Chapter Ins 3

Ins 3.25(20)(e) (e) With the approval of the commissioner, a company may, for valuation purposes, use any appropriate mortality or morbidity table, in lieu of those specified in pars. (b), (c) and (d), that is based on credible credit life or disability experience and either explicitly or implicitly has adequate margins for the present value of all future unaccrued liabilities.

Ins 3.25(20)(f) (f) Unearned premium reserves shall be computed as follows:

Ins 3.25(20)(f)1. 1. Unearned premiums shall be reported consistently as of the beginning and the end of each year, and shall be based on the premium that would be charged for the remaining amount and term of coverage using the premium rate or schedule of premium rates in effect at the time the coverage became effective. The following calculation bases shall be deemed to comply with this requirement in lieu of a precise calculation:

Ins 3.25(20)(f)1.a. a. For single premium uniformly decreasing credit life insurance coverage, the “sum of the digits” method, commonly known as the “Rule of 78;”

Ins 3.25(20)(f)1.b. b. For single premium credit accident and sickness coverage with substantially equal monthly benefits and with conterminous coverage and benefit periods, the arithmetic mean of the unearned premium calculated according to the “sum of the digits” method and the pro rata unearned premium calculated as the original premium multiplied by the ratio of the remaining coverage term to the original coverage term;

Ins 3.25(20)(f)1.c. c. For premiums payable on a monthly outstanding balance basis, single premium level life coverage or any other coverage where the benefit amount remains constant throughout the remaining coverage period, the pro rata unearned premium calculated as the original premium multiplied by the ratio of the remaining coverage term to the original coverage term;

Ins 3.25(20)(f)1.d. d. For decreasing credit life insurance coverage provided for the full term of the indebtedness where the benefit is equal to the actual or scheduled net amount necessary to liquidate the indebtedness, the unearned premium calculated as the original premiums multiplied by the ratio of the scheduled remaining dollar-months of coverage to the scheduled initial dollar-months of coverage. Dollar-months of coverage may be approximated using an assumed interest rate that is reasonably representative of the interest rates applicable to all indebtedness with respect to which coverage is provided on this basis;

Ins 3.25(20)(f)1.e. e. For credit life insurance coverage providing a combination of level and decreasing benefits, or providing a truncated coverage period or providing full-term coverage of an indebtedness that requires a balloon payment, an appropriate combination of methods described in this paragraph; or

Ins 3.25(20)(f)1.f. f. Any other reasonable approximation method approved by the commissioner.

Ins 3.25(20)(f)1.g. g. In this paragraph, a “dollar-month of coverage” means one dollar of coverage for one month.

Ins 3.25(20)(f)2. 2. Unearned premium for partial months may be calculated on an exact daily basis, on a basis assuming that the valuation date occurs in the middle of each installment period or using the method commonly known as the “15 day 16 day rule” in which the value at the beginning of the month is used if less than 16 days have elapsed in the current month and the value at the end of the month is used if more than 15 days have elapsed in the current month. For the purpose of the “15 day-16 day rule,” the current month shall be deemed to begin on the day following the most recent payment due date of the indebtedness and end on the next succeeding payment due date. The valuation date shall be counted as a full day.

Ins 3.25(20)(f)3. 3. Claim reserves and liabilities shall be reported on a consistent basis from year to year. Any change in the basis of calculation shall be disclosed, together with a recalculation of all items as of the end of the preceding calendar year according to the revised basis.

Ins 3.25(22) (22) Penalty. Violations of this section shall subject the violator to ss. 601.64 and 601.65, Stats.

