Life specific Laws Flashcards
The Director determines
whether an ad is misleading or deceptive
Each insurer must maintain control over its
life and annuity advertisements, and is responsible for its content regardless of who wrote, created, designed, or presented them.
Insurers must maintain all ads at its
home office for 4 years.
The term advertisement includes
Printed, published, and audio-visual material and descriptive literature used in direct mail, newspapers and magazines, radio and television scripts, and billboards and similar displays
Descriptive literature and sales aids an insurer or agent issues, including circulars, leaflets, booklets, depictions, illustrations, and form letters
Material used to recruit, train, and educate sales personnel, agents, solicitors, and brokers
Prepared sales talks, presentations, and material for use by sales personnel, agents, solicitors, and brokers
The term advertisement does not include
Internal communication or materials not intended for the public
Communications with policyholders not urging policyholders to purchase, increase, modify, reinstate, or retain a policy
A general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list, of a policy or program
Disclosure requirements: An ad must be
truthful, have a clear form and content, and avoid deception.
An ad must disclose
The insurer’s name and the type of policy being marketed
That dividends are not guaranteed
The source of any statistical info about an insurer or policy
An individual’s financial interest, if any, in an insurer for which he/she has made a testimonial or endorsement
Any conditions associated with a special or limited enrollment period, if the insurer uses successive enrollment periods as its usual marketing method
Accurate and complete comparisons of policies, benefits, dividends, or rates when referring to a competitor’s products
Identity of insurer: Ads may not use language
So similar to a governmental program’s combination of words or symbols that they mislead prospective insureds to believing the solicitation is connected with the program. medicare
Jurisdiction licensing: Ads may not
imply licensing beyond the limits of the jurisdiction in which the insurer is licensed
Advertising and marketing of annuities and variable life:
any ad of annuities and VL contracts directed toward persons age
65 or older must disclose that an insurer or insurance producer may contact the applicant
No advertisement may imply that the consumer may
lose a right or privilege or benefits under federal, Sate, or local law if he/she fails to respond to the ad
No ad for an event where insurance products will be offered for sale may use the terms
“seminar” “class” “info meeting” or substantially equivalent terms to characterize the purpose of the public gathering or event unless it adds the words “and insurance sales presentation” immediately following those terms in the same size and font as those terms
Penalties: an insurer who violates advertising provisions may be fined up to
1000 per violation, have its license or certificate of authority suspended or revoked, or both
The purpose of replacement regulations is to
regulate insurer and producer activities
Protect life policy and annuity purchases from losing benefits
Assure that purchasers get enough info to make an informed decision
Reduce the opportunity for misrepresentation
Establish penalties for failure to comply with replacement rules
replacement is any transaction in which a new life policy or annuity is to be purchased ant the producer
knows or should know that existing contracts will be:
Lapsed, forfeited, surrendered or terminated
Amended to reduce the coverages benefit or term
Reissued with a reduced cash value
Converted into paid-up insurance, continued as extended term insurance, or decreased in value by use of another form of nonforfeiture benefit
Pledged as collateral for a loan, or subjected to borrowing
Exemptions:
The following types of policies are exempt from state replacement regulations:
Credit life insurance–> can never be convertible or renewable
Group life insurance or annuities
Life insurance policies in connection with a pension, profit sharing, or other benefit plan qualifying for tax deductibility of premiums.
Registered contracts, except that the appropriate prospectus or offering circular shall be given to the applicant
Existing life insurance that is non-convertible, is term and expires within 5 years
Transactions where the existing insurer and replacing insurer are the same.
Coverages whose total cash surrender value is less than $500, and whose total face value is less than $5,000
A producer transacting insurance where replacement is involved must give the applicant:
A list of policies to be replaced
an outline of coverage
a notice of replacement signed by the producer
a copy of each sales proposal
a completed comparison statement
a reminder that new evidence of insurability may be required
The surrender cost index is used to
compare cost of similar policies. The producer also needs to give his/her insurer a copy of any proposals and of the comparison statement, including the name of the insurer that issued the policy being replaced.
