Sen. William R. Haine

Filed: 4/4/2014

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 646

2    AMENDMENT NO. ______. Amend Senate Bill 646 by replacing
3everything after the enacting clause with the following:
 
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8    (Section scheduled to be repealed on January 1, 2017)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

 

 

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1    members, which may also be extended to others. Such
2    purposes may be carried out directly by the society or
3    indirectly through subsidiary corporations or affiliated
4    organizations.
5    (b) Every society shall have the power to adopt laws and
6rules for the government of the society, the admission of its
7members and the management of its affairs. It shall have the
8power to change, alter, add to or amend such laws and rules and
9shall have such other powers as are necessary and incidental to
10carrying into effect the objects and purposes of the society.
11    (c) A domestic society that provides any of the benefits
12specified in Section 297.1 of this Code must be governed by a
13board of directors and managed by qualified officers subject to
14the following requirements:
15        (1) The laws of a society must provide that:
16            (i) the board of directors shall have the powers
17        and perform the duties ordinarily possessed and
18        exercised by a board of directors under this Code,
19        including, but not limited to, the authority and
20        responsibility for the hiring and the discharge of a
21        president, chief executive officer, or an equivalent
22        position, except that a society that elects its
23        president, chief executive officer, or equivalent
24        position pursuant to its by-laws, as of the effective
25        date of this amendatory Act of the 98th General
26        Assembly, may continue to do so if it elects a

 

 

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1        president, chief executive officer, or equivalent
2        position that meets qualifications set forth in a rule
3        adopted by the Director; and
4            (ii) the board of directors may remove a director
5        for cause and replace the director with another
6        qualified director.
7        After the effective date of this amendatory Act of the
8    98th General Assembly, a domestic society shall amend its
9    laws, as necessary, to comply with this paragraph (1) as
10    soon as reasonably practicable, but in no event later than
11    January 1, 2019.
12        (2) A person convicted of a felony may not be a
13    director or an officer of a domestic society.
14        (3) A society shall provide information regarding
15    qualifications of board candidates to voting members prior
16    to the time of election.
17        (4) Each newly elected director of a domestic society
18    shall participate in a board training or orientation
19    program within 6 months after their election to the board
20    that includes information regarding board duties and
21    responsibilities.
22        (5) At least annually, the board of directors shall
23    conduct a self-assessment.
24        (6) Each domestic society shall establish an audit
25    committee. The composition and responsibilities of the
26    audit committee shall comply with the Illinois

 

 

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1    Administrative Code provisions relating to annual
2    financial reporting.
3(Source: P.A. 84-303.)
 
4    (215 ILCS 5/291.1)  (from Ch. 73, par. 903.1)
5    (Section scheduled to be repealed on January 1, 2017)
6    Sec. 291.1. Organization. A domestic society organized on
7or after the effective date of this amendatory Act shall be
8formed as follows:
9        (a) Seven or more citizens of the United States, a
10    majority of whom are citizens of this State, who desire to
11    form a fraternal benefit society may make, sign and
12    acknowledge, before some officer competent to take
13    acknowledgement of deeds, articles of incorporation, in
14    which shall be stated:
15            (1) The proposed corporate name of the society,
16        which shall not so closely resemble the name of any
17        society or insurance company already authorized to
18        transact business in this State as to be misleading or
19        confusing;
20            (2) The place where its principal office shall be
21        located within this State;
22            (3) The purposes for which it is being formed and
23        the mode in which its corporate powers are to be
24        exercised. Such purposes shall not include more
25        liberal powers than are granted by this amendatory Act;

 

 

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1        and
2            (4) The names and residences of the incorporators
3        and the names, residences and official titles of all
4        the officers, trustees, directors or other persons who
5        are to have and exercise the general control of the
6        management of the affairs and funds of the society for
7        the first year or until the ensuing election, at which
8        all such officers shall be elected by the supreme
9        governing body, which election shall be held not later
10        than one year from the date of issuance of the
11        permanent certificate of authority;
12        (b) Duplicate originals of the articles of
13    incorporation, certified copies of the society's bylaws
14    and rules, copies of all proposed forms of certificates,
15    applicants and rates therefor, and circulars to be issued
16    by the society and a bond conditioned upon the return to
17    applicants of the advanced payments if the organization is
18    not completed within one year shall be filed with the
19    Director, who may require such further information as the
20    Director deems necessary. The bond with sureties approved
21    by the Director shall be in such amount, not less than
22    $300,000 nor more than $1,500,000, as required by the
23    Director. All documents filed are to be in the English
24    language. If the Director finds that the purposes of the
25    society conform to the requirements of this amendatory Act
26    and all provisions of the law have been complied with, the

