Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO:
KRS
304.12-010,
304.12-020,
304.12-230
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
304.2-110(1) authorizes the
Commissioner of Insurance to promulgate administrative regulations necessary
for or as an aid to the effectuation of any provision of the Kentucky Insurance
Code, KRS Chapter 304. This administrative regulation establishes requirements
for insurers to deliver information to purchasers of life insurance that is
designed to improve the buyer's ability to select the most appropriate plan of
life insurance for the buyer's needs and improve the buyer's understanding of
the basic features of the policy that has been purchased or is under
consideration.
Section 1. Definitions.
(1) "Buyer's Guide" means the current Life
Insurance Buyer's Guide published by the National Association of Insurance
Commissioners.
(2) "Current scale
of nonguaranteed elements" means a formula or other mechanism that produces
values for an illustration as if there is no change in the basis of those
values after the time of illustration.
(3) "Generic name" means a short title that
is descriptive of the premium and benefit patterns of a policy or a
rider.
(4) "Nonguaranteed elements"
means the premiums, credited interest rates, including any bonus, benefits,
values, non-interest based credits, charges, or elements of formulas used to
determine any of these, that are subject to company discretion and are not
guaranteed at issue. An element is considered nonguaranteed if any of the
underlying nonguaranteed elements are used in its calculation.
(5) "Policy data" means a display or schedule
of numerical values, both guaranteed and nonguaranteed, for each policy year or
a series of designated policy years of the following information:
(a) Illustrated annual, other periodic, and
terminal dividends;
(b)
Premiums;
(c) Death benefits;
and
(d) Cash surrender values,
outstanding policy loans, current policy loan interest rate, and endowment
benefits.
(6) "Policy
summary" means a separate document describing the elements of the policy and
complying with the requirements established in Section 3 of this administrative
regulation.
Section 2.
Application.
(1) Except as provided in
subsection (2) of this section, this administrative regulation shall apply to:
(a) A solicitation, negotiation, or
procurement of life insurance occurring within this state; and
(b) An issuer of life insurance contracts
including fraternal benefit societies.
(2) This administrative regulation shall not
apply to:
(a) Individual and group annuity
contracts;
(b) Credit life
insurance;
(c) Group life
insurance;
(d) Life insurance
policies issued in connection with pension and welfare plans that are subject
to the federal Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. Section
1001 et seq. as amended; or
(e) Variable life insurance under which the
amount or duration of the life insurance varies according to the investment
experience of a separate account.
Section 3. Policy Summary. A policy summary
shall describe the elements of the policy including the following:
(1) A permanently placed title stating:
"STATEMENT OF POLICY COST AND BENEFIT INFORMATION";
(2) The name and address of the insurance
agent or, if an agent is not involved, a statement of procedure to be followed
in order to receive responses to inquiries regarding the policy
summary;
(3) The full name and home
office or administrative office address of the life insurance company issuing
the policy;
(4) The generic name of
the basic policy and each rider;
(5) The following amounts shall be listed in
total, not on a per thousand or per unit basis and, if applicable for the first
ten (10) policy years and representative policy years thereafter, the amounts
shall be listed sufficiently to clearly illustrate the premium and benefit
patterns, including at least an age from sixty (60) through sixty-five (65) and
policy maturity:
(a) The annual premium of the
basic policy;
(b) The annual
premium for each optional rider;
(c)
1. The
amount payable upon death at the beginning of the policy year pursuant to the
basic policy with additional benefits for each rider shown
separately.
2. If more than one (1)
insured is covered pursuant to one (1) policy or rider, death benefits shall be
displayed separately for each insured or for each class of insured's if death
benefits do not differ within the class;
(d) The total guaranteed cash surrender
values at the end of the year with values shown separately for the basic policy
and each rider; and
(e) Endowment
amounts payable pursuant to the policy that are not included pursuant to the
cash surrender values described in this subsection;
(6)
(a) The
effective policy loan annual percentage interest rate, if the policy contains
this provision, specifying whether the rate is applied in advance or in
arrears.
(b) If the policy loan
interest rate is adjustable, the policy summary shall state that the annual
percentage rate shall be determined in accordance with the provisions of the
policy and the applicable law; and
(7) The date on which the policy summary was
prepared.
Section 4.
Duties of Insurers.
(1) Requirements for new
issues.
(a)
1. Except as provided in subparagraph 2. of
this paragraph, the insurer shall provide the Buyer's Guide to each prospective
purchaser prior to accepting the applicant's initial premium or premium
deposit.
2. If the policy for which
application is made contains an unconditional refund provision of at least ten
(10) days, the Buyer's Guide may be delivered with the policy or prior to
delivery of the policy.
