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.

Effective Date: July 1, 2012.

Agency Contact: James Young, Manager, Special Projects, Bureau of Insurance, 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. There were no further changes to the rules as proposed.

AT RICHMOND, JUNE 11, 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 ADOPTING RULES

By Order to Take Notice entered March 30, 2012, all interested persons were ordered to take notice that subsequent to May 4, 2012, the State Corporation Commission ("Commission") would consider the entry of an order to adopt amendments to the Commission’s Rules Governing Advertisement of Life Insurance and Annuities, 14VAC5-41-10 et seq., specifically set forth at 14VAC5-41-40, General disclosure requirements. These amendments were proposed by the Bureau of Insurance ("Bureau"). The Order to Take Notice required that on or before May 4, 2012, any person objecting to the amendments to 14VAC5-41-40 shall have filed a request for hearing with the Clerk of the Commission ("Clerk").

The Order to Take Notice also required all interested persons to file their comments in support of or in opposition to the amendments to 14VAC5-41-40 on or before May 4, 2012.

No request for a hearing was filed with the Clerk. Comments in support of the proposed amendments to 14VAC5-41-40 were timely filed by Settlers Life Insurance Company, National Guardian Life Insurance Company, Atlantic Coast Life Insurance Company, and Great Western Life Insurance Company. Comments in opposition to the proposed amendments to 14VAC5-41-40 were timely filed by the American Council of Life Insurers. The Bureau filed a Statement of Position concerning the filed comments with the Clerk on May 31, 2012.¹

The Bureau recommends that the Commission adopt the amendments to 14VAC5-41-40 as proposed. The amendments to subsection H of 14VAC5-41-40 are necessary to clarify that the disclosure requirements contained in this subsection only apply to an advertisement of a life policy or annuity that includes a listing, summary, description or comparison of actual or estimated costs of funeral goods or services. Advertisements for policies used to fund a preneed funeral contract are exempt from this requirement.

NOW THE COMMISSION, having considered this matter and the Bureau's recommendation to amend 14VAC5-41-40, is of the opinion that the amendments to 14VAC5-41-40 should be adopted as proposed, effective July 1, 2012.

Accordingly, IT IS ORDERED THAT:

(1) The amendments to Chapter 41 of Title 14 of the Virginia Administrative Code entitled Rules Governing Advertisement of Life Insurance and Annuities specifically set forth at 14 VAC 5-41-40, which are attached hereto and made a part hereof, are hereby ADOPTED effective July 1, 2012.

(2) AN ATTESTED COPY hereof, together with a copy of the adopted amendments to 14VAC5-41-40, shall be sent by the Clerk of the Commission to Althelia P. Battle, Deputy Commissioner, Bureau of Insurance, State Corporation Commission, who forthwith shall give further notice of the adopted amendments to 14VAC5-41-40 by mailing a copy of this Order, including a clean copy of the amendments to 14VAC5-41-40, to all companies licensed by the Commission to write life insurance or annuities in the Commonwealth of Virginia, as well as all interested parties.

(3) The Commission's Division of Information Resources shall cause a copy of this Order, together with the adopted amendments to 14VAC5-41-40, to be forwarded to the Virginia Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

(4) The Commission's Division of Information Resources shall make available this Order and the attached adopted amendments to 14VAC5-41-40 on the Commission's website: http://www.scc.virginia.gov/case.

(5) The Bureau of Insurance shall file with the Clerk of the Commission an affidavit of compliance with the notice requirements of Ordering Paragraph (2) above.

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¹The Statement of Position represents that the American Council of Life Insurers acknowledged and understood the Bureau staff's position and explanation regarding the proposed amendments and was satisfied with the Bureau staff’s response to its concerns. Statement of Position at 2.

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."