Titles of Regulations: 14VAC5-40. Rules Governing Life Insurance and Annuity Marketing Practices (repealing 14VAC5-40-10 through 14VAC5-40-80).

14VAC5-41. Rules Governing Advertisment of Life Insurance and Annuities (adding 14VAC5-41-10 through 14VAC5-41-160).

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: December 17, 2010.

Agency Contact: Weldon Hazlewood, Principal Market Examiner, Bureau of Insurance, State Corporation Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9047, FAX (804) 371-9944, or email weldon.hazlewood@scc.virginia.gov.

Summary:

The repeal of 14VAC5-40 is necessary because the rules are outdated and many provisions are no longer applicable to current advertising practices. The proposed rules in 14VAC5-41 address and clarify many of the advertisement requirements found in the Code of Virginia, retain some of the provisions from Chapter 40, and more closely follow the National Association of Insurance Commissioners' Model Regulation on this subject. The proposed rules (i) establish the form and content of advertisements; (ii) establish general disclosure requirements; (iii) set standards for advertisements regarding information on premiums, nonguaranteed policy elements and benefits, policy costs and cost comparison, insurer identity, testimonials, and introductory or special offers; and (iv) establish requirements for policies sold to students, licensing, and approval and records maintenance. It is anticipated that these regulations will become effective July 1, 2011.

AT RICHMOND, OCTOBER 20, 2010

COMMONWEALTH OF VIRGINIA

At the relation of the

STATE CORPORATION COMMISSION

CASE NO. INS-2010-00214

Ex Parte: In the matter of
Repealing and Adopting New
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 repeal Chapter 40 of Title 14 of the Virginia Administrative Code entitled Rules Governing Life Insurance and Annuity Marketing Practices ("Rules"), which are set out at 14 VAC 5-40-10 through 14 VAC 5-40-80, and proposes a new chapter, Chapter 41 of Title 14 of the Virginia Administrative Code entitled Rules Governing Advertisement of Life Insurance and Annuities ("Proposed Rules") set forth at 14 VAC 5-41-10 through 14 VAC 5-41-160.

The repeal of Chapter 40 is necessary because the Rules are old and outdated, and many provisions are no longer applicable to current advertisement practices.

The Proposed Rules in Chapter 41 address and clarify many of the advertisement requirements found in the Code of Virginia, retain some of the provisions from Chapter 40, and more closely follow the National Association of Insurance Commissioners' (NAIC) Model Regulation on this subject. The Proposed Rules establish the form and content of advertisements and general disclosure requirements, set standards for advertisements that include information on premiums, nonguaranteed policy elements and benefits, address policy costs and cost comparison requirements, insurer identity, advertisements using testimonials or offering introductory or special offers, requirements for policies sold to students and licensing, as well as approval and records maintenance requirements.

The Commission is of the opinion that the Rules contained in Chapter 40 of Title 14 of the Virginia Administrative Code should be repealed, and the Proposed Rules at Chapter 41 of Title 14 of the Virginia Administrative Code should be considered for adoption.

THEREFORE, IT IS ORDERED THAT:

(1) The proposal that Chapter 40 of Title 14 of the Virginia Administrative Code set out at 14 VAC 5-40-10 through 14 VAC 5-40-80 be repealed and a new chapter proposed at Chapter 41 of Title 14 of the Virginia Administrative Code set forth at 14 VAC 5-41-10 through 14 VAC 5-41-160, be 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 the repeal of Chapter 40 and the adoption of the proposed new Chapter 41 shall file such comments or hearing request on or before December 17, 2010, with the Clerk of the Commission, Document Control Center, P.O. Box 2118, Richmond, Virginia 23218 and shall refer to Case No. INS-2010-00214. 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.

(3) If no written request for a hearing on the proposed repeal and adoption of new rules is filed on or before December 17, 2010, the Commission, upon consideration of any comments submitted in support of or in opposition to the proposal, may repeal Chapter 40 and adopt proposed Chapter 41 of Title 14 of the Virginia Administrative Code as proposed by the Bureau of Insurance.

