Report No. MCLH-1O-2010-E INSURANCE ADMINISTRATION. Examination Period: July 1, March 31, 2010

Transcription

1 MARKET CONDUCT EXAMINATION REPORT OFTHE LIFE INSURANCE BUSINESS OF JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (NAIC#65838) 197 Clarendon Street Boston, MA Report No. MCLH-1O-2010-E Examination Period: July 1, March 31, 2010 INSURANCE ADMINISTRATION STATE OF MARYLAND MARYLAND INSURANCE ADMINISTRATION ELIZABETH SAMMIS, ACTING COMMISSIONER OCTOBER 25, 2010

2 MARTIN O MALLEY Governor M4THONY G. BROWN Lt. Governor MARYLAND INSURANCE ADMINISTRATION BETH SAMMIS Acting Commissioner KAREN STAKEM HORNIG Deputy Commissioner NANCY GRODIN Associate Commissioner Compliance & Enforcement 200 St. Paul Place, Suite 2700, Baltimore, Maryland Direct Dial: Fax: ngrodin@mdirisurance.state.md.us TTY: state.md.us October25, 2010 The Honorable Elizabeth Sammis Acting Commissioner of Insurance State of Maryland 200 St. Paul Place, Suite 2700 Baltimore, Maryland Dear Commissioner Sammis: Pursuant to your instructions and authorization, an examination has been made of the market conduct affairs of: JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) whose home office is located at 197 Clarendon Street, Boston, Massachuseffs The report of such Examination is being respectfully submiffed. Sincerely, Signature on file with original Compliance and Enforcement

3 MARYLAND INSURANCE ADMINISTRATION OCTOBER 25, 20W TABLE OF CONTENTS SECTION PAGE I. EXECUTIVE SUMMARY I II.. SCOPE OF EXAMINATION 2 III. COMPANY PROFILE 3 IV. BUYER S GUIDE 4 V. POLICY SUMMARY 5 VI. RECOMMENDATION 10 VII. CLOSING 11 VIII. EXAMINATION REPORT SUBMISSION 12 John Hancock Life Insurance Company (U.S.A.)

4 I. EXECUTIVE SUMMARY The Maryland Insurance Administration (hereinafter MIA ) conducted a targeted Market Conduct Examination of John Hancock Life Insurance Company (hereinafter Company ). The focus of the Examination was to review the Company s business practices as they relate to its life insurance line of business to determine whether the Company s disclosure and producer communication practices comply with Maryland insurance laws and regulations. The Company has provided the following certifications: The Company submitted the current Life Insurance Buyer s Guide in use during the examination period. It is distributed by the agent during the application process; The Company submitted four Life Insurance Policy Quotes and four Policy Summary specimens for one term life insurance product. The level premium nonillustrated term life insurance product is the only product applicable to the examination; The Company does not sell pre-need funeral products or pre-arrangements; The Company provided a sample Agent Report and Issue Checklist to demonstrate proper policy forms distribution and quality control; The Company has provided the quality controls it currently has in place to ensure its documents are up-to-date and accurate and its procedures are being followed for all Maryland residents. A total of six violations are noted herein. A more precise description ofthe violations is provided on the following pages by individual statutory code. One recommendation is noted herein regarding the Company s Policy Summary. In the Criticism response dated June 4, 2010, the Company responded to the MIA regarding the violations contained in the Report. To the extent the MIA found the Company s position on, or explanation for, certain violations valid, those violations have been removed from this Report. In addition, the Company indicated that it has taken corrective action on one violation noted herein. John Hancock Life Insurance Company (U.S.A) 1

5 II. SCOPE OF EXAMINATION A target Market Conduct Examination ( Examination ) has been performed on the Company and a Report thereon is submitted as follows: The Examination was conducted pursuant to the statutory authority granted under ~2-205, 2-207, 2-208, and of the Insurance Article and COMAR The period covered by the examination was July 1, 2009 through March 31, The purpose of the examination was to assess the Company s compliance with COMAR , amended effective May 18, 2009, titled Life Insurance Disclosure. All unacceptable or non-compliant practices may not have been discovered or noted in the report. Failure to identify or criticize improper or non-compliant business practices does not constitute acceptance of such practices. John Hancock Life Insurance Company (U.S.A) 2

