Report Title:

Mutual Benefit Societies; Insurance Commissioner; Oversight

Description:

Provides the insurance commissioner with the necessary authority to oversee and regulate the administration of mutual benefit societies.

HOUSE OF REPRESENTATIVES

H.B. NO.

2811

TWENTY-THIRD LEGISLATURE, 2006

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to mutual benefit societies.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that mutual benefit societies hold a unique position in the State's economy and business community. Mutual benefit societies are organized and carried on for the primary benefit of their members and their beneficiaries and not for profit, and as a result, they are tax-exempt or receive preferential tax treatment. Mutual benefit societies are self-controlling and the operation of mutual benefit societies is in the sole and self-perpetuating control of the management. The management of a mutual benefit society does not have to answer to either shareholders or, in reality, to its members.

The purpose of this Act is to ensure that mutual benefit societies do operate for the primary benefit of members and their beneficiaries by increasing the supervisory authority of the insurance commissioner and authorizing the insurance commissioner to provide, as parens patriae on behalf of the members of mutual benefit societies, supervision over certain aspects of governance of the society.

SECTION 2. Section 432:1-202, Hawaii Revised Statutes, is amended to read as follows:

"§432:1-202 Constitution and bylaws; officers; government of society. (a) Mutual benefit societies promising or offering to pay death, sick, disability, or other benefits in an amount equal to or in excess of $25 [shall], subject to the approval of the commissioner, shall have the power to make a constitution and bylaws for the government of the society, the admission of [its] their members, the management of [its] their affairs, and the fixing and readjusting of the rates of contribution of [its] their members. The societies shall have the power to amend the constitution and bylaws and such other powers as are necessary to carry into effect the object and purpose of the society, but shall not suspend temporarily any part of [its] their constitution or bylaws as the same are governed by this article.

(b) Each mutual benefit society shall elect or otherwise appoint among its officers a president and a treasurer, who shall be residents of the State.

(c) After the organization of a society is completed and a certificate of compliance with law is granted by the commissioner, the society shall be governed by its [administrative] board [or body] of directors in accordance with its constitution and bylaws[.] and this article.

(d) Upon compliance with this article any society engaged in transacting business or operating in this State may exercise all of the rights conferred by this article, and all of the rights, powers, and privileges possessed by it under its constitution and bylaws, rules and regulations, or articles of incorporation or charter not inconsistent with this article.

(e) An aggrieved member of a mutual benefit society who has a concern relating to the governance of the society may apply to the commissioner for relief. The commissioner may order equitable relief to ensure that the mutual benefit society operates for the benefit of members, including reviewing the mutual benefit society's bylaws and constitution to determine whether the bylaws and constitution sufficiently protect the rights of the members. If the commissioner deems that the mutual benefit society's bylaws or constitution, in part or in whole, insufficiently protects the rights of its members, the commissioner may order the mutual benefit society to remove and revise the relevant provisions of the bylaws or constitution, as the commissioner deems appropriate.

(f) In exercising the authority established under this section, the commissioner may order a mutual benefit society to disclose to its members information such as executive compensation, political campaign involvement and contributions, whether through political action committees or directly, contracts with or other activity involving subsidiary companies and contracts with or other activity with companies or organizations providing administrative services to the mutual benefit society, and any other information that may otherwise be considered confidential.

(g) Notwithstanding any other provision of this article, if a mutual benefit society fails to comply with the requirements of this section, the commissioner may take appropriate action to ensure that the continued operation of the mutual benefit society will not be hazardous to its members. Appropriate action by the commissioner shall include any applicable penalty provided in section 432:1-105. In addition, if the mutual benefit society fails to comply with the requirements of this section within sixty days from being notified of a violation by the commissioner, the commissioner may impose the following penalties:

(1) Denial of an application for a certificate of authority or revocation of a previously issued certificate of authority if the mutual benefit society's bylaws or constitution insufficiently protects the rights of its members and the mutual benefit society fails to submit revised bylaws or a revised constitution acceptable to the commissioner;

(2) Revocation of the tax exemption provided to the mutual benefit society under subsection 432:1-403; and

(3) Prohibition of further soliciting and enrolling of members.

(h) Any order of the commissioner issued under this section shall be:

(1) Considered a final administrative decision; and

(2) Served upon the society by certified mail;

provided that the commissioner's order may be appealed pursuant to chapter 91."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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