To Amend The Standard Nonforfeiture Law For Life Insurance; And To Require An Insurer To Pay Interest On Deferred Payment Of Any Cash Surrender Value Under Certain Policies.
Summary
HB1488 amends Arkansas’s Standard Nonforfeiture Law for Life Insurance to address how insurers handle deferred payment of a policy’s cash surrender value when a policyholder surrenders the policy. Under the bill, an insurer may still defer payment for up to six months after demand and surrender of the policy, but the policy’s death benefit must remain in force until the payment is made.
The bill also adds a new consumer-protection feature: if the insurer does not pay the cash surrender value within 30 days after demand, it must pay interest on that amount at the prime rate published in the Wall Street Journal, beginning on the date of surrender and continuing until the cash surrender value is paid within the six-month deferral period. In practical terms, the measure creates a financial incentive for timely payment and compensates policyholders for delays.
Impact
HB1488 changes Arkansas Code § 23-81-203(c), which governs deferred payment rights under the Standard Nonforfeiture Law for Life Insurance. The bill preserves insurers’ existing ability to delay payment for up to six months, but it requires continued death-benefit coverage during the deferral period and imposes an interest obligation on delayed cash-surrender payments after 30 days. The affected parties are life insurers and policyholders who surrender life insurance policies for cash value, especially consumers waiting for payout after surrender.
Sentiment
The bill appears to have been broadly supported and noncontroversial. It passed the House 100-0, the Senate 33-0, and later received Senate concurrence on an amendment by an 81-13 vote, indicating strong overall legislative approval. The voting record suggests the core policy goal—protecting policyholders while preserving insurer deferral rights—was generally acceptable to both chambers.
Contention
There is little evidence of major disagreement in the available record, but the only notable point of contention is the balance between insurer flexibility and consumer compensation. The bill preserves the six-month deferral period for insurers, which may be important to the insurance industry, while requiring interest payments after 30 days, which benefits policyholders. The Senate amendment and the 81-13 concurrence vote suggest some members may have had concerns about the amendment or the precise mechanics of the interest requirement, but the measure still advanced with substantial support.