High-Risk Insurance Pool Now Open for
Applications
One of the first components of the health care reform law is now
open for consumers to apply for coverage, State Insurance
Commissioner Jim Ridling said.
"This is a federal program that we do not administer,"
Commissioner Ridling said. "But it is important that we share this
information for interested Alabamians, so they can visit the web
site or call the toll-free number of the program to see if it will
benefit them."
To qualify for the Pre-Existing Condition Insurance Plan:
- You must be a citizen or national of the United States or
lawfully present in the United States. You must provide a copy
of a document that confirms your citizenship, such as a copy of
your U.S. Passport, a copy of your birth certificate, a copy of
your certificate of citizenship, or a copy of your
naturalization certificate.
- You must have been uninsured for at l0east the last six
months.
- You must have had a problem getting insurance due to a
pre-existing condition.
The easiest access for the plan is to visit http://www.pcip.gov.
The telephone number is 866-717-5826. Help via telephone is
available Monday through Friday, 7 a.m.-10 p.m., (Central Time).
The United States Department of Health and Human Services, which
is operating the plan, says the plan will cover primary and
specialty care, hospital care and prescription drugs. The rates for
the plan will be announced July 15, but HHS estimates that the plan
will cost between $514 and $628 per month for a 50 year old. Those
who apply and are accepted prior to July 15 will be covered
effective August 1. Those who apply after the 15th of any month will
not have coverage until the first day of the second month following.
Applications, for now, must be downloaded from the web site and
mailed to: National Finance Center Pre-Existing Condition Insurance
Plan P.O. Box 60017 New Orleans, LA 70160-0017. An application that
can be submitted online will be available August 1, according to HHS.
The plan will be in effect until December 31, 2013, giving way to
the health insurance exchange system that will be in effect on
January 1, 2014.
Alabama Insurance Day 2010
Thursday, September 30, 2010 – Bryant Conference Center,
Tuscaloosa, Alabama
Alabama Insurance Say, I-Day, is a day devoted to the
professionals who work in and with those in the insurance industry.
I-Day includes topics from outstanding speakers, updates from the
Alabama Department of Insurance, breakout sessions on Life/Health
and Property/Casualty issues. Up to six hours of Continuing
Education Credit will be available, along with the networking
opportunities.
Lunch speakers for this year’s event will be former quarterbacks
Tyler Watts from the University of Alabama and Stan Waite from
Auburn University.
Mark your calendar and watch for more details at
http://www.aldoi.gov/.
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Proposed Regulations
The Alaska Division of Insurance is planning to make changes to
existing regulations as listed below. Interested persons may send
comments on the following rule changes by close of business July 9,
2010 to the Division of Insurance; Attention: Gloria Glover; 550
West Seventh Avenue, Suite 1560; Anchorage, AK 99501-3567; fax to
(907) 269-7912; or e-mail to
Gloria.Glover@alaska.gov.
Derivative Investment Instruments, Valuation of Life Insurance
Policies, and Mortality Tables
The Division of Insurance proposes to adopt regulation changes in
Title 3 of the Alaska Administrative Code, primarily dealing with
derivative investment instruments, valuation of life insurance
policies, and mortality tables as follows:
- 3 AAC 21.213, 3 AAC 21.271, 3 AAC 21.365, and 3 AAC 21.399
are proposed to be added or amended to address the requirements
that must be met for an insurer to engage in a derivative
investment transaction and to define terms regarding derivative
investments.
- 3 AAC 21.835 is proposed to be amended to clarify the
disclosure of interim results by an appointed actuary in the
actuarial opinion and memorandum.
- 3 AAC 21.900 - 3 AAC 21.949 are proposed to be added to
establish standards for the valuation of life insurance policies
and to define terms used in these sections.
- 3 AAC 28.620, 3 AAC 28.630, and 3 AAC 28.635, are proposed
to be amended or added to update the mortality tables used by
life insurers and the requirements for their use.
- 3 AAC 31.210 is proposed to be amended to repeal the
retaliatory filing fee requirement for insurers.
Annual Audits
The Division of Insurance proposes to adopt regulation changes in
Title 3 of the Alaska Administrative Code, dealing with annual
audits of financial statements and a management’s report of internal
control over annual audited financial reporting for admitted
insurers as follows:
- 3 AAC 21.705 is proposed to be amended to clarify when and
how a foreign or alien insurer is exempt from filing
requirements of an audited financial statement.
- 3 AAC 21.775 is proposed to be added to outline who must
file and the requirements necessary to be in a management’s
report of internal control over financial reporting.
- 3 AAC 21.799 is proposed to be amended to add definitions
for terms used in section 775 referenced above.
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Installment Plans for Payment of
Premium
(Bulletin 4-2010)
Insurance companies, agencies, brokers and producers may offer
installment payment plans to policyholders for the payment of
premium. However, except for those fees specifically allowed by Ark.
