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1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 286.1, 291.1, 294.1, 297.1, 300.1, and 315.6
6and by adding Sections 295.2 and 315.9 as follows:
 
7    (215 ILCS 5/286.1)  (from Ch. 73, par. 898.1)
8    (Section scheduled to be repealed on January 1, 2017)
9    Sec. 286.1. Purposes and Powers.
10    (a) A society shall operate for the benefit of members and
11their beneficiaries by:
12        (1) Providing benefits as specified in Section 297.1 of
13    this amendatory Act; and
14        (2) Operating for one or more social, intellectual,
15    educational, charitable, benevolent, moral, fraternal,
16    patriotic or religious purposes for the benefit of its
17    members, which may also be extended to others. Such
18    purposes may be carried out directly by the society or
19    indirectly through subsidiary corporations or affiliated
20    organizations.
21    (b) Every society shall have the power to adopt laws and
22rules for the government of the society, the admission of its
23members and the management of its affairs. It shall have the

 

 

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1power to change, alter, add to or amend such laws and rules and
2shall have such other powers as are necessary and incidental to
3carrying into effect the objects and purposes of the society.
4    (c) A domestic society that provides any of the benefits
5specified in Section 297.1 of this Code must be governed by a
6board of directors and managed by qualified officers subject to
7the following requirements:
8        (1) The laws of a society must provide that:
9            (i) the board of directors shall have the powers
10        and perform the duties ordinarily possessed and
11        exercised by a board of directors under this Code,
12        including, but not limited to, the authority and
13        responsibility for the hiring and the discharge of a
14        president, chief executive officer, or an equivalent
15        position, except that a society that elects its
16        president, chief executive officer, or equivalent
17        position pursuant to its by-laws, as of the effective
18        date of this amendatory Act of the 98th General
19        Assembly, may continue to do so if it elects a
20        president, chief executive officer, or equivalent
21        position that meets qualifications set forth in a rule
22        adopted by the Director; and
23            (ii) the board of directors may remove a director
24        for cause and replace the director with another
25        qualified director.
26        After the effective date of this amendatory Act of the

 

 

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1    98th General Assembly, a domestic society shall amend its
2    laws, as necessary, to comply with this paragraph (1) as
3    soon as reasonably practicable, but in no event later than
4    January 1, 2019.
5        (2) A person convicted of a felony may not be a
6    director or an officer of a domestic society.
7        (3) A society shall provide information regarding
8    qualifications of board candidates to voting members prior
9    to the time of election.
10        (4) Each newly elected director of a domestic society
11    shall participate in a board training or orientation
12    program within 6 months after their election to the board
13    that includes information regarding board duties and
14    responsibilities.
15        (5) At least annually, the board of directors shall
16    conduct a self-assessment.
17        (6) Each domestic society shall establish an audit
18    committee. The composition and responsibilities of the
19    audit committee shall comply with the Illinois
20    Administrative Code provisions relating to annual
21    financial reporting.
22(Source: P.A. 84-303.)
 
23    (215 ILCS 5/291.1)  (from Ch. 73, par. 903.1)
24    (Section scheduled to be repealed on January 1, 2017)
25    Sec. 291.1. Organization. A domestic society organized on

 

 

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1or after the effective date of this amendatory Act shall be
2formed as follows:
3        (a) Seven or more citizens of the United States, a
4    majority of whom are citizens of this State, who desire to
5    form a fraternal benefit society may make, sign and
6    acknowledge, before some officer competent to take
7    acknowledgement of deeds, articles of incorporation, in
8    which shall be stated:
9            (1) The proposed corporate name of the society,
10        which shall not so closely resemble the name of any
11        society or insurance company already authorized to
12        transact business in this State as to be misleading or
13        confusing;
14            (2) The place where its principal office shall be
15        located within this State;
16            (3) The purposes for which it is being formed and
17        the mode in which its corporate powers are to be
18        exercised. Such purposes shall not include more
19        liberal powers than are granted by this amendatory Act;
20        and
21            (4) The names and residences of the incorporators
22        and the names, residences and official titles of all
23        the officers, trustees, directors or other persons who
24        are to have and exercise the general control of the
25        management of the affairs and funds of the society for
26        the first year or until the ensuing election, at which

