§ 3209 — Life insurance, annuities and funding agreements disclosure requirements

§ 3209. Life insurance, annuities and funding agreements disclosure\nrequirements. (a) Except as hereafter exempted, this section shall apply\nto any solicitation, negotiation or procurement of life insurance,\nannuities or funding agreements occurring within this state. This\nsection shall apply to any issuer of life insurance or annuity contracts\nor funding agreements, including fraternal benefit societies and the\nlife insurance department of a savings and insurance bank. Unless\notherwise specifically included, this section shall not apply to: credit\nlife insurance; group life insurance; life insurance policies, annuity\ncontracts, and funding agreements issued in connection with pension and\nwelfare plans as defined by and to the extent covered by the federal\nEmployee Retirement Income Security Act of 1974 (ERISA); funding\nagreements issued to other than individuals pursuant to subsection (b)\nof section three thousand two hundred twenty-two of this article; and\nany group annuity unless at least one certificate is subject to\nparagraph two of subsection (b) of section four thousand two hundred\ntwenty-three of this chapter.\n (b) (1) No policy of life insurance shall be delivered or issued for\ndelivery in this state after the applicable effective date, as set forth\nin subsection (n) of this section, unless the prospective purchaser has\nbeen provided with the following:\n (A) a copy of the most recent buyer's guide and the preliminary\ninformation required by subsection (d) of this section, at or prior to\nthe time an application is taken. When sales solicitations are made by\nmail, without the involvement of an agent or broker, each initial\nsolicitation must include a copy of the buyer's guide unless the policy\nfor which application is made provides for a period of at least thirty\ndays within which the applicant may return the policy for an\nunconditional refund of the premiums paid, in which event the buyer's\nguide must be delivered with the policy or prior to delivery of the\npolicy; in addition, such solicitation must alert the prospective\npurchaser of the right to receive, upon request, a buyer's guide and a\npolicy summary prior to delivery of the policy; and\n (B) a policy summary upon delivery of the policy.\n (2) No annuity contract or life insurance policy or certificate with\nan equity index account shall be delivered or issued for delivery in\nthis state unless, no later than at the time of application, the\nprospective purchaser has been provided with a disclosure statement\ncontaining the following:\n (A) a statement in bold type to the effect that the equity index\naccount provides benefits linked to an external equity index and does\nnot participate directly in the equity market;\n (B) a statement identifying the equity index used in the equity index\nformula, together with a description of any alternate index should the\ninitial index no longer be publicly available;\n (C) a statement indicating whether paid dividends are included in\nchanges in the equity index, together with a description of how such\ndividends, or lack thereof, would affect the changes in the equity\nindex; the statement must provide the average dividend rate over the\nlesser of ten years or the calculable life of the index;\n (D) a statement fully describing the equity index formula;\n (E) a statement explaining and illustrating the equity index formula\nincluding any features of the equity index formula subject to change\nafter issuance of the contract, policy or certificate;\n (F) a statement identifying the initial minimum guaranteed interest\nrate for the minimum accumulation value of an equity index account and\nany withdrawal charge;\n (G) a statement identifying the initial current and the minimum\nspecified participation rate, i.e., how much of the increase in the\nindex will be used to calculate the indexed linked interest rate, if\nany;\n (H) a statement identifying the initial current and the minimum upper\nlimit or cap on the indexed linked interest rate, if any;\n (I) for a life insurance policy crediting additional amounts in\naccordance with an equity index less frequently than annually, a\nstatement to the effect that: if the policyholder requests a full\nsurrender of a policy prior to the expiration of the equity index\ncrediting period, no additional interest based on the equity index will\nbe credited and that only the guaranteed interest will be credited to\nthe account; and the policyholder is advised to consider alternatives to\na full surrender of the policy prior to the expiration of the equity\nindex crediting period, such as a policy loan or, if available, a\npartial withdrawal of the policy; and\n (J) other disclosure information the superintendent deems appropriate.