Code Ann. § 23-66-308, such fees must be included in any rate filing
made by the insurer with this Department pursuant to Ark. Code Ann.
§§ 23-67-201, et seq. The Commissioner will disapprove any
installment fee that is excessive or exceeds the actual cost of
processing and servicing the installment payment plan. The charging
of such a fee absent the requisite filings pursuant to Ark. Code
Ann. §§ 23-67-201, et seq., would constitute a violation of Ark.
Code Ann. § 23-66-310(b)(1), which prohibits collection of a fee in
excess of the premium rate as filed and approved, where necessary,
by the Commissioner or a fee that exceeds the premiums and charges
specified in the policy.
If an installment payment fee is charged and the fee was not
specified in the policy itself, except to the extent provided in an
applicable filing with this Department, the fee could be a violation
of Ark. Code Ann. § 23-66-308. Subsection (a) of that statute
prohibits the provision of credit or any other benefit not specified
in the policy as an inducement to insure.
This bulletin is not intended, and should not be interpreted, to
prohibit any charges allowable pursuant to Ark. Code Ann. §
23-66-310. If you have any questions regarding this bulletin, please
contact the Department’s Legal Division at (501) 371-2820.
Rule 82: Annuity Training
(Bulletin 5-2010)
Section 9 of Rule 82 requires all producers marketing annuities
in Arkansas to complete a four (4) hour annuity training course by
July 15, 2010, and annually thereafter. This provision applies to
resident and non-resident producers.
The training requirement was added to the NAIC model regulation
on suitability in annuity transactions. Since our adoption of Rule
82, other states have also adopted the NAIC model. Some states have
also added new training requirements and others are considering
adding similar provisions.
The Department has become concerned that our training requirement
will not be consistent with the requirements set forth in other
states. In order to be more consistent with other states and include
a better annuity training requirement, the Department feels that it
should revise this Section of Rule 82. Since this process may take
several months, the Department will no longer enforce the provision
of Section 9 of Rule 82. Until Rule 82 is revised, the four (4) hour
annual annuity training will no longer be required.
Any questions regarding this Bulletin should be directed to the
Legal Division of the Arkansas Insurance Department at
insurance.legal@arkansas.gov.
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Notice of Intent to Amend Regulations
The Connecticut Insurance Commissioner proposes to amend a
regulation defining standards and the Insurance Commissioner's
authority for insurance companies deemed to be in a hazardous
financial condition.
Statement of Purpose: To amend regulations that set forth
standards and the Insurance Commissioner's authority for insurance
companies deemed to be in a hazardous financial condition.
All interested persons are invited to submit written data, views,
or arguments in connection with the proposed action within thi11y
days following publication of this notice in the Connecticut Law
Journal to the State of Connecticut, Insurance Department,
Attention: Jon E. Arsenault, Esq., P.O. Box 816, Hartford, CT
06142-0816.
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Notice of Proposed Rulemaking:
Senior-Specific Certifications
The Commissioner of the Department of Insurance, Securities, and
Banking hereby gives notice of intent to establish a new chapter 58
of Title 26A and a new section 169 of chapter 1 of Title 26B, of the
District of Columbia Municipal Regulations. The new chapter will set
forth certain guidelines and prohibitions regarding the use of
senior-specific certifications, designations, and credentials by
insurance producers, and investment advisers and investment adviser
representatives.
This chapter shall apply to any solicitation, sale, or purchase
of, or advice made in connection with, a life insurance or annuity
product by an insurance producer. The use of a senior-specific
certification or professional designation by any person in
connection with the solicitation, sale, or purchase of life
insurance or annuity products that indicates or implies that the
insurance producer has special certification or training in advising
or servicing seniors or retirees, in such a way as to mislead,
constitutes an unfair and deceptive act or practice in the business
of insurance.
Persons desiring to comment on these proposed rules should submit
comments in writing to Gennet Purcell, Commissioner, Department of
Insurance, Securities, and Banking, 810 First Street, N.E., Suite
701, Washington, D.C. 20002.
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Bulletins
The Idaho Department of Insurance has issued the following
bulletins.
CLICK HEREfor the complete bulletins.
Senate Bill 1327: Annuity Sales to Consumers – Disclosures
(Bulletin 10-06)
The 2010 Idaho Legislature enacted Senate Bill No. 1327 creating
new disclosure requirements for annuity sales to consumers. The new
law, Idaho Code Section 41-1941, takes effect July 1, 2010, and will
affect any person involved in selling annuity contracts where the
contract owner is a resident of Idaho. Persons involved in the sale
of annuity products should carefully review this law.
-
CLICK HERE for the full text of Senate Bill No. 1327.
