Current through Register Vol. 49, No. 2, February 2024
Section
1.
Purpose
A. The
purpose of this rule is to set forth standards to protect active duty service
members of the United States Armed Forces from dishonest and predatory
insurance sales practices by declaring certain identified practices to be
false, misleading, deceptive or unfair.
B. Nothing herein shall be construed to
establish or extinguish a private right of action for a violation of this
rule.
Section 2.
Scope
This rule shall apply only to the solicitation or sale of any
life insurance or annuity product by an insurer or insurance producer to an
active duty service member of the United States Armed Forces.
Section 3.
Authority
This rule is promulgated by the Arkansas Commissioner of
Insurance pursuant to Ark. Code Ann. §
23-61-108, Ark.
Code Ann. §
23-66-207,
and Ark. Code Ann. §§
25-15-201,
et seq.
Section
4.
Exemptions
A.
This rule shall not apply to solicitations or sales involving:
1. Credit insurance;
2. Group life insurance or group annuities
where there is no in-person, face-to-face solicitation of individuals by an
insurance producer or where the contract or certificate does not include a side
fund;
3. An application to the
existing insurer that issued the existing policy or contract when a contractual
change or a conversion privilege is being exercised; or, when the existing
policy or contract is being replaced by the same insurer pursuant to a program
filed with and approved by the commissioner; or, when a term conversion
privilege is exercised among corporate affiliates;
4. Individual stand-alone health policies,
including disability income policies;
5. Contracts offered by Servicemembers' Group
Life Insurance (SGLI) or Veterans' Group Life Insurance (VGLI), as authorized
by 38 U.S.C. Section
1965
et seq.;
6. Life insurance contracts offered through
or by a non-profit military association, qualifying under Section 501 (c) (23)
of the Internal Revenue Code (IRC), and which are not underwritten by an
insurer; or
7. Contracts used to
fund:
(a) An employee pension or welfare
benefit plan that is covered by the Employee Retirement and Income Security Act
(ERISA);
(b) A plan described by
Sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the IRC, as amended, if
established or maintained by an employer;
(c) A government or church plan defined in
Section 414 of the IRC, a government or church welfare benefit plan, or a
deferred compensation plan of a state or local government or tax exempt
organization under Section 457 of the IRC;
(d) A nonqualified deferred compensation
arrangement established or maintained by an employer or plan sponsor;
(e) Settlements of or assumptions of
liabilities associated with personal injury litigation or any dispute or claim
resolution process; or
(f)
Prearranged funeral contracts.
B. Nothing herein shall be construed to
abrogate the ability of nonprofit organizations (and/or other organizations) to
educate members of the United States Armed Forces in accordance with Department
of Defense DoD Instruction 1344.07 Personal Commercial Solicitation on DoD
Installations or successor directive.
C. For purposes of this rule, general
advertisements, direct mail and internet marketing shall not constitute
"solicitation." Telephone marketing shall not constitute "solicitation"
provided the caller explicitly and conspicuously discloses that the product
concerned is life insurance and makes no statements that avoid a clear and
unequivocal statement that life insurance is the subject matter of the
solicitation. Provided however, nothing in this subsection shall be construed
to exempt an insurer or insurance producer from this rule in any in-person,
face-to-face meeting established as a result of the "solicitation" exemptions
identified in this subsection.
Section
5.
Definitions
A.
"Active Duty" means full-time duty in the active military service of the United
States and includes members of the reserve component (National Guard and
Reserve) while serving under published orders for active duty or full-time
training. The term does not include members of the reserve component who are
performing active duty or active duty for training under military calls or
orders specifying periods of less than 31 calendar days.
B. "Department of Defense (DoD) Personnel"
means all active duty service members and all civilian employees, including
non-appropriated fund employees and special government employees, of the
Department of Defense.
C. "Door to
Door" means a solicitation or sales method whereby an insurance producer
proceeds randomly or selectively from household to household without prior
specific appointment.
D. "General
Advertisement" means an advertisement having as its sole purpose the promotion
of the reader's or viewer's interest in the concept of insurance, or the
promotion of the insurer or the insurance producer.
E. "Insurer" means an insurance company
required to be licensed under the laws of this state to provide life insurance
products, including annuities.
F.
"Insurance producer" means a person required to be licensed under the laws of
this state to sell, solicit or negotiate life insurance, including
annuities.