 

 

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1    Director shall approve the articles of incorporation and
2    issue the incorporators a preliminary certificate of
3    authority authorizing the society to solicit members as
4    hereinafter provided;
5        (c) No preliminary certificate of authority issued
6    under the provisions of this Section shall be valid after
7    one year from its date of issue or after such further
8    period, not exceeding one year, as may be authorized by the
9    Director, upon cause shown, unless the 500 applicants
10    hereinafter required have been secured and the
11    organization has been completed as herein provided. The
12    articles of incorporation and all other proceedings
13    thereunder shall become null and void in one year from the
14    date of the preliminary certificate of authority or at the
15    expiration of the extended period, unless the society shall
16    have completed its organization and received a certificate
17    of authority to do business as hereinafter provided;
18        (d) Upon receipt of a preliminary certificate of
19    authority from the Director, the society may solicit
20    members for the purpose of completing its organization,
21    shall collect from each applicant the amount of not less
22    than one regular monthly premium in accordance with its
23    table of rates and shall issue to each such applicant a
24    receipt for the amount so collected. No society shall incur
25    any liability other than for the return of such advance
26    premium nor issue any certificate nor pay, allow or offer

 

 

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1    or promise to pay or allow any benefit to any person until:
2            (1) Actual bona fide applications for benefits
3        have been secured on not less than 500 applicants and
4        any necessary evidence of insurability has been
5        furnished to and approved by the society;
6            (2) At least 10 subordinate lodges have been
7        established into which the 500 applicants have been
8        admitted;
9            (3) There has been submitted to the Director, under
10        oath of the president or secretary, or corresponding
11        officer of the society, a list of such applicants,
12        giving their names, addresses, date each was admitted,
13        name and number of the subordinate lodge of which each
14        applicant is a member, amount of benefits to be granted
15        and premiums therefor; and
16            (4) It shall have been shown to the Director, by
17        sworn statement of the treasurer or corresponding
18        officer of such society, that a least 500 applicants
19        have each paid in cash at least one regular monthly
20        premium as herein provided, which premiums in the
21        aggregate shall amount to at least $150,000. Said
22        advance premiums shall be held in trust during the
23        period of organization, and, if the society has not
24        qualified for a certificate of authority within one
25        year unless extended by the Director, as herein
26        provided, such premiums shall be returned to said

 

 

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1        applicants; and
2            (5) In the case of a domestic society that is
3        organized after the effective date of this amendatory
4        Act of the 98th General Assembly, the society meets the
5        following requirements:
6                (i) maintains a minimum surplus of $2,000,000,
7            or such higher amount as the Director may deem
8            necessary; and
9                (ii) meets any other requirements as
10            determined by the Director.
11        (e) The Director may make such examination and require
12    such further information as the Director deems necessary.
13    Upon presentation of satisfactory evidence that the
14    society has complied with all the provisions of law, the
15    Director shall issue to the society a certificate of
16    authority to that effect and that the society is authorized
17    to transact business pursuant to the provisions of this
18    amendatory Act; and
19        (f) Any incorporated society authorized to transact
20    business in this State at the time this amendatory Act
21    becomes effective shall not be required to reincorporate.
22(Source: P.A. 84-303.)
 
23    (215 ILCS 5/294.1)  (from Ch. 73, par. 906.1)
24    (Section scheduled to be repealed on January 1, 2017)
25    Sec. 294.1. Reinsurance.

 

 

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1    (a) A domestic society may enter into reinsurance
2transactions only in accordance with Article XI of this Code.
3    (b) A domestic society may reinsure the risks of another
4society in connection with a merger transaction with approval
5by the Director.
6(Source: P.A. 84-303.)
 
