Title of Regulation: 14VAC5-41. Rules Governing Advertisement of Life Insurance and Annuities (amending 14VAC5-41-40).

Statutory Authority: §§ 12.1-13 and 38.2-223 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: May 4, 2012.

Agency Contact: James Young, Manager Special Projects, Bureau of Insurance, Life and Health Division, State Corporation Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9612, FAX (804) 371-9944, or email james.young@scc.virginia.gov.

Summary:

The amendments clarify the disclosure language required for advertisements of certain life insurance policies and annuities.

AT RICHMOND, MARCH 30, 2012

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. INS-2012-00044

Ex Parte: In the matter of
Amending the Rules Governing
Advertisement of Life Insurance
and Annuities

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction, and § 38.2-223 of the Code of Virginia provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of Title 38.2 of the Code of Virginia.

The rules and regulations issued by the Commission pursuant to § 38.2-223 of the Code of Virginia are set forth in Title 14 of the Virginia Administrative Code.

The Bureau of Insurance ("Bureau") has submitted to the Commission a proposal to amend the Rules Governing Advertisment of Life Insurance and Annuities at Chapter 41 of Title 14 of the Virginia Administrative Code, specifically set forth at 14 VAC 5-41-40, General disclosure requirements.

A request for clarification of the amendments to subsection H of 14 VAC 5-41-40 was made by a group of life insurance companies that do business primarily in the final expenses market. After the Bureau promulgated new rules at 14 VAC 5-41, which became effective July 1, 2011, this group of companies questioned the applicability of the disclosure language in subsection H to certain policies, as well as the length of required disclosure, and asked the Bureau for clarification. The Bureau has revised the language to meet the Bureau's goals as well as to address the concerns of these companies.

NOW THE COMMISSION is of the opinion that amendments to Section 40 of Chapter 41 of Title 14 of the Virginia Administrative Code should be considered for adoption.

Accordingly, IT IS ORDERED THAT:

(1) The proposal to amend Chapter 41 of Title 14 of the Virginia Administrative Code, specifically 14 VAC 5-41-40, General disclosure requirements, is attached hereto and made a part hereof.

(2) All interested persons who desire to comment in support of or in opposition to, or request a hearing to oppose amending Section 40 in Chapter 41 of Title 14 of the Virginia Administrative Code, shall file such comments or hearing request on or before May 4, 2012, with Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Interested persons desiring to submit comments electronically may do so by following the instructions at the Commission's website: http://www.scc.virginia.gov/caseinfo.htm. All comments shall refer to Case No. INS-2012-00044.

(3) If no written request for a hearing on the proposal to amend 14 VAC 5-41-40 is received on or before May 4, 2012, the Commission, upon consideration of any comments submitted in support of or in opposition to the proposal, may amend 14 VAC 5-41-40.

(4) AN ATTESTED COPY hereof, together with a copy of the proposal to amend rules, shall be sent by the Clerk of the Commission to the Bureau of Insurance in care of Deputy Commissioner Althelia P. Battle, who forthwith shall give further notice of the proposal to amend rules by mailing a copy of this Order, together with the proposal, to all companies licensed by the Commission to write life insurance or annuities in the Commonwealth of Virginia, as well as all interested parties.

(5) The Commission's Division of Information Resources forthwith shall cause a copy of this Order, together with the proposal to amend rules, to be forwarded to the Virginia Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

(6) The Commission's Division of Information Resources shall make available this Order and the attached proposed amendments to the rules on the Commission's website: http://www.scc.virginia.gov/case.

(7) The Bureau of Insurance shall file with the Clerk of the Commission an affidavit of compliance with the notice requirements of Ordering Paragraph (4) above.

14VAC5-41-40. General disclosure requirements.

A. The information required to be disclosed by this chapter shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of an advertisement so as to confuse or mislead.

B. If an advertisement uses the terms "nonmedical," "no medical examination required," or similar terms where issue is not guaranteed, these terms shall be accompanied by a further disclosure of equal prominence and juxtaposition to the effect that issuance of the policy may depend upon the answers to the health questions contained in the application.

C. An advertisement shall not contain figures, dollar amounts, or statistical information unless it accurately reflects recent and relevant facts. The source of any figures, dollar amounts, or statistics used in advertisements shall be identified therein.

D. An advertisement for a life insurance policy containing graded or modified benefits shall prominently display any limitation of benefits. If the premium is level and coverage decreases or increases with age or duration, that fact shall be commonly disclosed. An advertisement of or for a life insurance policy under which the death benefit varies with the length of time the policy has been in force shall accurately describe and clearly call attention to the amount of minimum death benefit under the policy.

E. Any advertisement that mentions or refers to universal life insurance premiums shall indicate that it is possible that coverage will expire when either no premiums are paid following the initial premium, or subsequent premiums are insufficient to continue coverage , if true.

F. An insurer or agent shall advise a prospective applicant who is considering replacing a policy that under the existing policy the period of time during which the existing insurer could contest the policy or deny coverage for death caused by suicide may have expired or may expire earlier than it will under the proposed policy.

G. An advertisement for life insurance or an annuity that is to be used to fund a preneed funeral contract shall disclose that fact.

H. An advertisement for of a life insurance policy or an annuity in which the face amount or any part of the face amount is based on the that will not fund a preneed funeral contract and that includes a listing, summary, description, or comparison of actual or estimated cost costs of funeral goods or services shall contain the following disclosure:

"This is (life insurance or an annuity). This (life insurance or annuity) does not specifically cover funeral goods or services, and may not cover the entire cost of your funeral at the time of your death. The beneficiary of this (life insurance or annuity) may use the proceeds of this (life insurance or annuity) for any purpose, unless otherwise directed. The face amount of this (life insurance or annuity) is not guaranteed to increase at the same rate as the costs of a funeral increase."