The producer must submit, with the application,
a statement signed by the applicant affirming whether the policy will replace any existing life policy insurance or annuity. the producer must keep a copy of replacement forms for 3 years.
The replacing insurer must:
Ensure that all replacement actions are legal
Give the applicant a copy of the buyers guide
Notify each existing insurer within 3 working days after receiving the application and upon request give them a copy of any proposals and comparison statements
Keep copies of proposals, receipts, and comparison statement for at least 3 years.
The existing policy should not be
terminated until the new policy is issued and delivered.
Life solicitation:
The following apply to the solicitation of
individual life policies, except credit policies, policies connected with a pension or welfare plan defined by ERISA, or variable policies with variable death benefits
Purpose:
The purpose of this section is to improve the buyer’s ability to
select the most appropriate plan of life insurance for his/her needs, improve the buyers understanding of the basic feature of the policy, and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance.
Disclosure requirements: An insurer must give an applicant a
Buyer’s Guide before accepting an initial premium or premium deposit. For direct response sales, The buyers guide must be delivered before or with the policy
A policy summary must be delivered
before or with a policy solicited through a producer or by direct response. Failure to provide a Buyer’s Guide or a Policy Summary, when required, constitutes a misrepresentation of the policy’s benefits, advantages, conditions, or terms.
An agent must inform the prospective purchaser that
he is acting as a life agent
Terms such as
financial planner, investment, advisor, financial consultant, or financial counseling may not be used to imply that the insurance agent is generally engaged in an advisory business in which compensation is unrelated to sales.
Any reference to policy dividends
must include a statement that dividends are not guaranteed. A presentation of benefits may not display guaranteed and non-guaranteed benefits as a single sum.
In recommending the purchase of exchange of an annuity, the producer, or the insurer if no producer is involved, must
reasonably believe that the recommendation is suitable for the consumer on the basis of the consumer’s financial needs, investments, and other insurance products
Prior to the purchase or exchange of an annuity, the producer or insurer must make reasonable efforts to obtain data regarding the purchaser’s:
financial status
Tax status
investment objectives
Other information the produce or insurer considers to be reasonable n making a recommendation to the purchaser.
There is obligation to a consumer concerning any recommendation if the consumer refuses to provide
information, or purchases an annuity without recommendation by the producer or insurer.
Accelerated benefits: A life insurance contracts providing accelerate benefits must
meet filling requirements, include the phrase “accelerated benefit” in the title and state coverage conditions
Include all of the following:
A net death benefit greater than or equal to accelerated benefits
Guaranteed renewability and cost
Accelerated benefits effective for illness within 30 days after the effective date
A waiver of premium for either the entire contract or the accelerated benefit provisions only
Be nondiscriminatory with respect to qualifying events
The insurer must explain
any continuing premium required if the benefit is claimed
Before paying an accelerated benefit an insurer must get
any assignee’s or irrevocable beneficiary’s signed acceptance of the payment.
an insurer must keep
benefit calculation procedures available for examination by the Director upon request.
The payment must include
a lump sum option.
An insurer may require the insured to
submit to a medical examination it orders
Required Discloser:
Policy value information and any charge for the benefit must
be disclosed upon the policyholder’s request.
Before or with the app, the producer must give the insured a written disclosure including the following
A brief description of the accelerated benefit
Conditions triggering payment of the benefits
Any benefit payment’s effect on the policy’s cash value, death benefit, premium, and policy loans. (if there is a charge for the benefit, this must be provided in a generic illustration)
A statement on the first page of any contract documents, that recipient should seek help from a personal tax advisor because the benefit payments may be taxable.
When an accelerated benefit is requested
The producer must disclose in writing, that the accelerated benefits may be taxable so the insured should seek help from a personal tax advisor.
