PRIOR PRINTER'S NO. 3410 PRINTER'S NO. 4184
No. 2640 Session of 1994
INTRODUCED BY COLAFELLA, DeWEESE, TANGRETTI, KUKOVICH, BELFANTI,
STABACK, YEWCIC, GORDNER, MICHLOVIC, DERMODY, DeLUCA,
GIGLIOTTI, LaGROTTA, LAUGHLIN AND D. R. WRIGHT,
MARCH 23, 1994
AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, SEPTEMBER 28, 1994
AN ACT
1 Regulating the sale of life insurance and annuities; providing
2 for additional powers and duties of the Insurance Department;
3 defining certain unfair financial planning practices; and
4 providing for compensation limits THE ESTABLISHMENT AND <--
5 FILING OF INTERNAL AUDIT AND COMPLIANCE PROCEDURES, for
6 procedural matters, for policy copies, for records retention,
7 for the use of illustrations, FOR THE REGULATION OF <--
8 REPLACEMENTS WITHIN THE SAME INSURER OR INSURER GROUP and for
9 enforcement.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Short title.
13 This act shall be known and may be cited as the Life
14 Insurance Marketing and Sales Reform Act.
15 Section 2. Definitions.
16 The following words and phrases when used in this act shall
17 have the meanings given to them in this section unless the
18 context clearly indicates otherwise:
19 "Agent." A licensed representative of an insurer as defined
20 in section 601 of the act of May 17, 1921 (P.L.789, No.285),
1 known as The Insurance Department Act of 1921.
2 "Broker." A licensed representative of an insurance
3 applicant or insured as defined in section 621 of the act of May
4 17, 1921 (P.L.789, No.285), known as The Insurance Department
5 Act of 1921.
6 "Commission" or "compensation." Any form of remuneration <--
7 paid to an agent by an insurer or fraternal benefit society for
8 services associated with the solicitation, sale, underwriting
9 and servicing of a life or annuity insurance policy.
10 "Commissioner." The Insurance Commissioner of the
11 Commonwealth.
12 "Complaint." Any WRITTEN communication received PRIMARILY <--
13 expressing a grievance, written or otherwise. <--
14 "Department." The Insurance Department of the Commonwealth.
15 "Existing life insurance or annuity." A life insurance or
16 annuity policy in force, including life insurance under a
17 binding or conditional receipt or a life insurance policy or
18 annuity that is within an unconditional refund period WHERE A <--
19 COMMISSION AND A PREMIUM HAVE ALREADY BEEN PAID.
20 "Fraternal benefit society." Any entity licensed to engage
21 in the business of insurance under the act of December 14, 1992
22 (P.L.835, No.134), known as the Fraternal Benefit Societies
23 Code.
24 "Illustration." Anything that purports to describe the <--
25 policy A LIFE INSURANCE POLICY OR ANNUITY in a ledger-type <--
26 format reflecting guaranteed/nonguaranteed values FUTURE <--
27 CONTRACT PREMIUMS, PREMIUM OUTLAYS, SURRENDER VALUES AND
28 BENEFITS and is used in the sales presentation. THE TERM DOES <--
29 NOT INCLUDE AN ILLUSTRATION GENERATED FOR A TERM LIFE INSURANCE
30 POLICY OR A UNIVERSAL TERM LIFE POLICY.
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1 "Lapse." The termination of a policy for nonpayment of
2 premium or due to return of policy during the unconditional
3 refund period.
4 "Life insurer" or "insurer." An entity licensed to engage in
5 the business of insurance under the act of May 17, 1921
6 (P.L.682, No.284), known as The Insurance Company Law of 1921.
7 "Projected values." Nonguaranteed future values of a policy. <--
8 "NONGUARANTEED VALUES." VALUES THAT ARE BASED UPON NO MORE <--
9 THAN THE CURRENT SCALE OF DIVIDENDS OR INTEREST OR OTHER CREDITS
10 BEING PAID AND NO LESS THAN THE MORTALITY AND EXPENSE CHARGES
11 BEING ASSESSED BY THE LIFE INSURER OR FRATERNAL BENEFIT SOCIETY,
12 AS CERTIFIED BY A QUALIFIED ACTUARY, FOR THE SAME TYPE OF POLICY
13 OR ANNUITY BEING ILLUSTRATED.
14 "QUALIFIED ACTUARY." AN INDIVIDUAL WHO IS A MEMBER IN GOOD
15 STANDING OF THE AMERICAN ACADEMY OF ACTUARIES.
16 "Replacement." A transaction in which new life insurance or
17 a new annuity is to be purchased, and it is known or should be
18 known to the proposing agent, broker or proposing insurer, that
19 by reason of the transaction, existing life insurance or annuity
20 has been or is to be one of the following:
21 (1) Lapsed, forfeited, surrendered, assigned to the
22 replacing insurer, or otherwise terminated.