7    (215 ILCS 5/295.2 new)
8    Sec. 295.2. Maintenance of solvency.
9    (a) In the event a domestic society has an authorized
10control level event described in Section 35A-25 of this Code
11under circumstances the Director determines will not be
12promptly remedied, the Director may, in addition to all other
13actions required or permitted by subsection (b) of Section
1435A-25 of this Code, issue an order declaring the domestic
15society to be in hazardous condition and ordering that all
16steps be taken to remedy such condition pursuant to this
17Section.
18    (b) A domestic society may negotiate an agreement to
19transfer members, certificates, and other assets and
20liabilities of the society, in whole or in part, to another
21organization through merger, consolidation, assumption, or
22other means. Such transfer shall be concluded within the
23timeframe established by the Director and subject to approval
24by the Director. Such transfer agreement shall be deemed fully
25approved by the domestic society upon majority vote of its

 

 

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1board of directors. Such transfer shall be effective
2notwithstanding the provisions of Section 295.1 of this Code or
3any other law or regulation or laws of the domestic society
4requiring another form of notice to or approval by members,
5which shall be superseded by this Section.
6    (c) In the event of an agreement to transfer under this
7Section to an organization without a certificate of authority
8in this State, the Director may grant a limited certificate of
9authority to such organization, upon request, if the
10organization does not apply for and obtain a certificate of
11authority to transact business in this State. Such limited
12certificate of authority shall grant the organization
13authority to service the certificates following the transfer
14and fulfill all obligations owed to certificate holders but not
15to otherwise transact insurance business in this State.
16    (d) The board of directors of a domestic society may
17suspend or modify its qualifications for membership as
18necessary or appropriate to facilitate an agreement to transfer
19under this Section, notwithstanding the laws of the society, or
20any other law or regulation to the contrary.
 
21    (215 ILCS 5/297.1)  (from Ch. 73, par. 909.1)
22    (Section scheduled to be repealed on January 1, 2017)
23    Sec. 297.1. Benefits.
24    (a) A society may provide the following contractual
25benefits in any form:

 

 

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1        (1) Death benefits;
2        (2) Endowment benefits;
3        (3) Annuity benefits;
4        (4) Temporary or permanent disability benefits;
5        (5) Hospital, medical or nursing benefits;
6        (6) Monument or tombstone benefits to the memory of
7    deceased members; and
8        (7) Such other benefits as authorized for life insurers
9    and which are not inconsistent with this amendatory Act.
10    (b) A society shall specify in its rules those persons who
11may be issued, or covered by, the contractual benefits in
12subsection (a), consistent with providing benefits to members
13and their dependents. A society may provide benefits on the
14lives of children under the minimum age for adult membership
15upon application of an adult person.
16    (c) After the effective date of this amendatory Act of the
1798th General Assembly, a society shall provide an applicant for
18contractual benefits a disclosure statement that reads
19substantially as follows:
20    ". . . . . . .(name of the society) is licensed to do
21    business in the State of Illinois as a fraternal benefit
22    society. As such, it is not included in the Illinois Life
23    and Health Guaranty Association (otherwise known as the
24    Guaranty Association). This means that fraternal benefit
25    societies cannot be assessed for the insolvency of other
26    life insurers or other fraternal benefit societies. By law,

 

 

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1    a fraternal benefit society is responsible for its own
2    solvency. If there is an impairment of reserves, a
3    certificate holder may be assessed a proportionate share of
4    the impairment. This process is described in the
5    certificate issued by the society.".
6    The statement must appear immediately above the
7applicant's signature on the society's membership application
8or certificate or policy application, in upper case and bold
9type or boxed.
10(Source: P.A. 84-303.)
 
