Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(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 Paragraph (a)(2) of this Section
2695.26.
(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 for said service member's attendance to any event where an
application for life insurance is solicited.
(8) Advising a service member to change said
service member's 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 said
service member's 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 (109 P.L. 290; 120 Stat.
1317).
(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. A basic illustration that meets the
requirements of Chapter 5.5 of Part 2 of Division 2 of the Insurance Code,
commencing at section 10109.950, shall be deemed sufficient to meet this requirement
for a written disclosure.
(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 unless the insurer has reasonable grounds for believing that the
life insurance death benefit, standing alone, is suitable. Offering for sale or
selling a life insurance product which includes a side fund to a service member 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.
(2) Excluding individually issued annuities,
offering for sale or selling any life insurance contract which includes a side fund
unless:
(A) interest credited accrues from the
date of deposit to the date of withdrawal and permits withdrawals without limit or
penalty;
(B) 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) funds accumulated in the side fund cannot be
diverted or transferred by default to pay, reduce or offset any premiums
due.
(3) 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, violates Article 3A of Chapter 1 of
Part 2 of Division 2, commencing at section 10159.1, or Article 3B of Chapter 1 of
Part 2 of Division 2, commencing at section
10168, of the
Insurance Code.
(4) 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. However, a life insurance product that provides for
an increased benefit (e.g., double indemnity) in the event of accidental death may
exclude coverage for such an increase if the insured's death is related to war,
declared or undeclared, or any act related to military service, so that when death
is so related to war or military service the product will pay an amount equal to the
primary coverage amount (and not, for example, twice that amount, as would
ordinarily be the case with a product providing for double indemnity in the event of
accidental death), even though the cause of death is accident.
1. New section
filed 2-22-2008; operative 2-22-2008 pursuant to Government Code section
11343.4
(Register 2008, No. 8).
2. Change without regulatory effect amending
subsections (a)(7)-(8) and (d)(3) filed 7-14-2021 pursuant to section
100, title 1, California Code of
Regulations (Register 2021, No. 29). Filing deadline specified in Government Code
section
11349.3(a)
extended 60 calendar days pursuant to Executive Order
N-40-20.
Note: Authority cited: Sections
720,
790.10,
10168.92,
10206.5,
10506 and
10506.3,
Insurance Code; CalFarm Ins. Co. v. Deukmejian, 48 Cal.3d 805 (1989); 20th Century
Ins. Co. v. Garamendi, 8 Cal. 4th 216 (1994). Reference: Sections
32,
101,
330,
331,
332,
333,
334,
350,
351,
358,
359,
360,
700,
730,
733,
780,
781,
783,
783.5,
790.03,
791.02,
791.03,
1626,
10159.1,
10165,
10168,
10206.5,
10506,
10506.3,
10509.8,
10509.9 and
10540, Insurance
Code; Section
823.5,
Military and Veterans Code.
