No. 28267: R590-98. Unfair Practice in Payment of Life Insurance and Annuity Policy Values

DAR File No.: 28267
Filed: 11/28/2005, 02:34
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The changes made are a result of comments received during the last comment period.

 

Summary of the rule or change:

The changes made are: 1) in Subsection R590-98-6(B), removes the reminder that the policy will remain in effect until the paid-to date; 2) in Subsection R590-98-6(C), clarifies that only the charges assessed by the company need to be specified in the policy as opposed to unknown outside charges of a vendor, such as overnight mail fees; and 3) Subsection R590-98-6(D) has been reworded to clarify that consent is to be obtained prior to processing a loan. (DAR NOTE: This change in proposed rule has been filed to make additional changes to a proposed amendment that was published in the October 15, 2005, issue of the Utah State Bulletin, on page 39. Underlining in the rule below indicates text that has been added since the publication of the proposed rule mentioned above; strike-out indicates text that has been deleted. You must view the change in proposed rule and the proposed amendment together to understand all of the changes that will be enforceable should the agency make this rule effective.)

 

State statutory or constitutional authorization for this rule:

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

 

Anticipated cost or savings to:

the state budget:

These changes will have no effect on the state's budget. It will not require insurers to pay more or less in fees and will not change the department's work load.

 

local governments:

This rule only applies to the relationship between the Insurance Department and its licensees. It does not affect local government laws or procedures.

 

other persons:

The change to this rule will not require a change in the insurers workload or fees paid to the Insurance Department. The changes provide a consumer protection in timely receiving surrender values from insurers.

 

Compliance costs for affected persons:

The change to this rule will not require a change in the insurers workload or fees paid to the Insurance Department. The changes provide a consumer protection in timely receiving surrender values from insurers.

 

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 insurers or Utah businesses. D. Kent Michie, Insurance 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:

01/17/2006

 

This rule may become effective on:

01/18/2006

 

Authorized by:

Jilene Whitby, Information Specialist

 

 

RULE TEXT

R590. Insurance, Administration.

R590-98. Unfair Practice in Payment of Life Insurance and Annuity Policy Values.

R590-98-6. Requirements.

A. Before an insurer exercises the right to defer the payment of any policy values, the insurer must file a written request with the commissioner. The request must include an explanation of the reason for such action, the steps to be taken by the company to alleviate the situation, the manner in which the deferment is being imposed fairly and equitably on all policyholders, the notice to policyholders as to why the company is taking such action and the anticipated date on which the policy values are expected to be available.

B. If the policy does not specify policy values between policy anniversaries, such policy values may be the values shown in the policy nonforfeiture value tables as of the end of the policy year or may be computed by the interpolation of values between policy years. If the former method is used, the company may deduct from the policy value any premiums required to pay the policy to the next succeeding anniversary date. In no event, may premiums be deducted that will advance the paid-to date past the next succeeding anniversary date.[ Regardless of the method used, the policy remains in force until the paid-to date.]

C. No surrender or service charge assessed by the company will be deducted from the policy values unless specifically provided in the policy.

D. With consent of the policyholder, [Companies]companies may[, with written consent of the policyholder, offer]process a policy loan in lieu of cash surrender as a means to conserve business, but only if the following criteria are strictly adhered to:

(1) The computation of policy values and premium deductions, if any, will be calculated on the same basis as enumerated in B above.

(2) The policyholder must be informed fully and concisely as to the reasons the company is sending the proceeds of a policy loan as opposed to the cash surrender value, an explanation as to the effect the loan will have upon interest charges, premiums, and death benefits, and the procedures for the repayment of the loan.

(3) If a policy loan check is issued in lieu of cash surrender values, the loan shall be processed within 20 days of receipt of the request to surrender. The check for policy loan values must be immediately negotiable. A stamped, self-addressed envelope and a cash surrender form must accompany the loan value check, together with appropriate instructions as to how the policyholder should proceed to obtain the full policy surrender value. A request for the balance of the cash surrender value must be processed within ten days of receipt of such request.

 

KEY: insurance law

[2005]2006

Notice of Continuation April 28, 2004

31A-2-201

31A-23a-402