A key part of the disclosure requirement is providing annuity
applicants a buyer’s guide in a form prescribed by the director. The
purpose of this bulletin is to inform carriers and producers that
the form prescribed by the director is that of the most current
version of the NAIC Buyer’s Guide to Fixed Deferred Annuities with
Appendix for Equity-Indexed Annuities.
The Department may develop additional procedures and rules to
implement the requirements of the new law. Additional information
will be made available on the
Department’s
website.
Rate of Interest on Deferred Payment of
Cash Surrendered Benefits, Effective July 1, 2010
(Bulletin 10-07 Rescinds Bulletin 09-07)
Effective July 1, 2010, insurers must pay a minimum of 5.375% on
deferred payment of cash surrender values pursuant to Idaho Code
Sections 41- 1927(3) and 41-1927A(3)(b). The 5.3755% interest rate
is computed in accordance with Idaho Code § 28-22-104 and is
effective from July 1, 2010 through June 30, 2011. The Idaho State
Treasurer will announce a new rate by July 1st of each succeeding
year.
An insurer that has not tendered payments in satisfaction of a
cash surrender request within thirty days of receipt of the request
will be deemed to have elected to defer payment of the cash
surrender benefit. The thirty day period for processing cash
surrender requests will begin upon the date the request was received
by the insurer or its authorized agent or representative. An insurer
that elects to defer payment of a cash surrender benefit pursuant to
Idaho Code Sections 41-1927 or 41-1927A is required to pay interest
from the date on which the cash surrender request is received.
2010 Insurance Legislation and Rules Summary
The Idaho Department of Insurance has prepared a summary of
insurance-related legislation passed during this year’s session. All
legislation takes effect July 1, 2010 unless otherwise noted.
CLICK HERE for the full list, which includes direct links to all
legislation cited.
Department of Insurance Legislation:
House Bill 424 - Repeals Idaho Code Section 41-1830, which
makes life insurance proceeds the separate property of a married
woman. Last year, the Idaho Supreme Court ruled this old code
section to be unconstitutional because it did not extend similar
protections to men.
House Bill 431 - Clarifies that financial reports filed with
the Department by self-funded health plans subject to regulation
under Chapters 40 and 41 of Title 41, Idaho Code, are records
open to inspection by the public. It also makes examination
reports relating to title agents records open to inspection by
the public. The changes are to Chapters 27, 40, and 41, of Title
41, Idaho Code, and will take effect July 1 of this year.
Other Insurance Related Legislation for 2010:
HB593a -Amends Idaho Code § 41-1839 to allow an award of
attorney fees in arbitration proceedings involving disputed
insurance claims.
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Prohibition on Discretionary Clauses
(Bulletin 2010-05)
This advisory provides notice to all entities and individuals
regulated by this Department that are engaged in the issuance of
accident, health or disability insurance policies in this State.
Insurance regulations prohibit accident, health, and disability
insurance policies issued in Illinois from containing provisions
reserving discretion in the insurer to interpret the terms of the
contract.
Section 2001.3 of Title 50 to the Illinois Administrative Code
(50 Ill. Admin. Code 2001.3) provides as follows:
Section 2001.3 Discretionary Clauses Prohibited
No policy, contract, certificate, endorsement, rider
application or agreement offered or issued in this State, by a
health carrier, to provide, deliver, arrange for, pay for or
reimburse any of the costs of health care services or of a
disability may contain a provision purporting to reserve
discretion to the health carrier to interpret the terms of the
contract, or to provide standards of interpretation or review
that are inconsistent with the laws of this State.
It has come to the attention of the Department that, with respect
to insurance policies originally issued before the July 1, 2005
effective date of the regulation, certain insurers continue to
exercise discretionary clauses against their policyholders.
Typically this is done under the theory that the regulation has no
retroactive application. Such conduct does not comply with the law
in that it does not properly take into account the renewal of the
policy.
Policies offering accident, health and disability benefits
typically are renewed annually. The Department’s regulation
prohibiting discretionary clauses was adopted five years ago next
month. It is therefore unlikely that there are any policies in
existence that have not been either renewed or issued subsequent to
the effective date of the regulation.
The regulation prohibiting discretionary clauses is accordingly
applicable to all currently issued and outstanding accident, health,
and disability insurance policies in that all such policies will
have either been issued or renewed since the effective date of the
regulation. Insurers who do not comply with the absolute prohibition
on discretionary clauses contained in 50 Ill. Admin. Code 2001.3
will be held accountable and subject to regulatory action.
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Electronic Filing Requirements
(Bulletin 10-01)
To: Preneed Sellers, Sales Agents and Perpetual Care
Cemeteries
The purpose of this bulletin is to respond to concerns raised
about the on-line filing requirements recently implemented for
filings made pursuant to Iowa Code chapters 523A and 523I. The
Division is aware that the new on-line filing requirements were
difficult for a number of businesses and individuals. This bulletin
is intended to provide flexibility in the delivery methods. First,
licensees may submit their annual reports, license applications and
license renewals to the Division electronically without filing
on-line. Second, licensees may submit fee amounts by mailing a check
to the Division.