23 (2) Converted to reduce paid-up insurance, continued as
24 extended term insurance, or otherwise reduced in value by the
25 use of nonforfeiture benefits, dividend cash values or other
26 policy cash values.
27 (3) Amended so as to effect a reduction in benefits or
28 in the term for which coverage would otherwise remain in
29 force or for which benefits would be paid.
30 (4) Reissued with a reduction in CASH value. <--
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1 (5) Pledged as collateral or subjected to borrowing,
2 whether in a single loan or under a schedule of borrowing
3 over a period of time for amounts in the aggregate exceeding
4 25% of the loan value set forth in the policy.
5 (6) PROVIDED, HOWEVER, THAT THIS SHALL NOT INCLUDE GROUP <--
6 LIFE INSURANCE OR GROUP ANNUITIES, EXCEPT WHERE CERTIFICATES
7 UNDER SUCH COVERAGE ARE MARKETED OR SOLD IN THIS COMMONWEALTH
8 BY AGENTS OR BROKERS; LIFE INSURANCE ISSUED UNDER THE ACT OF
9 SEPTEMBER 2, 1961 (P.L.1232, NO.540), KNOWN AS THE MODEL ACT
10 FOR THE REGULATION OF CREDIT LIFE INSURANCE AND CREDIT
11 ACCIDENT AND HEALTH INSURANCE; LIFE INSURANCE ISSUED IN
12 CONNECTION WITH A PENSION, PROFIT SHARING OR OTHER BENEFIT
13 PLAN QUALIFYING FOR DEDUCTIBILITY OF PREMIUMS; OR
14 TRANSACTIONS INVOLVING AN APPLICATION TO THE EXISTING INSURER
15 THAT ISSUED THE EXISTING LIFE INSURANCE OR ANNUITY AND A
16 CONTRACTUAL CHANGE OR A CONVERSION PRIVILEGE IS BEING
17 EXERCISED.
18 Section 3. Applicability and purpose.
19 This EXCEPT AS EXPRESSLY PROVIDED, THIS act shall apply to <--
20 all life insurance companies and fraternal benefit societies
21 licensed to do business in this Commonwealth WITH RESPECT TO ANY <--
22 LIFE INSURANCE POLICY OR ANNUITY DELIVERED OR ISSUED FOR
23 DELIVERY IN THIS COMMONWEALTH and to all agents and brokers
24 licensed to sell life insurance or annuities WITH RESPECT TO ANY <--
25 LIFE INSURANCE POLICY OR ANNUITY MARKETED OR SOLD IN THIS
26 COMMONWEALTH. The purpose of this act is to prescribe standards
27 which shall be followed in the solicitation and, sale, ISSUANCE <--
28 AND DELIVERY of life insurance AND ANNUITY products. <--
29 Section 4. Unfair financial planning practices.
30 (a) General rule.--No agent or broker shall hold himself
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1 out, directly or indirectly, to the public as a financial
2 planner, investment adviser, consultant, financial counselor or
3 any other specialist engaged in the business of giving financial
4 planning or advice relating to investments, insurance, real
5 estate, tax matters or trust and estate matters when that person
6 is in fact engaged only in the sale of life or annuity insurance
7 policies. This subsection shall not limit persons who hold some
8 form of formally recognized financial planning or consultant
9 designation approved by the department from using this <--
10 designation when they are not ONLY selling insurance. However, <--
11 these persons may not charge an additional fee for services that
12 are customarily associated with the solicitation, negotiation or
13 servicing of policies.
14 (b) Disclosure to client.--
15 (1) An agent or broker shall not engage in the business
16 of financial planning without disclosing to the client prior
17 to the execution of the agreement provided for in subsection
18 (c) or solicitation of the sale of a product or service that:
19 (i) he is also an insurance salesperson; and
20 (ii) a commission for the sale of an insurance
21 product will be received from an insurer apart from a fee
22 for financial planning, if such is the case.
23 (2) The disclosure requirement under this subsection may
24 be met by including it in any disclosure required by Federal
25 or State securities law.