 

 

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1        all such officers shall be elected by the supreme
2        governing body, which election shall be held not later
3        than one year from the date of issuance of the
4        permanent certificate of authority;
5        (b) Duplicate originals of the articles of
6    incorporation, certified copies of the society's bylaws
7    and rules, copies of all proposed forms of certificates,
8    applicants and rates therefor, and circulars to be issued
9    by the society and a bond conditioned upon the return to
10    applicants of the advanced payments if the organization is
11    not completed within one year shall be filed with the
12    Director, who may require such further information as the
13    Director deems necessary. The bond with sureties approved
14    by the Director shall be in such amount, not less than
15    $300,000 nor more than $1,500,000, as required by the
16    Director. All documents filed are to be in the English
17    language. If the Director finds that the purposes of the
18    society conform to the requirements of this amendatory Act
19    and all provisions of the law have been complied with, the
20    Director shall approve the articles of incorporation and
21    issue the incorporators a preliminary certificate of
22    authority authorizing the society to solicit members as
23    hereinafter provided;
24        (c) No preliminary certificate of authority issued
25    under the provisions of this Section shall be valid after
26    one year from its date of issue or after such further

 

 

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1    period, not exceeding one year, as may be authorized by the
2    Director, upon cause shown, unless the 500 applicants
3    hereinafter required have been secured and the
4    organization has been completed as herein provided. The
5    articles of incorporation and all other proceedings
6    thereunder shall become null and void in one year from the
7    date of the preliminary certificate of authority or at the
8    expiration of the extended period, unless the society shall
9    have completed its organization and received a certificate
10    of authority to do business as hereinafter provided;
11        (d) Upon receipt of a preliminary certificate of
12    authority from the Director, the society may solicit
13    members for the purpose of completing its organization,
14    shall collect from each applicant the amount of not less
15    than one regular monthly premium in accordance with its
16    table of rates and shall issue to each such applicant a
17    receipt for the amount so collected. No society shall incur
18    any liability other than for the return of such advance
19    premium nor issue any certificate nor pay, allow or offer
20    or promise to pay or allow any benefit to any person until:
21            (1) Actual bona fide applications for benefits
22        have been secured on not less than 500 applicants and
23        any necessary evidence of insurability has been
24        furnished to and approved by the society;
25            (2) At least 10 subordinate lodges have been
26        established into which the 500 applicants have been

 

 

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1        admitted;
2            (3) There has been submitted to the Director, under
3        oath of the president or secretary, or corresponding
4        officer of the society, a list of such applicants,
5        giving their names, addresses, date each was admitted,
6        name and number of the subordinate lodge of which each
7        applicant is a member, amount of benefits to be granted
8        and premiums therefor; and
9            (4) It shall have been shown to the Director, by
10        sworn statement of the treasurer or corresponding
11        officer of such society, that a least 500 applicants
12        have each paid in cash at least one regular monthly
13        premium as herein provided, which premiums in the
14        aggregate shall amount to at least $150,000. Said
15        advance premiums shall be held in trust during the
16        period of organization, and, if the society has not
17        qualified for a certificate of authority within one
18        year unless extended by the Director, as herein
19        provided, such premiums shall be returned to said
20        applicants; and
21            (5) In the case of a domestic society that is
22        organized after the effective date of this amendatory
23        Act of the 98th General Assembly, the society meets the
24        following requirements:
25                (i) maintains a minimum surplus of $2,000,000,
26            or such higher amount as the Director may deem

 

 

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1            necessary; and
2                (ii) meets any other requirements as
3            determined by the Director.
4        (e) The Director may make such examination and require
5    such further information as the Director deems necessary.
6    Upon presentation of satisfactory evidence that the
7    society has complied with all the provisions of law, the
8    Director shall issue to the society a certificate of
9    authority to that effect and that the society is authorized
10    to transact business pursuant to the provisions of this
11    amendatory Act; and
12        (f) Any incorporated society authorized to transact
13    business in this State at the time this amendatory Act
14    becomes effective shall not be required to reincorporate.
15(Source: P.A. 84-303.)
 
