Hot Topics in Life & Annuities. AICP Northwest E-Day May 2012

Transcription

1 Hot Topics in Life & Annuities AICP Northwest E-Day May 2012

2 Today s Agenda Continuing trends and hot topics from 2011 Emerging regulatory issues in 2012 Managing changes/mitigating compliance risk

3 Regulatory Focus Unclaimed Property Annuities Suitability Retained Asset Accounts Disclosures Trade Practices

4 Unclaimed Property

5 Unclaimed Property Do the Math Significant enforcement actions = Significant regulatory actions

6 Unclaimed Property Iowa Effective February 1, 2012 Rule Life insurers obligations regarding the reporting, transferring, and claiming of abandoned property to the state Report and deliver funds held in a retained asset account to the division if a beneficiary hasn't demonstrated an interest in the account for three years

7 Unclaimed Property Alabama HB 126 Establishes the Unclaimed Life Insurance Benefits Act; requires the insurer to search the death master file; requires that no fee is to be charged associated with the search; requires the insurer to notify the State Treasurer; requires the insurer to submit the unclaimed life insurance benefits or unclaimed retained asset account, plus interest to the State Treasurer

8 Unclaimed Property Maryland SB 77 Requires an insurer that issues or delivers a policy of life insurance or an annuity contract to perform a cross-check of the insurer's in- force life insurance policies, annuity contracts, and retained asset accounts against a specified death master file to identify any death benefit payments that may be due as a result of the death of an insured, annuitant, or account holder

9 Unclaimed Property Kentucky HB 135 Requires insurers to compare in-force life insurance policies against the Death Master File to determine potential matches of their insureds; requires escheat of policy proceeds after the expiration of the fee statutory time period only if no claim for the policy's proceeds has been made and if good faith efforts to contact the retained asset holder and any beneficiary are unsuccessful

10 Unclaimed Property Tennessee HB 2283 Comparison of in-force life insurance policies and retained asset accounts against a death master file, on at least a quarterly basis. For those potential matches identified as a result of a death master file match, the insurer shall within 90 days of a death master file match: 1. Complete a good faith effort, which shall be documented by the insurer, to confirm the death of the insured or retained asset account holder against other available records and information 2. Determine whether benefits are due in accordance with the applicable policy or contract; and if benefits are due in accordance with the applicable policy or contract 3. Use good faith efforts, which shall be documented by the insurer, to locate the beneficiary or beneficiaries; and 4. Provide the appropriate claims forms or instructions to the beneficiary or beneficiaries to make a claim including the need to provide an official death certificate

11 Annuities Suitability

12 Annuities Suitability Activity Alaska: 3 AAC California: AB 689 Colorado: Regulation ; B-4.12 Connecticut: 38a-432a Hawaii: SB 1278; Bulletin LIC Illinois: 50 Ill. Adm. Code ; Bulletin Iowa: Bulletin Maryland: COMAR ; Bulletins & New Jersey: NJAC 11:4-59 Texas: HB 2277 New York: Reg 187 North Dakota: Ohio: Oregon: to Rhode Island: R27-12; Bulletin West Virginia: B

13 Annuities Suitability Florida HB 1065 Provides that recommendations relating to annuities made by an insurer or its agents apply to all consumers not just to senior consumers Revises the duties of insurers and agents; providing that recommendations must be based on consumer suitability information; Revises the information relating to annuities that must be provided by the insurer or its agent to the consumer Revises the requirements for monitoring contractors that are providing certain functions for the insurer relating to the insurer's system for supervising recommendations Revises provisions relating to the relationship between this act and FINRA Sets forth training requirements for agents

14 Annuities Suitability South Dakota Utah

15 Retained Asset Accounts

16 Retained Asset Accounts Activity Legislative California - SB 713/ SB 599 Indiana SB 360 Kentucky HB 309 Maryland SB 217 New York AB 683/SB 504 (P) Rhode Island - H5244Aaa/S0045A Pennsylvania HB 718 (P) Texas HB 2152 (P) Virginia HB 1458/SB 1388 Regulatory Colorado B-4.12 Connecticut Bulletin IC-27 Illinois - Bulletin / R Iowa Bulletin Maine Bulletin 376 Maryland Nebraska CB-125 New Jersey Order A ; NJAC 11: Ohio Bulletin West Virginia - Informational Bulletin 178A

17 Retained Asset Accounts New York - Circular Letter No. 4 (2012) New York Regulation 200 Louisiana - Bulletin

18 Disclosures

19 Model 245 Iowa effective April 11, 2012 Disclosures Illustrations

20 Trade Practices

21 Fraud "For your protection Arizona law requires the following statement to appear on this form. Any person who knowingly presents a false or fraudulent claim for payment of a loss is subject to criminal and civil penalties." Added definition of "claims form" Any document supplied by an insurer to an insured, claimant or other person that the insured, claimant or other person is required to complete and submit in support of a claim for benefits.

