“Generic name" means a short title descriptive of the policy being illustrated such as “whole life," “term life" or “flexible premium adjustable life."
“Guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue.
“Illustrated scale" means a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:
“Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and is one of the three illustrations described in pars. (b)
, and (s)
“Illustration actuary" means an actuary meeting the requirements of sub. (10)
“In force illustration" means an illustration furnished at any time after the policy that it depicts has been in force.
“Lapse-supported illustration" means an illustration of a policy form failing the test of self-supporting as defined in this section, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first 5 years and 100% policy persistency thereafter.
“Minimum assumed expenses" means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:
Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.
A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the commissioner.
“Non-guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.
“Non-term group life" means a group policy or individual policies of life insurance issued to members of an employer group or other permitted group under all of the following conditions:
Every plan of coverage was selected by the employer or other group representative.
Some portion of the premium is paid by the group or through payroll deduction.
“Policy owner" means the owner named in an individual policy
or the certificate holder in the case of a group policy.
“Premium outlay" means the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket.
“Self-supporting illustration" means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value includes cash surrender values and any other illustrated benefit amounts available at the policy owner's election.
“Supplemental illustration" means an illustration furnished in addition to a basic illustration.
Each insurer marketing policies to which this section is applicable shall notify the commissioner whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on January 1, 1998, the insurer shall
identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after January 1, 1998, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the commissioner.
If an insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first anniversary is prohibited.
If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this section is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.
Potential enrollees of non-term group life subject to this regulation shall be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation shall not be considered an illustration for purposes of this section, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.
An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this section, be clearly labeled “life insurance illustration" and contain all of the following basic information:
Name and business address of agent or insurer's authorized representative, if any.
Name, age and sex of proposed insured, except where a composite illustration is permitted under this section.
Underwriting or rating classification upon which the illustration is based.
Generic name of policy, the insurer's product name, if different, and form number.
Dividend option election or application of non-guaranteed elements, if applicable.
When using an illustration in the sale of a life insurance policy, an insurer or its agent or other authorized representatives shall not:
Represent the policy as anything other than a life insurance policy.
Use or describe non-guaranteed elements in a manner that is misleading or has the capacity or tendency to mislead.
State or imply that the payment or amount of non-guaranteed elements is guaranteed.
Use an illustration that does not comply with the requirements of this section.
Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated.
Represent in any way 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.
Use the term “vanish" or “vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums.
Except for policies that can never develop nonforfeiture values, use an illustration that is “lapse-supported".
If an interest rate used to determine the illustrated non-guaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.
In determining the disciplined current scale an insurer may use standards established by the actuarial standards board that meet all of the following criteria:
Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred.
Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date.
Do not permit assumed expenses to be less than minimum assumed expenses.
A basic illustration shall conform with the following requirements:
The illustration shall be labeled with the date on which it was prepared.
Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration.
The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified.
If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force.
The assumed payments on which the illustrated benefits and values are based shall be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments shall be identified as premium outlay.
Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium shall be shown and clearly labeled guaranteed.
If the illustration shows any non-guaranteed elements, they cannot be based on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration. These elements shall be clearly labeled non-guaranteed.
The guaranteed elements, if any, shall be shown before corresponding non-guaranteed elements. Any page of an illustration that shows or describes only the non-guaranteed elements shall include a reference to the page where guaranteed elements are shown and a statement that guaranteed elements are found on that page.
The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown on the same page in close proximity to the corresponding value available upon surrender.
The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable.
Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.
Any illustration of non-guaranteed elements shall be accompanied by a statement indicating that the benefits and values are not guaranteed, that the assumptions on which they are based are subject to change, and that actual results may be more or less favorable.
If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration shall clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up.
If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values.
A basic illustration shall include the following narrative summary:
A brief description of the policy being illustrated, including a statement that it is a life insurance policy.
A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code.
A brief description of any policy features, riders or options, guaranteed or non-guaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy.
Identification and a brief definition of column headings and key terms used in the illustration.
A statement containing in substance the following: “This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."
A basic illustration shall include the following numeric summary, following the narrative summary:
A summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values shall be based on the contract premium. This summary shall be shown for at least policy years 5, 10 and 20 and at age 70, if applicable, on the three bases shown below in subds. 2.
, and 4.
For multiple life policies the summary shall show policy years 5, 10, 20 and 30.
Insurer's illustrated scale used but with the non-guaranteed elements reduced as follows:
Dividends at 50% of the dividends contained in the illustrated scale used.
Non-guaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.
All non-guaranteed charges, including but not limited to, term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.
If coverage would cease prior to policy maturity or age 100, the year in which coverage ceases shall be identified for each of the three bases shown above in subds. 2.
Statements substantially similar to the following shall immediately follow the numeric summary and be signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this section.
A statement to be signed and dated by the applicant or policy owner reading as follows: “I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."
A statement to be signed and dated by the agent or other authorized representative of the insurer reading as follows: “I certify that this illustration has been presented to the applicant or policy owner
and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."
The following elements shall be shown in tabular detail:
A basic illustration shall include the following for at least each policy year from 1 to 10 and for every 5th policy year thereafter ending at age 100, policy maturity or final expiration; and except for term insurance beyond the 20th year, for any year in which the premium outlay and contract premium, if applicable, is to change: