Wisconsin Administrative Code
Office of the Commissioner of Insurance
Chapter Ins 2 - Life Insurance
Section Ins 2.15 - Annuity benefit solicitations
Universal Citation: WI Admin Code § Ins 2.15
Current through November 25, 2024
(1) FINDINGS. Information on file in the office of the commissioner of insurance and submitted as Exhibit 4 at the hearing February 28, 1980 shows that some of the brochures, presentations, illustrations and other sales material which have been used by insurers and their representatives to sell annuity contracts to Wisconsin residents are confusing, misleading and incomplete, and that annuity purchasers are not receiving the information needed to make sound purchase decisions. The commissioner of insurance finds that such presentations and sales material are misleading, deceptive and restrain competition unreasonably as considered by s. 628.34(12), Stats., and that their continued use would constitute an unfair trade practice under s. 628.34(12), Stats., and would result in misrepresentation as defined and prohibited in s. 628.34(1), Stats.
(2)
(a) The purpose of this section is to require
insurers to deliver to prospects for deferred annuity contracts or deposit
funds, riders or provisions accepted in conjunction with insurance policies or
annuity contracts, information which helps the prospect select an annuity
benefit appropriate to the prospect's needs, improves the prospect's
understanding of the basic features of the plan under consideration and
improves the prospect's ability to evaluate the relative benefits of similar
plans. This section does not prohibit the use of additional material which is
not in violation of any other Wisconsin rule or statute. This section is in
addition to and not a substitute for the requirements set forth in s.
Ins 2.16.
(b)
This section interprets and implements s.
628.34(12),
Stats.
(3) SCOPE.
(a) Except as specified in par. (b), this
section shall apply to any solicitation, negotiation or procurement of annuity
or deposit fund arrangements occurring within this state. This section shall
apply to any issuer of life insurance policies or annuity contracts, including
fraternal benefit societies.
(b)
This section shall not apply to:
1.
Non-registered variable annuities issued exclusively to an accredited investor
or qualified purchaser as those terms are defined by the Securities Act of 1933
(15 U.S.C.
Section 77 a et seq.), the Investment Company
Act of 1940 (15 U.S.C. Section
80a-1 et seq.), or the regulations
promulgated under either of those acts, and offered for sale and sold in a
transaction that is exempt from registration under the Securities Act of 1933 (15 U.S.C.
Section 77 a et seq.);
2. Transactions involving variable annuities
and other registered products in compliance with Securities and Exchange
Commission (SEC) rules and Financial Industry Regulatory Authority (FINRA)
rules relating to disclosures and illustrations;
a. Notwithstanding subdivision 2. above, the
delivery of the applicable Buyer's Guide is required in sales of variable
annuities and, when appropriate, in sales of other registered
products.
b. Nothing in this
subdivision will limit the Commissioner's ability to enforce the provisions of
this regulation or to require additional disclosures.
3. Group annuity and pure endowment contracts
purchased under a retirement plan or plans of deferred compensation established
or maintained by an employer (including a partnership or sole proprietorship)
or by an employee organization, or both;
4. Immediate annuity contracts (arrangements
under which payments begin within 13 months of the issue date);
5. Policies or contracts issued in connection
with employee benefit plans as defined by
29
USC 1002(3) of the federal
employee retirement income security act of 1974 (ERISA), except policies or
contracts issued in connection with plans providing for the purchase of annuity
contracts solely by reason of salary reduction agreements under
26 USC
403(b) of the internal
revenue code;
6. Individual
retirement accounts and individual retirement annuities as described in
26 USC
408 of the internal revenue code;
7. A single advance payment of specified
premiums equal to the discounted value of such premiums;
8. A policyholder's deposit account
established solely to facilitate payment of regular premiums;
9. Settlement options under life insurance or
annuity contracts.
(4) DEFINITIONS.
(a) "Contract Summary" means a written
statement to be provided to the buyer at the time of contract delivery
describing the elements of the annuity contract or deposit fund in the manner
set out in sub. (6).
(b)
"Preliminary Contract Summary" means a written statement to be provided to the
buyer prior to sale which describes the elements of the annuity contract or
deposit fund in the manner set out in sub. (5).
(c) "Buyer's Guide" means one of the
following buyer's guides adopted by the National Association of Insurance
Commissioners (NAIC):
1. With respect to
sales of fixed or fixed indexed annuities, either:
a. The Buyer's Guide for Deferred Annuities
(2013); or
b. The Buyer's Guide for
Deferred Annuities Fixed (2013).
2. With respect to sales of variable
annuities, either:
a. The Buyer's Guide for
Deferred Annuities (2013); or
b.
The Buyer's Guide for Deferred Annuities Variable (2013).