(b) The insurer shall provide a policy
summary to prospective purchasers in which the insurer shall identify the
policy form as not marketed with an illustration.
1. The policy summary shall show guarantees
only.
2. The policy summary shall
consist of a separate document with all required information set out in a
manner that does not minimize or render any portion of the summary
obscure.
3. Amounts that remain
level for two (2) or more years of the policy may be represented by a single
number if it is clearly indicated what amounts are applicable for each policy
year.
4. Amounts in Section 3(5) of
this administrative regulation shall be listed in total, not on a per thousand
or per unit basis.
5. If more than
one (1) insured is covered under one (1) policy or rider, death benefits shall
be displayed separately for each insured or for each class of insured if death
benefits do not differ within the class.
6. Zero amounts shall be displayed as a blank
space.
7. Delivery of the policy
summary shall be consistent with the time for delivery of the Buyer's Guide as
specified in paragraph (a) of this subsection.
(2) Requirements applicable to existing
policies.
(a) Upon request by the policy
owner, the insurer shall furnish the policy data or an in force illustration as
follows:
1. For policies issued prior to
January 1, 2008, the insurer shall furnish policy data, or, at its option, an
in force illustration meeting the requirements of
806 KAR
12:140.
2.
For policies issued on or after January 1, 2008 and declared not to be used
with an illustration, the insurer shall furnish policy data, limited to
guaranteed values, if it has chosen not to furnish an in force illustration
meeting the requirements of
806 KAR
12:140.
3.
If the policy was issued on or after January 1, 2008 and declared to be used
with an illustration, an in force illustration shall be provided.
4. Unless otherwise requested, the policy
data shall be provided for twenty (20) consecutive years beginning with the
previous policy anniversary.
(b)
1. If a
life insurance company changes its method of determining scales of
nonguaranteed elements on existing policies, it shall notify each affected
policy owner of the change and its effect on the policy no later than the date
of the first payment on the new basis.
2. The requirement established in
subparagraph 1. of this paragraph shall not apply to policies for which the
death benefit pursuant to the basic policy on the date of notice does not
exceed $5,000.
(c) If
the insurer makes a material revision in the terms and conditions which will
limit its right to change any nonguaranteed factor, it shall notify each
affected policy owner of the change no later than the first policy anniversary
following the revision.
Section 5. General Rules.
(1)
(a)
Prior to commencing a life insurance sales presentation, an agent shall inform
the prospective purchaser that the agent is acting as a life insurance
agent.
(b) The agent shall inform
the prospective purchaser, in writing, of the full name of the insurance
company which the agent represents.
(c) In sales situations in which an agent is
not involved, the insurer shall identify the insurer's full name.
(2)
(a) An insurance producer marketing insurance
products shall not use a title or designation, including "financial planner,"
"investment advisor," "financial consultant," or "financial counseling" to
imply that the insurance producer is engaged in an advisory or consulting
business in which compensation is unrelated to sales.
(b) This subsection shall not preclude:
1. A person recognized as having a financial
planning or consultant designation from using the designation even if only
selling insurance; or
2. Members of
a recognized trade or professional association from having these terms as part
of the organization's name from citing membership. If authorized only to sell
insurance products, a person citing membership shall disclose that
fact.
(c) A person shall
not charge an additional fee for services customarily associated with the
solicitation, negotiation, or servicing of policies.
(3)
(a) A
reference to nonguaranteed elements shall include a statement that the item is
not guaranteed and is based on the company's current scale of nonguaranteed
elements.
(b) If a nonguaranteed
element would be reduced by the existence of a policy loan, a statement to that
effect shall be included in each reference to nonguaranteed elements.
Section 6. Failure to
Comply. Failure of an insurer to provide or deliver the Buyer's Guide, an in
force illustration, a policy summary, or policy data shall constitute an
omission that misrepresents the benefits, advantages, conditions, or terms of
an insurance policy.
Section 7.
Effective Date. The requirements of this administrative regulation shall not be
implemented or enforced prior to the effective date, determined pursuant to
KRS
13A.330, or January 1, 2012, whichever is
later.
Section 8. Incorporation by
Reference.
(1) "Life Insurance Buyer's Guide,
"National Association of Insurance Commissioners", 2018 is incorporated by
reference.
(2) This material may be
inspected, copied, or obtained, subject to applicable copyright law, at the
Department of Insurance, Mayo-Underwood Building, 500 Mero Street, Frankfort,
Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. This material is
also available on the department's Web site at:
http://insurance.ky.gov.
STATUTORY AUTHORITY:
KRS
304.2-110