New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 2 - LIFE INSURANCE AND ANNUITIES REPLACEMENT
Section 11:4-2.5 - Duties of insurers that use producers

Universal Citation: NJ Admin Code 11:4-2.5

Current through Register Vol. 56, No. 18, September 16, 2024

(a) Each insurer shall maintain a system of supervision and control to ensure compliance with the requirements of this subchapter. At a minimum, all such systems shall provide for the insurer to:

1. Inform its producers of the requirements of this subchapter and incorporate the requirements of this subchapter into all relevant producer training manuals prepared by the insurer;

2. Provide to each producer a written statement of the company's position with respect to the acceptability of replacements that provides guidance to the producer as to the appropriateness of these transactions;

3. Include a system to review the appropriateness of each replacement transaction that the producer does not indicate is in accord with (a)2 above;

4. Include procedures to verify that the requirements of this subchapter have been met; and

5. Include procedures to detect transactions that are replacements of existing policies or contracts by the existing insurer, but that have not been reported as such by the applicant or producer. Compliance with this subchapter may include but shall not be limited to, systematic customer surveys, interviews, confirmation letters, or programs of internal monitoring.

(b) Each insurer shall have the capacity to monitor each producer's life insurance policy and annuity contract replacements for that insurer, and shall, upon request, produce and make such records available to the Department. The capacity to monitor shall include the ability to produce the following records for each producer:

1. Life replacements, including financed purchases, as a percentage of the producer's total annual sales of life insurance;

2. The number of lapses of policies by the producer as a percentage of the producer's total annual sales of life insurance;

3. Annuity contract replacements as a percentage of the producer's total annual annuity contract sales;

4. The number of transactions that are unreported replacements of existing policies or contracts by the existing insurer detected by the company's monitoring system as required by (a)5 above; and

5. Replacements indexed by replacing producer and existing insurer.

(c) Each insurer shall require with, or as a part of, each application for life insurance or an annuity, a statement signed by both the applicant and the producer as to whether the applicant has existing policies or contracts.

(d) Each insurer shall require with each application for life insurance or an annuity that indicates the existence of a current policy or contract a completed notice regarding replacements as contained in Appendix A.

(e) When the applicant has existing policies or contracts, the insurer shall be able to produce copies of any sales material as required by 11:4-2.3(e), the basic illustration and any supplemental illustrations related to the specific policy or contract that was purchased, and the producer's and applicant's signed statements with respect to financing and replacement for at least five years after the termination or expiration of the purchased policy or contract.

(f) If an application fails to meet all the requirements of this subchapter, the insurer shall notify the producer and applicant of such failure and fulfill any outstanding requirements which the insurer has the ability to fulfill.

(g) If an insurer prohibits the use of sales material other than that approved by the company, as an alternative to the requirements of 11:4-2.3(d), the insurer may:

1. Require with each application a statement signed by the producer affirming that:
i. The producer used only company-approved sales material; and

ii. Copies of all sales material were left with the applicant in accordance with 11:4-2.3(c); and

2. Within 10 days of the issuance of the policy or contract:
i. Notify the applicant, either in writing or verbally by a person whose duties are separate from the marketing area of the insurer, that the producer has represented that copies of all sales material have been left with the applicant in accordance with 11:4-2.3(c);

ii. Provide the applicant with a toll free telephone number to enable the applicant to contact company personnel involved in the compliance function if such is not the case; and

iii. Notify the applicant either in writing or verbally that it is important to retain copies of the sales material for future reference.

(h) The insurer shall be able to produce a copy of the writing or other verification of compliance with (g)2 above in the policy file for at least five years after the termination or expiration of the policy or contract.

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