OCI has established minimum standards to be observed by insurers and intermediary agents when replacing or proposing replacement of certain life insurance policies or annuities in order to minimize the opportunity for misrepresentation or unfair business practices.
Related statutes or rules
See the statutes interpreted above.
Plain language analysis and summary of the proposed rule
OCI has established minimum standards of conduct to be observed by insurers and producers in life insurance and annuity replacement or financed purchase transactions to assure disclosure of material information to purchasers and to reduce opportunities for misrepresentation and unfair business practices. The proposed rule expands and clarifies the information that must be communicated by a producer to a purchaser at the time an application is completed. The rule provides notice formats to assure uniform disclosures. The rule requires that certification of the disclosure be obtained from the purchaser and the producer, and that a copy of the certification along with a copy of all sales materials be provided to the purchaser and submitted to the insurer with the completed application. The rule defines and includes financed purchases in the replacement disclosure and reporting requirements.
Under the proposed rule insurers who use producers are required to maintain a system of supervision, control and monitoring to assure compliance which at a minimum must provide training, guidance, review and detection procedures. Insurers must have the capacity to monitor each producer's replacement activity and to maintain and produce transactional records upon request of the commissioner. Records must be retained by the insurer for at least 5 years. A replacing insurer must notify an existing insurer of a replacement transaction within 5 business days of receipt of a completed application, and must notify a purchaser of the right to cancel the transaction within 30 days of delivery of a policy or contract and receive a refund. An existing insurer must retain replacement notices for at least 5 years, must notify the existing policyholder of the right to receive information regarding the existing policy or contract and must notify the existing policyholder of the potential effect of release of policy values. Insurers engaging in direct response solicitation where there is no producer are required to make inquiries and provide disclosures to an applicant in any transaction that may involve a replacement.
Comparison with federal regulations
There are no federal regulations which address replacement of life insurance policies or annuities by insurers or intermediary agents doing business in Wisconsin.
Comparison of rules in adjacent states
Illinois:
Admin. Reg. Title 50, ss 917.20 to 917.110
Iowa:
Admin. Code ss 191-16.21 to 191-16.30
Michigan:
Minnesota:
Stats. ss. 61A.53 to 61A.60
Factual data and analytical methodologies
The proposed rule is based upon a model regulation adopted and recommended by the National Association of Insurance Commissioners (NAIC). It has been adopted by a number of states, and a former version of the model formed a basis of the existing Wisconsin replacement rule. The proposed rule will enhance supervision and monitoring by insurers of life insurance policy and annuity replacements and improve disclosure to consumers of the possible consequences and effects of replacement.
Analysis and supporting documentation used in determination of the rule's effect on small businesses
The proposed rule continues reporting and disclosure requirements relating to replacements of life insurance policies and annuities that have been in existence, and should therefore have little or no effect on small businesses.
Small Business Impact
This rule does not impose any additional requirements on small businesses and will have little or no effect on small businesses.
Small business regulatory coordinator
The OCI small business coordinator is Eileen Mallow and may be reached at phone number (608) 266-7843 or at email address
eileen.mallow@wisconsin.gov
Fiscal Estimate
There will be no state or local government fiscal effect.
This rule change will have no significant effect on the private sector regulated by OCI.
Agency Contact Person and Copy of Proposed Rule
A copy of the full text of the proposed rule changes, analysis and fiscal estimate may be obtained from the OCI internet Web site at
http://oci.wi.gov/ocirules.htm or by contacting:
Inger Williams, OCI Services Section, at:
Phone: (608) 264-8110
Address: 125 South Webster St – 2nd Floor
Madison WI
Mail: PO Box 7873, Madison, WI 53707-7873