(4) AN ATTESTED COPY hereof, together with a copy of the proposal to repeal and adopt new rules, shall be sent by the Clerk of the Commission to the Bureau of Insurance in care of Deputy Commissioner Jacqueline K. Cunningham, who forthwith shall give further notice of the proposal to repeal and adopt new rules by mailing a copy of this Order, together with the proposal, to all insurers licensed by the Commission to write life insurance and annuity contracts 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 repeal and adopt new 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 revisions 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 paragraph (4) above.

CHAPTER 41
RULES GOVERNING ADVERTISEMENT OF LIFE INSURANCE AND ANNUITIES

14VAC5-41-10. Purpose and applicability.

A. The purpose of this chapter is to set forth minimum standards and guidelines to assure a full and truthful disclosure to the public of all material and relevant information in the advertising of life insurance policies and annuity contracts.

B. All advertisements, regardless of by whom written, created, designed, or presented, shall be the responsibility of the insurer or the agent who created or presented the advertisement.

C. This chapter shall apply to any life insurance or annuity advertisement intended for dissemination in this Commonwealth. In variable contracts where disclosure requirements are established pursuant to federal regulation, this chapter shall be interpreted to eliminate any conflict with federal regulation.

14VAC5-41-20. Definitions.

The following words and terms when used in this chapter shall have the following meaning unless the context clearly indicates otherwise:

"Advertisement" means any marketing communication that is oral, printed, written, or other material of any type from any source that is used by an agent or insurer and that is designed to create or has the effect of creating public interest in life insurance or annuities, or induces or tends to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy including, but not limited to:

1. Printed or published material, audiovisual material, mailing envelopes, or descriptive literature of an insurer or agent used in direct mail, newspapers, magazines, radio, telephone and television scripts, billboards or similar displays, websites and other Internet displays or communications, social media, or other forms of electronic communications;

2. Descriptive literature and sales aids of all kinds, authored by the insurer, its agents, or third parties, issued, distributed, or used by an insurer or agent including but not limited to circulars, booklets, illustrations, form letters, pamphlets, brochures, and books or portions thereof;

3. Materials, statements, or communications of any type used for the recruitment, training, and education of an insurer's sales personnel and agents that are designed to be used or are used to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy; or

4. Prepared or extemporaneous sales talks, presentations, and material for use or used by agents.

"Advertisement" does not include:

1. Communications or materials used within an insurer's own organization, not used as a sales aid, and not intended to be disseminated to the public;

2. Communications with policyholders other than material urging them to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy; or

3. A general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged; provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage.

"Agent" means a person defined in § 38.2-1800 of the Code of Virginia.

"Commission" means the State Corporation Commission.

"Contribution principle" means the dividend determination principle wherein aggregate divisible surplus is distributed or illustrated to be distributed among participating policies in the same proportion as the policies are considered to have contributed to divisible surplus.

"Determinable policy elements" means elements that are derived from processes or methods that are guaranteed at issue and not subject to company discretion, but where the values or amounts cannot be determined until some point after issue. These elements include the premiums, credited interest rates (including any bonus), benefits, values, noninterest based credits, charges or elements of formulas used to determine any of these. These elements may be described as guaranteed but not determined at issue. An element is considered determinable if it was calculated from underlying determinable policy elements only, or from both determinable and guaranteed policy elements.

"Guaranteed policy elements" means the premiums, benefits, values, credits or charges under a policy, or elements of formulas used to determine any of these that are guaranteed and determined at issue.

"Home office" means either the insurer's home office or the principal executive or administrative office of the insurer from which policyholder services available to the citizens of this Commonwealth are directed or administered.

"Insurer" means any person, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's, fraternal benefit society, or any other legal entity that is defined as an "insurer" in the Code of Virginia.

"Nonguaranteed policy elements" means the premiums, credited interest rates (including any bonus), benefits, values, noninterest 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.

"Policy" means any policy, plan, certificate including a fraternal benefit certificate, contract, agreement, statement of coverage, rider, or endorsement that provides for life insurance or annuity benefits unless otherwise specifically defined in this chapter.

"Preneed funeral contract" means any agreement where payment is made by the consumer prior to the receipt of services or supplies contracted for, that evidences arrangements prior to death for (i) the providing of funeral services or (ii) the sale of funeral supplies.