26 (c) Agreement for fees.--
27 (1) No agent or broker shall charge fees, other than
28 commissions, for financial planning unless such fees are
29 based upon a written agreement signed by the party to be
30 charged in advance of the performance of the services under
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1 the agreement. A copy of the agreement must be provided to
2 the party to be charged at the time the agreement is signed
3 by that party. The written agreement must include, at a
4 minimum:
5 (i) A detailed description of the services for which
6 the fee is to be charged.
7 (ii) The amount of the fee to be charged or how it
8 will be determined or calculated.
9 (iii) The fact that the client is under no
10 obligation to purchase any insurance product through the
11 insurance agent, broker or consultant.
12 (2) The agent or broker shall retain a copy of the
13 agreement for not less than three years after completion of
14 services, and a copy shall be available to the department
15 upon request.
16 Section 5. Policy receipt form.
17 When an insurer uses agents to effect delivery of a life or <--
18 annuity insurance policy OR ANNUITY, a delivery receipt shall be <--
19 used. This receipt must be in carbon AT LEAST duplicate sets and <--
20 state the date the policy or annuity was received by the
21 policyholder. The receipt date shall be the date on which the
22 policyholder and agent sign the delivery receipt, and such date
23 shall commence the ANY APPLICABLE policy or annuity examination <--
24 period. Copies of the delivery receipt must be provided to the
25 policyholder on the date of policy or annuity delivery and to
26 the issuing insurer.
27 Section 6. Compensation limits. <--
28 (a) General rule.--A life insurer or fraternal benefit
29 society may provide commission or other compensation to an agent
30 or broker for the sale of a life or annuity insurance policy
19940H2640B4184 - 6 -
1 only if the first-year commission or other compensation is not
2 greater than 50% of the first-year premium.
3 (b) Renewal years.--The commission or other compensation
4 provided in subsequent renewal years must be the same as that
5 provided in the second year and must be provided for a minimum
6 of five renewal years. The annual commission or other
7 compensation for such a renewal period for the second and
8 subsequent years shall not exceed 10% of premium.
9 (c) Replacement, etc.--When there is a replacement of an
10 existing policy or coverage within the same insurer or insurer
11 group, no insurer or fraternal benefit society shall provide
12 compensation to its agents or brokers greater than the renewal
13 compensation payable under subsection (b).
14 (d) Disclosure.--Every agent and broker must disclose in
15 writing the commission level to an applicant at the point of
16 sale.
17 (e) Definition.--As used in this section, the term
18 "compensation" includes pecuniary or nonpecuniary remuneration
19 of any kind relating to the sale or renewal of the policy,
20 including, but not limited to, bonuses, gifts, prizes, awards
21 and finder's fees.
