Legislative & Regulatory Report

• Alaska

• California

• Illinois

• Nebraska

• Wisconsin

Alaska

Proposed Regulation: Suitability in Annuity Contract Transactions

The Division of Insurance proposes to adopt regulation changes in Title 3 of the Alaska Administrative Code, dealing with standards for settlements of health care claims and suitability in annuity contract transactions as follows:

• 3 AAC 26.110 is proposed to be amended by adding language establishing procedures for an insurer seeking to recover an overpayment to a health care provider or health care facility.
• 3 AAC 26.770 is proposed to be amended to make a technical change to conform with the National Association of Insurance Commissioners’ model regulations and to make clear that an employee of an insurer that transacts insurance, including making a recommendation to a consumer regarding the suitability of an annuity contract, must be licensed under AS 21.27.
• 3 AAC 26.775 - 3 AAC 26.789 are proposed to be amended to conform to the National Association of Insurance Commissioners’ model regulations as follows: Section 775 is amended to clarify and more specifically define the duties of an insurance producer and an insurer in an annuity contract transaction regarding the suitability of a product for a consumer.
  • Section 778 is added to provide for requirements for insurance producer annuity training.
  • Section 780 is amended to update and provide more detail in the requirements for retention of records pertaining to annuity contract transactions.
  • Section 789 is amended by adding definitions needed for the changes to the above referenced sections.

You may comment on the proposed regulation changes, including the potential costs to private persons of complying with the proposed action, by submitting written comments to the Division of Insurance; Attention: Katie Campbell; P.O. Box 110805; Juneau, AK 99811-0805; e-mail to Katie.Campbell@alaska.gov; or fax to (907) 465-3422. The comments must by received no later than 5:00 p.m., Alaska Daylight Time, April 19, 2011.

Oral or written comments also may be submitted at a hearing to be held on Tuesday, April 12, 2011 in the 17th floor conference room, 550 West Seventh Avenue, Suite 1760, (Atwood Building) Anchorage, Alaska and by teleconference from the DCCED Conference Room C, 333 Willoughby Street, Ninth Floor, Juneau, Alaska. The hearing will be held from 10:30 a.m. to 11:30 a.m., ADT, and may be extended to accommodate those present before 11:30 a.m. who may not have had the opportunity to comment. If you are unable to attend the meeting in person and would like to participate by teleconference, please contact Barbara Karl by fax at (907) 269-7898, by telephone at (907) 269-7919, or by e-mail at Barbara.Karl@alaska.gov no later than 5:00 p.m., April 7, 2011.

• Notice & proposed rule

California

Suitability in Annuity Transactions

The Insurance Commissioner proposes to adopt the regulations described below after considering comments from the public. The Commissioner proposes to add to Title 10, Chapter 5, Subchapter 7.5 of the California Code of Regulations the new Article 1.4: Suitability in Annuity Transactions, consisting of Section 2695.185 et seq. The regulations set forth standards to protect consumers from being sold unsuitable annuities. The regulations also set forth standards and responsibilities that both insurers and insurance agents must follow and fulfill in their sales of annuities.

The Commissioner will hold a public hearing on April 25, 2011, at 10:00 a.m., to provide all interested persons an opportunity to present statements or arguments, either orally or in writing, with respect to this regulation/ The hearing will take place at the Department of Insurance Administrative Hearing Bureau Hearing Room, 45 Fremont Street, 22nd Floor, San Francisco CA 94105

All persons are invited to submit written comments on the proposed regulations during the public comment period. The public comment period will end at 5:00 p.m. on April 25, 2011. Please direct all written comments to Jodi S. Lerner, Senior Staff Counsel, California Department of Insurance, 45 Fremont Street, 21st Floor, San Francisco, CA 94105; (415) 538-4122; Jodi.Lerner@insurance.ca.gov. 

All written materials must be received by the Insurance Commissioner, addressed to the contact person at her address listed above, no later than 5:00 p.m. on April 25, 2011.

• Notice

• Rule

Illinois

Use Of Retained Asset Accounts (Bulletin 2011-03)

Section 5/224(1) of the Illinois Insurance Code requires that with respect to life insurance (other than industrial, group or annuities and certain pure endowments) no such policy may be issued or delivered in this State unless interest shall accrue on the proceeds payable because of the death of the insured, from date of death, at a rate of 9% on the total amount payable or the face amount if payments are to be made in installments until the total payment or first installment is paid, unless payment is made within fifteen (15) days from the date of receipt by the company of due proof of loss. This provision need not appear in the policy, however, the company shall notify the beneficiary at the time of claim of this provision.

