Have you compared the contract charges or other policy expenses?
OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:
What are the tax consequences of buying the new policy?
Is this a tax free exchange? (See your tax advisor.)
Is there a benefit from favorable “grandfathered" treatment of the existing policy under the federal tax code?
Will the existing insurer be willing to modify the existing policy?
How does the quality and financial stability of the new insurer compare with your existing insurer?
Special policies and provisions; prohibitions, regulations, and disclosure requirements. Ins 2.08(1)(1)
The interest of the public and the maintenance of a fair and honest life insurance market must be safeguarded by identifying and prohibiting certain types of policy forms
policy provisions and by requiring certain insurance premiums to be separately stated. This rule implements and interprets applicable statutes including ss. 628.34
, 632.44 (1)
This rule shall apply to the kinds of insurance authorized by s. Ins 6.75 (1) (a)
, and shall also apply to fraternal benefit societies.
For the purpose of this rule certain life insurance policy forms and provisions referred to herein shall have the following meaning:
“Coupon policy" is any policy form which includes a series of coupons prominently and attractively featured in combination with an insurance contract. Such coupons are one-year pure endowments whether or not so identified and whether or not physically attached to the insurance contract. The coupons are devised to give the appearance of the interest coupons that are frequently attached to investment bonds. Although the face amount of the coupon benefit is essentially a refund of premium previously paid by a policyholder, it is frequently represented that is the earnings or return on the investment of the policyholder in life insurance.
“Charter policy" is a term or name assigned by an insurance company to a policy form. Such a policy is usually issued by a newly organized company and it is sold on the basis that its availability will be limited to a specific predetermined number of units of a fixed dollar amount. Such policies generally provide that the policyholder shall participate in the earnings resulting from either or both participating policies and non-participating policies. It is characteristic of such a policy that in its presentation to the public it is represented that the policyholder will receive a special advantage in any future distribution of earnings, profits, dividends or abatement of premium. It is also represented that such advantage will not be made available to the persons holding other types of policies issued by the company. Other names such as Founders, President, and Executive Special
are frequently used for policies of the type herein described, and for the purpose of this rule when they are so used they shall be considered as charter policies.
A “Profit-sharing policy" is any policy form which contains provisions representing that the policyholder will be eligible to participate, with special advantage not available to the persons holding other types of policies issued by the same company, in any future distribution of general corporate profits. Such policy forms are so drafted that it appears to a prospective policyholder that he or she is purchasing a preferential share of the future profit and earnings of the insurance corporation rather than purchasing a life insurance policy which may be subject to refund of excess premium payments. The provisions of the policy may incorrectly represent the amount and source of surplus that will be available for apportionment and return to policyholders in the form of dividends. Policy forms using such terms as profits, surplus, or surplus-sharing in the manner herein described shall, for the purpose of this rule, be considered as profit-sharing policies.
(4) Prohibitions, regulations, and disclosure requirements.
In accordance with the purpose expressed in sub. (1)
and in consideration of the apparent intent of the legislature, the use in this state of certain types of policy forms and policy provisions shall be subject to the following prohibitions and regulations:
Coupon policy forms misrepresent, distort, and disguise the true nature of the insurance purchased. Therefore, no coupon policy shall be approved for use and no coupon policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962.
Any policy, except a policy which is only used as a funding medium to provide gifts to a corporation without profit, as provided in s. 615.04
, Stats., containing a series of one-year pure endowments or a series of guaranteed periodic benefits maturing during the premium-paying period of the policy in which the amount of any pure endowment or periodic benefit or benefits payable during any policy year is less than the total annual policy premium for such year has special characteristics making such policy peculiarly susceptible to misrepresentation and misunderstanding. Such policies are founded on the utmost good faith of the company, and the public interest requires that the premium charged for such benefits shall be fully and fairly disclosed to the policyholder without deception or misrepresentation. Therefore, on or after April 1, 1965, no such policy herein described shall be approved for use and no such policy heretofore approved shall be issued or delivered in this state unless:
Ins 2.08 Note
Note: Section 615.04, Stats., was repealed.