G. "Known" or
"Knowingly" means, depending on its use herein, the insurance producer or
insurer had actual awareness, or in the exercise of ordinary care should have
known, at the time of the act or practice complained of, that the person
solicited:
(1) is a service member;
or
(2) is a service member with a
pay grade of E-4 or below.
H. "Life Insurance" means insurance coverage
on human lives including benefits of endowment and annuities, and may include
benefits in the event of death or dismemberment by accident and benefits for
disability income and unless otherwise specifically excluded, includes
individually issued annuities.
I.
"Military Installation" means any federally owned, leased, or operated base,
reservation, post, camp, building, or other facility to which service members
are assigned for duty, including barracks, transient housing, and family
quarters.
J. "MyPay" is a Defense
Finance and Accounting Service (DFAS) web-based system that enables service
members to process certain discretionary pay transactions or provide updates to
personal information data elements without using paper forms.
K. "Service Member" means any active duty
officer (commissioned and warrant) or enlisted member of the United States
Armed Forces.
L. "Side Fund" means
a fund or reserve that is part of or otherwise attached to a life insurance
policy (excluding individually issued annuities) by rider, endorsement or other
mechanism which accumulates premium or deposits with interest or by other
means. The term does not include:
(1)
accumulated value or cash value or secondary guarantees provided by a universal
life policy;
(2) cash values
provided by a whole life policy which are subject to standard nonforfeiture law
for life insurance; or
(3) a
premium deposit fund which:
(a) contains only
premiums paid in advance which accumulate at interest;
(b) imposes no penalty for
withdrawal;
(c) does not permit
funding beyond future required premiums;
(d) is not marketed or intended as an
investment; and
(e) does not carry
a commission, either paid or calculated.
M. "Specific Appointment" means a prearranged
appointment agreed upon by both parties and definite as to place and
time.
N. "United States Armed
Forces" means all components of the Army, Navy, Air Force, Marine Corps, and
Coast Guard.
Section 6.
Practices Declared False, Misleading, Deceptive or Unfair on a Military
Installation
A. The following acts or
practices when committed on a military installation by an insurer or insurance
producer with respect to the in-person, face-to-face solicitation of life
insurance are declared to be false, misleading, deceptive or unfair:
(1) Knowingly soliciting the purchase of any
life insurance product "door to door" or without first establishing a specific
appointment for each meeting with the prospective purchaser.
(2) Soliciting service members in a group or
"mass" audience or in a "captive" audience where attendance is not
voluntary.
(3) Knowingly making
appointments with or soliciting service members during their normally scheduled
duty hours.
(4) Making appointments
with or soliciting service members in barracks, day rooms, unit areas, or
transient personnel housing or other areas where the installation commander has
prohibited solicitation.
(5)
Soliciting the sale of life insurance without first obtaining permission from
the installation commander or the commander's designee.
(6) Posting unauthorized bulletins, notices
or advertisements.
(7) Failing to
present DD Form 2885, Personal Commercial Solicitation
Evaluation, to service members solicited or encouraging service
members solicited not to complete or submit a DD Form 2885.
(8) Knowingly accepting an application for
life insurance or issuing a policy of life insurance on the life of an enlisted
member of the United States Armed Forces without first obtaining for the
insurer's files a completed copy of any required form which confirms that the
applicant has received counseling or fulfilled any other similar requirement
for the sale of life insurance established by regulations, directives or rules
of the DoD or any branch of the Armed Forces.
B. The following acts or practices when
committed on a military installation by an insurer or insurance producer
constitute corrupt practices, improper influences or inducements and are
declared to be false, misleading, deceptive or unfair:
(1) Using DoD personnel, directly or
indirectly, as a representative or agent in any official or business capacity
with or without compensation with respect to the solicitation or sale of life
insurance to service members.
(2)
Using an insurance producer to participate in any United States Armed Forces
sponsored education or orientation program.
Section 7.
Practices Declared False,
Misleading, Deceptive or Unfair Regardless of Location
A. The following acts or practices by an
insurer or insurance producer constitute corrupt practices, improper influences
or inducements and are declared to be false, misleading, deceptive or unfair:
(1) Submitting, processing or assisting in
the submission or processing of any allotment form or similar device used by
the United States Armed Forces to direct a service member's pay to a third
party for the purchase of life insurance. The foregoing includes, but is not
limited to, using or assisting in using a service member's "MyPay" account or
other similar internet or electronic medium for such purposes. This subsection
does not prohibit assisting a service member by providing insurer or premium
information necessary to complete any allotment form.