16    (215 ILCS 5/294.1)  (from Ch. 73, par. 906.1)
17    (Section scheduled to be repealed on January 1, 2017)
18    Sec. 294.1. Reinsurance.
19    (a) A domestic society may enter into reinsurance
20transactions only in accordance with Article XI of this Code.
21    (b) A domestic society may reinsure the risks of another
22society in connection with a merger transaction with approval
23by the Director.
24(Source: P.A. 84-303.)
 

 

 

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1    (215 ILCS 5/295.2 new)
2    Sec. 295.2. Maintenance of solvency.
3    (a) In the event a domestic society has an authorized
4control level event described in Section 35A-25 of this Code
5under circumstances the Director determines will not be
6promptly remedied, the Director may, in addition to all other
7actions required or permitted by subsection (b) of Section
835A-25 of this Code, issue an order declaring the domestic
9society to be in hazardous condition and ordering that all
10steps be taken to remedy such condition pursuant to this
11Section.
12    (b) A domestic society may negotiate an agreement to
13transfer members, certificates, and other assets and
14liabilities of the society, in whole or in part, to another
15organization through merger, consolidation, assumption, or
16other means. Such transfer shall be concluded within the
17timeframe established by the Director and subject to approval
18by the Director. Such transfer agreement shall be deemed fully
19approved by the domestic society upon majority vote of its
20board of directors. Such transfer shall be effective
21notwithstanding the provisions of Section 295.1 of this Code or
22any other law or regulation or laws of the domestic society
23requiring another form of notice to or approval by members,
24which shall be superseded by this Section.
25    (c) In the event of an agreement to transfer under this
26Section to an organization without a certificate of authority

 

 

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1in this State, the Director may grant a limited certificate of
2authority to such organization, upon request, if the
3organization does not apply for and obtain a certificate of
4authority to transact business in this State. Such limited
5certificate of authority shall grant the organization
6authority to service the certificates following the transfer
7and fulfill all obligations owed to certificate holders but not
8to otherwise transact insurance business in this State.
9    (d) The board of directors of a domestic society may
10suspend or modify its qualifications for membership as
11necessary or appropriate to facilitate an agreement to transfer
12under this Section, notwithstanding the laws of the society, or
13any other law or regulation to the contrary.
 
14    (215 ILCS 5/297.1)  (from Ch. 73, par. 909.1)
15    (Section scheduled to be repealed on January 1, 2017)
16    Sec. 297.1. Benefits.
17    (a) A society may provide the following contractual
18benefits in any form:
19        (1) Death benefits;
20        (2) Endowment benefits;
21        (3) Annuity benefits;
22        (4) Temporary or permanent disability benefits;
23        (5) Hospital, medical or nursing benefits;
24        (6) Monument or tombstone benefits to the memory of
25    deceased members; and

 

 

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1        (7) Such other benefits as authorized for life insurers
2    and which are not inconsistent with this amendatory Act.
3    (b) A society shall specify in its rules those persons who
4may be issued, or covered by, the contractual benefits in
5subsection (a), consistent with providing benefits to members
6and their dependents. A society may provide benefits on the
7lives of children under the minimum age for adult membership
8upon application of an adult person.
9    (c) After the effective date of this amendatory Act of the
1098th General Assembly, a society shall provide an applicant for
11contractual benefits a disclosure statement that reads
12substantially as follows:
13    ". . . . . . .(name of the society) is licensed to do
14    business in the State of Illinois as a fraternal benefit
15    society. As such, it is not included in the Illinois Life
16    and Health Guaranty Association (otherwise known as the
17    Guaranty Association). This means that fraternal benefit
18    societies cannot be assessed for the insolvency of other
19    life insurers or other fraternal benefit societies. By law,
20    a fraternal benefit society is responsible for its own
21    solvency. If there is an impairment of reserves, a
22    certificate holder may be assessed a proportionate share of
23    the impairment. This process is described in the
24    certificate issued by the society.".
25    The statement must appear immediately above the
26applicant's signature on the society's membership application