11    (215 ILCS 5/300.1)  (from Ch. 73, par. 912.1)
12    (Section scheduled to be repealed on January 1, 2017)
13    Sec. 300.1. The Benefit Contract.
14    (a) Every society authorized to do business in this State
15shall issue to each owner of a benefit contract a certificate
16specifying the amount of benefits provided thereby. The
17certificate, together with any riders or endorsements attached
18thereto, the laws of the society, the application for
19membership, the application for insurance and declaration of
20insurability, if any, signed by the applicant and all
21amendments to each thereof shall constitute the benefit
22contract, as of the date of issuance, between the society and
23the owner, and the certificate shall so state. A copy of the
24application for insurance and declaration of insurability, if
25any, shall be endorsed upon or attached to the certificate. All

 

 

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1statements on the application shall be representations and not
2warranties. Any waiver of this provision shall be void.
3    (b) Any changes, additions or amendments to the laws of the
4society duly made or enacted subsequent to the issuance of the
5certificate shall bind the owner and the beneficiaries and
6shall govern and control the benefit contract in all respects
7the same as though such changes, additions or amendments had
8been made prior to and were in force at the time of the
9application for insurance, except that no change, addition or
10amendment shall destroy or diminish benefits which the society
11contracted to give the owner as of the date of issuance.
12    (c) Any person upon whose life a benefit contract is issued
13prior to attaining the age of majority shall be bound by the
14terms of the application and certificate and by all the laws
15and rules of the society to the same extent as though the age
16of majority had been attained at the time of application.
17    (d) A society shall provide in its laws and its
18certificates that, if its reserves as to all or any class of
19certificates become impaired, its board of directors or
20corresponding body may require that there shall be paid by the
21owner to the society an assessment in the amount of the owner's
22equitable proportion of such deficiency as ascertained by its
23board, and that, if the payment is not made, either (1) it
24shall stand as an indebtedness against the certificate and draw
25interest not to exceed the rate specified for certificate loans
26under the certificates; or (2) in lieu of or in combination

 

 

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1with (1), the owner may accept a proportionate reduction in
2benefits under the certificate. However, in no event may an
3assessment obligation be forgiven, credited, or repaid by
4whatever means or however labeled by the society in lieu of
5collection or reduction in benefits, unless provided to all
6society members and approved in writing by the Director, except
7that the forgiveness or repayment of any assessments issued by
8a society that remain outstanding as of the date of this
9amendatory Act of the 98th General Assembly may be forgiven or
10repaid by any manner or plan certified by an independent
11actuary and filed with the Director to make reasonable and
12adequate provision for the forgiveness or repayment of the
13assessment to all society members. The society may specify the
14manner of the election and which alternative is to be presumed
15if no election is made. No such assessment shall take effect
16unless a 30-day notification has been provided to the Director,
17who shall have the ability to disapprove the assessment only if
18the Director finds that such assessment is not in the best
19interests of the benefit members of the domestic society.
20Disapproval by the Director shall be made within 30 days after
21receipt of notice and shall be in writing and mailed to the
22domestic society. If the Director disapproves the assessment,
23the reasons therefore shall be stated in the written notice.
24    (e) Copies of any of the documents mentioned in this
25Section, certified by the secretary or corresponding officer of
26the society, shall be received in evidence of the terms and

 

 

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

 

 

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1    (g) Benefit contracts issued on the lives of persons below
2the society's minimum age for adult membership may provide for
3transfer of control or ownership to the insured at an age
4specified in the certificate. A society may require approval of
5an application for membership in order to effect this transfer
6and may provide in all other respect for the regulation,
7government and control of such certificates and all rights,
8obligations and liabilities incident thereto and connected
9therewith. Ownership rights prior to such transfer shall be
10specified in the certificate.
11    (h) A society may specify the terms and conditions on which
12benefit contracts may be assigned.
13(Source: P.A. 84-303.)
 
14    (215 ILCS 5/315.6)  (from Ch. 73, par. 927.6)
15    (Section scheduled to be repealed on January 1, 2017)
16    Sec. 315.6. Application of other Code provisions. Unless
17otherwise provided in this amendatory Act, every fraternal
18benefit society shall be governed by this amendatory Act and
19shall be exempt from all other provisions of the insurance laws
20of this State not only in governmental relations with the State
21but for every other purpose, except for those provisions
22specified in this amendatory Act and except as follows:
23        (a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1,
24    132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136,
25    138, 139, 140, 141, 141.01, 141.1, 141.2, 141.3, 143, 143c,

 

 

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