Chapter 0181 - 511R - H Ver of SB1243

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-108, Arizona Revised Statutes, is amended to read:

START_STATUTE20-108. Types of insurers excepted

No provision of This title applies does not apply with respect to:

1. Hospital and medical service corporations, except as stated in chapter 4, article 3 of this title.

2. Fraternal benefit societies and associations or orders as defined in section 20‑861, except as stated in chapter 4, article 4 of this title.

3. Extended warranty insurers who comply with the bond requirements of section 20‑108.01. For the purposes of this paragraph "extended warranty insurer" means any insurer as otherwise defined by this title that does not manufacture, sell or service radio, television or sound reproduction equipment and that:

(a) For a premium charged, not greater than twenty dollars per annum, nor greater than a three‑year term, provides a nonrenewable warranty, guaranty or service contract on radio, television or sound reproduction equipment in addition to, or as an extension of, any warranty, guaranty or service provided by the manufacturer of such equipment.

(b) Is not otherwise authorized to transact property or casualty insurance business in this state or any other governmental jurisdiction.

(c) Is not owned or controlled in any degree nor to any extent by a person, persons or business otherwise authorized to transact property or casualty insurance business in this state or any other state or jurisdiction.

(d) Has gross sales in this state not exceeding one hundred thousand dollars annually.

(e) Has maximum contractual contingent liability not exceeding three hundred thousand dollars in this state. END_STATUTE

Sec. 2. Section 20-861, Arizona Revised Statutes, is amended to read:

START_STATUTE20-861. Definitions

In this article, unless the context otherwise requires:

1. "Association or order" means any association or order that is a non-profit military mutual aid association, whose members are officers or enlisted, regular or reserve, active, retired or honorably discharged members of the armed forces or sea services of the United States, and whose principal purpose is to provide life insurance and annuities to its members and their dependents or beneficiaries.

1. 2. "Benefit contract" means an agreement for the provision of benefits.

2. 3. "Benefit member" means an adult who is a member of a fraternal benefit society and who is designated by the laws or rules of the society to be a benefit member under a benefit contract.

3. 4. "Certificate" means a document that is issued as written evidence of the benefit contract.

4. 5. "Fraternal benefit society" means a society, order or supreme lodge without capital stock, including an incorporated or unincorporated society that is exempt under section 20‑893, that is conducted solely for the benefit of its members and their beneficiaries, is not for profit, operates on a lodge system with a ritualistic form of work, has a representative form of government and provides benefits according to this article.

5. 6. "Laws" means the articles of incorporation, constitution and bylaws of the society.

6. 7. "Lodge" means a subordinate member of the society, including any camp, court, council, branch or other designated unit.

7. 8. "Premiums" means rates, dues or other required contributions that are payable under the certificate.

8. 9. "Rules" means the rules, regulations and resolutions that are adopted by the supreme governing body or board of directors and that are intended to apply to the members of the society.

9. 10. "Society" means a fraternal benefit society. END_STATUTE

Sec. 3. Section 20-893, Arizona Revised Statutes, is amended to read:

START_STATUTE20-893. Exemption of societies and associations and orders from insurance laws

A. Except as otherwise provided by this article, The following fraternal benefit societies and associations or orders are exempt from compliance with this article and all other insurance laws of this state:

1. Fraternal benefit societies that were doing business in this state on January 1, 1955 and that provide benefits exclusively through local or subordinate lodges.

2. Fraternal benefit societies that admit to membership only those persons who are engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, and that insure only their own members, their families, the descendants of members and the ladies' auxiliaries to those societies.

3. Any association or order, with respect to the sale of life insurance and annuities, only if any policy or contract issued pursuant to the exemption prescribed in this subsection contains a conspicuously stamped or written notice in bold type that states:

This policy is issued by an association or order that does not possess a certificate of authority from the director of the Arizona department of insurance. If the association or order that issued this policy becomes insolvent, members or claimants will not be eligible for insurance guaranty fund protection pursuant to title 20, Arizona Revised Statutes.

B. Each association or order that intends on doing business in this state and that is not licensed under this title shall provide proof satisfactory to the department that it is a nonprofit organization that is exempt from taxation under section 501(c) of the internal revenue code and is subject to the following:

1. On or before June 1 of each preceding year, each association and order shall file with the director a true and complete statement of its statutory financial condition, transactions and affairs for the preceding calendar year, audited by an independent certified public accountant together with an actuarial memorandum issued by a qualified actuary pursuant to section 20‑696.04, and shall pay a filing fee at the determination of the director. The statement and actuarial memorandum are approved thirty days after filing unless the director, within the thirty day period, has issued an order affirmatively approving or disapproving the filing.

2. The director may require an association or order to file financial statements on a quarterly basis and may require an association or order to file financial statements on other than an annual or quarterly basis due to factors or trends affecting insurers writing a particular class or classes of business or because of changes in the management or financial or operating condition of the association or order.

3. If, in the opinion of the director, an association or order does not possess sufficient capital and surplus based on eligible assets pursuant to chapter 3, article 2 of this title to meet its liabilities, the director may order the association or order to increase its capital or surplus, or both, to amounts the director deems sufficient. If the association or order fails to comply with the order, the director may order the association or order to cease and desist from assuming any additional liabilities in this state until such time as the association or order is able to comply with the capital and surplus requirements.

B. C. Except for a society prescribed by subsection A, a fraternal benefit society or association or order that is exempt from the requirements of this article pursuant to this section shall not give to or allow any person any compensation for procuring new members.

C. D. A society that is organized and incorporated before January 1, 1955, that provides for benefits in case of death or disability resulting solely from an accident and that does not obligate itself to pay natural death or sick benefits may secure a certificate of authority under this article if it was authorized before January 1, 1955. The society has all of the privileges and is subject to all of the provisions of this article, except that the provisions of this article relating to medical examinations, standard provisions, prohibited provisions, valuations of certificates and incontestability do not apply.

D. E. The director by examination or otherwise may require any information that will enable him the director to determine if the society or association or order is exempt from this article. END_STATUTE