Scope Statements
Insurance
The statement of scope was approved by the governor on August 18, 2014.
Rule No.
Relating to
Life insurance solicitation, and section 2.15, Wis. Adm. Code, relating to annuity benefit solicitation.
Rule Type
Permanent.
1. Finding / Nature of Emergency (Emergency Rule Only)
Not applicable.
2. Detailed Description of the Objective of the Rule
The objective of the rule change is to update the buyer's guide that is furnished to Wisconsin consumers during the sale of annuities. Currently, the Wisconsin Buyer's Guide to Annuities is available online, and contains general product information and provides answers to basic questions about risks and investing that consumers can use to decide whether these products are right for them. Unfortunately, the Wisconsin buyer's guide is outdated as it does not provide any information about indexed annuity products which are now common in the marketplace. In 2013, the National Association of Insurance Commissioners (NAIC) revised and updated the NAIC buyer's guide to include information about fixed, indexed and variable annuities. The NAIC now offers three versions of the Buyer's Guide for Deferred Annuities: a general information guide, a fixed annuity guide, and a variable annuity guide. It is the goal of the OCI to amend s.
Ins 2.15 to permit insurers and agents to use the most current version of the applicable NAIC Buyer's Guide for Deferred Annuities, rather than the Wisconsin Buyer's Guide to Annuities. As a result of this change, the outdated Wisconsin Buyer's Guide to Annuities would be discontinued. Wisconsin adopted the NAIC Life Insurance Buyer's Guide in 1998. Using the NAIC guides for both life insurance and annuities will provide uniformity and consistency for insurers, agents and consumers.
The objective of amending s.
Ins 2.14 (4) (g) 1. is to bring the rule up to date with a change in the law that occurred in 1998. The entire subdivision should be deleted because the sentence stating “Further explanation of the intended use of these indexes is provided in the life insurance buyer's guide" is incorrect as no such explanation is contained in the NAIC Life Insurance Buyer's Guide concerning cost indexes. The explanation was previously included in OCI's Life Insurance Buyer's Guide which was replaced with the NAIC Buyer's Guide by rule change in January, 1998.
3. Description of Existing Policies Relevant to the Rule and of New Policies Proposed to be Included in the Rule and an Analysis of Policy Alternatives; the History, Background, and Justification for the Proposed Rule
Wisconsin adopted the NAIC Life Insurance Buyer's Guide in 1998, effectively replacing the Wisconsin Life Insurance Buyer's Guide. To be consistent, Wisconsin should also adopt the NAIC Buyer's Guide for Deferred Annuities, effectively replacing Wisconsin Buyer's Guide to Annuities. Using the NAIC buyer's guides for both life insurance and annuities will provide uniformity and consistency for insurers, agents and consumers.
Section Ins. 2.14 requires insurers to use the most current version of the NAIC Life Insurance Buyer's Guide. The change to s.
Ins 2.14 (4) (g) 1. acknowledges that the NAIC Life Insurance Buyer's Guide does not contain an explanation of the use of cost comparison indexes. The explanation was previously included in Wisconsin's Life Insurance Buyer's Guide which was replaced with the NAIC Buyer's Guide by rule change in January, 1998. This is a minor technical change to the existing rule which does not encompass a change of existing policy with respect to the disclosure rules applicable to life insurance.
4. Detailed Statutory Authority for the Rule (Including the Statutory Citation and Language)
The statutory authority for these rules are ss.
227.11 (2) (a) and
601.41 (3), Wis. Stats., which provide for the commissioner's rulemaking authority in general and specifically ss.
628.34 (12) and
628.38, Wis. Stats. Section
628.34 (12), Wis. Stats., states the commissioner “may define specific unfair trade practices by rule, after a finding that they are misleading, deceptive, unfairly discriminatory, provide an unfair inducement, or restrain competition unreasonably." Section
628.38, Wis. Stats., states the commissioner “may by rule require insurers to deliver to prospective buyers of life or disability insurance, at a time specified in the rule, information consistent with ss.
601.01 and
628.34, Wis. Stats., that will improve their ability to select appropriate coverage."
5. Estimates of the Amount of Time that State Employees Will Spend to Develop the Rule And of Other Resources Necessary to Develop the Rule
200 hours and no other resources are necessary to develop the rule.
6. List with Description of all Entities that may be Impacted by the Rule
Insurers, insurance agencies and individual agents may be impacted by the rule.
7. Summary and Preliminary Comparison of any Existing Or Proposed Federal Regulation that is Intended to Address the Activities to be Regulated by the Rule
The Office is unaware of any proposed or existing federal laws or regulations that are intended to address the activities to be regulated by the proposed rule changes.
8. Anticipated Economic Impact of Implementing the Rule (Note if the Rule is Likely to Have a Significant Economic Impact on Small Businesses)
yes
x no
local/statewide economic impact (choose one)
x minimal or none (< or = $50,000)
moderate ($50,000—$20,000,000)
significant (>$20,000,000)
The amendment to s.