14VAC5-41-30. Form and content of advertisements.

A. An advertisement shall not be combined or included with an advertisement of a product or service that is not life insurance or an annuity that disguises, misleads, misinforms or otherwise minimizes the nature of the advertisement.

B. An advertisement shall be truthful and not misleading in fact or by implication. The form and content of an advertisement shall be sufficiently accurate, complete, and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the commission from the overall impression that the advertisement may be reasonably expected to create within the segment of the public to which it is directed.

C. An advertisement shall not omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving purchasers, prospective purchasers or policyowners as to the nature of their relationship with the insurer, or the nature or extent of any policy benefit, loss covered, premium payable, or state or federal tax consequences. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale, or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

D. An advertisement shall not make unfair, inaccurate, or incomplete comparisons of policies, benefits, dividends, or rates of other insurers. An advertisement shall not disparage or falsely or unfairly describe other insurers, agents, policies, services, or methods of marketing.

E. An advertisement shall not use the terms "investment," "investment plan," "founder's plan," "charter plan," "expansion plan," "profit," "profits," "profit sharing," "deposit," "interest plan," "savings," "savings plan," "retirement plan," "private pension plan" or other similar terms in connection with a policy in a context or under circumstances or conditions as to have the capacity or tendency to mislead.

F. An advertisement of a particular policy shall not state or imply that prospective insureds shall be or become members of a special class, group or quasi-group and as such enjoy special rates, dividends, or underwriting privileges, unless that is fact.

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 that relates to a policy under which the death benefit varies with the length of time the policy has been in force shall clearly call attention to the amount of minimum death benefit under the policy. If the death benefit during a specified period following the policy date of issue is limited to an amount equal to the sum of the premiums paid on the policy (with or without interest at a stated rate and regardless of whether the premiums are assumed to have always been paid annually), then any advertisement of the policy by an insurer shall prominently and clearly disclose the nature of the limited benefit. For the purposes of this subdivision only, the term "death benefit" does not include amounts payable because of accidental death, and exclusions applicable to death caused by suicide, occupational hazard, or aviation hazard are not to be considered in deriving the "death benefit."

E. Any advertisement that mentions or refers to universal life insurance premiums shall include the following disclosure:

"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."

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 life insurance or an annuity in which the face amount or any part of the face amount is based on the actual or estimated cost 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. 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."

14VAC5-41-50. Premiums.

A. An amount that is a premium for a policy shall be referred to in any advertisement only as a premium. The use of words such as "deposit," "deposit premium," "investment," or other misleading or confusing terminology to refer to a premium is prohibited.

B. An advertisement shall not contain a statement or representation that premiums paid for a policy can be withdrawn under the terms of the policy. Reference may be made to amounts paid into an advance premium fund, which are intended to pay premiums at a future time, to the effect that they may be withdrawn under the conditions of the prepayment agreement. Reference also may be made to withdrawal rights under any unconditional premium refund offer.

C. An advertisement for a policy with nonlevel premiums shall prominently describe the premium changes.

D. An advertisement in which the insurer describes a policy that reserves the right to change the amount of the premium during the policy term shall prominently describe this feature.

E. An advertisement for a policy with pure endowment benefits payable within the premium paying period shall contain information regarding the premium charged in a clearly identified separate amount. The specific amount of each separate endowment shall be shown in dollar amounts only. An advertisement shall not represent a pure endowment benefit as a "profit" or "return" on the premium paid, rather than a policy benefit for which a specified premium is paid.

F. An advertisement shall not imply the existence of an actuarial relationship between a specific premium or portion thereof, and a specific benefit or portion thereof, provided under a policy where, in fact, none exists. No premium or a portion of a premium shall be represented as an "additional," "separate," or "special" premium unless there is an actuarial relationship between the premium or portion thereof, and some specifically identifiable benefit or portion thereof.

G. No artificial relationships among premiums, interest rates, and benefits or portions thereof shall be implied or created.

H. An advertisement shall not represent that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact.

I. An advertisement shall not use the term "vanish," "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan using nonguaranteed elements to pay a portion of future premiums.