The payment of a pure endowment or guaranteed periodic benefit is not contingent on the payment of premiums falling due on or after the time such pure endowment has matured,
The gross premium for the pure endowment or guaranteed periodic benefits is shown prominently and separately in the policy distinct from the regular insurance premium,
The gross premium for the pure endowment or guaranteed periodic benefits is based on reasonable assumptions as to interest, mortality, and expense,
The number of one-year endowment or guaranteed periodic benefits provided by the policy equals the number of annual premiums for such benefits,
All advertisements, sales materials, agent's presentations, and other representations of the policy to the public represent the pure endowment or guaranteed periodic benefits of the policy to be nothing other than insurance benefits for which a premium is being paid,
All representations of the total premium for the policy contract also show the gross premium for the pure endowment or guaranteed periodic benefits to an extent such that the prospect or purchaser is fully informed as to the separate costs involved.
Charter policy forms are defined by s. 628.33
, 1987 stats., to be an unfair method of competition. They purport to provide a means to an end result that is not authorized by statute and an end result that is without reasonable expectation of achievement. Such policy forms misrepresent the responsibility and obligation of the company for equitable distribution of dividends or abatement of premiums. Therefore, no charter policy shall be approved for use and no charter policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962.
Profit-sharing policy forms are contrary to statute and the public interest by representing as an inducement to insurance that the person who purchases such a policy is procuring a preferential interest in the future profits and earnings of the insurance corporation. Any distribution to a policyholder of the company of earnings, profits, or surplus is a refund of the excess premiums paid by that policyholder. Such distribution must be fair and equitable to all policyholders, it must not discriminate unfairly between individuals of the same class and equal expectation of life, and it must be in the best interest of the company and its policyholders. Therefore, no profit-sharing policy shall be approved for use and no profit-sharing policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962. Further, on or after June 15, 1962, no participating policy shall be approved and no participating policy heretofore approved shall be issued or delivered in this state unless the policy provides without deception or misrepresentation that the source of any dividends or abatement of premium is limited to the divisible surplus derived from participating business.
Ins 2.08 Note
See historical note relating to s. Ins 2.08
as printed with this rule as released in December, 1984.
Ins 2.08 History
Cr. Register, May, 1962, No. 77
, eff. 6-15-62; am. (4) (b), Register, August 1964, No. 104
, eff. 12-1-64; am. (4) (b) (intro. par.), Register, March, 1965, No. 111
, eff. 4-1-65. emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249
, eff. 10-1-76; am. (2), Register, March, 1979, No. 279
, eff. 4-1-79; am. (4) (b) (intro.), Register, January, 1984, No. 337
, eff. 2-1-84; r. (5) under s. 13.93 (2m) (b) 16., Stats., Register, December, 1984, No. 348
; correction in (4) (c) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436
; correction in (2) (c) made under s. 13.93 (2m) (b) 5., Stats., Register, June, 1997, No. 498
Separate and distinct representations of life insurance. Ins 2.09(1)(1)
The interests of policyholders and purchasers of life insurance which is sold in connection with any security must be safeguarded by providing them with clear and unambiguous written proposals and statements in which all material relating to life insurance is set forth separately from any other material. This rule implements and interprets s. 628.34
, Stats., by establishing minimum standards for the form of proposals and statements used to solicit, service, or collect premiums for life insurance which is sold in connection with a mutual fund or other security.
This rule shall apply to the solicitation of, negotiation for, procurement of, or joint billing of any insurance specified in s. Ins 6.75 (1) (a)
, within this state or involving a resident of this state where it is known to the insurer or the insurance agent that the sale of any mutual fund or other security has been, may become, or is a part of any such transaction.
For the purposes of this rule:
“Proposal" includes any estimate, illustration, or statement which involves a representation of any premium charge, dividends, terms, or benefits of any policy of life insurance within sub. (2)
“Life insurance" includes life insurance, annuities, and endowments.
(4) Responsibility of insurer and agent.
No insurer and no insurance agent shall make, in connection with any transaction within sub. (2)
, a proposal or billing other than in accordance with this rule. Every insurer must inform its agents involved with the solicitation of life insurance on residents of this state of the requirements of this rule.