Ins 3.25 History History: Cr. Register, August, 1972, No. 200, eff. 9-1-72; cr. (2) (c), (6) (h) and (8) (h); am. (4) (b), (5), (8) (f), (12), (13) (a), (14) (e), and r. (17) (a), Register, February, 1973, No. 206, eff. 3-1-73; am. (4), (5), (6) (a) 6., (6) (h), (8) (f), (12) (g) 2., (13) (c) 3., (14) (c) and (d) and cr. (6) (i) and (13) (c) 5., Register, April, 1975, No. 232, eff. 5-1-75; am. (13) (b), Register, June, 1975, No. 234, eff. 7-1-75; emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249, eff. 10-1-76; am. (4) and (11) (d), cr. (12) (h) and (13) (d), Register, March, 1977, No. 255, eff. 4-1-77; am. (1), (2) and (14) (c), Register, March, 1979, No. 279, eff. 4-1-79; am. (12) (b) to (e), Register, September, 1981, No. 309, eff. 10-1-81; r. (19) under s. 13.93 (2m) (b) 16., Stats., Register, December, 1984, No. 348; reprinted to correct printing errors in (13) (b), (14) (c) and (f), Register, June, 1986, No. 366; r. and recr. Register, November, 1987, No. 383, eff. 1-1-88; am. (8) (c) and (17) (d), Register, November, 1988, No. 395, eff. 12-1-88; r. and recr. (9) (g), am. (13) (b) and (c) (intro.), (14) (d), (19) (intro.), (20) (a) and Appendix B, r. (20) (d), renum. (20) (e) to (g) to be (20) (d) to (f) and am. (20) (e) and (f), Register, November, 1989, No. 407, eff. 12-1-89, except (9) (g) eff. 4-1-90; emerg. cr. (13) (bm), (c) 4. d., (e) 3., am. (13) (c) (intro.), 1., 4. c., 6. (intro.), (d) (intro.), (14) (e) 1., 2. b., (15) (b) 2. b., (17) (d) and (19) (intro.), r. (19) (a) and (b), (21), Appendix B, r. and recr. (20) (f), eff. 1-1-96; cr. (13) (bm), (c) 4. d., (e) 3., am. (13) (c) (intro.), 1., 4. c., 6. (intro.), (d) (intro.), (14) (e) 1., 2. b., (15) (b) 2. b., (17) (d) and (19) (intro.), r. (19) (a) and (b), (21), Appendix B, r. and recr. (20) (f), Register, March, 1996, No. 483, eff. 4-1-96.

Ins 3.25 Appendix A

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Ins 3.26 Ins 3.26 Unfair trade practices in credit life insurance and credit accident and sickness insurance.

Ins 3.26(1) (1) Purpose. The purpose of this rule is to assist in the maintenance of a fair and equitable credit life insurance and credit accident and sickness insurance market. This rule interprets, including but not limited to, the following ss. 601.04, 601.01 (1), (2), (3), (7) and (8), 601.41 (1), (2) and (3), Stats., and ch. 628, Stats.

Ins 3.26(2) (2) Scope. This rule shall apply to the transaction of credit life insurance as defined in s. Ins 6.75 (1) (a) 1. and s. 632.44 (3), Stats., and the transaction of credit accident and sickness insurance as defined in s. Ins 6.75 (1) (c) 1. or (2) (c) 1.

Ins 3.26(3) (3) Unfair trade practices defined. The following acts, whether done directly or indirectly, in consideration of or in connection with a policy issued or proposed to be issued are defined to be prohibited unfair trade practices in the transaction of insurance described in sub. (2):

Ins 3.26(3)(a) (a) The offer or grant by an insurer of any special favor or advantage, or any valuable consideration or inducement not set out in the insurance contract. The payment of agents’ commissions, reported annually in Schedule 24S, shall not be a violation of this paragraph but the acts cited in pars. (b), (c), (d), (e) and (f) may not in any way be construed as agents’ commissions.

Ins 3.26(3)(b) (b) The offer to deposit or the deposit with a bank or other financial institution, money or securities of the insurer or of any affiliate of the insurer with the design or intent that the deposit offset or take the place of a deposit of money or securities which otherwise would be required of the creditor by such bank or financial institution as a compensating balance or offsetting deposit for a loan or other advancement.

Ins 3.26(3)(c) (c) The deposit with a bank or other financial institution of money or securities without interest or at a lessor rate of interest than is currently being paid other depositors on similar deposits with such bank or other financial institution. This shall not be construed to prohibit the maintenance by an insurer of such demand deposits as are reasonably necessary for use in the ordinary course of business of the insurer.

Ins 3.26(3)(d) (d) The offer to sell or the sale of any capital stock or other security or certificate of indebtedness of the insurer or affiliated person.

Ins 3.26(3)(e) (e) The offer to pay or the payment of any part of the premium for any insurance on the life, health or property of any creditor or any employee or other person affiliated with the creditor.

Ins 3.26(3)(f) (f) The extension to the creditor of credit for the remittance of premium beyond the grace period of a group policy or for more than 45 days from the effective date of an individual policy.