14VAC5-41-60. Nonguaranteed policy elements.

A. An advertisement shall not utilize or describe nonguaranteed policy elements in a manner that is misleading or has the capacity or tendency to mislead. In this connection, analogies and comparisons between dividends payable on shares of stock and dividends payable under a policy are prohibited unless the advertisement fully, clearly, and accurately describes the differences.

B. An advertisement shall not state or imply that the payment or amount of nonguaranteed policy elements is guaranteed. If nonguaranteed policy elements are illustrated, they shall be based on the insurer's current scale, and the illustration shall contain a prominent statement to the effect that the nonguaranteed policy elements are not to be construed as guarantees of amounts to be paid in the future.

C. An advertisement shall not state or imply that illustrated dividends or other nonguaranteed policy elements under either or both a participating policy or pure endowment will be or can be sufficient at any future time to assure without the future payment of premiums, the receipt of benefits, such as a paid-up policy, unless the advertisement clearly and precisely explains the benefits or coverage provided at that time and the conditions required for that to occur.

D. An advertisement shall not state or imply that dividends are other than mainly a refund or return of part of the premium paid or that dividends are guaranteed.

E. An advertisement shall not state or imply that a prospective policyholder will receive dividends or other nonguaranteed benefits, or special or favored treatment in the allowance or payment of amounts or other monetary benefits not expressly provided in the policy.

F. An advertisement shall not refer to dividends as "tax free" or use words of similar import, unless the tax treatment of dividends is fully explained and the nature of the dividend as a return of premium is indicated clearly.

G. An advertisement shall show dividends in dollar amount form only.

H. If a dividend illustration is determined in a manner involving substantial deviation from the contribution principle, an advertisement showing illustrated dividends shall prominently display the following caution: "The illustrated dividends for this policy were determined in a manner inconsistent with generally accepted practices."

14VAC5-41-70. Policies and benefits.

A. An advertisement shall not use as the name or title of a policy any phrase which omits the words "life insurance" or "annuity," as appropriate, unless accompanied by other language clearly indicating it is life insurance or an annuity.

B. An advertisement shall clearly and prominently describe the true nature or type of policy advertised.

C. An advertisement shall not state, represent or imply that a prospective or current policyholder will receive the right to benefits that are not a part of the policy itself, or made an effective part of the policy by rider or other instrument approved by and on file with the commission.

D. An advertisement shall not represent, directly or indirectly, that a policy may be sold only to certain persons because of their occupation, association, age, sex, or other condition unless it can be shown that the policy advertised is, in fact, sold only to those persons.

E. An advertisement shall not contain statements indicating that because a prospect has agreed to furnish names of potential purchasers, he is entitled to any specific benefits not available to all policyholders generally.

F. An advertisement shall not represent an increasing or other term insurance provision as a return of premium, a cash surrender value, or anything other than a guaranteed insurance benefit for which a premium is charged.

G. An advertisement shall not state or imply that a policy contains features or benefits that are not found in other policies, unless that is true.

H. In any advertisement, the basic death benefit shall be shown as a single amount, not arbitrarily or deceptively split into two or more parts, implying that there is a relationship between some part of a premium or other policy amount and some part of the death benefit, unless that is the fact, and provided the relationship is not for the purpose of, or may likely have the effect of, misleading or deceiving.

I. If nonforfeiture values are shown in any advertisement, the values must be shown either for the entire amount of the basic death benefit or for each $1,000 of initial death benefit.

J. An advertisement shall not state or imply that on the death of an insured, the beneficiary will receive, or should have received, the cash value of a policy in addition to the face amount, unless the policy so provides.

K. An advertisement shall not state or imply in any way that interest charged on a policy loan or the reduction of death benefits by the amount of outstanding policy loans is unfair, inequitable, or in any manner an incorrect or improper practice.

L. The use of savings "passbooks" and similar misleading techniques to show a policy's cash value is prohibited.

M. Analogies between a policy's cash values and savings accounts or other investments, and between premium payments and contributions to savings accounts or other investments shall be complete and accurate. The analogy shall make clear that the representation is an analogy only and that cash values and premium payments are not identical to a savings account or other investments and contributions.