Until further notice, licensees may submit documents (annual
reports, license applications and license renewals) on a Compact
Disc capable of data storage and accessible by a computer (commonly
known as a "CD") or a Digital Versatile Disc capable of data storage
and accessible by a computer (commonly known as a "DVD"). Licensees
may also submit documents by electronic mail. Preneed Sellers and
Sales Agents should send emails to
Rhonda.Smith@iid.iowa.gov
and Perpetual Care Cemeteries should send emails to
Lisa.Lann@iid.iowa.gov.
The on-line filing system will continue to be available for those
who wish to utilize that delivery method.
If you have any questions about this bulletin, please call Dennis
Britson at the Iowa Insurance Division at 515-281-5705 or email
dennis.britson@iid.iowa.gov.
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High Risk Pool Launches July 1
Information on the Pre-Existing Condition Insurance Plan (also
known as the temporary federal high-risk pool), which is part of the
Patient Protection and Affordable Care Act, will be available
beginning July 1. It is anticipated that the plan’s Web site (www.healthcare.gov)
will be launched at that time. An application and information on the
plan, including cost and benefits, will be available on the Web
site.
To be eligible for the plan, a person must have a pre-existing
medical condition and have been uninsured for at least six months.
Other eligibility information will be available on the Web site.
This new plan will run parallel to the state’s existing high risk
pool, Kentucky Access, and does not replace that program.
The new plan will serve as a bridge between now and 2014 when the
health exchanges are in place. In 2014, insurers will not be able to
deny coverage to anyone based on medical condition. It is
anticipated that coverage in the new pool will begin September 1.
Those interested should apply as soon as possible.
Additional information will be available at
http://insurance.ky.gov/.
Insurance Legislation Adopted by
the·2010 Kentucky General Assembly (Bulletin 2010–05)
The Kentucky Department of Insurance has prepared a comprehensive
list of insurance-related legislation from the 2010 General
Assembly.
The bulletin is for information purposes only and does not amend
or interpret provisions of the Kentucky revised statutes or the
Kentucky administrative regulations. The complete and accurate text
of the law can be secured when the 2010 acts of the Kentucky general
assembly are published in the summer of 2010. Unless otherwise
noted, the effective date of the legislation is July 15, 2010.
House Bill 126 - Financial Examination of Insurers;
Disclosure Requirements for Life Insurance
With regard to the financial examination of insurers, this bill
amends the following statutes:
KRS 304.2-210(2) is amended to allow for the examination of
each domestic insurer not less than every five (5) years rather
than every three (3) years;
KRS 304.2-320 is amended to require entities seeking a
merger, acquisition or other change of control to be responsible
for the cost of the public hearing notice;
KRS 304.3-242 is amended to adopt the updates to the NAIC
Property and Casualty Actuarial Opinion Model Law. The primary
updates include the requirement that insurers file an actuarial
opinion summary in addition to the statement of actuarial
opinion; and
KRS 304.3-180 is amended to require insurers to rotate
accountants every five (5) years as opposed to seven (7) years.
Additionally, this bill creates a new statute in KRS 304,
Subtitle 15 to require life insurance companies to provide a
disclosure to insureds who are at least 60 years old and
insureds that are known by the insurer to be chronically or
terminally ill. The bill also permits the Department of
Insurance to promulgate a regulation to exempt life insurance
policies of less than $100,000 from the notice requirements.
House Bill 278 - Local Government Premium Taxes
This bill makes technical clarifications to HB 524 enacted during
the 2008 Regular Session. Specifically, the bill:
Amends KRS 91A.0804 to clarify that the exclusive remedy
began on July 15, 2008 (the effective date of HB 524);
Amends KRS 91A.0810 to clarify that the disclosure notice is
applicable to new business in addition to renewal business; and
Amends KRS 304.10-180 to make the disclosure requirements
applicable to surplus lines brokers.
Additionally, the bill includes language to exempt from local
government premium taxes premiums paid by non-profit
self-insurance groups whose membership consists of cities,
counties, charter county governments, urban-county governments,
consolidated local governments, school districts, or any other
political subdivisions of the Commonwealth. This exemption is
applicable for the fiscal year beginning July I, 2010 and
expires June 30, 2012.
House Bill 393 - Public Protection Cabinet Reorganization
This bill ratified Executive Order 2009-535, which created the
Department of Insurance, headed by a Commissioner, and abolished the
Office of Insurance, headed by an Executive Director.
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Life Insurance Policyholder Notice
(Bulletin 374 - supersedes Bulletin 370)
The Maine Viatical and Life Settlements Act requires the
Superintendent of Insurance to develop an informational brochure to
apprise consumers of their rights as owners of life insurance
policies. Life insurers must provide copies of this brochure to
policy owners in certain situations. This requirement applies only
to individual life insurance. Group life insurance policies are not
subject to this notice requirement.
