Ins 2.05(8)(8)Effective date. On or after April 1, 1965, no life insurance policy shall be approved for use and no such policy heretofore approved shall be issued or delivered in this state unless it meets the requirements of this rule.
Ins 2.05 NoteNote: See historical note relating to s. Ins 2.05 as printed with this rule as released in December, 1984.
Ins 2.05 HistoryHistory: 1-2-56; r. and recr. Register, March, 1965, No. 111, eff. 4-1-65; emerg. am. (1), (2) and (3) (b), eff. 6-22-76; am. (1), (2) and (3)(b), Register, September, 1976, No. 249, eff. 10-1-76; am. (1), (2) and (3) (b), Register, March, 1979, No. 279, eff. 4-1-79; r. (9) under s. 13.93 (2m) (b) 16., Stats., Register December, 1984, No. 348; corrections made under s. 13.93 (2m) (b) 6., Stats., Register, June, 1997, No. 498.
Ins 2.07Ins 2.07Replacement of life insurance or annuity contracts; disclosure requirements.
Ins 2.07(1)(1)Purpose. The purpose of this section is:
Ins 2.07(1)(a)(a) To regulate the activities of insurers and producers with respect to the replacement of existing life insurance and annuities.
Ins 2.07(1)(b)(b) To protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions to assure that purchasers receive information with which a decision can be made in the purchaser’s best interest, reduce the opportunity for misrepresentation and incomplete disclosure, and establish penalties for failure to comply with requirements of this section.
Ins 2.07(2)(2)Scope. This section shall apply to the solicitation of life insurance and annuities authorized by s. Ins 6.75 (1) (a) and (b), covering residents of this state, and issued by insurers including insurance corporations, fraternal benefit societies, or the State Life Insurance Fund. Except as specifically stated, this section shall not apply to transactions involving any of the following:
Ins 2.07(2)(a)(a) Credit life insurance.
Ins 2.07(2)(b)(b) Group life insurance or group annuities where there is no direct solicitation of individuals by a producer. Direct solicitation shall not include any group meeting held by a producer solely for the purpose of educating or enrolling individuals or, when initiated by an individual member of the group, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual. Group life insurance or group annuity certificates marketed through direct response solicitation shall be subject to the provisions of sub. (8).
Ins 2.07(2)(c)(c) Group life insurance and annuities used to fund prearranged funeral contracts.
Ins 2.07(2)(d)(d) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the commissioner; or, when a term conversion privilege is exercised among corporate affiliates.
Ins 2.07(2)(e)(e) Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same insurer.
Ins 2.07(2)(f)(f) Policies or contracts used to fund an employee pension or welfare benefit plan that is covered by the Employee Retirement Income Security Act, ERISA, 29 USC 1001 et. seq., a plan described by sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for purposes of ERISA, is established or maintained by an employer, a governmental or church plan defined in section 414 of the Internal Revenue Code, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the Internal Revenue Code, or a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor. This section shall apply to policies or contracts used to fund any plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after-tax basis, and where the insurer has been notified that plan participants may choose from among 2 or more insurers and there is a direct solicitation of an individual employee by a producer for the purchase of a contract or policy. As used in this subsection, direct solicitation shall not include any group meeting held by a producer solely for the purpose of educating individuals about the plan or arrangement or enrolling individuals in the plan or arrangement or, when initiated by an individual employee, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual employee.
Ins 2.07(2)(g)(g) Where new coverage is provided under a life insurance policy or contract and the cost is borne wholly by the insured’s employer or by an association of which the insured is a member.
Ins 2.07(2)(h)(h) Existing life insurance that is a non-convertible term life insurance policy that will expire in 5 years or less from the date of issue and cannot be renewed.
Ins 2.07(2)(i)(i) Immediate annuities that are purchased with proceeds from an existing annuity contract. Immediate annuities purchased with proceeds from an existing life insurance policy are not exempted from the requirements of this section.
Ins 2.07(2)(j)(j) Structured settlements.
Ins 2.07(2)(k)(k) Registered contracts shall be exempt from the requirements of subs. (6) (a) 2. and (7) (b) with respect to the provision of illustrations or policy summaries; however, premium or contract contribution amounts and identification of the appropriate prospectus or offering circular shall be required instead.
Ins 2.07(3)(3)Definitions. In this section:
Ins 2.07(3)(a)(a) “Direct response solicitation” means a solicitation through a sponsoring or endorsing entity or individually solely through mail, telephone, the Internet or other mass communication media.
Ins 2.07(3)(b)(b) “Existing insurer” means the insurer whose policy or contract is or will be changed or affected in a manner described within the definition of “replacement.”
Ins 2.07(3)(c)(c) “Existing policy or contract” means an individual life insurance policy or annuity contract in force, including a policy under a binding or conditional receipt or a policy or contract that is within an unconditional refund period.
Ins 2.07(3)(d)(d) “Financed purchase” means the purchase of a new policy involving the actual or intended use of funds obtained by the withdrawal or surrender of, or by borrowing from values of an existing policy to pay all or part of any premium due on the new policy. For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same insurer within 4 months before or 13 months after the effective date of the new policy, it will be deemed prima facie evidence of the policyholder’s intent to finance the purchase of the new policy with existing policy values. This prima facie standard is not intended to increase or decrease the monitoring obligations contained in sub. (5) (a).
Ins 2.07(3)(e)(e) “Illustration” means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years as defined in s. Ins 2.17.
Ins 2.07(3)(f)(f) “Policy summary” for policies or contracts other than universal life policies, means a written statement regarding a policy or contract which shall contain to the extent applicable, but need not be limited to, the following information: current death benefit; annual contract premium; current cash surrender value; current dividend; application of current dividend; and amount of outstanding loan. For universal life policies “policy summary” means a written statement that shall contain at least the following information: the beginning and end date of the current report period; the policy value at the end of the previous report period and at the end of the current report period; the total amounts that have been credited or debited to the policy value during the current report period, identifying each by type, for example, interest, mortality, expense and riders; the current death benefit at the end of the current report period on each life covered by the policy; the net cash surrender value of the policy as of the end of the current report period; and the amount of outstanding loans, if any, as of the end of the current report period.
Ins 2.07(3)(g)(g) “Producer” shall include intermediaries, agents, brokers and producers.
Ins 2.07(3)(h)(h) “Registered contract” means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933, 15 USC 77a et. seq.
Ins 2.07(3)(i)(i) “Replacement” means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated, converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values, amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid, reissued with any reduction in cash value, or used in a financed purchase.