N. An advertisment shall not represent a pure endowment benefit as earnings on premiums paid or represent that a pure endowment benefit in a policy is other than a guaranteed benefit for which a specific part or all of the premium is being paid by the policyholder. For the purpose of this section, coupons or other devices for periodic payment of endowment benefits are included within the phrase "a pure endowment benefit."

14VAC5-41-80. Policy costs and cost comparisons.

A. The words "free," "no cost," "without cost," "no additional cost," "at no extra cost," or words of similar import shall not be used with respect to any benefit or service being made available with a policy unless true. If there is no charge to the insured, then the identity of the payor and the amount of the payment shall be prominently disclosed. An advertisement may specify the charge for a benefit or a service or may state that a charge is included in the premium or use other appropriate language.

B. An advertisement of a particular policy shall not use the phrase "inexpensive," "low cost" or any similar term unless that fact is capable of being demonstrated to the satisfaction of the commission.

C. An advertisement shall not imply or state that all older policies are more or less costly than newer policies.

D. A system or presentation that does not recognize the time value of money through the use of appropriate interest adjustments shall not be used for comparing the costs of two or more policies. The system may be used for the purpose of providing accounting information on a single policy owned by a business or for the purpose of showing the income tax implications of ownership of a single policy provided (i) it is accompanied by a statement disclosing that the presentation does not recognize that, because of interest, a dollar in the future has less value than a dollar today, and (ii) it is not used, directly or by implication, for purposes of illustrating the cost of the policy.

E. An advertisement of two or more policies sold as a "package" or other combination shall not direct attention improperly at the cost competitiveness of one part of the "package" when the cost competitiveness of that part is not indicative of the cost competitiveness of the "package" as a whole.

F. An advertisement of a single policy shall not direct attention improperly at the cost competitiveness of a part of the policy when the cost competitiveness of that part is not indicative of the cost competitiveness of the entire policy.

G. An advertisement of a policy at a particular issue age, sex, or amount shall not lead prospective policyholders to believe that the cost competitiveness of the policy is similar at other issue ages, sex, or amounts unless that is a fact.

H. An advertisement containing a cost comparison of two or more policies with nonguaranteed policy elements in which the method of investment income allocation differs between or among the policies shall state that fact and shall contain a brief explanation of the implications of the cost comparison.

14VAC5-41-90. Insurer identity and representations.

A. An advertisement shall not contain statements, pictures, comparative financial ratios, or illustrations that are false, misleading, or irrelevant in fact or by implication, with respect to the assets, liabilities, insurance in force, corporate structure, financial condition, age, or relative position of the insurer in the insurance business or with regard to affiliates or subsidiaries of the insurer. An advertisement shall not contain a recommendation by any commercial rating service unless it clearly defines the scope and extent of the recommendation.

B. An advertisement shall not state or imply that a purchaser of a policy will share in or receive a stated percentage or portion of the earnings on the general account assets of the insurer unless that is a fact.

C. The name of the insurer shall be clearly identified in all advertisements about the insurer or its products, and if any specific policy is advertised it shall be identified either by its form number or other appropriate description. If an application is a part of the advertisement, the name of the insurer shall be shown on the application.

D. An advertisement shall not use a trade name, an insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, a reinsurer of the insurer, service mark, slogan, symbol, or other device or reference without disclosing the name of the insurer if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the insurer, or create the impression that a company other than the insurer would have any responsibility for the financial obligations under a policy.

E. An advertisement shall not use any combination of words, symbols, or physical materials that by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a governmental program or agency or otherwise appear to be of a nature that they tend to mislead prospective insureds into believing that the solicitation is in some manner connected with a governmental program or agency.

F. An advertisement shall not use any combination of words, symbols, or physical materials that by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a noninsurance company with whom the prospective insured has a financial relationship or otherwise appear to be of a nature that it tends to mislead or deceive the prospective insured into believing that the purchase of insurance is required by the company.

G. An advertisement shall not represent that the mere size of an insurer or its total insurance in force necessarily affects either the solvency of the insurer or the reliability of the policies issued by the insurer.

