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.

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 may 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.