(d) "Yields" means those effective
annual interest rates at which the accumulation of 100% of all gross
considerations would be equal to the guaranteed and illustrated cash surrender
values at the points specified. For contracts without surrender values the
yields shall be figured on the basis of the contract values used to determine
annuity payments at the points specified.
(5) PRELIMINARY CONTRACT SUMMARY. The Preliminary Contract Summary shall include:
(a) A prominently placed title, PRELIMINARY
CONTRACT SUMMARY, followed by an identification of the arrangement to which the
statement applies;
(b) The name and
address of the insurance intermediary or, if no intermediary is involved, a
statement of the procedure to be followed in order to receive responses to
inquiries;
(c) The full name and
home office or administrative office address of the insurer;
(d) A statement as to whether the arrangement
provides any guaranteed death benefits during the deferral period;
(e) A prominent statement that the contract
does not provide cash surrender values, if such is the case;
(f) For arrangements under which guaranteed
cash surrender values at any duration are less than the total scheduled
considerations paid, a prominent statement that such contract or fund may
result in loss if kept for only a few years;
(g) Any minimum or maximum premium
limitations;
(h) A prominent
description of all fees, charges, and loading amounts that are or may be
deducted from initial or subsequent considerations paid or that are or may be
deducted from the contract or fund values prior to or at contract maturity,
including but not limited to, any surrender penalties, discontinuance fees,
partial surrender or withdrawal penalties or fees, transaction fees, and
account maintenance fees;
(i) In
the event any sales promotion literature or oral representation illustrates
values or annuity payments which are based on dividends, excess interest
credits, or current annuity rates, then the Preliminary Contract Summary shall
contain a statement that such dividends, excess interest credits, and current
annuity purchase rates are not guaranteed and that any corresponding values and
annuity amounts are illustrations only and are not guaranteed;
(j) A statement that the insurer shall
provide the prospective customer a Contract Summary upon request.
(6) CONTRACT SUMMARY. The Contract Summary shall include:
(a) A prominently
placed title, CONTRACT SUMMARY, followed by an identification of the
arrangement to which the statement applies;
(b) The name and address of the insurance
intermediary or, if no intermediary is involved, a statement of the procedure
to be followed in order to receive responses to inquiries;
(c) The full name and home office or
administrative office address of the insurer;
(d) Any guaranteed death benefits during the
deferral period, and the form of annuity payment selected for pars. (f), (g)
and (i);
(e) A prominent statement
that the contract does not provide cash surrender values if such is the
case;
(f) The amount of the
guaranteed annuity payments at the scheduled commencement thereof, based on the
assumption that all scheduled considerations are paid and there are no prior
withdrawals from or partial surrenders of the arrangement and no indebtedness
to the insurer on the contract;
(g)
Illustrative annuity payments on a current basis, if shown, must be on the same
basis as for par. (f) except for guarantees, and may not be greater in amount
than those based on:
1. The current dividend
scale and the interest rate currently used to accumulate dividends under such
arrangements, or the current excess interest rate credited by the insurer,
and
2. Current annuity purchase
rates;
(h) For
arrangements under which guaranteed cash surrender values at any duration are
less than the total considerations paid, a prominent statement that such
contract or fund may result in loss if kept for only a few years and showing
the number of years such a relationship exists, together with a reference to
the schedule of guaranteed cash surrender values required by par. (i)
3.;
(i) The following amounts,
where applicable, for the first 5 years and representative years thereafter
sufficient to illustrate clearly the patterns of considerations and benefits,
including but not limited to the tenth and twentieth contract years and at
least one age from 60 through 65 or the scheduled commencement of annuity
payments:
1. The gross consideration for the
arrangement;
2. Any minimum or
maximum premium limitation;
3. The
total guaranteed cash surrender value at the end of the year or, if no
guaranteed cash surrender values are provided, the total guaranteed paid-up
annuity at the end of the year;
4.
If other than guaranteed cash values are shown, the total illustrative cash
value or paid-up annuity at the end of the year may not be greater in amount
than that based on:
a. The current dividend
scale and the interest rate currently used to accumulate dividends under such
arrangements or the current excess interest rate credited by the insurer,
and
b. Current annuity purchase
rates.
(im)
If the annuity payments have not yet commenced, the yield on gross
considerations at the end of 10 years and at the scheduled commencement of
annuity payments. For contracts without surrender values, only the yield at the
scheduled commencement of annuity payments need be shown. The yield shall be
figured on the basis of the contract value used to determine the annuity
payments. These yield figures shall be shown on a guaranteed basis and, if
current annuity payments or cash surrender values are shown, on an illustrative
basis also.
(in) A statement of the
interest rates used in calculating the guaranteed and illustrative contract or
fund values.