Individual Life Insurance Notice
Life insurers must provide copies of this brochure to owners of
individual life insurance policies when the insured is 60 years of
age or older, or is known by the insurer to be terminally ill or
chronically ill, and:
(1) the policyowner has requested the surrender of the policy
in whole or in part;
(2) the policyowner has requested an accelerated death
benefit; or
(3) the insurer sends an initial notice that the policy may
lapse.
Insurers must begin providing copies of the informational
brochure to all policyholders described in the statute no later than
September 1, 2010. The brochure is Attachment 1 to this Bulletin.
-
CLICK HERE for the brochure. Insurers may reproduce the
brochure as necessary, and may download copies.
Insurers that wish to provide standardized notice on a multistate
basis may use an alternative notice, Attachment 2 to this Bulletin,
based on the Washington Life Settlement Regulation, WAC 284-97-910,
which may be downloaded at:
The statute refers to "notice to the policyowner that there may
be alternative transactions available, including a copy of the
superintendent’s brochure." The Bureau of Insurance has received
questions as to whether this requirement contemplates some
additional notice above and beyond the brochure. Sending the
brochure is sufficient to satisfy the notice requirement. No cover
letter or other additional information is required.
The Bureau will be conducting rulemaking to further clarify the
statutory notice requirements discussed above. In the interim, it is
the expectation of the Bureau that an insurer will send proper and
timely notice to the owner of any individual life insurance policy
with death benefits over $100,000 when the insured is 60 years of
age or older, or is known by the insurer to be terminally ill or
chronically ill, and: a. the policyowner has requested the surrender
of the policy in whole or in part or has requested an accelerated
death benefit; or b. the policyowner has failed to pay premium when
due.
Further, life insurance for the purposes of this notice
requirement does not include credit life or benefits limited to
death by accident or other specified causes. Timely notice means
that the policyowner has at least one month after the notice is sent
in which to maintain or reinstate the policy or to rescind the
policy surrender or accelerated death benefit, without fees or
penalties.
-
CLICK HERE for the bulletin, which includes the attachments.
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Proposed Regulation - Complaint
Handling Standards
The Maryland Insurance Administration has prepared a draft
proposed regulation setting forth certain procedures for handling
complaints. Please review and submit your comments, if any, in
writing to Brenda Wilson, Associate Commissioner, Life and Health,
by email to
bwilson@mdinsurance.state.md.us by close of business on Monday,
August 2, 2010. This chapter applies to carriers that issue or
deliver insurance policies or health maintenance contracts in
Maryland.
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Insurance Producer Variable
Life/Variable Annuities Line of Authority (Bulletin 2010-14-INS)
This bulletin clarifies how the Office of Financial and Insurance
Regulation (OFIR) processes insurance producer licensing
applications for the Variable Annuities (VA) line of authority. It
supersedes both Michigan Insurance Bureau Bulletin No. 1990-04,
issued May 25, 1990, and Bulletin 2009-15-0FIR, issued November 17,
2009.
In Michigan variable life insurance and variable annuities are
considered insurance products and regulated as such, despite their
status as securities under federal law. OFIR processes all insurance
producer licensing applications through the National Insurance
Producer Registry (NIPR). Since April 4, 2008, the V A line of
authority, which encompasses variable life and variable annuities,
has been issued to insurance producers as a separate line of
authority pursuant to Section 1206(1)(e) of the Insurance Code, 1956
PA 218 as amended, MCL 500.1206(1)(e). All resident and non-resident
applicants for the V A line of authority must first register or be
registered with the Financial Industry Regulatory Authority (FINRA),
http://www.finra.org/ (formerly known as NASD) and have
successfully completed the FINRA Series 6 or 7 examination.
Any resident insurance producer seeking to hold the VA line of
authority is also required to pass the Michigan variable annuities
examination, but is no longer required, as previously specified in
Bulletin 1990-04, to hold a basic life qualification as a
precondition to seeking a VA line of authority. However, a producer
who intends to sell life insurance other than variable life
insurance must obtain the life line of authority in addition to the
VA line of authority. OFIR does not require pre-licensing education
for the VA line of authority. However, continuing education
requirements under MCL 500.1204c do apply to the VA line of
authority.
A non-resident insurance producer applicant, who holds a VA line
of authority in his /her home state, may apply for a reciprocal
Michigan VA line of authority. A non-resident insurance producer
applicant from a state that issues the life line authority only must
pass the Michigan variable annuities examination, register with
FINRA as specified above, and apply for a Michigan VA line of
authority before selling any variable products in Michigan.
Since August 3, 2009, all resident and non-resident insurance
producers have been required to take the Michigan variable annuities
examination prior to receiving the V A line of authority or the
insurance producer must have taken an examination in another state
and maintain a reciprocal license in good standing.