The insurer must notify the policyholder, in writing, of any benefit payment’s effect on the policy’s cash value, death benefit, premium, and policy loans
Effect of payment on cash value
The policy’s cash value may
not be reduced by the benefit payment on more than a pro rate basis.
an illustration must:
Show the date it was prepared
Clearly identify the assume premium due dates and benefit payout dates
Identify the assumed payments on which the benefits and values are based as premium due dates or benefit outlay dates.
Label guaranteed values as guaranteed
Display the page number and total number of ages on each page
Identify the surrender value by the name the value is given in the policy.
An illustration of non-guaranteed elements must indicate that:
The benefits and values are not guaranteed
The assumptions on which they are based may be changed by the insurer
Actual results may be more or less favorable.
An illustration showing that policy charges may
be paid using non-guranteed values must disclose that a charge continues to be required and that the insured may need to continue or resume premium payments.
Illustrations provided at policy delivery must include the following statements to be signed and dated.
By the applicant “I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to changed and could be either higher or lower. The agent has told me they are not guaranteed
By the producer “I certify that this illustration has been presented to the applicant and that I have explained that nay non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration”
An illustration may show
benefits and values in graphic or chart form in addition to tabular form
An illustration may not
base non-guaranteed elements on a scale that is more favorable to the policy owner than the insurers illustrated scale.
A basic illustration
briefly describe the policy, its premium, and any features, riders, or pitons shows and the impact they have on the policy’s benefits and values
Identify and briefly define column headings and key terms
State: “This illustration assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown.
Standards for supplemental illustrations: supplemental illustrations must
Be accompanies or preceded by a basic illustration
Show non-guaranteed elements as the same as or less favorable to the policy owner than the non-guaranteed elements used in the basic illustration
State that non-guaranteed elements are not guaranteed
Show the same premium shown in the basic illustration
Refer the insured to the basic illustration for guaranteed elements and other information
General rules and prohibitions
An illustration used to sell a life policy must be clearly labeled
“life insurance illustration” and contain the following info:
The name of the insurer and producer, the producer’s business address, and except where a composite illustration is permitted, the proposed insured name, age and sex.
The illustration’s underwriting or rating classification
The policy’s generic name, name from the insurer (if different) and form number
The initial death benefit
The dividend options are application of non-guaranteed elements, if applicable
An insurer or producer using an illustration in life policy sales may not:
Represent the policy as anything other than a life policy
Use non-guaranteed elements in a misleading manner
imply that non-guaranteed elements are guaranteed
Use an illustration that is illegal, incomplete, or self-contradictory; shows performance more favorable that the performance produced by the insurer’s illustrated scale; or unless the policy cannot develop nonforfeiture values, is lapse-supported.
Falsely represent that premium payments will not be required for each policy year in order to maintaining the illustrated death benefits
Use the term “vanish” or “vanishing premium” or similar term imply the policy becomes paid up by suing non-guaranteed elements to pay a portion of future premiums.
An illustration that shows the interest rate used to determine the non-guaranteed elements may not
show an interest rate higher than the earned interest rate underlying the discipline current scale
A producer using an illustration when selling a life policy must
get a copy of the illustration signed accordingly, give a copy to the applicant, and submit a copy with the application
if a policy is issued other than as applied for,
the applicant and producer must sign and date the revised basic illustration at policy delivery
A producer not using an illustration when selling a life policy, or applying for a policy other than as illustrated must
certify and have the applicant certify, to that effect in writing on a from from the insurer and submit the form with the application.
A basic illustration must be delivered with
the policy and signed before or during policy deliver. the producer must give the insurer and the policy owner a copy
An insurer must keep a copy of any illustration and any certification until
3 years after the policy is no longer in force
Viatical settlements:
an individual, partnership, corporation, or other entity must
apply, pay a fee for, and obtain a license from the Director in order to act as a viatical settlement provider.
The director must investigate each applicant and may issue a license if
the applicant has provided a detailed plan of operation, is competent and trustworthy, has a good business reputation, and has had qualifying experience, training, or education.
A viatical settlement provider must file a
viatical settlement contract with the Director and get the Director’s approval of the contract before using it.
