Increases the insurance commissioner's powers over mutual benefit societies.

A BILL FOR AN ACT

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, 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 either to shareholders or, in reality, to its members.

The purpose of this Act is to ensure that mutual benefit societies do in fact 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, equitable relief and legal remedies on behalf of aggrieved members of mutual benefit societies.

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 members, the management of its affairs, and the fixing and readjusting of the rates of contribution of its 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 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 in accordance with this article. The members of the board of directors shall be residents of this State and shall be members of the mutual benefit society, but shall not be employees of the mutual benefit society. No member of the board shall serve more than six years. All mutual benefit societies organized under this article shall comply with this requirement within six months of the effective date of this Act.

(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) Any member of a mutual benefit society that is aggrieved by the governance of the society may apply to the commissioner for relief. The commissioner may order any equitable relief, including, but not limited to, reviewing the society's bylaws and constitution to determine whether the bylaws and constitution sufficiently protect the rights of the members. In the event the commissioner deems the society's bylaws or constitution, in part or in whole, to insufficiently protect the rights of the members, the commissioner may order the society to remove and revise the relevant provisions of the bylaws or constitution, as the commissioner may deem appropriate under the circumstances.

(f) 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 is for the benefit of its members. Appropriate action by the commissioner includes 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 the violation by the commissioner, the following penalties may also apply:

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.