Any questions regarding this bulletin should be directed to:
Office of Financial and Insurance Regulation Licensing and Product
Review Division Insurance Licensing Section 611 West Ottawa Street
P.O. Box 30220 Lansing, Michigan 48909-7720; Toll Free: (877)
999-6442.
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Stranger Originated Annuities [STOAs]
(Bulletin 10-14)
Fixed and variable annuities are vital long term insurance
products largely intended to protect individuals from the financial
risks associated with longevity - - running out of money saved for
retirement. As such, these products offer many valuable guaranteed
benefits, including minimum lifetime income guarantees.
Variable annuities also provide guaranteed death benefits at
relatively low prices. The low price is achievable, in part, because
variable annuities have historically attracted healthy individuals
(i.e., those least likely to be motivated by an ancillary minimum
death benefit guarantee).
However, in the case of Stranger Originated Annuities (STOAs), an
insurance producer and/or "investor" may offer a stranger a fee for
the use of their identity as the measuring life, or annuitant, in
the variable annuity. Consumers who are terminally ill or in
extremely poor health are targeted for such transactions, and the
annuities are, in effect, being used as a wagering contract that
pays off on the death of the vulnerable annuitant.
These schemes may go undetected because the producers/investors
take deliberate steps to ensure that the dollar amount of annuity
premium falls below the insurer’s underwriting guidelines. Often, a
trust or organization is named as beneficiary of the death benefit
in order to hide the identity of the beneficiary. STOAs hurt
contract holders and insurers because the wagering profits realized
by the producers/investors will eventually be passed on to other
contract holders in the form of higher annuity fees and/or weaker
guarantees. These and other similar schemes should be void as a
matter of public policy, and the Department is encouraging companies
to take a proactive stance in helping to eliminate them.
The Department believes that insurers currently have the ability
to eliminate STOAs without the need for any new legislation or
regulations. P.L. 2008, Chapter 88 (codified at N.J.S.A. 17B:25-34
et seq.), effective April 1, 2009, requires individuals selling
individual annuities to make reasonable efforts to obtain and record
information about the suitability of the product for the solicited
consumer and the consumer’s acknowledgement of the information
recorded. The Unfair Trade Practices Act at N.J.S.A. 17:29B-1 et
seq. prohibits any person from engaging in unfair or deceptive acts
or practices in the business of insurance. The New Jersey Insurance
Fraud Prevention Act at N.J.S.A. 17:33A-1 et seq., allows for the
imposition of both civil and criminal penalties in legal actions for
insurance fraud violations commenced by the New Jersey Insurance
Fraud Prosecutor’s Office established pursuant to N.J.S.A.
17:33A-16.
Address questions regarding this Bulletin to the Department’s
Life & Health Division at 609-292-5427 or via e-mail to
neil.vance@dobi.state.nj.us.
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Bonus Recapture from Death Benefit
Proceeds Is No Longer Permitted (Circular Letter 8-2010)
The purpose of this Circular Letter is to clarify for insurers
that as a result of amendments to Insurance Law § 4223(c)(1),
insurers may not "recapture" any bonus interest rates or credits
from: 1) the death benefit proceeds of a fixed deferred annuity
contract or certificate, or 2) the portion of the death benefit
proceeds related to the fixed account portion of an annuity contract
or certificate that combines both fixed and variable benefits.
Because Insurance Law § 4240(d) states that Insurance Law § 4223
does not apply to variable annuities, these amendments do not affect
the variable portion of a fixed and variable annuity.
Section 1 of Chapter 170 of the Laws of 2008 amended Insurance
Law § 4223(c)(1) to state:
Except as provided in paragraph four of this subsection, the
minimum values as specified in subsections (d), (e), (f), (g)
and (i) of this section of any paid-up annuity, cash surrender
or death benefits attributable to any account subject to this
section under an annuity contract shall be based (except as
provided in subsection (e) of this section with respect to the
use of a market-value adjustment formula) upon the actual
accumulation amount computed as provided in this subsection. For
contracts that provide a cash surrender benefit prior to the
commencement of annuity payments, the death benefit attributable
to any account, other than an equity index account, shall not be
less than the actual accumulation amount, as defined in
paragraph two of this subsection, and the death benefit
attributable to an equity index account shall not be less than
the value of the equity index account, as defined in paragraph
four of this subsection. [Emphasis supplied.]
Thus, if an annuity contract or certificate provides for a cash
surrender benefit prior to the commencement of annuity payments, and
a death benefit becomes payable before those annuity payments
commence, insurers must pay an amount not less than the actual
accumulation amount or, in the case of an equity index account, the
value of the equity index account. Put another way, if a death
benefit becomes payable before annuity payments commence, then
insurers may not reduce—even by recapturing any bonus interest rate
or credit—1) the death benefit proceeds of a fixed deferred annuity
contract or certificate, or 2) the portion of the death benefit
proceeds related to the fixed account portion of an annuity contract
or certificate that combines both fixed and variable benefits.