"Retained Asset Account" means any mechanism whereby the settlement of proceeds payable under a life insurance policy is accomplished by the insurer or an entity acting on behalf of the insurer depositing the proceeds into an account with check or draft writing privileges, where those proceeds are retained by the insurer pursuant to a supplementary contract not involving annuity benefits.

The use of a Retained Asset Account where the proceeds payable are held by the insurer may not be deemed to be either a total payment or a first installment paid to the insured for purposes of avoiding the 9% interest accrual in that the insurer retains custody and use of the funds. Moreover, the beneficiary who is to receive the proceeds can only be deemed to have consented to the retained asset account when there is full disclosure in the notification of the terms of the Retained Asset Account at the time of claim.

The Department will deem the use of such accounts as qualifying as a total payment avoiding the 9% interest accrual when there is compliance with the provisions of this bulletin.

Section 1. Explanation of Settlement Options

The insurer shall provide the beneficiary, at the time a claim is made, written information describing 9% interest accrual and the settlement options available under the policy and how to obtain specific details relevant to the options.

Section 2. Supplemental Contract

If the insurer settles benefits through a retained asset account, the insurer shall provide the beneficiary with a supplemental contract that clearly discloses the rights of the beneficiary and obligations of the insurer under the supplemental contract.

Section 3. Disclosures for Retained Asset Accounts to Beneficiaries

The insurer shall provide the following written disclosures to the beneficiary before the account is selected, if optional, or established, if not:

1. Payment of the full benefit amount is accomplished by delivery of the "draft book"/"check book."
2. One draft or check may be written to access the entire amount, including interest, ofthe retained asset account at any time.
3. Whether other available settlement options are preserved until the entire balance is withdrawn or the balance drops below the insurer’s minimum balance requirements.
4. A statement identifying the account as either a checking or draft account and an explanation of how the account works.
5. Information about the account services provided and contact information where the beneficiary may request and obtain more details about such services.
6. A description of fees charged, if applicable.
7. The frequency of statements showing the current account balance, the interest credited, drafts/checks written and any other account activity.
8. The minimum interest rate to be credited to the account and how the actual interest rate will be determined.
9. The interest earned on the account may be taxable.
10. Retained asset account funds held by insurance companies are not guaranteed by the Federal Deposit Insurance Corporation (FDIC), but are guaranteed by the State Guaranty Associations. The insurer must advise the beneficiary to contact the National Organization of Life and Health Insurance Guaranty Associations (www.nolhga.com) to learn more about the coverage limitations to his or her account.
11. A description of the insurer’s policy regarding retained asset accounts that may become inactive.

• Complete bulletin 

Nebraska

Use Of Retained Asset Accounts (Bulletin CB-125)

The Nebraska Department of Insurance has also issued a bulletin regarding the use of Retained Asset Accounts. It is identical to the bulletin cited above and for the many other states that have issued this bulletin.

• Complete document

Wisconsin

Proposed Rule: Readability and Electronic Access to Insurance Policies

Notice is hereby given that the Wisconsin OCI will hold a public hearing to consider the adoption of a new rule relating to readability and electronic access to insurance policies and affecting small business. The hearing will take place on May 3, 2011, at 10:00 a.m. at OCI, Room 227, 125 South Webster St 2nd Floor, Madison, Wisconsin. This proposed rule revises the current rules, s. Ins 6.07, Wis. Adm. Code, governing filing readability and access to electronic versions of policy forms.

Written comments can be mailed to Julie E. Walsh, Office of the Commissioner of Insurance, PO Box 7873, Madison WI 53707-7873; julie.walsh@wisconsin.gov. Comments may also be submitted through the Wisconsin Administrative Rule Web site at: http://adminrules.wisconsin.gov. The deadline for submitting comments is 4:00 p.m. on the 10th day after the date for the hearing stated in this Notice of Hearing.

Section 631.22 (2), Stats., requires insures to provide policies that are coherent, written in commonly understood language, legible, appropriately divided and captioned by its various sections and presented in a meaningful sequence. This proposed rule returns the administrative standards back to requirements previously used.

The proposed rule returns the readability score, Flesch or equivalent, back to 40 across product lines unless other provisions regulate the readability of the policy, i.e. Medicare supplement policy requirements. The proposed rule also repeals requirements related to use of active voice in policy forms, requirement to contain all exclusions and limitations within one section and replaces those provisions with language in place in 2010. Finally the proposed rule repeals the requirement that insurers make available an insured’s complete insurance policy and production timeframes. Statutory requirements already exist that require insurers to provide the insured or policyholder a copy of their policy. Although s. Ins 6.07 (9) provided more detail and delineated process for obtaining copies of policies OCI believes the existing laws are sufficient without further rule.

The rule is available at http://oci.wi.gov/ocirules.htm.