Ins 2.14 (4) (g) 1. should have no impact economic impact on the insurance industry as it merely deletes an erroneous reference in the applicable rule.
The amendment to s.
Ins 2.15 will have a minimal additional cost for insurers and insurance agents. OCI does not charge insurers or agents for using the Wisconsin Buyer's Guide to Annuities. However, NAIC charges $0.35 for each copy of a buyer's guide. This has been a consistent cost for using NAIC guides.
Contact Person
Robin S. Jacobs, Staff Attorney
(608) 261-8283
Insurance
The statement of scope was approved by the governor on August 18, 2014.
Rule No.
Relating to
2012 individual annuity reserving mortality table.
Rule Type
Permanent and emergency.
1. Finding/Nature of Emergency
Under the current rule governing the minimum standards of valuation for individual life and pure endowment contracts life insurers are required to use the Annuity 2000 Mortality Table, which has become outdated. OCI is addressing the issue by enacting an emergency and permanent rule that would require insurers to use the 2012 Individual Annuity Reserving Mortality Table (2012 IAR Table) for contracts issued on or after January 1, 2015. Wisconsin insurers have expressed support for the proposed rule and its enactment at the earliest date possible in 2014. Insurers are requesting time in advance of January 2015 in order to modify existing policy forms and marketing material so that they are able to compete with other insurers on a level playing field. However, in order for insurers to have sufficient time to file new policy and rate forms for use beginning January 1, 2015 the rule must be in place no later than November 2014 to ensure sufficient time to submit form or rate filings with the Office. Delay beyond January 2015 will not be in the best interest of insurers or consumers.
The 2012 IAR Table provides insurers with a more accurate tool for calculating minimum reserves. This is beneficial to the both the insurers and consumers. The emergency rule will provide insurers with the earliest opportunity to use the 2012 IAR Table while the permanent rule moves through the legislative process. In addition, the proposed permanent rule has been recommended by the National Association of Insurance Commissioners (NAIC) and is in the process of being adopted in other states. The emergency rule will help domestic insurers remain on equal footing with insurers from other states where the rule is already being adopted.
2. Detailed Description of the Objective of the Rule
The proposed emergency and permanent rule would require life insurers to use the 2012 IAR Table when determining the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after January 1, 2015. The proposed emergency and permanent rule would modernize an outdated table. The 2012 IAR Table is comprised of a basic experience table with margins (the 2012 Individual Annuity Mortality Period Life Table) and a projection scale. The addition of a projection scale to the 2012 IAR Table allows the Table to remain up-to-date over a longer period of time because it allows the Table to adjust by considering the most accurate statistics during each valuation year.
3. Description of Existing Policies Relevant to the Rule and of New Policies Proposed to be Included in the Rule and an Analysis of Policy Alternatives; the History, Background, and Justification for the Proposed Rule
The existing requirements are contained primarily in s.
623.06 (2a) (b) and
(4m), Wis. Stats., s.
Ins 2.30 (3), and Subch.
V of ch. Ins. 50, Wis. Adm. Code. These provisions establish that mortality tables are to be used by insurers to calculate minimum reserves and establish requirements related to testing and reporting of actuarial information. Current rules require insurers to use the Annuity 2000 Mortality Table as adopted by the NAIC. The proposed emergency and permanent rule will require insurers to use the 2012 IAR Table as adopted by the NAIC in December 2012 for calculating the minimum reserves on contracts written on or after January 1, 2015. The proposed rule is being considered as it has been recommended by the NAIC and is in the process of being adopted by other states. Further, not adopting the 2012 IAR Table may place domestic insurers at a competitive disadvantage compared to insurers from states where the table has been adopted.
4. Detailed Statutory Authority for the Rule (Including the Statutory Citation and Language)
The Commissioner has the general authority to promulgate rules necessary to administer and enforce chs.
600 to
655, Wis. Stats., and as provided under ss.
227.11 (2) (a) and
601.41 (3), Wis. Stats. Further, under ss.
623.06 (2a) (b) and
(4m), Wis. Stats., the commissioner has specific authority to determine the minimum standard for the valuation of individual annuity and pure endowment contracts by establishing mortality tables to be used by insurers to calculate minimum reserves and requirements related to the testing and reporting of actuarial information.
5. Estimates of the Amount of Time that State Employees Will Spend to Develop the Rule And of Other Resources Necessary to Develop the Rule
60 hours and no other resources are necessary to develop the rule.
6. List with Description of all Entities that may be Impacted by the Rule
The proposed rule will affect insurers offering individual annuity and pure endowment contracts.
7. Summary and Preliminary Comparison of any Existing or Proposed Federal Regulation that is Intended to Address the Activities to be Regulated by the Rule