\n (3) No participating dividend-paying paid-up deferred annuity contract\nshall be delivered or issued for delivery in this state unless a\nprospective purchaser is provided with a disclosure statement, no later\nthan at the time of application, containing the following:\n (A) a statement indicating that dividends are not guaranteed under the\nparticipating dividend-paying paid-up deferred annuity contract and the\nincome is therefore not guaranteed to increase from the dollar amount\nset at the time of issue; and\n (B) a statement indicating that the initial income under a\nparticipating dividend-paying paid-up deferred annuity contract may be\nlower than the initial income under a fully guaranteed paid-up deferred\nannuity contract.\n (c) Every insurer must provide, to any policyholder who so requests, a\npolicy summary for each in-force premium-paying policy for which no\npolicy summary has ever been furnished. The insurer may charge the\npolicyholder a reasonable fee for preparation of this summary, subject\nto guidelines specified in rules promulgated by the superintendent.\n (d) The preliminary information shall be in writing and include, to\nthe extent applicable, the following:\n (1) the name and address of the insurance agent or broker or, if no\nagent or broker is involved, a statement of the procedure to be followed\nin order to receive responses to inquiries concerning the preliminary\ninformation;\n (2) the full name and home office, administrative office or branch or\nagency office address of the company in whose name the life insurance\npolicy is to be written;\n (3) the date of the preliminary information and the generic name, the\ninitial amount of insurance and the initial annual premium for the basic\npolicy;\n (4) the total guaranteed cash surrender values for the basic policy,\nat the end of the tenth and twentieth policy years or at the end of the\npremium-paying period if earlier. These values may be shown on a per\nthousand or per unit basis;\n (5) the effective policy loan annual percentage interest rate, if the\npolicy would contain this provision, and whether this rate is applied in\nadvance or in arrears, adjustable or fixed;\n (6) for the life insurance policies described in paragraph one of\nsubsection (n) of this section, life insurance cost indexes and the\nequivalent level annual dividend for the basic policy for ten and twenty\nyears, but in no case beyond the premium-paying period;\n (7) in addition, the applicant shall be advised that, when the policy\nis issued, a complete policy summary, including cost data, based on the\nbenefits, premiums and dividends of the policy as issued, will be\nfurnished; and that, following the receipt of the policy and policy\nsummary, there will be a period of not less than ten days within which\nthe applicant may return the policy for an unconditional refund of the\npremiums paid; and\n (8) notwithstanding the foregoing, no applicant for life insurance\nshall be prevented or delayed in effecting or applying for coverage by\nthe requirements of this section. In such cases where prior to\napplication it is impractical to provide any items prescribed by this\nsection, such items may be estimated in good faith or furnished as soon\nthereafter as practical prior to delivery of policy.\n (e) A policy summary shall include the following:\n (1) a prominently placed title as follows:\n "STATEMENT OF POLICY COST AND BENEFIT INFORMATION";\n (2) the name and address of the insurance agent or broker, or, if no\nagent or broker is involved, a statement of the procedure to be followed\nin order to receive responses to inquiries regarding the policy summary;\n (3) the full name and home office, administrative office or branch or\nagency office address of the company in whose name the life insurance\npolicy is to be or has been written;\n (4) the generic name of the basic policy and each rider;\n (5) for the life insurance policies described in paragraph one of\nsubsection (n) of this section, the following amounts, where applicable,\nfor the first five policy years and representative policy years\nthereafter sufficient to clearly illustrate the premium and benefit\npatterns, including the years for which life insurance cost indexes are\ndisplayed and at least one age from sixty through sixty-five or\nmaturity, whichever is earlier:\n (A) the annual premium for the basic policy;\n (B) the annual premium for each optional rider;\n (C) guaranteed amount payable upon death at the beginning of the\npolicy year regardless of the cause of death, other than suicide or\nother