22 SECTION 6. ESTABLISHMENT AND FILING OF INTERNAL AUDIT AND <--
23 COMPLIANCE PROCEDURES.
24 (A) GENERAL RULE.--EVERY LIFE INSURER OR FRATERNAL BENEFIT
25 SOCIETY SHALL INSTITUTE AND MAINTAIN INTERNAL AUDIT AND
26 COMPLIANCE PROCEDURES WHICH PROVIDE FOR THE EVALUATION OF
27 COMPLIANCE WITH ALL STATUTES AND REGULATIONS DEALING WITH SALES
28 METHODS, ADVERTISING AND FILING AND APPROVAL REQUIREMENTS FOR
29 LIFE INSURANCE AND ANNUITIES. THESE PROCEDURES SHALL ALSO
30 PROVIDE FOR THE FOLLOWING:
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1 (1) PERIODIC REVIEWS OF CONSUMER COMPLAINTS IN ORDER TO
2 IDENTIFY PATTERNS OF IMPROPER PRACTICES, AND FOR REGULAR
3 REPORTING TO SENIOR OFFICERS AND THE BOARD OF DIRECTORS OR AN
4 APPROPRIATE COMMITTEE THEREOF WITH RESPECT TO ANY SIGNIFICANT
5 FINDINGS.
6 (2) THE ESTABLISHMENT OF LINES OF COMMUNICATION, CONTROL
7 AND RESPONSIBILITY OVER THE DISSEMINATION OF ADVERTISING AND
8 PROMOTIONAL MATERIALS, INCLUDING ILLUSTRATIONS AND
9 ILLUSTRATION EXPLANATIONS, WITH THE REQUISITE THAT SUCH
10 MATERIALS SHALL NOT BE USED WITHOUT THE APPROVAL BY COMPANY
11 EMPLOYEES WHOSE COMPENSATION, OTHER THAN GENERALLY APPLICABLE
12 COMPANY BONUS OR INCENTIVE PLANS, IS NOT DIRECTLY LINKED TO
13 MARKETING OR SALES.
14 (B) FILING WITH COMMISSIONER.--EACH LIFE INSURER OR
15 FRATERNAL BENEFIT SOCIETY SHALL FILE WITH THE COMMISSIONER ITS
16 INTERNAL AUDIT AND COMPLIANCE PROCEDURES WITHIN 60 DAYS OF THE
17 EFFECTIVE DATE OF THIS ACT. IF, AFTER REVIEW, THE COMMISSIONER
18 DETERMINES THAT THE PROCEDURES DO NOT COMPLY WITH THIS SECTION,
19 THE COMMISSIONER MAY DISAPPROVE THE PROCEDURES, WITH NOTICE
20 THEREOF STATING THE SPECIFIC REASONS FOR SUCH DISAPPROVAL. ANY
21 PROCEDURES DISAPPROVED BY THE COMMISSIONER SHALL BE REFILED
22 WITHIN 60 DAYS OF THE DATE OF THE NOTICE OF DISAPPROVAL. EACH
23 LIFE INSURER OR FRATERNAL BENEFIT SOCIETY SHALL MAKE AN ANNUAL
24 SUMMARY REPORT ON THE RESULTS OF AND ACTIONS TAKEN UNDER THESE
25 PROCEDURES AVAILABLE TO THE DEPARTMENT UPON REQUEST.
26 Section 7. Record retention.
27 (a) General rule.--Every LIFE insurer or fraternal benefit <--
28 society shall maintain COMPILE records for each agent of the <--
29 agent's number of replacement sales as a percent of the agent's
30 total annual sales and the number of lapses of life and annuity
19940H2640B4184 - 8 -
1 insurance policies sold by the agent as a percent of the agent's
2 total annual sales.
3 (b) Report to department.--Each LIFE insurer or fraternal <--
4 benefit society shall report annually to the department by June
5 30 of each year the 10% of its agents with the greatest <--
6 percentages of lapses and replacements OF ITS AGENTS as measured <--
7 under subsection (a). EACH LIFE INSURER OR FRATERNAL BENEFIT <--
8 SOCIETY SHALL MAKE THE PERCENTAGES FOR AN AGENT AVAILABLE TO
9 THAT AGENT UPON HIS REQUEST.
10 (c) Records of complaints.--Every LIFE insurer or fraternal <--
11 benefit society shall maintain records of all complaints against
12 agents or brokers received during the preceding four years. This
13 record shall indicate by agent or broker the total number of
14 complaints, the nature of each complaint and the disposition of
15 the complaints. Complaint records shall be made available to the
16 department upon request. EVERY LIFE INSURER OR FRATERNAL BENEFIT <--
17 SOCIETY SHALL, WITHIN A REASONABLE PERIOD OF TIME AFTER RECEIPT
18 OF A COMPLAINT, FORWARD A COPY OF THE COMPLAINT TO THE AGENT OR
19 BROKER AGAINST WHOM THE COMPLAINT IS MADE. THE LIFE INSURER OR
20 FRATERNAL BENEFIT SOCIETY SHALL INCLUDE IN ITS RECORD OF
21 COMPLAINTS ANY COMMENTS RECEIVED FROM THE AGENT OR BROKER
22 AGAINST WHOM THE COMPLAINTS ARE MADE.
23 (D) IMMUNITY.--NO INSURER OR AGENT SHALL BE SUBJECT TO CIVIL
24 LIABILITY FOR LIBEL, VIOLATION OF PRIVACY OR OTHERWISE BY VIRTUE
25 OF THE FILING OF REPORTS OR FURNISHING OF OTHER INFORMATION
26 REQUIRED BY SECTION 6 OR THIS SECTION.
27 Section 8. Use of illustrations.
28 (a) General rule.--All illustrations ILLUSTRATION SYSTEMS <--
29 used in conjunction with the marketing and sale of life
30 insurance or annuities may only be produced PROVIDED by the <--
19940H2640B4184 - 9 -
1 insurer or fraternal benefit society for whom the life insurance
2 or annuity is to be sold and issued. Illustrations may not be <--
3 generated or produced by agents or brokers. NO AGENT OR BROKER <--
4 MAY WITHHOLD, ALTER, CHANGE OR IN ANY WAY MODIFY THE RESULTS OF
5 A LIFE INSURANCE OR ANNUITY ILLUSTRATION SYSTEM PROVIDED BY A
6 LIFE INSURER OR FRATERNAL BENEFIT SOCIETY. NOTHING IN THIS
7 SECTION SHALL REQUIRE AN INSURER, AGENT OR BROKER TO USE
8 ILLUSTRATIONS IN CONJUNCTION WITH THE MARKETING OR SALE OF LIFE
9 INSURANCE OR ANNUITIES.
10 (b) Standard format STANDARDS.--All illustrations used in <--
11 conjunction with the marketing and sale of life insurance or
12 annuities shall conform to a standardized format as established <--
13 by the department.