6 Ill. COMPANY PROFILE Date Incorporated: 09/06/1 955 Date Commenced: 01/31/1 956 Domicile: MI Originally incorporated in Maine as Maine Fidelity Life Insurance Company, the Company changed its name to The Manufacturers Life Insurance Company (U.S.A.) in 1990 and redomesticated to Michigan in December The present name was adopted on January 1,2005. Mergers: Manufacturers Life Insurance Company of America, Michigan, A.M. Best, AMB Online Credit Report - Insurance Professional, History, revised 2/19/2010, retrieved 6/10/2010. John Hancock Life Insurance Company (U.S.A) 3

7 IV. BUYER S GUIDE Issue I -Violation of COMAR3I B. The Company failed to provide the most current version of the NAIC Life Insurance Buyer s Guide to Maryland insureds. COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING I.05 Duties of Carriers. B. If the policy for which application is made contains an unconditional refund provision of at least 10 days, the carrier shall provide the buyer s guide with the policy or before delivery of the policy. The NAIC Life Insurance Buyer s Guide that the Company submitted for review contains Cost Index information. In June 2001, the NAIC removed cost index information from its current version of its Buyer s Guide. Per COMAR B (I) Buyer s guide means the most current version of the Life Insurance Buyer s Guide adopted by the National Association of Insurance Commissioners (NAIC). In thecompany s criticism response dated June 4, 2010, the Company indicated that the error has been remedied and the Company is currently supplying the current edition of the NAIC Buyer s Guide. John Hancock Life Insurance Company (U.S.A) 4

8 V. POLICY SUMMARY Issue 2 - Violation of COMAR C (2)(b) The Company failed to provide a Statement of Policy Cost and Benefit Information in compliance with this regulation. COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING 2.05 Duties of Carriers. C. Policy Forms Not Marketed With an Illustration. (2) Requirements for Forms Not Marketed With an Illustration. (b) The policy summary shall consist of a separate document with all required information set out in a manner that does not minimize or render any portion of the summary obscure. The Company provided an eight page document entitled A Life Insurance Policy Quote of John Hancock which was also called A Level Premium Term Life Insurance Quote. One of the eight pages was designated as the Statement of Policy Cost and Benefit Information. This page failed to incorporate all ofthe required elements of a policy summary. The eight page document in total also failed to incorporate all of the required elements of a policy summary. Notwithstanding that a review was undertaken of all eight pages, the policy summary shall consist of a separate document with all required information set out in a manner that does not minimize or render any portion of the summary obscure. The policy summary did not consist of a separate document and the fact that some, but not all of the required elements were present throughout the eight page document, minimized or rendered those portions of the summary obscure. The Company shall update the Policy Summary page to assure compliance with Maryland insurance laws and regulations. John Hancock Life Insurance Company (U.S.A) 5

9 Issue 3 - Violation of COMAR A (2) The Company failed to include the address of the insurance producer on its Policy Summary. COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING 3.04 Policy Summary. A. A carrier shall include in a policy summary all of the following: (2) The name and address of the insurance producer, or, if an insurance producer is not involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the policy summary; The Company s Policy Summary submitted for review does not display the address of the insurance producer in violation of COMAR A (2). The Company s Statement of Policy Cost and Benefit Information page states: AT THE ISSUE OF A POLICY CONTRACT FOR WHICH THIS QUOTE IS BASED, THIS STATEMENT OF POLICY COST AND BENEFIT INFORMATION SHALL SERVE AS THE POLICY SUMMARY. While the address of the insurance producer is shown within the Company s Policy Quote, COMAR requires these specific items to be disclosed in a separate document titled STATEMENT OF POLICY COST AND BENEFIT INFORMATION. The Company shall update the Policy Summary document to assure compliance with Maryland insurance laws and regulations. John Hancock Life Insurance Company (U.S.A) 6

