section 515.129B provides that an insurer cannot refuse to renew a personal lines policy or contract of insurance unless at least 30 days before the end date of the policy or contract the insurer delivers or mails written notice to the first named insured at the insured’s last known address, of the insurer’s intention not to renew accompanied by an explanation of the specific reason for the nonrenewal.
   New Code section 515.129C sets forth requirements for the notice to an insured of the renewal or nonrenewal of personal lines policies or contracts. Such notice must be mailed or delivered to the first named insured at least 30 days prior to the end of the policy or contract term and must also be mailed, delivered, or electronically transmitted to the producer of record of the policy or contract. An offer to renew shall state the amount and due date of the premium. If the renewal premium is not received by the due date or the policy or contract expiration date, whichever is later, the policy or contract lapses. If an insurer fails to comply with these notice requirements, the policy or contract is extended on the same terms and conditions for another policy or contract term or until the effective date that similar insurance is procured by the insured, whichever is earlier. Renewal of a policy or contract under this Code section does not constitute an estoppel or waiver with respect to grounds for cancellation that existed prior to the effective date of the renewal. 
   MORTGAGE GUARANTY INSURANCE. Code section 515C.5 is amended to allow the commissioner to suspend the requirements concerning the amount of outstanding liability that a mortgage guaranty insurer may have upon request of the insurer for such time and under such conditions as the commissioner may order. The commissioner may adopt rules as necessary relating to the consideration of such requests for suspension of those requirements. 
   CEMETERY AND FUNERAL MERCHANDISE, AND FUNERAL SERVICES.

Code section 523A.102 is amended to add definitions of irrevocable and revocable purchase agreements to furnish cemetery and funeral merchandise, and funeral services, or a combination thereof. 
   Code section 523A.204(4) is amended to give the commissioner the discretion to levy an administrative penalty in an amount up to $500 against a preneed seller who fails to file an annual report when due. A corresponding change to Code section 523A.502A allows the commissioner such discretion when levying a penalty against a sales agent who fails to file a report when due. 
   Code section 523A.207 is amended to provide that if a person selling or transferring a purchase agreement fails to comply with the obligation to file an audit report with the commissioner prior to the sale or transfer, that obligation is shared by any preneed seller that assumes the obligations of the purchase agreement. In addition, the seller or transferor of the purchase agreement remains jointly and severally liable to perform the terms of the purchase agreement until the audit report is received by the commissioner. 
   Code section 523A.401(5) is amended to provide that when a purchase agreement is funded by insurance policy proceeds, the insurance policy shall not be owned by the seller and to delete an exception to this requirement related to social security requirements pertaining to burial trust funds. A corresponding change is made to Code section 523A.402(5)(a) to provide that when a purchase agreement is funded by annuity proceeds the annuity shall not be owned by the seller and to delete a similar exception in relation to social security requirements. Code section 523A.401(9) is added to allow the commissioner to adopt rules to require written trust agreements and establish terms and conditions for trusts holding insurance policies that fund purchase agreements. Code section 523A.402(9) is added to allow the adoption of similar rules as to annuities that fund purchase agreements. 
   Code section 523A.601 is amended to allow disclosures concerning purchase agreements to include information that tells purchasers or beneficiaries that the agreement may be made irrevocable if the purchaser or beneficiary is receiving or has applied to receive Medicaid or supplemental security income benefits. This language corresponds to the changes made in Code section 523A.602(3).
   Code section 523A.602(4) is added to specify the restrictions applicable to an irrevocable purchase agreement. Such a purchase agreement must specify the merchandise and services selected and the cost of each; a life insurance policy or annuity funding the agreement must be held in trust by the preneed seller; and any transfer of trust assets must be to another licensed preneed seller in connection with an assumption of the existing purchase agreement or a new purchase agreement for the same selection of merchandise and services and specifying the cost.
   Code section 523A.807(3) relating to penalties for violations of specific sections of Code chapter 523A is amended to apply to violations of Code sections 523A.203 (qualification and investment requirements of financial institution trustees); 523A.207 (performance of audits prior to sale of purchase agreements); and 523A.504 (appointment of sales agents and payment of fees). A violation of one of these sections may result in civil penalties and orders prohibiting sales pursuant to Code chapter 523A. 
   CEMETERY REGULATION. Code section 523I.213A(7) is added to provide that notwithstanding Iowa’s open records law, the commissioner shall not make information obtained in the course of an examination of a cemetery public except under the specified circumstances. A corresponding change is made by adding Code section 20.7(65), which states that such information is not a public record.