 

 

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1or certificate or policy application, in uppercase and bold
2type or boxed.
3(Source: P.A. 84-303.)
 
4    (215 ILCS 5/300.1)  (from Ch. 73, par. 912.1)
5    (Section scheduled to be repealed on January 1, 2017)
6    Sec. 300.1. The Benefit Contract.
7    (a) Every society authorized to do business in this State
8shall issue to each owner of a benefit contract a certificate
9specifying the amount of benefits provided thereby. The
10certificate, together with any riders or endorsements attached
11thereto, the laws of the society, the application for
12membership, the application for insurance and declaration of
13insurability, if any, signed by the applicant and all
14amendments to each thereof shall constitute the benefit
15contract, as of the date of issuance, between the society and
16the owner, and the certificate shall so state. A copy of the
17application for insurance and declaration of insurability, if
18any, shall be endorsed upon or attached to the certificate. All
19statements on the application shall be representations and not
20warranties. Any waiver of this provision shall be void.
21    (b) Any changes, additions or amendments to the laws of the
22society duly made or enacted subsequent to the issuance of the
23certificate shall bind the owner and the beneficiaries and
24shall govern and control the benefit contract in all respects
25the same as though such changes, additions or amendments had

 

 

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1been made prior to and were in force at the time of the
2application for insurance, except that no change, addition or
3amendment shall destroy or diminish benefits which the society
4contracted to give the owner as of the date of issuance.
5    (c) Any person upon whose life a benefit contract is issued
6prior to attaining the age of majority shall be bound by the
7terms of the application and certificate and by all the laws
8and rules of the society to the same extent as though the age
9of majority had been attained at the time of application.
10    (d) A society shall provide in its laws and its
11certificates that, if its reserves as to all or any class of
12certificates become impaired, its board of directors or
13corresponding body may require that there shall be paid by the
14owner to the society an assessment in the amount of the owner's
15equitable proportion of such deficiency as ascertained by its
16board, and that, if the payment is not made, either (1) it
17shall stand as an indebtedness against the certificate and draw
18interest not to exceed the rate specified for certificate loans
19under the certificates; or (2) in lieu of or in combination
20with (1), the owner may accept a proportionate reduction in
21benefits under the certificate. However, in no event may an
22assessment obligation be forgiven, credited, or repaid by
23whatever means or however labeled by the society in lieu of
24collection or reduction in benefits, unless provided to all
25society members and approved in writing by the Director, except
26that the forgiveness or repayment of any assessments issued by

 

 

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1a society that remain outstanding as of the date of this
2amendatory Act of the 98th General Assembly may be forgiven or
3repaid by any manner or plan certified by an independent
4actuary and filed with the Director to make reasonable and
5adequate provision for the forgiveness or repayment of the
6assessment to all society members. Notwithstanding the
7foregoing, a society may fully repay, credit, or forgive an
8assessment from the date of death of any life insured under a
9certificate so long as the plan to forgive or repay the
10assessment is certified by an independent actuary and filed
11with the Director to make reasonable and adequate provision for
12the forgiveness or repayment of the assessment to all assessed
13society members as a result of the death. The society may
14specify the manner of the election and which alternative is to
15be presumed if no election is made. No such assessment shall
16take effect unless a 30-day notification has been provided to
17the Director, who shall have the ability to disapprove the
18assessment only if the Director finds that such assessment is
19not in the best interests of the benefit members of the
20domestic society. Disapproval by the Director shall be made
21within 30 days after receipt of notice and shall be in writing
22and mailed to the domestic society. If the Director disapproves
23the assessment, the reasons therefore shall be stated in the
24written notice.
25    (e) Copies of any of the documents mentioned in this
26Section, certified by the secretary or corresponding officer of