10 Issue 4 - Violation of COMAR A (3) The Company failed to include the address of the home office or administrative office of the carrier on the Policy Summary. COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING 4.04 Policy Summary. A. A carrier shall include in a policy summary all ofthe following: (3) The full name and home office or administrative office address of the carrier in which the life insurance policy is to be or has been written; The Company s Policy Summary submitted for review does not display the address of the Company, in violation of COMAR A (3). The Company s Statement of Policy Cost and Benefit Information page states: AT THE ISSUE OF A POLICY CONTRACT FOR WHICH THIS QUOTE IS BASED, THIS STATEMENT OF POLICY COST AND BENEFIT INFORMATION SHALL SERVE AS THE POLICY SUMMARY. While the Company s city and state is shown within the Company s Policy Quote, COMAR requires the full name and address of the Company s home office or administrative office to be disclosed on the document titled STATEMENT OF POLICY COST AND BENEFIT INFORMATION. The Company shall update the Policy Summary document to assure compliance with Maryland insurance laws and regulations. John Hancock Life Insurance Company (U.S.A) 7

11 Issue 5-Violation of COMAR A (4) The Company failed to include the generic name of each rider on the Policy Summary. COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING 5.04 Policy Summary. A. A carrier shall include in a policy summary all ofthe following: (4) The generic name of the basic policy and each rider; The Company s Policy Summary submitted for review does not display the name of the rider purchased with the policy, in violation of COMAR A (4). The Company s Statement of Policy Cost and Benefit Information page states: AT THE ISSUE OF A POLICY CONTRACT FOR WHICH THIS QUOTE IS BASED, THIS STATEMENT OF POLICY COST AND BENEFIT INFORMATION SHALL SERVE AS THE POLICY SUMMARY. While the names of each rider are shown within the Company s Policy Quote, COMAR requires these specific items to be disclosed in a separate document titled STATEMENT OF POLICY COST AND BENEFIT INFORMATION. The Company shall update the Policy Summary to assure compliance with Maryland insurance laws and regulations. John Hancock Life Insurance Company (U.S.A) 8

12 MARYLAND INSURANCE ADMINISTRATION OCTOBER 2~2010 Issue 6 - Violation of C The Company failed to Policy Summary. OMAR 3 include A (5) (b) the annual premium of each optional rider on the COMAR , titled Life Insurance Disclosure, provides in pertinent part: FINDING 6.04 Policy Summary. A. A carrier shall include in a policy summary all ofthe following: (5) The following amounts, when applicable, for the first 5 policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including at least one from age 60 years old through 65 years old and policy maturity: (b) The annual premium for each optional rider; The Company s Policy Summary submitted for review does not display premiums for optional riders purchased with the policy, in violation of COMAR A (5) (b). The Company s Statement of Policy Cost and Benefit Information page states: AT THE ISSUE OF A POLICY CONTRACT FOR WHICH THIS QUOTE IS BASED, THIS STATEMENT OF POLICY COST AND BENEFIT INFORMATION SHALL SERVE AS THE POLICY SUMMARY. While the annual premium of each optional rider is shown within the Policy Quote, COMAR requires these specific items to be disclosed in a separate document titled STATEMENT OF POLICY COST AND BENEFIT INFORMATION. The Company shall update the Policy Sumrriary to assure compliance with Maryland insurance laws and regulations. John Hancock Life Insurance Company (U.S.A) 9

13 VI. RECOMMENDATION Recommendation 1: The Company s Policy Summary submitted for review displays cost index information with references to the Buyer s Guide for an explanation. If the Company would like to continue to display the cost indexes on the policy summary, the MIA recommends including a brief explanation within the policy summary ofeach cost index displayed and how the cost index should be used by the consumer. Another option would be to remove the cost indexes from the policy summary, as they are no longer required. John Hancock Life Insurance Company (U.S.A) 10

14 VII. CLOSING The Company submitted and the MIA reviewed one Buyer s Guide, four Policy Quotes, four Policy Summary specimens, and a sample of agent communications material in use during the examination period. There were a total of six violations described in the preceding pages. One recommendation is noted herein regarding the Company s Policy Summary. In the Criticism response dated June 4, 2010, the Company responded to the MIA regarding the violations contained in the Report. To the extent the MIA found the Company s position on, or explanation for, certain violations valid, those violations have been removed from this Report. In addition, the Company indicated that it has taken corrective action on one violation noted herein. John Hancock Life Insurance Company (U.S.A) 11