14 (c) Disclosure of all expenses and charges.--All
15 illustrations shall provide clear disclosure of any and all
16 applicable expense loads and charges, including withdrawal,
17 surrender and mortality charges, and clearly identify the
18 contract represented by type and form number. CONFORM TO THE <--
19 FOLLOWING STANDARDS:
20 (1) EACH ILLUSTRATION SHALL IDENTIFY THE INSURANCE
21 COMPANY AND BE CLEARLY LABELED "LIFE INSURANCE POLICY
22 ILLUSTRATION" OR "ANNUITY ILLUSTRATION," AS APPLICABLE. THE
23 GENERIC TYPE OF THE POLICY OR ANNUITY AND ITS COMPANY PRODUCT
24 NAME SHALL FOLLOW.
25 (2) EACH ILLUSTRATION SHALL CLEARLY STATE, TO THE EXTENT
26 APPLICABLE, THE NAME, SEX, AGE AND RISK CLASSIFICATION OF THE
27 PROPOSED INSURED OR ANNUITANT.
28 (3) TO THE EXTENT APPLICABLE, EACH ILLUSTRATION SHALL
29 CONTAIN A COLUMN HEADED ANTICIPATED PAYMENTS SETTING FORTH
30 THE POLICYHOLDER'S ANTICIPATED PAYMENTS IN ORDER FOR VALUES
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1 AND BENEFITS, GUARANTEED OR NONGUARANTEED, TO BE PAID AS
2 ILLUSTRATED. IF A GREATER AMOUNT MUST BE PAID IN ORDER TO
3 GUARANTEE THE CONTINUATION OF THE POLICY, IT SHALL BE
4 INCLUDED IN A COLUMN HEADED CONTRACT PREMIUM OR, IN THE CASE
5 OF AN ANNUITY, CONTRACT CONTRIBUTION. FOR UNIVERSAL LIFE
6 POLICIES, THE HEADING PREMIUM OUTLAY SHALL BE USED FOR THE
7 ILLUSTRATED PAYMENTS. FOR SINGLE PAYMENT POLICIES, A
8 NARRATIVE STATEMENT MAY BE USED INSTEAD OF A COLUMN.
9 (4) TO THE EXTENT APPLICABLE, EACH ILLUSTRATION SHALL
10 CONTAIN COLUMNS SETTING FORTH GUARANTEED CASH SURRENDER
11 VALUES AND DEATH BENEFITS AND TITLED GUARANTEED FOR THE
12 ANTICIPATED PAYMENTS SHOWN. GUARANTEED VALUES AND BENEFITS
13 SHALL BE SHOWN BEFORE NONGUARANTEED VALUES AND BENEFITS AND
14 MUST BE REFERRED TO ON ANY PAGE OF THE ILLUSTRATION WHICH
15 SHOWS ONLY NONGUARANTEED VALUES AND BENEFITS. THE CASH
16 SURRENDER VALUES SHALL BE SHOWN AS THE VALUE AVAILABLE TO THE
17 POLICYHOLDER IN A LUMP SUM.
18 (5) EACH ILLUSTRATION MAY CONTAIN COLUMNS SETTING FORTH
19 ADDITIONAL VALUES AND BENEFITS BASED UPON THE COMPANY'S
20 CURRENT SCALE OR ON ANY OTHER SCALE PRODUCING LOWER VALUES
21 AND BENEFITS, PROVIDED THAT SUCH COLUMNS ARE APPROPRIATELY
22 TITLED GUARANTEED OR NONGUARANTEED. IF NONGUARANTEED VALUES
23 AND BENEFITS ARE SHOWN, THE ILLUSTRATION MUST INCLUDE A
24 STATEMENT THAT THESE ARE BASED ON CURRENT SCALE AND THAT
25 ACTUAL RESULTS MAY BE LESS OR MORE FAVORABLE.
26 (6) IF A LIFE INSURANCE ILLUSTRATION SHOWS AN
27 ANTICIPATED PAYMENT WHICH, BASED ON A COMPANY'S CURRENT
28 SCALE, WOULD ALLOW THE POLICYHOLDER THE OPTION TO SUSPEND
29 ANTICIPATED PAYMENTS AT SOME POINT BEFORE THE END OF THE
30 COVERAGE PERIOD, THE ILLUSTRATION MUST DISCLOSE THAT
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1 DEPENDING ON THE ACTUAL POLICY RESULTS, ANTICIPATED PAYMENTS