Ins 3.26(4) (4) Penalty. Violations of this rule shall subject the insurer or agent to s. 601.64, Stats.

Ins 3.26 History History: Cr. Register, October, 1972, No. 202, eff. 11-1-72; 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; correction in (1) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436.

Ins 3.27 Ins 3.27 Advertisements of and deceptive practices in accident and sickness insurance.

Ins 3.27(1) (1) Purpose. The interest of prospective purchasers of accident and sickness insurance must be safeguarded by providing such persons with clear and unambiguous statements, explanations, advertisements and written proposals concerning the policies offered to them. This purpose can best be achieved by the establishment of and adherence to certain minimum standards of and guidelines for conduct in the advertising and sale of such insurance which prevent unfair competition among insurers and are conducive to the accurate presentation and description to the insurance buying public of policies of such insurance. This rule interprets and implements, including but not limited to, the following Wisconsin Statutes: ss. 628.34 and 601.01 (3), Stats.

Ins 3.27(2) (2) Scope. This rule shall apply to any solicitation, representation or advertisement in this state of any insurance specified in s. Ins 6.75 (1) (c) or (2) (c), made directly or indirectly by or on behalf of any insurer, fraternal benefit society, nonprofit service plan subject to ch. 613, Stats., voluntary nonprofit sickness care plan organized under s. 185.981, Stats., interscholastic benefit plan organized under s. 616.08, Stats., or agent as defined in ch. 628, Stats.

Ins 3.27(3) (3) Interpretation of requirements applicable to advertisements.

Ins 3.27(3)(a) (a) The proper promotion, sale and expansion of accident and sickness insurance are in the public interest. This rule is to be construed in a manner which does not unduly restrict, inhibit or retard such promotion, sale and expansion.

Ins 3.27(3)(b) (b) In applying this rule, it shall be recognized that advertising is essential in promoting a broader distribution of accident and sickness insurance. Advertising necessarily seeks to serve this purpose in various ways. Some advertisements are the direct or principal sales inducement and are designed to invite offers to contract. In other advertisements the function is to describe coverage broadly for the purpose of inviting inquiry for further information. Other advertisements are for the purpose of summarizing or explaining coverage after the sale has been made. Still other advertisements are solely for the purpose of promoting the interest of the reader in the concept of accident and sickness insurance or of promoting the insurer sponsoring the advertisement. These differences shall be considered in interpreting this rule.

Ins 3.27(3)(c) (c) When applying this rule to a specific advertisement, the type of policy to which the advertisement refers and the detail, character, purpose, use and entire content of the advertisement shall be taken into consideration.

Ins 3.27(3)(d) (d) This rule applies to individual, franchise, group and blanket accident and sickness insurance. Because these types of coverage differ in some respects, one interpretation will not always suffice; a specific interpretation for individual, franchise, group or blanket coverage may be indicated.

Ins 3.27(3)(e) (e) The extent to which policy provisions need be disclosed in an advertisement will depend on the content, detail, character, purpose and use of the advertisement and the nature of the exceptions, reductions, limitations and other qualifications involved. The principal criterion is whether the advertisement has the capacity and tendency to mislead or deceive if such a provision is not disclosed.

Ins 3.27(3)(f) (f) Whether an advertisement has the capacity and tendency to mislead or deceive shall be determined by the commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

Ins 3.27(4) (4) Coverage types.

Ins 3.27(4)(a) (a) An advertisement which is an invitation to apply shall clearly and prominently designate and at least briefly describe the type or types of coverage provided by the policy advertised. The level and extent of benefits provided by or available under the coverage shall also be clearly indicated.

Ins 3.27(4)(b) (b) The following are the standard types of coverage designations and the minimum adequate form of description that must be used. Any type of coverage authorized by Wisconsin Statutes which is not reasonably included within one or more of the standard coverage types listed shall be similarly and appropriately named and described so as to clearly disclose the benefits provided.

Ins 3.27(4)(b)1. 1. ‘Basic hospital expense benefits.’ This coverage provides benefits for hospital room and board and miscellaneous hospital charges, based upon actual expenses incurred, up to stated maximum amounts.

Ins 3.27(4)(b)2. 2. ‘Basic medical expense benefits.’ This coverage provides benefits for medical benefits based upon actual expenses incurred, up to stated maximum amounts.

Ins 3.27(4)(b)3. 3. ‘Basic surgical expense benefits.’ This coverage provides benefits for surgical benefits based upon actual expenses incurred up to stated maximum amounts.

Ins 3.27(4)(b)4. 4. ‘Major medical or comprehensive expense benefits.’ These coverages provide high maximum benefit amounts covering almost all types of medical care and contain deductible and co-insurance features.

Ins 3.27(4)(b)5. 5. ‘Disability income benefits.’ This coverage provides periodic benefit payments to help replace income when the insured is unable to work as a result of illness or injury.

Ins 3.27(4)(b)6. 6. ‘Hospital confinement indemnity benefits.’ This coverage provides benefits in a stated amount for confinement in a hospital, regardless of the hospital expenses actually incurred by the insured, due to such confinement.

Ins 3.27(4)(b)7. 7. ‘Accident only benefits.’ This coverage provides benefits for losses for accidental bodily injury.

Ins 3.27(4)(b)8. 8. ‘Specified disease or treatment benefits.’ This coverage provides benefits for treatment of a specific disease or diseases named in the policy or for specified treatment.

Ins 3.27(5) (5) General definitions.

Ins 3.27(5)(a) (a) An advertisement relating to accident and sickness insurance for the purpose of this rule includes the following:

Ins 3.27(5)(a)1. 1. Printed and published material, audio visual material and descriptive literature of an insurer used in newspapers, magazines, other periodicals, radio and TV scripts, the internet, web pages, electronic or computer presentations, billboards and similar displays, excluding advertisements prepared for the sole purpose of obtaining employees, agents or agencies.

Ins 3.27(5)(a)2. 2. Descriptive literature and sales aids of all kinds issued by an insurer or agent for presentation to members of the public, including but not limited to circulars, leaflets, booklets, depictions, illustrations and form letters.

Ins 3.27(5)(a)2.a. a. Including material used in the solicitation of renewals and reinstatements except for communications or notices which mention the cost of the insurance but do not describe benefits,

Ins 3.27(5)(a)2.b. b. Excluding material in house organs of insurers, communications within an insurer’s own organization not intended for dissemination to the public, individual communications of a personal nature, and correspondence between a prospective group or blanket policyholder and an insurer in the course of negotiating a group or blanket policy,

Ins 3.27(5)(a)2.c. c. Including group and blanket booklets, summaries of coverage and other explanatory material issued to insured persons, and

Ins 3.27(5)(a)2.d. d. Excluding general announcements from group or blanket policyholders to eligible individuals that a contract has been written.

Ins 3.27(5)(a)3. 3. Prepared sales talks, presentations of material for use by agents and representations made by agents in accordance therewith, excluding materials to be used solely by an insurer for the training and education of its employees or agents, and

Ins 3.27(5)(a)4. 4. Envelopes used in connection with the above.

Ins 3.27(5)(b) (b) A policy for the purpose of this rule includes any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits whether on a cash indemnity, reimbursement or service basis,

Ins 3.27(5)(b)1. 1. Except such benefits contained in a policy providing another kind of insurance other than life, and

Ins 3.27(5)(b)2. 2. Except disability and double indemnity benefits included in life insurance, endowment or annuity contracts or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as

Ins 3.27(5)(b)2.a. a. Provide additional benefits in case of death or dismemberment or loss of sight by accident or

Ins 3.27(5)(b)2.b. b. Operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity if the insured or annuitant becomes totally and permanently disabled, as defined by the contract or supplemental contract.

Ins 3.27(5)(c) (c) An insurer for the purpose of this rule includes any person, individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, nonprofit service plan subject to ch. 613, Stats., voluntary nonprofit sickness care plan organized under s. 185.981, Stats., interscholastic benefit plan organized under s. 616.08, Stats., and any other legal entity engaged in advertising a policy as herein defined.

Ins 3.27(5)(d) (d) An exception for the purpose of this rule means any provision in a policy whereby coverage for a specified hazard is entirely eliminated. It is a statement of a risk not assumed under the policy.

Ins 3.27(5)(e) (e) A reduction for the purpose of this rule means any provision in a policy which reduces the amount of the benefits. A risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction clause not been used.

Ins 3.27(5)(f) (f) A limitation for the purpose of this rule means any provision in a policy which restricts coverage under the policy other than an exception or a reduction.

Ins 3.27(5)(g) (g) An invitation to apply means an advertisement which is the direct or principal sales inducement and is designed to invite an offer to contract. Such an advertisement, which usually describes benefits in considerable detail, attempts to persuade the reader or listener to make application for the policy advertised. Such an advertisement would indicate what coverage the purchaser would receive and what such coverage would cost.

Ins 3.27(5)(h) (h) An invitation to inquire means an advertisement which is designed to attract the reader’s or listener’s interest in the policy so that he or she will inquire for further information or details. Such an advertisement describes the policy broadly and withholds some information regarding the policy without which the reader or listener would not reasonably decide to apply for the policy.

Ins 3.27(5)(i) (i) An institutional advertisement means one which is prepared solely to promote the reader’s or listener’s interest in the concept of accident and sickness insurance or of promoting the insurer sponsoring the advertisement.

Ins 3.27(5)(j) (j) A testimonial means any statement made by a policyholder, certificate holder or other person covered by the insurer which promotes the insurer and its policy by describing such person’s benefits, favorable treatment or other experience under the policy.

Ins 3.27(5)(k) (k) An endorsement for the purposes of sub. (13) means any statement promoting the insurer and its policy made by an individual, group of individuals, society, association or other organization which makes no reference to the endorser’s experience under the policy.

Ins 3.27(5)(L) (L) An outline of coverage means an appropriately and prominently captioned portion of a printed advertisement which is clearly set off from the rest of the advertisement by means such as placing it within a prominent border or box or printing it in contrasting color, or a separate appropriately captioned or titled printed statement, which advertisement portion or printed statement contains only a summary of the benefits provided, a designation of the applicable type or types of coverage as defined in sub. (4) and, under appropriate captions, the information required by subs. (10) and (11).

Ins 3.27(5)(m) (m) An individual policy issued on a group basis means an individual policy or contract issued where:

Ins 3.27(5)(m)1. 1. Coverage is provided to employees or members or classes thereof defined in terms of conditions pertaining to employment or membership in an association or other group which is eligible for franchise or group insurance as provided in s. 600.03 (22) and (23), Stats.,

Ins 3.27(5)(m)2. 2. The coverage is not available to the general public and can be obtained and maintained only because of the covered person’s membership in or connection with the group,

Ins 3.27(5)(m)3. 3. Premiums or subscription charges are paid to the insurer by the employer, association or some designated person acting on behalf of the employer, association or covered persons, and

Ins 3.27(5)(m)4. 4. The insurance plan is sponsored by the employer or association.

Ins 3.27(6) (6) Advertisements and representations in general.

Ins 3.27(6)(a) (a) Advertisements and representations shall be truthful and not misleading in fact or in implication and shall accurately describe the policy to which they apply. Words or phrases the meaning of which is clear only by implication or by familiarity with insurance terminology shall not be used.

Ins 3.27(6)(b) (b) Oral representations shall conform to the requirements of this rule.

Ins 3.27(7) (7) Suitability of policies. No agent or insurer shall recommend to a prospective buyer the purchase of any individual policy without reasonable grounds to believe that the recommendation is not unsuitable to the applicant. The agent or insurer shall make such inquiry as may be necessary under the circumstances to determine that the purchase of such insurance is not unsuitable for the prospective buyer. This requirement shall not apply to an individual policy issued on a group basis.

Ins 3.27(8) (8) Outline of coverage.

Ins 3.27(8)(a) (a) Every advertisement of a specific individual policy or policies which constitutes an invitation to apply shall include an outline of coverage as defined in sub. (5) (L).

Ins 3.27(8)(b) (b) Every agent at the time of taking an application for an individual policy shall furnish the applicant an outline of coverage as defined in sub. (5) (L).

Ins 3.27(8)(c) (c) The requirement for an outline of coverage shall not apply to an advertisement or the taking of an application for an individual policy issued on a group basis or an individual conversion policy issued under a group or franchise insurance plan.

Ins 3.27(9) (9) Deceptive words, phrases or illustrations.

Ins 3.27(9)(a) (a) An advertisement shall not exaggerate a benefit or minimize cost by overstatement, understatement or incompleteness. Information shall not be omitted or words, phrases, statements, references or illustrations shall not be used if such omission or use has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. An advertisement referring to any policy benefit payable, loss covered or premium payable shall be sufficiently complete and clear as to avoid deception or the capacity and tendency to mislead or deceive.