(2) Knowingly receiving funds from a service
member for the payment of premium from a depository institution with which the
service member has no formal banking relationship. For purposes of this
section, a formal banking relationship is established when the depository
institution:
(a) provides the service member
a deposit agreement and periodic statements and makes the disclosures required
by the Truth in Savings Act,
12 U.S.C. §
4301
et seq. and the
regulations promulgated thereunder; and
(b) permits the service member to make
deposits and withdrawals unrelated to the payment or processing of insurance
premiums.
(3) Employing
any device or method or entering into any agreement whereby funds received from
a service member by allotment for the payment of insurance premiums are
identified on the service member's Leave and Earnings Statement or equivalent
or successor form as "Savings" or "Checking" and where the service member has
no formal banking relationship as defined in subsection 7 (A)(2).
(4) Entering into any agreement with a
depository institution for the purpose of receiving funds from a service member
whereby the depository institution, with or without compensation, agrees to
accept direct deposits from a service member with whom it has no formal banking
relationship.
(5) Using DoD
personnel, directly or indirectly, as a representative or agent in any official
or unofficial capacity with or without compensation with respect to the
solicitation or sale of life insurance to service members who are junior in
rank or grade, or to the family members of such personnel.
(6) Offering or giving anything of value,
directly or indirectly, to DoD personnel to procure their assistance in
encouraging, assisting or facilitating the solicitation or sale of life
insurance to another service member.
(7) Knowingly offering or giving anything of
value to a service member with a pay grade of E-4 or below for his or her
attendance to any event where an application for life insurance is
solicited.
(8) Advising a service
member with a pay grade of E-4 or below to change his or her income tax
withholding or State of legal residence for the sole purpose of increasing
disposable income to purchase life insurance.
B. The following acts or practices by an
insurer or insurance producer lead to confusion regarding source, sponsorship,
approval or affiliation and are declared to be false, misleading, deceptive or
unfair:
(1) Making any representation, or
using any device, title, descriptive name or identifier that has the tendency
or capacity to confuse or mislead a service member into believing that the
insurer, insurance producer or product offered is affiliated, connected or
associated with, endorsed, sponsored, sanctioned or recommended by the U.S.
Government, the United States Armed Forces, or any state or federal agency or
government entity. Examples of prohibited insurance producer titles include,
but are not limited to, "Battalion Insurance Counselor," "Unit Insurance
Advisor," "Servicemen's Group Life Insurance Conversion Consultant" or
"Veteran's Benefits Counselor."
Nothing herein shall be construed to prohibit a person from using
a professional designation awarded after the successful completion of a course
of instruction in the business of insurance by an accredited institution of
higher learning. Such designations include, but are not limited to, Chartered
Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Certified
Financial Planner (CFP), Master of Science In Financial Services (MSFS), or
Masters of Science Financial Planning (MS).
(2) Soliciting the purchase of any life
insurance product through the use of or in conjunction with any third party
organization that promotes the welfare of or assists members of the United
States Armed Forces in a manner that has the tendency or capacity to confuse or
mislead a service member into believing that either the insurer, insurance
producer or insurance product is affiliated, connected or associated with,
endorsed, sponsored, sanctioned or recommended by the U.S. Government, or the
United States Armed Forces.
C. The following acts or practices by an
insurer or insurance producer lead to confusion regarding premiums, costs or
investment returns and are declared to be false, misleading, deceptive or
unfair:
(1) Using or describing the credited
interest rate on a life insurance policy in a manner that implies that the
credited interest rate is a net return on premium paid.
(2) Excluding individually issued annuities,
misrepresenting the mortality costs of a life insurance product, including
stating or implying that the product "costs nothing" or is "free."
D. The following acts or practices
by an insurer or insurance producer regarding SGLI or VGLI are declared to be
false, misleading, deceptive or unfair:
(1)
Making any representation regarding the availability, suitability, amount,
cost, exclusions or limitations to coverage provided to a service member or
dependents by SGLI or VGLI, which is false, misleading or deceptive.
(2) Making any representation regarding
conversion requirements, including the costs of coverage, or exclusions or
limitations to coverage of SGLI or VGLI to private insurers which is false,
misleading or deceptive.
(3)
Suggesting, recommending or encouraging a service member to cancel or terminate
his or her SGLI policy or issuing a life insurance policy which replaces an
existing SGLI policy unless the replacement shall take effect upon or after the
service member's separation from the United States Armed Forces.