2 MAY NEED TO BE CONTINUED OR RESUMED.
3 (7) EACH LIFE INSURANCE ILLUSTRATION SHALL CONTAIN
4 GUARANTEED AND NONGUARANTEED COST COMPARISON INDEXES AND
5 PREFACE THEM WITH THE FOLLOWING LANGUAGE: "THESE COST
6 COMPARISON INDEXES PROVIDED TWO MEANS OF COMPARING THE
7 RELATIVE COST OF SIMILAR PLANS OF INSURANCE. A LOW INDEX
8 NUMBER REPRESENTS A LOWER COST THAN A HIGH ONE."
9 (C) EXPLANATION OF ILLUSTRATION.--ALL ILLUSTRATIONS USED IN
10 CONJUNCTION WITH THE MARKETING AND SALE OF LIFE INSURANCE OR
11 ANNUITIES SHALL INCLUDE A WRITTEN EXPLANATION CONTAINING THE
12 FOLLOWING INFORMATION:
13 (1) POLICY DESCRIPTION, INCLUDING A STATEMENT THAT THE
14 POLICY BEING ILLUSTRATED IS A LIFE INSURANCE CONTRACT OR
15 ANNUITY, AS APPLICABLE.
16 (2) PREMIUMS OR, IN THE CASE OF ANNUITIES,
17 CONTRIBUTIONS. WITH RESPECT TO LIFE INSURANCE, THE
18 EXPLANATION SHALL STATE THE LESSER OF THE MINIMUM PREMIUM
19 OUTLAY NECESSARY TO GUARANTEE BENEFITS THROUGH THE POLICY'S
20 COVERAGE PERIOD OR THE MAXIMUM PREMIUM ALLOWABLE FOR THE
21 POLICY TO QUALIFY AS LIFE INSURANCE UNDER CURRENT TAX LAWS.
22 (3) BENEFITS PAYABLE, INCLUDING A STATEMENT DESCRIBING
23 WHEN OR UNDER WHAT CIRCUMSTANCES BENEFITS ARE PAYABLE AND A
24 DESCRIPTION OF POLICY FEATURES OR OPTIONS THAT HAVE A
25 MATERIAL IMPACT ON THE CONTINUED VALUES, BENEFITS AND/OR
26 COSTS OF THE POLICY.
27 (4) WHERE NONGUARANTEED VALUES AND BENEFITS ARE SET
28 FORTH IN THE ILLUSTRATION, THE EXPLANATION SHALL INCLUDE:
29 (I) A STATEMENT THAT THESE ARE BASED ON ASSUMPTIONS
30 AND THAT ACTUAL RESULTS MAY BE LESS OR MORE FAVORABLE.
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1 (II) WITH RESPECT TO LIFE INSURANCE, A STATEMENT
2 THAT ANTICIPATED PAYMENTS WILL NOT CEASE AS ILLUSTRATED
3 IF ACTUAL RESULTS ARE LESS FAVORABLE THAN THOSE SHOWN IN
4 THE ILLUSTRATION; THAT IN SUCH A CASE, ADDITIONAL
5 ANTICIPATED PAYMENTS MUST BE PAID TO MAINTAIN POLICY
6 VALUES AND TO KEEP THE POLICY IN FORCE; AND THAT REACHING
7 A POINT WHERE ANTICIPATED PAYMENTS NO LONGER MUST BE PAID
8 DOES NOT MEAN THAT THE POLICY IS PAID UP UNLESS THIS IS
9 GUARANTEED.
10 (III) TO THE EXTENT APPLICABLE, INFORMATION SETTING
11 FORTH THE ANTICIPATED PAYMENT, VALUES AND BENEFITS AT
12 YEARS 5, 10 AND 20 ON THREE BASES, GUARANTEED,
13 NONGUARANTEED AND USING AN INTEREST RATE 1% BELOW THAT
14 USED TO DETERMINE THE NONGUARANTEED VALUE.
15 (IV) WHERE THE LIFE INSURANCE OR ANNUITY IS ISSUED
16 ON A BASIS OTHER THAN AS APPLIED FOR, OR IF A RATING IS
17 IMPOSED THAT AFFECTS VALUES, THE LIFE INSURER OR
18 FRATERNAL BENEFIT SOCIETY SHALL DELIVER A REVISED
19 ILLUSTRATION AND EXPLANATION WITH THE POLICY.
20 (d) Withholding and modification prohibited.--No agent or
21 broker may withhold, alter, change or in any way modify a life
22 insurance or annuity illustration provided by an insurer or
23 fraternal benefit society.
