Current through Register Vol. 43, No. 39, September 26, 2024
(a) Definitions.
(1) "Agent" means each agent, broker, or
other person representing an insurer in the sale of any type of policy.
(2) "Company" or "insurer" means
each company, society, association or other financial institution which issues
a policy subject to the supervision of the Kansas insurance department.
(3) "Life insurance" means each
life insurance policy, annuity, or variable annuity contract, unless
specifically exempted in subsection (b).
(4) "Substantial cash values" means each
transaction in which an amount exceeding 50 percent of the tabular cash value
may be released on one or more of the existing policies.
(5) "Substantial borrowings" means each
transaction in which an amount exceeding 50 percent of the tabular cash value
may be borrowed on one or more existing policies.
(6) "Securities," as used in this regulation,
shall not include any insurance or endowment policy, or annuity contract under
which an insurance company promises to pay a fixed or variable sum of money
either in a lump sum or periodically for life or for some other specified
period.
(7) "Replacement" means
each transaction in which new life insurance may be purchased from an agent who
knows, or reasonably should know that, as a part of the transaction or in
consequence of it, a previously existing life insurance has been or is likely
to be:
(A) Lapsed or surrendered;
(B) converted into paid-up insurance,
continued as extended term insurance or another form of non-forfeiture benefit;
(C) converted to effect a
reduction either in the amount of the existing life insurance, or in the period
of time the existing life insurance will continue in force;
(D) reissued with a reduction in amount so
that substantial cash values are released; or
(E) assigned as collateral for a loan or
subjected to substantial borrowing of loan values in single or multiple
transactions.
(8)
"Sales proposal" means individualized, written sales aids. Sales aids of a
general nature, which are maintained in the insurer's advertising compliance
file, shall not be considered a sales proposal.
(b) This regulation shall not apply when:
(1) The application for the new life
insurance is made to the same insurer that issued the existing life insurance,
and a contractual policy change or conversion privilege is being exercised;
(2) the new life insurance is
provided under:
(A) A group life insurance
policy; or
(B) policies covering
employees of an employer, debtors of a creditor, or members of an association,
which are distributed on a mass merchandising basis and administered by
group-type methods;
(3)
the existing life insurance is a non-convertible term policy with five years or
less to expire and which cannot be renewed;
(4) the solicitation is made by direct mail
and:
(A) All sales material is standard and
printed;
(B) the insurance company
notifies the existing insurance company within three business days that the
proposed insured has answered "yes" to the replacement question in the
application; and
(C) concurrent
with the notice to the existing company, the insurance company mails to the
applicant a copy of the "notice to applicant regarding replacement of life
insurance" described in subsection (h); or
(5) the policy is issued in connection with a
pension, profit sharing, an individual retirement account or other benefit plan
qualifying for an income tax deduction of premiums.
(c) Each life insurance agent shall:
(1) Obtain a statement signed by the
applicant as a part of each life insurance application as to whether the new
insurance will replace existing life insurance; and
(2) submit to the insurer in connection with
each life insurance application a statement as to whether, to the best of the
agent's knowledge, a life insurance replacement is involved in the transaction.
(d) When a replacement
is involved, each life insurance agent shall:
(1) Include as part of each application a
list of all existing life insurance policies to be replaced and the name of
each insurer which issued the insurance being replaced;
(2) present to the applicant, when the
application is submitted, a copy of each sales proposal used, and a "notice to
applicants regarding replacement of life insurance" described in section (h) in
a form acceptable to the commissioner. The agent shall leave the forms with the
applicant after explaining their content;
(3) submit with the application a copy of
each sales proposal used; and
(4)
have the applicant acknowledge receipt of the "notice to applicant regarding
replacement of life insurance."
(e) Each insurer shall:
(1) Inform its field representatives of the
requirements of this regulation;
(2) require with each application a statement
signed by the applicant as to whether the insurance will replace existing life
insurance; and
(3) require in
connection with each application for life insurance a statement signed by the
agent as to whether, to the best of the agent's knowledge, a life insurance
replacement is involved in the transaction.