(j) For a Contract
Summary which includes values based on the current dividend scale or the
current dividend accumulation or excess interest rate, a statement that such
values are illustrations and are not guaranteed;
(k) The date on which the Contract Summary is
prepared.
(7) PREPARATION OF PRELIMINARY CONTRACT SUMMARY AND CONTRACT SUMMARY. The following must be considered in preparing the Preliminary Contract Summary and the Contract Summary:
(a) The Preliminary Contract Summary
and the Contract Summary must be separate documents;
(b) All information required to be disclosed
must be set out in such a manner as not to minimize or render any portion
thereof obscure;
(c) Any amounts
which remain level for 2 years or more contract years may be represented by a
single number if it is clearly indicated what amounts are applicable for each
contract year;
(d) Amounts in sub.
(6) (d), (f), (g) and (i) shall, in the case of flexible premium annuity
arrangements, be determined either according to an anticipated pattern of
consideration payments or on the assumption that considerations payable will be
a specified level amount, such as $100 or $1,000 per year;
(e) If not specified in the contract, annuity
payments shall be assumed to commence at age 65 or 10 years from issue,
whichever is later;
(f) A dividend
scale or excess interest rate which has been publicly declared by the insurer
with an effective date not more than two months subsequent to the date of
declaration shall be considered a current dividend scale or a current excess
interest rate.
(8) DISCLOSURE REQUIREMENTS.
(a) The insurer and
its intermediaries shall provide, to all prospective purchasers of any contract
or arrangement subject to this section, a buyer's guide and a properly
completed Preliminary Contract Summary or Contract Summary prior to accepting
the applicant's initial consideration for the annuity contract, or, in the case
of a rider or provision, prior to acceptance of the applicant's initial
consideration for the associated insurance policy or annuity contract. Insurers
which do not market contracts through an intermediary may provide the Contract
Summary, and a buyer's guide at the point of contract delivery provided they:
1. Guarantee to the contractholder the right
to return the contract for a full refund of premium any time during a 30 day
period commencing on the date such contractholder receives the Contract Summary
and a buyer's guide;
2. Alert the
prospective contractholder, in advertisements or direct mail solicitations, of
his or her right to obtain a buyer's guide and a Preliminary Contract Summary
prior to the sale.
(b)
The insurer and its intermediaries shall provide a Contract Summary upon
delivery of the contract, if it has not been delivered beforehand;
(c) The insurer and its intermediaries shall
provide a buyer's guide and a Contract Summary to individual prospective
purchasers upon reasonable request;
(d) Any statement provided subsequent to sale
to a contractholder which purports to show the then current value of an
arrangement subject to this section shall show the then current guaranteed cash
surrender value or, if no guaranteed cash surrender value is provided the then
current guaranteed paid-up annuity.
(9) GENERAL REQUIREMENTS.
(a) Each insurer shall maintain at its home
office or principal office a complete file containing one copy of each document
authorized by the insurer for use pursuant to this section. The file shall
contain one copy of each authorized form for a period of at least 3 years
following the date of its last authorized use. The requirements of this
paragraph are in addition to the requirements set forth in s.
Ins 2.16(30);
(b) An intermediary shall inform the
prospective purchaser, prior to commencing a sales presentation, that the
intermediary is acting as an insurance intermediary and shall inform the
prospective purchaser of the full name of the insurer which the intermediary is
representing to the buyer. In sales situations in which an intermediary is not
involved, the insurer shall identify its full name;
(c) Terms such as financial planner,
investment advisor, financial consultant, or financial counseling shall not be
used in such a way as to imply that the insurance intermediary is generally
engaged in an advisory business in which compensation is unrelated to sales,
unless such is actually the case;
(d) Any reference to dividends or to excess
interest credits must include a statement that such dividends or credits are
not guaranteed;
(f) Recommendations
made by any person subject to this section concerning the purchase or
replacement of any arrangement subject to this section are subject to the
requirements of s.
Ins 2.16(6);
(g) No presentation of benefits may display
guaranteed and non-guaranteed benefits as a single sum unless guaranteed
benefits are shown separately in close proximity thereto and with equal
prominence. The requirements of this paragraph are in addition to the
requirements set forth in s.
Ins 2.16(21);
(h) Sales promotion literature and contract
forms shall not state or imply that annuity arrangements are the same as
savings accounts or deposits in banking or savings institutions. The use of
policies or certificates which resemble savings bank passbooks is prohibited.
If savings accounts or deposits in banking and savings institutions are
utilized in connection with such annuity arrangements, this shall not prohibit
the use of an accurate description of the annuity arrangement.
Disclaimer: These regulations may not be the most recent version. Wisconsin may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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