Prior to April 30, 2002, the Department’s long-standing position
held that an annuity contract’s death benefit must not be less than
the actual accumulation amount. But, since April 30, 2002, the
Department permitted insurers to recapture bonus interest rates or
credits from a death benefit only when death occurred within the 12
months immediately following the bonus credit. However, in light of
the 2008 revisions to Insurance Law § 4223(c)(1), the law now is
explicit that 1) the death benefit proceeds of a fixed deferred
annuity contract or certificate, or 2) the portion of the death
benefit proceeds related to the fixed account portion of an annuity
contract or certificate that combines both fixed and variable
benefits, must not be less than the actual accumulation amount if
death occurs before annuity payments commence. Accordingly, the
Department has updated its annuity product outline to reflect this
position.
The effective date of Chapter 170 of the Laws of 2008 was October
5, 2008. Thus, any contract or certificate issued prior to October
5, 2008 is not subject to the prohibition in Insurance Law §
4223(c)(1). However, in accordance with Insurance Law § 3103, any
contract or certificate issued on or after October 5, 2008 shall be
enforceable as if it conformed to the law. Accordingly, to prevent
any confusion, every insurer must endorse any annuity contract or
certificate issued on or after October 5, 2008 to remove any death
benefit bonus recapture provisions or in the case of a fixed and
variable annuity contract or certificate be endorsed to provide that
the recapture will not be applied to the fixed account portion of
the contract. An insurer need not issue an endorsement for a
contract or certificate where the bonus recapture period provided
for in the contract or certificate has expired prior to the date of
this Circular Letter.
For new issues of annuity contracts and certificates, insurers
may use endorsements or may submit new policy forms that include the
revisions. All endorsements and revised policy forms must be
submitted to the Life Bureau for approval.
An insurer that has recaptured bonus credits from contracts or
certificates issued after October 5, 2008 shall take appropriate
steps to provide restitution to the beneficiary or beneficiaries. If
an insurer takes appropriate steps to provide such restitution, the
Department does not intend to take further enforcement action
against the insurer related to the recaptures.
Please contact Peter Dumar, Associate Insurance Attorney, Life
Bureau, at (518) 474-4552 or by email at
pdumar@ins.state.ny.us,
with any questions about policy form submissions.
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Use of a Fraud or Misstatement
Warning
(Bulletin 2010-03)
The Rates and Forms Section of the Division receives form filings
that include a wide variety of fraud or misstatement warnings. While
the Oregon Insurance Code does not specifically address insurance
fraud, the Division supports anti-fraud efforts generally and fraud
or misstatement warnings specifically. This Bulletin is intended to
provide guidance on acceptable fraud or misstatement warnings.
Warning statements may be included on insurance applications,
claim forms and claim payments. They may appear in policies and
declaration pages only if the statement is part of the application
for insurance.
The Insurance Division reviews statements according to the
following guidelines:
- For remedies other than denial of a claim (e.g. rescission
or cancellation, depending upon statute), fraud or misstatement
warnings must assert that misstatements, misrepresentations,
omissions or concealments on the part of the insured must either
be fraudulent or material to the interests of the insurer in
order for the insurer to assert a right to remedy.
- Fraud or misstatement warnings must clarify that in order
for an insurer to deny a claim on the basis of misstatements,
misrepresentations, omissions or concealments on the part of the
insured, the insurer must show that the misinformation is
material to the content of the contract, that the insurer relied
upon the misinformation and that the information was either
material to the risk assumed by the insurer or that the
misinformation was provided fraudulently (ORS 742.013).
- Depending on the type of contract, fraud or misstatement
warnings may need to include an acknowledgment that material
misrepresentations must be willful or intentional in order to
trigger the right to remedy (e.g. fire insurance, ORS 742.208).
- Fraud or misstatement warnings must acknowledge that
misstatements, misrepresentations, omissions or concealments on
the part of the insured are not fraudulent unless they are made
with intent to knowingly defraud.
- Fraud or misstatement warnings using the term "deceptive"
must clearly relate the term to activities that are material to
the risk at issue or to the claim.
- Fraud or misstatement warnings that connect fraud statements
with criminal penalties must be phrased to avoid definite
statements of guilt. Phrases such as, "may be guilty of
insurance fraud," or "may be subject to prosecution for
insurance fraud" are acceptable.
- Fraud or misstatement warnings on life insurance policies
must not conflict with the applicable two-year limit on
contestability under Oregon law.
- Fraud or misstatement warnings on health insurance policies
must not conflict with the applicable two-year limit on
contestability under Oregon law, except that they must disclose
that there is no time limit on contestability in the event of
fraud on the part of the insured.