(f) When a replacement is involved, the
replacing insurer shall:
(1) Require with
each application a list prepared by the agent of all existing life insurance
policies to be replaced;
(2)
obtain a copy of any sales proposal used, proof of the receipt by the applicant
of the "notice to applicant regarding replacement of life insurance," and the
name of each insurer whose insurance is being replaced;
(3) within three working days, notify each
insurer whose insurance is being replaced by another insurer;
(4) delay, if it is not the existing insurer,
policy issuance for 20 days after sending the notification required by
subparagraph (3). The replacing insurer may issue its policy immediately when:
(A) The policy or a separate written notice
states that, except as provided in K.A.R. 40-2-15 with respect to adjustments
necessary to reflect investment risk on variable annuity contracts and variable
life insurance polices, the applicant has a right to an unconditional refund of
all premiums paid, within 20 days after delivery of the policy; and
(B) notice to the existing insurer is sent
within three working days of the date its policy is issued;
(5) maintain copies of each sales
proposal used, proof of receipt by the applicant of the "notice to applicant
regarding replacement," and the applicant's signed statement with respect to
replacement, in its home office for at least three years or until the
conclusion of the next succeeding regular examination by the insurance
department of its state of domicile, whichever is later. Each insurer receiving
notice that its existing insurance may be replaced shall maintain a copy of the
notice, indexed by insurer, for three years after receipt or until the
conclusion of the next regular examination conducted by the insurance
department of its state of domicile, whichever is later; and
(6) either by inclusion in the replacement
policy or by a rider attached thereto, provide that the new life insurance
issued by the replacing insurer will not be contestable by the replacing
insurer, in the event of the insured's death, to any greater extent than the
replaced life insurance would have been contestable by the insurer providing
the replaced coverage had a replacement not occurred. Subsection (f) (6) shall
not apply to any amount of insurance provided by the replacement policy which
exceeds the amount of insurance provided by the replaced policy.
(g) With the exception of the
reference to a comparative information form, the forms set forth in exhibits A,
B, and C of the national association of insurance commissioners' model life
insurance replacement regulation, December 1978 edition, are hereby adopted by
reference. Equivalent forms may be adopted with the prior approval of the
insurance commissioner. If the forms adopted by reference require modification
for replacements involving annuity contracts or contracts sold by direct mail
methods, each company shall modify the form and submit the modified form to the
insurance commissioner for approval. A copy of the modified forms shall be
filed with the insurance commissioner.
(h) If an agent, who holds both a life
insurance license and a securities license, proposes to sell securities to a
policyholder which will result in situations set forth in paragraph (7) of
subsection (a), the agent shall give written notice to the policyholder before
consummating the proposal. Each written notice shall:
(1) Be dated and signed by the licensed
agent, and state the agent's address;
(2) state the name and address of the
policyholder;
(3) describe the
insurance which has been or is to be affected, including the policy number,
amount of insurance, plan of insurance, issue age, effective date, and the
total premium;
(4) state how the
insurance will be affected, the amount of cash value affected and the facts
which support replacement; and
(5)
list the company or companies involved.
(i) Each agent, who holds both a life
insurance license and a securities license, shall keep a file containing a copy
of each written notice. The agent shall keep a copy of each notice for three
years. The file shall be subject to inspection and review by the insurance
department, upon written request.
(j) When any licensed agent solicits life
insurance in connection with the sale of securities not prohibited by
K.S.A.
40-232, this agent shall, in addition to
complying with the requirements of subsections (c) and (d), submit a copy of
the notice required by subsection (i) to the insurer. Each notice shall be
attached to and become a part of exhibit A referenced in section (g) of this
regulation.
(k) Any violation of
this rule shall be presumed to constitute a misleading representation for the
purpose of inducing or tending to induce an insured to lapse, forfeit or
surrender the insured's existing insurance.