24 (e) Projected values.--Projected values contained in life <--
25 insurance and annuity illustrations shall be limited to the
26 average rate of return actually paid during the most recent
27 three-year period for the contract type and policy form
28 illustrated. Any such use of projected values must include
29 clear, bold-faced disclosure that such values are only
30 projections based upon the insurer's average three-year results
19940H2640B4184 - 13 -
1 for the contract type and policy form illustrated and such
2 values are not guaranteed to occur. Specific reference shall be
3 made to contractually guaranteed values which shall appear in a
4 more prominent manner than projected values.
5 (f) Flexible premiums products.--Life insurance and annuity
6 illustrations prepared for flexible premium products shall be
7 based upon the actual amount of premium agreed to by the
8 consumer.
9 (g) (E) Dates and signatures.--All life insurance and <--
10 annuity illustrations shall provide for dated signatures of all
11 agents and brokers using such illustrations., as well as the <--
12 consumer for which such illustrations were prepared.
13 (h) (F) Consumer copy.--A copy of each THE illustration <--
14 used, IF ANY, FOR THE POLICY APPLIED FOR shall be provided to <--
15 the consumer at the point of solicitation or sale DELIVERY OF <--
16 THE CONTRACT and remain in the consumer's possession.
17 (i) (G) Insurer copy.--A copy of each such illustration used <--
18 shall be returned to the insurer or fraternal benefit society., <--
19 along with the application when a sale is made. Such
20 illustration copy shall be retained by the insurer in the
21 underwriting file along with the original application.
22 (j) (H) Illustration not part of policy.--Life insurance and <--
23 annuity illustrations may not be attached to or made part of any
24 life insurance or annuity policy issued.