specifically enumerated exclusions, which is provided by the basic\npolicy and each optional rider, with benefits provided under the basic\npolicy and each rider shown separately;\n (D) total guaranteed cash surrender values at the end of the year with\nvalues shown separately for the basic policy and each rider;\n (E) cash dividends payable at the end of the year with values shown\nseparately for the basic policy and each rider. Dividends need not be\ndisplayed beyond the twentieth policy year; and\n (F) guaranteed endowment amounts payable under the policy which are\nnot included in guaranteed cash surrender values above;\n (6) the effective policy loan annual percentage interest rate if the\npolicy contains this provision, specifying whether this rate is applied\nin advance or in arrears. If the policy provides for an adjustable loan\ninterest rate, the policy summary shall so state, shall set forth the\nfrequency at which the rate is to be determined for that policy, and\nshall describe the index upon which the maximum rate is based at the\ntime the policy is issued;\n (7) for the life insurance policies described in paragraph one of\nsubsection (n) of this section:\n (A) life insurance cost indexes for ten and twenty years but in no\ncase beyond the premium-paying period. Separate indexes are to be\ndisplayed for the basic policy and for each optional term life insurance\nrider. Such indexes need not be included for optional riders which are\nlimited to benefits such as accidental death benefits, disability waiver\nof premium, preliminary term life insurance coverage of less than twelve\nmonths and guaranteed insurability benefits, nor for basic policies or\noptional riders covering more than one life;\n (B) the equivalent level annual dividend, in the case of participating\npolicies and participating optional term life insurance riders, under\nthe same circumstances and for the same durations at which life\ninsurance cost indexes are displayed;\n (8) a policy summary which includes dividends shall also include a\nstatement that dividends are based on the company's current dividend\nscale and are not guaranteed; in addition, the summary shall, for the\nlife insurance policies described in paragraph one of subsection (n) of\nthis section, include a statement in close proximity to the equivalent\nlevel annual dividend as follows: "An explanation of the intended use of\nthe equivalent level annual dividend is included in the buyer's guide";\n (9) a statement in close proximity to the life insurance cost indexes\nas follows:\n "AN EXPLANATION OF THE INTENDED USE OF THESE INDEXES IS PROVIDED IN\nTHE BUYER'S GUIDE"; and\n (10) the date on which the policy summary is prepared.\n (f) The policy summary must be a separate document. All information\nrequired to be disclosed must be set out in such a manner as not to\nminimize or render any portion thereof obscure. Any amounts which remain\nlevel for two or more years of the policy may be represented by a single\nnumber if it is clearly indicated what amounts are applicable for each\npolicy year. Amounts in paragraph five of subsection (e) of this section\nshall be listed in total, not on a per thousand or per unit basis. If\nmore than one insured is covered under one policy or rider, guaranteed\ndeath benefits shall be displayed separately for each insured or for\neach class of insureds if death benefits do not differ within the class.\nZero amounts shall be displayed as zero and shall not be displayed as a\nblank space.\n (g) Every insurer shall maintain, at its home office or principal\noffice, a complete file containing one copy of each policy summary form\nauthorized by the insurer for use pursuant to this section.\n (h) An agent or broker shall inform a prospective purchaser, prior to\ncommencing a life insurance sales presentation, that he is acting as a\nlife insurance agent or broker, and inform the prospective purchaser of\nthe full name of the insurer which he is representing. In sale\nsituations in which an agent or broker is not involved, the insurer\nshall identify its full name.\n (i) As used in this section, "buyer's guide" means a separate document\npublished and disseminated by insurers. The language therein shall be\npromulgated by the superintendent, and shall, to the extent practicable\nand in the public interest as determined by the superintendent, be\nconsistent with the latest version of a buyer's guide as adopted by the\nnational association of insurance commissioners.