15 VIII. EXAMINATION REPORT SUBMISSION The courtesy and cooperation extended to the examiners by the Company s officers and employees during the course of the examination are gratefully acknowledged. Signature on file with original Nancy Grodin, Associate Commissioner Compliance & Enforcement Unit In addition, the following individuals participated in this examination and in the preparation of this report. William W. Rogers, MCM, AlE, FLMI, AIRC Assistant Chief Examiner Compliance & Enforcement Unit Mary McAusland, FLMI, AlE, MCM, AIRC, ACS Market Conduct Examiner Compliance & Enforcement Unit Penny Schuster Market Conduct Examiner Compliance & Enforcement Unit Kristen A. Walter Market Conduct Associate Compliance & Enforcement Unit John Hancock Life Insurance Company (U.S.A) 12

16 IN THE MATTER OF THE. BEFORE THE STATE O F.MARYLAND MARYLAND I NSURAN~ECOMMISSIONER ~ COMMISSIONER V. * JOHN HANCOCK LiFE INSURANCE company (U.S.A.) *.(N~JC S~&). 197 Glar~ndoI1.:Street * Boston; Massachusetts CASEN:o.: MlA.~201.~~ ~Q Q~L~ CONSENT O~E~ The Maryland lnsurance Corpmi~sioner( ~Cornrr~iss{oner ) ahd John Hanco~kLife lns~jj~ri~ Cb.n~pàr~y (U.S~ A.) (hereinsfter ~R~s p~nderft!!)., :P~~ t0,~ , 2-204; :2~.2~)5of the.tn~ura~e Arti~e,Md. C ~d~ Anm, (her.ein~fterthe 1nsuran~eArtic~ ~, and ~ny ~th.erapp1ic~biesections, enter into thiscor~sentdrder.as.folio*s;: E~PL ANAT~Y ST~ArEM~NTAP~DFINDiNGS OF F~ CT 1. M all ~.rei.av~nto th~ Cc~nsen.t~.O.rde.r ~e~pondenthas heki and curreatly ~ ~ ~ofá~~hb~it~ ftcm ~thema ~ tandi:i~s~an~e Mniinietr~tiøn.~her~inaftér Ad;pnlnIst~ti~i ~ ~ 2. The Administration conducted a Maricet Con~uot Examinatio.n (hereinafter ~E~aminatio.n ) of Res.pondent~ 3. ~espondentadmits t~the facts and ac.c~ptsthe Administpat~or~sconclusions as st~tedin E~amih~tionReport number MCLH~i0~010~E :(har~after ~Rsport ~), b~tdenies Iiab1I~ty to any Third party as a result of the vi~lationsnoted in This Report. Both Respond~ntaiidth:e ~dmi~i~tr~ionagree to the condiflons of:the b.rd:er and the ~temed.iai measures set forth herein. Respondent executes this Order knov~inglyand voluntarily. The {OOO4.12~LOOCO Form ~

17 V parties acknowledge that this Order is in the public interest and both parties desire to resolve this matter without further prbceedings. 4. The Examination, ~thedetails of which are included in the Report, incorporated her&n as if set forth in full, con~ludedthat Respondent violated the following Maryland Regulations: COMAR B C.OMAR C(2)(b), COMAR A(2) COMAR A(3) o COMAR ~03:.04A(4). C OMAR A(5)(b). WHEREFORE, pursuant to ~2-I 08.and~4-113(d)(i)of the Insurance Article, it is hereby ORDERED by the Commissioner and consented to by Respondent: A. Re.~,p~nde nt :sh~ll accept the Report as final and waives any right to a hearing on orfprjudici~irevie~ of the Report. B. Respondent shall correct th~vioiati~nsas n ote~in:the Report within ninety :(90) days of the date this Order is executed ~bythe Acting i n~uráncecommissib~eror her d~signee.respondent shall set forth in a letter to the Cpmmissioner that the vioi~tions have been successfully corrected, Such letter shall be accompanied by a certification, signed by an officer ~fthe Respondent, certffying thatthe information is true and accurate. C. Respondent shall ~ayan administrative penalty to the State of, Maryland for the violations stated herein In the amount of ten thousand dollars ($10,000.00) contemporaneously with Respondent s execution o~this Order, Administrative penalties - shall be made payable to the Maryland Insurance Administration and shall identify the -2-