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CLICK HERE for the bulletin. It becomes effective
immediately.
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Public Notice of Proposed Rule-Making
A public hearing to consider the following proposed amendments
shall be held on August 3, 2010, at 1511 Pontiac Avenue, Cranston,
Rhode Island, 02920. All interested parties are invited to submit
written or oral comments concerning the proposed regulations by
August 3, 2010 to Elizabeth Kelleher Dwyer, Department of Business
Regulation, 1151 Pontiac Avenue, Cranston, Rhode Island 02920,
edwyer@dbr.state.ri.us.
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CLICK HERE for the hearing notices and proposed rules.
Regulation 89: Actuarial Opinion and Memorandum
The Department of Business Regulation hereby gives notice of its
intent to amend Insurance Regulation 89 Actuarial Opinion and
Memorandum. The purpose of this amendment is to update the
regulation to the current National Association of Insurance
Commissioners Model Regulation. The hearing on this rule will begin
at 10:00 a.m.
Regulation 93 Valuation of Life Insurance Policies
The Department hereby gives notice of its intent to amend
Insurance Regulation 93 Valuation of Life Insurance Policies. The
purpose of this amendment is to update the regulation to the current
National Association of Insurance Commissioners Model Regulation.
The hearing on this rule will begin at 10:30 a.m.
Regulation 104: Recognition of Preferred Mortality Tables
for use in Determining Minimum Reserve Liabilities
The Department hereby gives notice of its intent to amend
Insurance Regulation 104 – Recognition of Preferred Mortality Tables
for use in Determining Minimum Reserve Liabilities. The purpose of
this amendment is to update the regulation to the current National
Association of Insurance Commissioners Model Regulation. The hearing
on this rule will begin at 11:00 a.m.
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Legislation Enacted by the 2010
General Assembly (Administrative Letter 2010-06)
The Virginia Bureau of Insurance has issued a bulletin
summarizing statutes enacted during the 2010 Session of the Virginia
General Assembly. The effective date of these statutes is July 1,
2010, except as otherwise indicated in this letter.
Chapter 211 (House Bill 77): This bill revises §§
38.2-3724 and 38.2-3735 (Credit Life and Credit Accident and
Sickness) relating to disclosure requirements for credit life and
accident and sickness contracts. The revision specifies the type of
contracts for which notice is required to advise a debtor of his
right to a refund if the insurance is terminated before its maturity
date or if the debt is paid off early.
Chapter 227 (House Bill 352) and Chapter 374 (Senate Bill
465): The bill amends § 38.2-3323 (Life Insurance Policies) relating
to group life insurance coverage of spouses, dependent children, and
other persons. The bill permits coverage under a group life
insurance policy to any other person in whom the insured group
member has an insurable interest as defined in §§ 38.2-301 and
38.2-302 as may mutually be agreed upon by the insurer and the group
policyholder.
Chapter 234 (House Bill 531): The bill adds an exception
to § 38.2-1907 (Regulation of Rates), which makes certain filings
and supplementary rate information open to public inspection.
Filings and supplementary rate information which contain information
that constitutes a trade secret, as defined in § 59.1-336, shall not
be open to public inspection.
Chapter 281 (House Bill 800): The bill amends §§ 38.2-1815
(License Required of Resident Life & Annuities Agents); 38.2-1825
(Duration and Termination of Licenses and Appointments); and
38.2-1869 (Termination of License) to remove the requirement that a
nonresident agent must obtain an underlying life and annuities
license from the Bureau of Insurance prior to applying a variable
contract license.
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Newly Enacted Legislation
The Wisconsin Office of the Commissioner of Insurance has issued
a bulletin summarizing new legislation. The following excerpt is
included in that bulletin.
ACT 343: Suitability of annuity contracts
Act 343 requires insurers and intermediaries making
recommendations on the purchase or replacement of an annuity shall
have reasonable grounds to believe the recommendation is suitable
for the consumer. The act also requires the disclosure to the
insured of features of the annuity including potential surrender
period and surrender charge, potential tax penalty if the consumer
sells, exchanges, surrenders, or annuitizes the annuity, mortality
and expense fees, investment advisory fees, potential charges for
and features of riders, limitations on interest returns, insurance
and investment components, and market risk. The Act also requires
that consumers be informed of the benefits of the annuity.
Act 343 requires insurers to establish supervision systems
designed to achieve compliance with the statutes including general
and product-specific training requirements. Insurers must also
maintain procedures to monitor all annuity sales and detect
recommendations that are not suitable. The Act also places training
requirements on intermediaries, including one-time training for
current life insurance licensees within the next six months. New
licensees must also complete the training if they wish to sell
annuities. The minimum of one-time or prelicensing education on
annuities must be at least 4 hours.
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CLICK HERE for the complete text of the act, which becomes
effective on May 1, 2011.