22 Fraud Maryland HB 301 revises that state s fraud warning as it no longer requires knowing and willful conduct as elements of the crime of insurance fraud. Effective Jan. 1, 2013, all applications for insurance and all claim forms, regardless of the form of transmission, are required to contain the following statement or a substantially similar statement: "Any person who knowingly or willfully presents a false or fraudulent claim for payment of a loss or benefit or who knowingly or willfully presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison."

23 Underwriting: Lawful Travel Cannot deny or refuse to accept an application for life insurance or refuse to renew, cancel, restrict, or otherwise terminate a policy of life insurance, or charge a different rate for the same life insurance coverage, based upon the lawful travel destinations of the applicant or the insured Exception where the denial, restriction, or rate differential is based upon sound actuarial principles or is related to actual or anticipated experience Oklahoma HB 1968

24 Underwriting & Claims Civil Unions 2011: Delaware, Hawaii, Illinois Prior to 2011: Connecticut, New Hampshire, New Jersey, Rhode Island, Vermont

25 Replacement in Arkansas The Department reiterated there is no "Replacement Memorandum" requirement as well as no form requirement under Rule 97 if there is no replacement Applies even if the proposed insured has "existing insurance," assuming the "existing insurance" is not being "replaced" If existing insurance information is collected DO NOT indicate to the customer that the DOI is requiring this information even if the "existing insurance" is not being replaced Bulletin

26 Advertising Life and health insurance advertisements produced and distributed by third-party marketing firms. No "regulatory buffer" between DOI and insurers and/or agents Insurance companies and/or their agents are responsible for the content of advertisements distributed directly Insurers required to notify all appropriate company personnel and appointed agents licensed Confirm with DOI Kansas Bulletin

27 Advertising: Life and Health Insurance Guaranty Association Act New Mexico Uncodified SB 47 s 20 (2012) Prohibition against using the existence of the association for the purpose of sales, solicitation or inducement to purchase insurance covered by the Association Summary document describing the general purposes/current limitations to be submitted to the superintendent for approval An insurer shall not deliver a policy or contract to a policy or contract owner unless the summary document is delivered to the policy or contract owner at the time of delivery of the policy or contract The document shall also be available upon request by a policy owner

28 Private Placement Variable Life Policies Insurers must use a prominent statement that due to the illiquid nature of the investment options, the payment of the death benefit, the cash surrender value, policy loans, partial withdrawals or partial surrenders, as applicable, may be delayed. The statement shall advise the applicant to refer to the policy for further details on any delay of payments. New York Regulation 77

29 Life Product Filings Illinois Bulletin If a previously approved life policy form is re-filed due to a change in mortality table/nonforfeiture interest rate a revised actuarial memorandum demonstrating compliance with 215 ILCS 5/229.2 is required to be filed as well The Department's Annuity Filing Checklist is required to be submitted with all annuity policy form filings

30 Life Standards for EIA s New Jersey Bulletin includes these requirements: The brief description on the face page must prominently describe the benefits under the product as depending on the performance of an equity index The contract should define the annuity value used to determine annuity income benefits and state the method for calculating the annuity value, particularly the method by which changes in the equity index will be credited to the annuity value; and The contract should specify the duration of the term(s) for purposes of equity credit calculation, and provide that any equity credit earned during a term will be credited to the annuity value no later than the end of that term.

31 All Lines Electronic Notifications Option to continue to receive hard copy mailings of notice requirements or other communications Disclosure to any policyholder electing to receive communications electronically, either in the language of the policy itself or in a separate disclosure form presented for the policyholder s signature must contain the following or substantially similar language: The policyholder electing to allow for notices and communications to be sent to the electronic mail address provided by the policyholder should be aware that the insurer rightfully considers this election to be consent by the policyholder that all notices may be sent electronically, including notice of nonrenewal and notice of cancellation. Therefore the policyholder should be diligent in updating the electronic mail address provided to the insurer in the event that the address should change. Tennessee (January 26, 2012)

32 Life Market Conduct: Underwriting Company violated the following provision of the Florida Insurance Code: Section (1)(dd), Florida Statutes - Refusal of life insurance; refusal to continue the life insurance of; or limiting the amount, extent, or kind of life insurance coverage available to an individual based solely on the individual s past or future lawful foreign travel plans. Florida (October 2011)

33 Regulatory Actions

34 Life Market Conduct: Underwriting Charged interest during the grace period on an automatic premium loan Failed to obtain or maintain copies of all pages of the Replacement form Failed to include the producer s address in the section on STATEMENT OF POLICY COST AND BENEFIT INFORMATION Did not provide the policy holder the most current Life Insurance Buyer s Guide Maryland (December 2011)

35 Life Market Conduct: Claims {Company} provided the examiner a sample term life proof of claim form in which the fraud warning notice did not comply with the language required by California law. {Company} reported that the claim payments made 30 days after the date of death did not specify the rate of interest paid on these claims. California (August 2011)

36 Dealing with Hot Topics Making sure you have all you need Managing all of it through to implementation Updating/aligning policies & procedures Making sure compliance is maintained

37 Compliance Risk Management Risk identification All those legislative & regulatory changes Check your controls Policies & procedures Audits

38 Questions?