18 case by number or name. Unpaid penalties will be referred to the Central Collection Unit for collections. D. The executed Order and payment of the administrative penalty shall be sent to the attention of: Associate Commissioner, Compliance and Enforcement, 200 St. Paul Place, Suite 2700, Baltimore, MD E. Respondent agrees that no amounts paid pursuant to P~ragraphC of this Order shall e included in or recoverable as expenses in any rate filing filed with the Administration or any other regulatoryauthority. F. For the purposes of the Administration and for any subsequent administrative or civil proceedings concerning Respondent, whether related or unrelated to the foregoing par~gra~h s~, and ~ith regard to requests for informétion about the Respondent made under the Maryland Public lrtion~aot, or properly made by g~vern~ental agencies,, this Ordei will be kept and maintained in th~r~gularcourse of business by the Administration. For the purposes of the business of the Adrr~inistration,the records and publications of the Administration will reflect this Order. 0. The parties agree that this Order resolves all matters relat.in~gto the Report only, and the fadtu~1assertions and agreements contained herein are ~tobe used solely for the purposes ~f this pro.oee ding brought by or on behalf of the Administration. Nothing herein shall be deemed a waiver of the C ommissionei~s right to proceed in an administrative action or civil action for violations not specifically identified in this Order, including,, but not limited to, specific consumer complaints received by the Administration, nor shall anything herein be deemed a waiver of the right of the Respondent to contest other procee~ings by the Adrninistration. Additionally, Respondent understands and agrees that this Order addresses and resolves onl~ the admirilsirative actions by the -3-

19 Compliance and Enforcement Section of the Administration relating to the Report. This Order shall not be construed to resolve or preclude any potential or pending civil, administrative, or criminal action or prosecution by any other person, entity or governmental authority, including but not limited to the Insurance Fraud Division of the Administration, regarding any.conduct by the Respondent including the conduct that is the subject ofthis Consent Order. H.,, Respondent has had the opportunity to have this Order reviewed by legal counsel of its choosing, and is aware of the benefits gained and obligations incurred by the execution of the Order. Respondent waives any and all rights to any hearing or judicial,r~viewof this Order to which it would otherwise be entitled under the Insurance Article with respe~t toany of the determin~tibns mad.e..or adtions order~dby this Order; I. This Order contains the entire a:gree~nent.between the. parties rel~tingto..th e administrative aotibns addressed herein; This Order si~pers edes any and all earlier agr,eebie nts or negotiations, whether oral or written. All time frames set forth in this Order may ~earn énde,d ~ormod ifi ed:ehly by ~Ubseq:uerftwritten agreement of the p.artie~. J. On behalf of Respondent, the undersigned representative of Res~dndent al~firmsthat he or she has taken all nedessary steps to obtain the :authorit.y to bind Re~pondentto the obligations stated herein and does in fact have the authority to bind Respondent to the obligations stated herein. K. This Order thail be effective upon Signing by the Co.mmis~Ioneror her designee,, and is:a FinaI Ordei~of the Commissioner under ~2-204ofthe Insurance Article. L. Feilure to com,~ilywith the terms of this Order may subject Respondent to further legal and/or administrative action. -4-

20 It is so ORDERED, this day of, ELIZABETH SAMMIS ACTING INSURANCECOMMISSIONER Signature on file with original By: Nancy.~ r6din,a~)ø6~ Commissioner Compli~ánce& EWor~ient RESPONDENT S CONSENT RESPONDENT hereby CONSENTS to th e repre~entationsmade in, and to the terms of, the above Consent Order. The undersigr~édhereby represents that he or she has th.e authority to bind John Hancock Life Insurance Company (U.S.A.) to the terms of the Consent Order reso lviiig Report number MCLH-1~-2O10-E. Name; ~rook~ ~ Signature: Title: ~ V Signature on file with original tcl - Date: i6/i~1!o -5-