It requires additional disclosure to be provided to customers by insurance companies and agents. Since this is a consumer protection rule, all disclosure must be uniform and it would be impossible to treat small business any different. It is expected that the cost to small business will be minimal since the form disclosures will need to be developed by the life insurance companies. It is not likely that any of them are small businesses.
Copies of Rule and Contact Person
A copy of the text of the proposed rule and fiscal estimate may be obtained from:
Meg Gunderson, Services Section
Telephone (608) 266-0110
Office of the Commissioner of Insurance
121 East Wilson Street
P. O. Box 7873
Madison, WI 53707-7873
Analysis Prepared by the Office of the Commissioner of Insurance
Statutory authority: ss. 601.41, 601.42, 628.34 (12), 628.38, 631.01 and 631.20
Statutes interpreted: ss. 601.41, 601.42, 628.34 (12), 628.38, 631.01 and 631.20
This rule is identical in content to the National Association of Insurance Commissioners (“NAIC”) Model Regulation adopted on December 4, 1995. The purpose of this rule is to protect consumers and foster consumer education by providing standardized formats for illustrating life insurance policies.
Notice of Hearing
Commissioner of Insurance
The Commissioner of Insurance, pursuant to the authority granted under s. 601.41 (3), Stats., and according to the procedures under s. 227.18, Stats., will hold a public hearing at the time and place indicated below, or as soon thereafter as the matter may be reached, to consider the creation of ch. Ins 23, Wis. Adm. Code, relating to life insurance sold to fund prearranged funeral plans.
Hearing Information
January 7, 1997 Room 23
Tuesday 121 East Wilson St.
10:00 a.m. MADISON, WI
This hearing site is fully accessible to people with disabilities.
Fiscal Estimate
There will be no state or local government fiscal effect.
Initial Regulatory Flexibility Analysis
Notice is hereby further given that pursuant to s. 227.114, Stats., the proposed rule may have an impact on small businesses. The initial regulatory flexibility analysis is as follows:
a. Types of small businesses affected: Insurance agents and funeral establishments.
b. Description of reporting and bookkeeping procedures required: None beyond those currently required.
c. Description of professional skills required: None beyond those currently required.
Contact Person
A copy of the text of the proposed rule and fiscal estimate may be obtained from:
Meg Gunderson, Services Section
Telephone (608) 266-0110
Office of the Commissioner of Insurance
121 East Wilson Street
P. O. Box 7873
Madison, WI 53707-7873
Analysis Prepared by the Office of the Commissioner of Insurance
Statutory authority: s. 632.41 (2) (b)
Statute interpreted: s. 632.41 (2) (b) 2
Section 632.41 (2) (b) 2., Stats., of 1995 Wis. Act 295 requires the Commissioner of Insurance to create minimum standards for life insurance policies that provide for the assignment of the proceeds to a funeral director or operator of a funeral establishment. The minimum standards must address the following areas: benefits, claims, marketing, compensation, and reporting practices. The proposed rule creates a chapter of the Insurance Code, governing the sale of funeral policies and establishing minimum standards in the above areas.
General
This rule requires that any agent who sells a funeral policy to fund a prearranged funeral plan be either an authorized and appointed agent of the funeral director or funeral establishment or have no direct or indirect relationship to the sale of the prearranged funeral plan. The rule further prohibits any misrepresentation by an agent that he or she is affiliated with or representing a funeral home, when the agent in fact has no such affiliations.
Funeral Policy Forms
The rule sets forth standards for funeral policies, including the type of policy which may be marketed for this purpose, the policy's death benefit value over time, the relationship between the policy's death benefit and premium costs, and the relationship between the costs of the policy and the costs of the prearranged funeral plan. A funeral policy is required to provide the following: a grace period; the payment of death benefits as specified; and a free-look period. An insurer may not require cancellation of a life insurance policy based on cancellation of the prearranged funeral plan.
Minimum Benefit Standards
The rule establishes minimum benefits standards for funeral policies which apply to death benefits in relation to premium payments and requires that death benefits equal or exceed cumulative premiums at a 3 percent interest rate compounded annually over ten years. The subsection excludes limited payment whole life insurance policies from this requirement.
Commissions
Under the rule, the Commissioner may review and disapprove consideration arrangements and a standard is established for insurers to use in structuring consideration arrangements.
Claim Payments
The rule sets forth minimum standards for claims payments under a funeral policy. This section prohibits payment of death benefits to a funeral director or funeral establishment unless the prearranged plan is in effect and prohibits the insurer from paying more than the actual costs of the burial expenses to the funeral director or funeral establishments.
Advertising
The rule sets forth the requirements for advertisements of funeral policies. These requirements include compliance with ch. Ins 2, disclosures as outlined, and responsibility of the insurer whose policy is advertised for ensuring that each advertisement complies with the laws and regulations and for approval of each advertisement prior to dissemination and use.
Marketing
The rule outlines requirements for the insurer in marketing funeral policies. These requirements include establishing and implementing written marketing procedures, training and monitoring its agent force to ensure compliance with the marketing procedures, and not accepting an application unless the application is on a completed approved form. The insurer is further required to make specified disclosures, statements, and questions on the application form.
Suitability
The rule requires an insurer to establish suitability standards. The rule specifies the subjects the standards must address. The insurer must train and monitor its agent force to ensure compliance with the standards. The section prohibits an insurer or agent from taking an application or issuing a funeral policy unless the policy is suitable for the applicant.
Solicitation
The rule details the requirements applicable to agents in soliciting funeral policies. The section requires agents to comply with the home solicitation rule and further outlines the disclosures that the agent is to make at the time of initial contact with a prospective buyer. Agents are prohibited from using certain solicitation practices which include:
/ Making any misleading representations, inducing the purchase of insurance through force, fright or threat;
/ Failing to disclose that a purpose of solicitation is the sale of insurance;
/ Using unapproved advertisement;
/ Interfering with the filing of a complaint with the Office of the Commissioner of Insurance; or
/ Interfering with an investigation or proceeding before the Office of the Commissioner of Insurance.
The agent further is required to provide the insurer with a list of funeral goods and services and comply with the outlined policy delivery requirements.
Administrative Rules Filed With The
Revisor Of Statutes Bureau
The following administrative rules have been filed with the Revisor of Statutes Bureau and are in the process of being published. The date assigned to each rule is the projected effective date. It is possible that the publication of these rules could be delayed. Contact the Revisor of Statutes Bureau at (608) 266-7275 for updated information on the effective dates for the listed rules.
An order affecting chs. ILHR 63 and 64, relating to ventilation and energy conservation.
Effective 01-01-97.
An order affecting ss. HSS 172.04, 175.04, 178.05, 195.04, 196.04, 197.04 and 198.04, relating to permit fees for the operation of public swimming pools, recreational and educational camps, campgrounds, hotels, motels and tourist rooming houses, restaurants, bed and breakfast establishments, and food and beverage vending operations.
Effective 02-01-97.
An order affecting ss. HSS 172.03 and 172.05, relating to operation of public swimming pools.
Effective 02-01-97.
An order affecting ss. NR 20.03, 20.036, 20.13 and 20.18, relating to sturgeon spearing.
Effective 02-01-97.
An order amending ss. NR 20.02 (1) (c) and 25.05 (1) (e), relating to sport and commercial fishing for yellow perch in Lake Michigan.