(5) Written proposal.
In any solicitation or sale within sub. (2)
, the prospect or policyholder must be furnished with a copy of a clear and unambiguous written proposal not later than at the time the solicitation or proposal is made.
(6) Contents of proposal.
Any proposal referred to in this rule must:
Be dated and signed by the insurance agent or by the insurer if no agent is involved;
State the name of the company in which the life insurance is to be written;
Contain no misrepresentations or false, deceptive or misleading statements;
Show the premium charge for life insurance separately from any other charge;
If values which may accrue prior to the death of the insured are involved in the presentation, show the value of the life insurance separately from any other values;
Show, if it is involved in the presentation, the amount of the death benefit for the life insurance separately from any other benefit which may accrue upon the death of the insured;
Set forth all matters pertaining to life insurance separately from any matter not pertaining to life insurance;
Contain only such representations as will accurately reflect the actual conditions applicable to the proposed insured.
(7) Statements to be separate.
Any bill, statement, or representation sent or delivered to any prospect or policyholder must show the premium charge for the life insurance and any other information mentioned concerning life insurance separately from any other charges or values shown in the same billing.
Any violation of this rule shall be deemed to be a misrepresentation of the nature of the life insurance involved.
Ins 2.09 History
Cr. Register, October, 1963, No. 94
, eff. 11-1-63; emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249
, eff. 10-1-76; am. (1) and (2), Register, March, 1979, No. 279
, eff. 4-1-79; r. (9) under s. 13.93 (2m) (b) 16, Stats., Register, December, 1984, No. 348
Exceptions to unfair discrimination.
The following practices, without being all-inclusive, shall not be considered unfairly discriminatory as considered by s. 628.34
Issuing life insurance policies or life annuity contracts on a salary savings, salary allotment, bank draft, pre-authorized check, or payroll deduction plan or other similar plan at a reduced rate or with special underwriting considerations reasonably related to the savings made by use of such plan.
Issuing life insurance policies or annuity contracts at premiums determined by rating plans which provide for modification of premiums based on the amount of insurance; but any such rating plans shall not result in reduction in premiums in excess of the savings reasonably related to the savings made by use of the plan. All cost factors must be given proper recognition in order to preserve equity between various classes of policyholders.
Issuing so-called “family plan' life insurance policies which include insured, spouse, and their children with the premium calculated on the basis of the family unit. The rating plan must give recognition to all cost factors in order to preserve equity between various classes of policyholders.
Issuing policies under the authority of s. Ins 6.75 (1) (a)
, with the premium calculated on the basis of the average age of those insured or calculated in some other manner which is appropriate for the coverage offered, provided that the rate must be reasonably related to the coverage provided and to the savings made by use of the rating procedure.
Issuing life insurance policies or life annuity contracts at special rates or with special underwriting considerations, reasonably related to the savings made, in connection with:
Plans used to fund retirement benefits under the Federal Self-Employed Individuals Tax Retirement Act of 1962.
Plans used to fund retirement benefits for employees of certain organizations exempt from Federal income tax and public schools (so-called tax sheltered annuity plans).
Ins 2.12 History
Cr. Register, May, 1964, No. 101
, eff. 6-1-64; emerg. am. (intro.), (4) and (5) (d), eff. 6-22-76; am. (intro.), (4) and (5) (d), Register, September, 1976, No. 249
, eff. 10-1-76; am. (4) and (5) (a), Register, March, 1979, No. 279
, eff. 4-1-79; r. (5) (d), Register, June, 1982, No. 318
, eff. 7-1-82; reprinted to correct error in (5), Register, August, 1982, No. 320
; correction in (5) (a) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436
Separate accounts and variable contracts. Ins 2.13(1)(1)
This section creates standards for establishing separate accounts and for issuing contracts on a variable basis, both as provided by ss. 611.25
and 632.45 (1)
“Agent" means a person who sells or offers to sell any contract on a variable basis.