25 (I) EXEMPTION.--THIS SECTION SHALL NOT APPLY TO GROUP LIFE <--
26 INSURANCE OR GROUP ANNUITIES, EXCEPT WHERE CERTIFICATES UNDER
27 SUCH COVERAGE ARE MARKETED OR SOLD IN THIS COMMONWEALTH BY
28 AGENTS OR BROKERS; TO LIFE INSURANCE ISSUED UNDER THE ACT OF
29 SEPTEMBER 2, 1961 (P.L.1232, NO.540), KNOWN AS THE MODEL ACT FOR
30 THE REGULATION OF CREDIT LIFE INSURANCE AND CREDIT ACCIDENT AND
19940H2640B4184 - 14 -
1 HEALTH INSURANCE; TO LIFE INSURANCE ISSUED IN CONNECTION WITH A
2 PENSION, PROFIT SHARING OR OTHER BENEFIT PLAN QUALIFYING FOR
3 DEDUCTIBILITY OF PREMIUMS; OR TO SUCH OTHER LIFE INSURANCE OR
4 ANNUITIES AS THE COMMISSIONER SHALL ALLOW. WITH RESPECT TO
5 VARIABLE LIFE INSURANCE AND VARIABLE ANNUITIES, SUBSECTIONS (B),
6 (C) AND (E) SHALL BE MET BY PROVIDING THE APPLICANT WITH PREMIUM
7 OR CONTRACT CONTRIBUTION AMOUNTS AND IDENTIFICATION OF THE
8 APPROPRIATE PROSPECTUS OR OFFERING CIRCULAR. THE COMMISSIONER
9 SHALL HAVE THE DISCRETION TO ALLOW EXCEPTIONS OR MODIFICATIONS
10 TO ONE OR MORE REQUIREMENTS OF THIS SECTION UPON A WRITTEN
11 REQUEST FROM A LIFE INSURER OR FRATERNAL BENEFIT SOCIETY.
12 SECTION 9. REPLACEMENTS WITHIN THE SAME INSURER OR INSURER
13 GROUP.
14 WHEN THERE IS SOLICITATION FOR THE REPLACEMENT OF AN EXISTING
15 LIFE INSURANCE POLICY OR ANNUITY WITHIN THE SAME INSURER OR
16 INSURER GROUP, A LIFE INSURER OR FRATERNAL BENEFIT SOCIETY SHALL
17 ISSUE PRIOR TO ACCEPTANCE OF AN APPLICATION ILLUSTRATIONS,
18 INCLUDING WRITTEN EXPLANATIONS, FOR BOTH THE REPLACEMENT
19 INSURANCE OR ANNUITY AND THE EXISTING INSURANCE OR ANNUITY. THE
20 LIFE INSURER OR FRATERNAL BENEFIT SOCIETY SHALL ALSO PROVIDE AT
21 THAT TIME A NOTICE REGARDING REPLACEMENT IN A FORM PRESCRIBED BY
22 THE COMMISSIONER AND CONSISTENT WITH THAT SET FORTH IN 31
23 PA.CODE CH.81, APP.A (RELATING TO REPLACEMENT OF LIFE INSURANCE
24 AND ANNUITIES). WHERE A LIFE INSURER OR FRATERNAL BENEFIT
25 SOCIETY IS NO LONGER ISSUING THE EXISTING POLICY, IT MAY ISSUE,
26 IN LIEU OF AN ILLUSTRATION AND WRITTEN EXPLANATION, INFORMATION
27 SETTING FORTH THE ANTICIPATED PAYMENT, VALUES AND BENEFITS AT
28 YEARS 5, 10 AND 20 ON THREE BASES, GUARANTEED, NONGUARANTEED AND
29 USING AN INTEREST RATE 1% BELOW THAT USED TO DETERMINE THE
30 NONGUARANTEED VALUE. FURTHER, THE COMMISSIONER SHALL HAVE THE
19940H2640B4184 - 15 -
1 DISCRETION TO ALLOW EXCEPTIONS OR MODIFICATIONS TO ONE OR MORE
2 REQUIREMENTS OF THIS SECTION UPON A WRITTEN REQUEST FROM A LIFE
3 INSURER OR FRATERNAL BENEFIT SOCIETY.
4 Section 9 10. Enforcement. <--
5 (a) Action by commissioner.--Upon satisfactory evidence of a <--
6 violation of this act A DETERMINATION BY HEARING THAT THIS ACT <--
7 HAS BEEN VIOLATED by any person subject to its terms, the
8 commissioner may pursue one or more of the following courses of
9 action:
10 (1) Suspend ISSUE AN ORDER REQUIRING THE PERSON TO CEASE <--
11 AND DESIST FROM ENGAGING IN SUCH VIOLATION OR SUSPEND or
12 revoke or refuse to issue the certificate of qualification or
13 license of the offending party or parties.
14 (2) Impose a civil penalty of not more than $5,000 for
15 each violation.
16 (3) Issue an order requiring appropriate restitution. <--
17 (b) Remedies cumulative.--The enforcement remedies imposed
18 under this section are in addition to any other remedies or
19 penalties imposed by any other applicable statute.
20 (C) HEARING AND JUDICIAL REVIEW.--ANY COURSE OF ACTION OR <--
21 ADJUDICATION OF THE COMMISSIONER UNDER THIS SECTION SHALL BE
22 PRECEDED BY A HEARING IN ACCORDANCE WITH 42 PA.C.S. CH. 5 SUBCH.
23 A (RELATING TO SUPREME COURT OF PENNSYLVANIA) AND SUBJECT TO
24 REVIEW AND APPEAL IN ACCORDANCE WITH 42 PA.C.S. CH. 7 SUBCH. A
25 (RELATING TO GENERAL PROVISIONS).
26 Section 10. Rulemaking authority. <--
27 SECTION 11. POWERS OF COMMISSIONER. <--
28 (A) REGULATIONS.--The commissioner may promulgate the rules <--
29 and regulations necessary for the administration of this act.
30 (B) EXAMINATIONS AND INVESTIGATIONS.--THE COMMISSIONER MAY <--
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1 EXAMINE AND INVESTIGATE THE AFFAIRS OF EVERY PERSON ENGAGED IN
2 THE BUSINESS OF INSURANCE IN THIS COMMONWEALTH IN ORDER TO
3 DETERMINE WHETHER SUCH PERSON HAS BEEN OR IS ENGAGED IN ANY ACT
4 OR PRACTICE PROHIBITED BY THIS ACT.
5 Section 11 12. Severability. <--
6 If any provision of this act or the application thereof to
7 any person or circumstance is for any reason held to be invalid,
8 the remainder of this act and the application of such provision
9 to other persons or circumstances shall not be affected thereby.
10 Section 12 13. Effective date. <--
11 This act shall take effect in 90 180 days. <--
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