H. An advertisement shall not contain any statement that would lead a prospective buyer or policyholder of life insurance or annuity to believe that he is acquiring stock in an insurer by purchasing the life insurance or annuity.

I. An advertisement shall not contain any statement that creates an inference that policyholders are entitled to benefits or profits on the same basis as stockholders.

J. An insurer or agent shall not use the terms "financial planner," "investment advisor," "financial consultant," "financial counseling" or other similar terms in a way that implies that the person who is engaged in the business of insurance, is generally engaged in an advisory business in which compensation is unrelated to sales unless that is actually a fact. No person engaged in the business of insurance shall hold himself out, directly or indirectly, to the public as a "financial planner," "investment advisor," "financial consultant," "financial counselor" or any other specialist engaged in the business of giving complete financial planning advice relating to investments, insurance, real estate, tax matters, and trust and estate matters unless that person in fact is engaged in that business and renders those services. Not included in "services" is the presentation of computer printouts that fall into the category of advanced programming for the purpose of selling a policy.

K. An advertisement of a policy marketed by direct response techniques shall not state or imply that because there is no insurance agent or commission involved there will be a cost savings to prospective purchasers unless that is the fact.

L. An insurer or agent shall not use materials, statements, or communications of any kind that when used alone are not misleading, but become deceptive or misleading when combined.

M. An insurer or agent shall not offer or provide to a proposed insured or other person a gift of substantial value if an application, inquiry card, or reinstatement application is returned within a specified period of time. For purposes of this subsection, a gift valued at $5.00 or less shall not be considered of substantial value.

14VAC5-41-100. Testimonials, appraisals, analyses and endorsements.

A. A testimonial, appraisal, analysis, or endorsement used in an advertisement shall be genuine; represent the current opinion of the author; be applicable to the policy advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective insureds as to the nature or scope of the testimonial, appraisal, analysis, or endorsement. In using testimonials, appraisals, analyses, or endorsements the insurer or agent makes as its own all the statements contained therein, and these statements are subject to all provisions of this chapter.

B. If the individual making a testimonial, appraisal, analysis, or endorsement has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, that fact shall be clearly and prominently disclosed in the advertisement. If an individual receives any financial benefit directly or indirectly, greater than required union scale wages, that fact shall be clearly and prominently disclosed in the advertisement by language identical or substantially similar to the following: "THIS IS A PAID ENDORSEMENT."

C. An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by a group of individuals, society, association, or other organization unless that is the fact and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial is owned, controlled, or managed by the insurer or receives any payment or other consideration from the insurer for making the endorsement or testimonial, that fact shall be disclosed in the advertisement.

14VAC5-41-110. Introductory, initial or special offers.

A. An advertisement of one policy or combination of policies shall not state or imply that the policy or combination of policies is an introductory, initial, or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless that is the fact. An advertisement shall not describe an enrollment period as "special" or "limited" or use similar words or phrases in describing it when the insurer uses successive enrollment periods as its usual method of marketing its policies.

B. An advertisement shall not state or imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of a particular policy because of special advantages available in the policy.

C. An advertisement shall not offer a policy that utilizes a reduced initial premium rate in a manner that overemphasizes the availability and the amount of the reduced initial premium. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, all references to the reduced initial premium shall be followed by an asterisk or other appropriate symbol that refers the reader to that specific portion of the advertisement that contains the full rate schedule for the policy.

D. An enrollment period during which a particular policy may be purchased on an individual basis shall not be offered within this Commonwealth unless there has been a lapse of not less than six months between the close of the immediately preceding enrollment period for the same or substantially similar policy and the opening of a new enrollment period. The advertisement shall specify the date by which the applicant must mail the application, that shall be not less than 10 days and not more than 40 days from the date on which the enrollment period is presented for the first time in the advertisement. This section applies to all the affiliated companies of a group of insurance companies under common management or control. This section does not apply to the use of a termination or cutoff date beyond which an individual application for a guaranteed issue policy will not be accepted by an insurer in those instances where the application has been sent to the applicant in response to his request. It is also inapplicable to solicitations of employees or members of a particular group or association that otherwise would be eligible under specific provisions of the Code of Virginia for group, blanket, or franchise insurance. In cases where a policy is marketed on a direct response basis to prospective insureds by reason of some common relationship with a sponsoring organization, this section shall be applied separately to each sponsoring organization.