“Contract on a variable basis" or “variable contract"means a policy or contract which provides for insurance or annuity benefits which may vary according to the investment experience of any separate account maintained by the insurer as to the policy or contract, as provided for in s. 632.45 (1)
, Stats., including contracts defined in pars. (e)
“Interest credits" means all interest that is credited to a policy or contract.
“Modified guaranteed annuity" means a deferred annuity contract, the underlying assets of which are held in a separate account and the values of which are guaranteed if held for specified periods, containing nonforfeiture values based on a market-value adjustment formula if held for shorter periods, which formula may or may not reflect the value of assets held in the separate account.
“Modified guaranteed life insurance policy" means an individual policy of life insurance, the underlying assets of which are held in a separate account and the values of which are guaranteed if held for specified periods, containing nonforfeiture values based on a market-value adjustment formula if held for shorter periods, which formula may or may not reflect the value of assets held in the separate account.
“Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.
(3) Qualification of insurer to issue variable contracts. Ins 2.13(3)(a)(a)
No insurer may issue variable contracts in this state unless:
It is licensed or organized to do a life insurance or annuity business in this state; and
The commissioner is satisfied that its condition or method of operation in connection with the issuance of variable contracts will not render its operation hazardous to the public or its policyholders in this state. In determining the qualification of an insurer requesting authority to issue variable contracts in this state, the commissioner shall consider among other things:
The character, responsibility and fitness of the officers and directors of the insurer; and
The law and regulation under which the insurer is authorized in the state of domicile to issue variable contracts.
If the insurer is a subsidiary of an admitted life insurance company, or affiliated with an admitted life insurance company by common management or ownership, the commissioner may deem it to have satisfied par. (a) 2.
if either it or the admitted life insurance company satisfies the provisions of par. (a) 2.
The commissioner may deem any licensed insurer which has a satisfactory record of doing business in this state for a period of at least 3 years to have satisfied the provisions of par. (a) 2.
Before any insurer issues variable contracts in this state, it shall submit to the commissioner:
A general description of the kinds of variable contracts it intends to issue;
If requested by the commissioner, a copy of the statutes and regulations of its state of domicile under which it is authorized to issue variable contracts; and
If requested by the commissioner, biographical data with respect to its officers and directors.
A domestic insurer issuing variable contracts shall establish one or more separate accounts pursuant to s. 611.25
, Stats., subject to the following provisions:
Except as provided in this subsection, an insurer may invest and reinvest amounts allocated to and accumulating in any separate account without regard to any requirements or limitations prescribed by the laws of this state governing the investments of life insurance companies. This subdivision applies only if the insurer maintains in any separate account its reserve liability with regard to benefits guaranteed as to amount and duration and funds guaranteed as to principal or rate of interest, and a portion of the assets of the separate account at least equal to the reserve liability, or another amount approved by the commissioner, is invested in accordance with the laws of this state governing the investments of life insurance companies. No investments in a separate account may be taken into account in applying the investment limitations applicable to the investments of the insurer.
With respect to 75% of the market value of the total assets in a separate account, no insurer may purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States if, immediately after the purchase or acquisition, the market value of the investment, together with prior investments of the separate account in the security taken at market, would exceed 10% of the market value of the assets of the separate account. The commissioner may waive this limitation if he or she believes that the waiver will not render the operation of the separate account hazardous to the public or the insurer's policyholders in this state.
No insurer may, either for its separate accounts or otherwise, invest in the voting securities of a single issuer in an amount exceeding 10% of the total issued and outstanding voting securities of the issuer. This limitation does not apply with respect to securities held in separate accounts, the voting rights in which are exercisable only in accordance with instructions from persons having interests in the accounts.
The limitations provided in subds. 2.
do not apply to the investment with respect to a separate amount in the securities of an investment company registered under the investment company act of 1940, 29 USC 80a-1
, as amended, if the investments of the investment company comply in substance with subds. 2.
Unless otherwise approved by the commissioner, an insurer shall value assets allocated to a separate account at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to the separate account, except that the insurer shall value the portion of the assets of the separate account equal to the insurer's reserve liability with regard to the benefits and funds described in par. (a) 1.
, if any, in accordance with the rules otherwise applicable to the insurer's assets.