No. 30042 (Amendment): R590-93. Replacement of Life Insurance and Annuities

DAR File No.: 30042
Filed: 06/08/2007, 10:39
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

During the last comment period, the department received a request to clarify if the "days" referred to in Subsection R590-93-6(3)(b) was calendar or business days. The department then went through the rule to clarify all such uses of "days".

Summary of the rule or change:

This rule has five instances in which "days" has been used without clarifying if they are "business days" or "calendar days". The changes make this clarification.

State statutory or constitutional authorization for this rule:

Sections 31A-2-201 and 31A-23a-402

Anticipated cost or savings to:

the state budget:

The changes to this rule will have no fiscal impact on revenues to the state's budget or workload on the department. No additional fees will be collected or filings made to the department as a result of these changes.

local governments:

The changes to this rule only deal with the relationship between the department and their licensees.

other persons:

The changes to this rule will have no effect on life insurers or their insured since it just makes clear what is already occurring in the marketplace now.

Compliance costs for affected persons:

The changes to this rule will have no effect on life insurers or their insured since it just makes clear what is already occurring in the marketplace now.

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes to this rule will have no fiscal impact on Utah businesses. They are already following the guidelines noted in the changes. D. Kent Michie, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2007

This rule may become effective on:

08/07/2007

Authorized by:

Jilene Whitby, Information Specialist

RULE TEXT

R590. Insurance, Administration.

R590-93. Replacement of Life Insurance and Annuities.

R590-93-6. Duties of Replacing Insurers that Use Producers.

(1) Where a replacement is involved in the transaction, the replacing insurer shall:

(a) verify that the required forms are received and are in compliance with this rule;

(b) with respect to an electronically completed Notice, the replacing insurer shall send a printed copy of the electronically executed Notice to the applicant within five [working]business days of the date the Notice is received by the company;

(c) notify any other existing insurer that may be affected by the proposed replacement within five business days of receipt of a completed application indicating replacement or when the replacement is identified if not indicated on the application, and mail a copy of the available illustration or the policy summary for the proposed policy or disclosure document for the proposed contract within five business days of a request from an existing insurer;

(d) be able to produce copies of the notification regarding replacement required in Subsection R590-93-4(2), indexed by producer, for at least five years or until the next regular examination by the insurance department of a company's state of domicile, whichever is later; and

(e) provide to the policy or contract holder notice of the right to return the policy or contract within 30 calendar days of the delivery of the contract and receive an unconditional full refund of all premiums or considerations paid on it; such notice may be included in Appendix A or C. This subsection does not preempt the requirements of 31A-22-423.

(2) In transactions where the replacing insurer and the existing insurer are the same or subsidiaries or affiliates under common ownership or control, allow credit for the period of time that has elapsed under the replaced policy's or contract's incontestability and suicide periods up to the face amount of the existing policy or contract. With regard to financed purchases the credit may be limited to the amount the face amount of the existing policy is reduced by the use of existing policy values to fund the new policy or contract.

(3) If an insurer prohibits the use of sales material other than that approved by the company, as an alternative to the requirements made of an insurer pursuant to Subsection R590-93-4(5) with regard to sales materials, the insurer may:

(a) require with each application a statement signed by the producer that:

(i) represents that the producer used only company-approved sales material; and

(ii) states that copies of all sales material were left with the applicant in accordance with Subsection R590-93-4(4); and

(b) within ten business days of the issuance of the policy or contract:

(i) notify the applicant by sending a letter or by verbal communication with the applicant by a person whose duties are separate from the marketing area of the insurer, that the producer has represented that copies of all sales material have been left with the applicant in accordance with Subsection R590-93-4(4);

(ii) provide the applicant with a toll free number to contact company personnel involved in the compliance function if such is not the case; and

(iii) stress the importance of retaining copies of the sales material for future reference; and

(c) be able to produce a copy of the letter or other verification in the policy file for at least five years after the termination or expiration of the policy or contract.

 

R590-93-7. Duties of the Existing Insurer.

Where a replacement is involved in the transaction, the existing insurer shall:

(1) retain and be able to produce all replacement notifications received, indexed by replacing insurer, for at least five years or until the conclusion of the next regular examination conducted by the insurance department of its state of domicile, whichever is later;

(2) within 5 business days of a replacement notification send a letter to the policy or contract holder of the right to receive information regarding the existing policy or contract values including, if available, an in force illustration or policy summary if an in force illustration cannot be produced. The policy or contract information shall be provided within five business days of receipt of the request from the policy or contract holder; and

(3) upon receipt of a request to borrow, surrender or withdraw any policy values, send a notice, advising the policy holder that the release of policy values may affect the guaranteed elements, non-guaranteed elements, face amount or surrender value of the policy from which the values are released. The notice shall be sent directly to the policyholder if the check is sent to anyone other than the policyholder. In the case of consecutive automatic premium loans, the insurer is only required to send the notice at the time of the first loan.

 

R590-93-12. Enforcement Date.

The commissioner will begin enforcing this rule 45 calendar days after the effective date.

 

KEY: life insurance, annuity replacement

Date of Enactment or Last Substantive Amendment: May 29, 2007

Notice of Continuation: April 28, 2004

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-23a-402