14VAC5-41-120. Policies sold to students.

A. The envelope in which advertisement material is contained may be addressed to the parents of students. The address shall not include any combination of words that imply that the correspondence is from a school, college, university, or other education or training institution nor shall it imply that the institution has endorsed the material or supplied the insurer with information about the student unless that is a fact.

B. All advertisements including, but not limited to, informational flyers shall be clearly identified as coming from an insurer or agent, if that is the case, and these entities shall be clearly marked as such.

C. The return address on the envelope shall not imply that the soliciting insurer or agent is affiliated with a university, college, school, or other educational or training institution unless that is a fact.

14VAC5-41-130. Individual deferred annuity contracts or deposit funds.

A. Any illustrations or statements containing or based upon nonguaranteed interest rates shall likewise set forth with equal prominence comparable illustrations or statements containing or based upon the guaranteed accumulation rates. The nonguaranteed interest rate shall not be greater than those currently being credited by the company unless the nonguaranteed rates have been publicly declared by the company with an effective date for new issues not more than three months subsequent to the date of declaration.

B. If an advertisement for a particular annuity or advance premium fund states the accumulation interest rate based on net contributions, it shall also disclose in close proximity and with equal prominence, the accumulation interest rate based on gross contribution and the relationship between gross and net contributions.

C. An advertisement shall not state or imply that annuities or advance premium funds are accorded preferential tax treatment unless the advertisement describes the tax consequences of purchasing an annuity or making payments into an advance premium fund, including tax consequences on surrender and on death.

D. If the contract does not provide a cash surrender benefit prior to commencement of payment of annuity benefits, an illustration or statement concerning the contract shall prominently state that cash surrender benefits are not provided.

E. Any illustrations, depictions, or statements containing or based on determinable policy elements shall set forth with equal prominence comparable illustrations, depictions, or statements containing or based on guaranteed policy elements.

14VAC5-41-140. Jurisdictional licensing.

A. An advertisement that is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer or agent is licensed shall not imply licensing beyond those limits.

B. An advertisement may state that an insurer or agent is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that competing insurers or agents may not be so licensed.

C. An advertisement shall not create the impression that the insurer, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are recommended or endorsed by any governmental entity. However, where a governmental entity has recommended or endorsed a policy form or plan, that fact may be stated if the entity authorizes its recommendation or endorsement to be used in an advertisement.

D. An advertisement shall not represent or imply that any financial ratio, illustrative material or advertisement, including pictures, diagrams, charts, projections, or other material, has been approved or sanctioned by the commission, unless that is a fact.

14VAC5-41-150. Approval and records maintenance requirements.

A. All advertisements written, created, designed, or presented by an agent or other party responsible for advertisement shall be approved by the insurer.

B. Each insurer shall establish and at all times maintain a system of control over the method of dissemination, content, and form of all advertisements of its policies. A system of control shall include regular and routine notification to agents, brokers, and others authorized by the insurer to disseminate advertisements of the requirement and procedures for company approval prior to the use of any advertisement that is not furnished by the insurer.

C. Each insurer shall maintain at its home or principal office a complete file containing a specimen copy of every printed, published, or prepared advertisement of its individual policies and specimen copies of typical printed, published, or prepared advertisements of its blanket, franchise, and group policies, disseminated in this Commonwealth, with a notation indicating the manner and extent of distribution and the form number of any policy referred to in any advertisement. The file shall be subject to inspection by the commission. All advertisements shall be maintained in the file for a period of five years after discontinuance of their use or publication.

D. Each insurer shall inform its agents of the requirements of this regulation.

E. If the commission finds that it may be in the best interests of the public, at the commission's specific request, it may require particular insurers or agents to submit all or any part of their advertisements to the commission for review or approval prior to use.

14VAC5-41-160. Severability.

If any provision of this chapter or its application to any person or circumstance is for any reason held to be invalid by a court, the remainder of this chapter and the application of the provisions to other persons or circumstances shall not be affected.