 

 

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1the society, shall be received in evidence of the terms and
2conditions thereof.
3    (f) No certificate shall be delivered or issued for
4delivery in this State unless a copy of the form has been filed
5with the Director in the manner provided for like policies
6issued by life insurers in this State. Every life, accident,
7health or disability insurance certificate and every annuity
8certificate issued on or after one year from the effective date
9of this amendatory Act shall meet the standard contract
10provision requirements not inconsistent with this amendatory
11Act for like policies issued by life insurers in this State
12except that a society may provide for a grace period for
13payment of premiums of one full month in its certificates. The
14certificate shall also contain a provision stating the amount
15of premiums which are payable under the certificate and a
16provision reciting or setting forth the substance of any
17sections of the society's laws or rules in force at the time of
18issuance of the certificate which, if violated, will result in
19the termination or reduction of benefits payable under the
20certificate. If the laws of the society provide for expulsion
21or suspension of a member, the certificate shall also contain a
22provision that any member so expelled or suspended, except for
23nonpayment of a premium or within the contestable period for
24material misrepresentation in the application for membership
25or insurance, shall have the privilege of maintaining the
26certificate in force by continuing payment of the required

 

 

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1premium.
2    (g) Benefit contracts issued on the lives of persons below
3the society's minimum age for adult membership may provide for
4transfer of control or ownership to the insured at an age
5specified in the certificate. A society may require approval of
6an application for membership in order to effect this transfer
7and may provide in all other respect for the regulation,
8government and control of such certificates and all rights,
9obligations and liabilities incident thereto and connected
10therewith. Ownership rights prior to such transfer shall be
11specified in the certificate.
12    (h) A society may specify the terms and conditions on which
13benefit contracts may be assigned.
14(Source: P.A. 84-303.)
 
15    (215 ILCS 5/315.6)  (from Ch. 73, par. 927.6)
16    (Section scheduled to be repealed on January 1, 2017)
17    Sec. 315.6. Application of other Code provisions. Unless
18otherwise provided in this amendatory Act, every fraternal
19benefit society shall be governed by this amendatory Act and
20shall be exempt from all other provisions of the insurance laws
21of this State not only in governmental relations with the State
22but for every other purpose, except for those provisions
23specified in this amendatory Act and except as follows:
24        (a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1,
25    132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136,

 

 

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1    138, 139, 140, 141, 141.01, 141.1, 141.2, 141.3, 143, 143c,
2    144.1, 147, 148, 149, 150, 151, 152, 153, 154.5, 154.6,
3    154.7, 154.8, 155, 155.04, 155.05, 155.06, 155.07, 155.08
4    and 408 of this Code; and
5        (b) Articles VIII 1/2, XII, XII 1/2, XIII, XXIV, and
6    XXVIII of this Code.
7(Source: P.A. 88-364; 89-97, eff. 7-7-95.)
 
8    (215 ILCS 5/315.9 new)
9    Sec. 315.9. Voluntary dissolution. Upon application to the
10Director, a domestic society may request that it be dissolved
11and that its existence be terminated. The application shall
12demonstrate that the applicant has satisfied its members'
13certificate obligations or that it has transferred such
14obligations to another organization, domestic or foreign, by
15means of assumption or bulk reinsurance or otherwise, and that
16the domestic society's supreme governing body has approved the
17termination and dissolution. The application shall contain any
18other information required by the Director. Any limitation
19related to reinsurance by a domestic society shall not apply to
20reinsurance entered into in conjunction with the transfer of
21members' certificate obligations as a part of a voluntary
22dissolution. Upon approval of the application by the Director,
23the domestic society shall be deemed dissolved and its
24existence terminated as of the date set forth in the
25application.