\n (j) For life insurance policies, except term life insurance policies,\nwhich are to be issued to qualify for special tax treatment under\nsubsection (b) of section four hundred three of the Internal Revenue\nCode of 1986, as amended, a written notice shall be delivered to the\nproposed insured in a manner satisfactory to the superintendent at or\nprior to the time an application is taken and shall read as follows:\n"The purchase of a life insurance policy with cash value, which\nqualifies for special tax treatment under section 403(b) of the Internal\nRevenue Code of 1986, as amended, may not be appropriate for individuals\nseeking to maximize the accumulation of funds for retirement or for\nindividuals seeking life insurance coverage primarily to provide a\nsurvivorship benefit for the spouse in the event of death prior to\nretirement. If an individual needs coverage to continue after\nretirement, current tax laws require the commencement of taxable\ndistributions under the tax sheltered annuity plan (TSA) no later than\nage seventy and one-half which may necessitate some adjustment in the\ncash value life insurance policy or may result in increased insurance\ncosts in future policy years. You should consult with your tax advisor\nbefore purchasing life insurance with cash value as part of a tax\nsheltered annuity (TSA)."\n (k) The superintendent shall promulgate by regulation the contents and\nallowable format of the preliminary information and the information to\nappear in the policy summary. The superintendent shall also promulgate\nby regulation standards governing the content, format and use of\nillustrations of individual life insurance policies and certain group\nlife insurance policies and certificates, life insurance policies\nsubject to section four thousand two hundred thirty-two of this chapter,\nvariable life insurance policies under which the death benefits and cash\nvalues vary in accordance with the unit values of investments held in a\nseparate account and individual annuities, individual funding\nagreements, variable annuities, and group annuity contracts if any\ncertificate is issued to which paragraph two of subsection (b) of\nsection four thousand two hundred twenty-three of this chapter applies.\nThe illustration regulation shall be consistent, to the greatest extent\npracticable and in the public interest as determined by the\nsuperintendent, with the illustration regulations as adopted by the\nnational association of insurance commissioners. The superintendent in\ndeveloping regulations to govern the content and format of the\npreliminary information, policy summary and illustrations shall ensure\nthat such forms are presented in an easy, concise and meaningful way to\nenable consumers to understand the operation of the policy or contract.\n (l) An insurer of any life insurance policy or annuity contract\nsubject to this section shall notify the superintendent whether its\npolicies or contract forms have been or will be marketed with or without\nan illustration. For those policies and contracts marketed with an\nillustration which complies with the regulations promulgated pursuant to\nsubsection (k) of this section, no preliminary information or policy\nsummary shall be required. For those policies which are not marketed\nwith an illustration, the preliminary information and policy summary\nshall be provided pursuant to the provisions of this section.\n (m) The superintendent, by regulation, shall determine the\napplicability of the illustration regulation promulgated pursuant to\nsubsection (k) of this section to group life insurance policies and\ngroup annuities and funding agreements. Such determination shall be\nconsistent, to the greatest extent practicable and in the public\ninterest, with the illustration regulations as adopted by the national\nassociation of insurance commissioners.\n (n) The effective dates of this section as applied to policies of life\ninsurance, annuity contracts, and funding agreements shall be as\nfollows:\n (1) for individual life insurance policies, certain group life\ninsurance policies and certificates and life insurance policies subject\nto section four thousand two hundred thirty-two of this chapter, January\nfirst, nineteen hundred ninety-eight;\n (2) for annuities and funding agreements, the date of promulgation of\nregulations by the superintendent pursuant to subsection (k) of this\nsection but not later than June thirty, nineteen hundred ninety-eight;\n (3) for variable life insurance policies and variable annuities, the\ndate of promulgation of regulations by the superintendent but not later\nthan January first, nineteen hundred ninety-nine.\n No less than three months prior to promulgating the regulations\nrequired to implement subsection (k) of this section pursuant to\nparagraphs two and three of this subsection, the superintendent shall\nhold public hearings on such regulations.\n