E. The following acts or practices
by an insurer and or insurance producer regarding disclosure are declared to be
false, misleading, deceptive or unfair:
(1)
Deploying, using or contracting for any lead generating materials designed
exclusively for use with service members that do not clearly and conspicuously
disclose that the recipient will be contacted by an insurance producer, if that
is the case, for the purpose of soliciting the purchase of life
insurance.
(2) Failing to disclose
that a solicitation for the sale of life insurance will be made when
establishing a specific appointment for an in-person, face-to-face meeting with
a prospective purchaser.
(3)
Excluding individually issued annuities, failing to clearly and conspicuously
disclose the fact that the product being sold is life insurance.
(4) Failing to make, at the time of sale or
offer to an individual known to be a service member, the written disclosures
required by Section 10 of the "Military Personnel Financial Services Protection
Act,"
Pub.
L. No. 109-290, p.16.
(5) Excluding individually issued annuities,
when the sale is conducted in-person face-to-face with an individual known to
be a service member, failing to provide the applicant at the time the
application is taken:
(a) an explanation of
any free look period with instructions on how to cancel if a policy is issued;
and
(b) either a copy of the
application or a written disclosure. The copy of the application or the written
disclosure shall clearly and concisely set out the type of life insurance, the
death benefit applied for and its expected first year cost. The written
disclosure shall set forth this information in clear and understandable
language.
F.
The following acts or practices by an insurer or insurance producer with
respect to the sale of certain life insurance products are declared to be
false, misleading, deceptive or unfair:
(1)
Excluding individually issued annuities, recommending the purchase of any life
insurance product which includes a side fund to a service member in pay grades
E-4 and below unless the insurer has reasonable grounds for believing that the
life insurance death benefit, standing alone, is suitable.
(2) Offering for sale or selling a life
insurance product which includes a side fund to a service member in pay grades
E-4 and below who is currently enrolled in SGLI, is presumed unsuitable unless,
after the completion of a needs assessment, the insurer demonstrates that the
applicant's SGLI death benefit, together with any other military survivor
benefits, savings and investments, survivor income, and other life insurance
are insufficient to meet the applicant's insurable needs for life insurance.
(a) "Insurable needs" are the risks
associated with premature death taking into consideration the financial
obligations and immediate and future cash needs of the applicant's estate
and/or survivors or dependents.
(b)
"Other military survivor benefits" include, but are not limited to: the Death
Gratuity, Funeral Reimbursement, Transition Assistance, Survivor and
Dependents' Educational Assistance, Dependency and Indemnity Compensation,
TRICARE Healthcare benefits, Survivor Housing Benefits and Allowances, Federal
Income Tax Forgiveness, and Social Security Survivor Benefits.
(3) Excluding individually issued
annuities, offering for sale or selling any life insurance contract which
includes a side fund:
(a) unless interest
credited accrues from the date of deposit to the date of withdrawal and permits
withdrawals without limit or penalty;
(b) unless the applicant has been provided
with a schedule of effective rates of return based upon cash flows of the
combined product. For this disclosure, the effective rate of return will
consider all premiums and cash contributions made by the policyholder and all
cash accumulations and cash surrender values available to the policyholder in
addition to life insurance coverage. This schedule will be provided for at
least each policy year from one (1) to ten (10) and for every fifth policy year
thereafter ending at age 100, policy maturity or final expiration;
and
(c) which by default diverts or
transfers funds accumulated in the side fund to pay, reduce or offset any
premiums due.
(4)
Excluding individually issued annuities, offering for sale or selling any life
insurance contract which after considering all policy benefits, including but
not limited to endowment, return of premium or persistency, does not comply
with standard nonforfeiture law for life insurance.
(5) Selling any life insurance product to an
individual known to be a service member that excludes coverage if the insured's
death is related to war, declared or undeclared, or any act related to military
service except for an accidental death coverage, e.g., double
indemnity, which may be excluded.
Section 8.
Severability
If any provision of these sections or the application thereof to
any person or circumstance is held invalid for any reason, the invalidity shall
not affect the other provisions or any other application of these sections
which can be given effect without the invalid provisions or application. To
this end all provisions of these sections are declared to be severable.
Section 9.
Effective
Date
This rule shall become effective October 1, 2007 and shall apply
to acts or practices committed on or after the effective date.