Life and Health Insurance

Transcription

1 Life and Health Insurance Connecticut Effective September 1, 2014 State Law Supplement Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to and check the Insurance Licensing Blog. If there is an update, it will be clearly noted in the blog entries for this state. CT L&H Law Supplement.indb 1 9/19/ :32:15 AM

2 At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. CONNECTICUT LIFE AND HEALTH INSURANCE LAW SUPPLEMENT, EFFECTIVE SEPTEMBER 1, Kaplan, Inc. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. If you find imperfections or incorrect information in this product, please visit and submit an errata report. Published in September 2014 by Kaplan Financial Education. Printed in the United States of America. ISBN: / PPN: CT L&H Law Supplement.indb 2 9/19/ :32:16 AM

3 Connecticut Law Supplement 1 INTRODUCTION This supplement focuses on statutes regarding Connecticut insurance law. Key aspects of each statute are discussed to help the student pass the state law portion of the licensing examination. In order to understand the content of this supplement, the student should first study the national insurance License Exam Manual. Thorough preparation for the exam requires the complete study of both the national License Exam Manual and the supplement. I. CONNECTICUT LAWS AND REGULATIONS PERTINENT TO LIFE, ACCIDENT, AND HEALTH INSURANCE A. POWERS AND DUTIES OF THE COMMISSIONER OF INSURANCE [SECS. 38A-8; 10] The primary duty of the Insurance Commissioner is to see that insurance laws are properly executed and the public interest is protected by the enforcing of these laws. The Commissioner is appointed by the governor and cannot be a director, officer, or agent of an insurer. He must submit an annual report to the governor. 1. Other powers The Commissioner of Insurance also has the power to: conduct investigations and hearings and issue subpoenas; revoke licenses of insurers, producers, adjusters, and consultants for just cause; regulate insurers for solvency; and regulate most insurance premium rates. 2. Other duties Other general duties include: issuing licenses and collecting the appropriate fees; setting reserves for domestic companies; appointing examiners (such as the division of a department, division chief, hearing officer, or examiner) who are delegated the duty of examining insurers; issuing cease and desist orders to insurers, producers, adjusters, and consultants for just cause; conducting hearings in connection with the wrongdoing of an insurer or licensee; and reporting illegalities in the insurance business to the state attorney general. 3. Hearings [Secs. 38a-16, 817, 818] Due process under the law requires notice and hearing. If a person has been engaging in unfair acts (i.e., sales methods), the Commissioner will issue a notice of hearing that lists the charges against the licensee. The hearing will be at least 30 days after the serving of the notice. The Commissioner may subpoena, examine, and cross-examine witnesses. If any witness ignores a subpoena and does not attend the hearing, the witness will be charged with contempt of court. The Commissioner may assess a monetary penalty of not more than $5,000 for each violation or unfair act, not to exceed an aggregate of $50,000. If the violator knew (or should have known) the law was being violated, the fine will be not more than $25,000 per act, not to exceed an aggregate of $250,000 in any six-month period. CT L&H Law Supplement.indb 1 9/19/ :32:16 AM

4 2 Connecticut Law Supplement 4. Penalties [Sec. 38a-2, 830] Any person or corporation violating any provision of Connecticut insurance law for which no other penalty is provided will be fined no more than $15,000. The penalty for an insurer that makes false statements or advertisements about financial information is a $10,000 fine for a first offense and $20,000 for each subsequent offense. 5. Cease and desist order [Sec. 38a-817(b), (e)] Whenever the Commissioner believes a person has engaged in an unfair method of competition or unfair or deceptive practice, he will issue a statement of charges and a notice of hearing which will occur within 30 days. After the hearing, the Commissioner may issue a cease and desist order if it is determined that the person is guilty; violation of a cease and desist order is punishable with a fine of not more than $50,000 or a suspension or revocation of the person s license. B. LICENSING DEFINITIONS AND INFORMATION [SEC. 38A-769] Licenses are required of all people or businesses who are selling insurance directly to the public and whose compensation is directly linked to their sales. Activities that require a license include selling, soliciting, and effectuating coverages of insurance. A license application must be properly filed and the appropriate fees paid. The Commissioner may examine the qualifications of each applicant, including evidence that the applicant is of good moral character and financially responsible. Each applicant shall take a written examination on the duties and responsibilities of a licensee and the laws of this state applicable to insurance. The Commissioner may require a waiting period not exceeding six months before reexamining any applicant who has failed to pass any such examination. A person shall not sell, solicit, or negotiate insurance in this state for any class or classes of insurance unless the person is licensed for that line of authority. 1. Insurer [Sec. 38a-1] An insurer or insurance company is any person or entity, other than a fraternal benefit society, that transacts insurance business. a. An alien insurer is one that is organized under the laws of a state or country outside the United States. b. A domestic insurer is one that is organized under Connecticut law. c. A foreign insurer is one that is organized under the laws of another US state or territory. d. A mutual insurer is one without capital stock. Its members elect its managing directors or officers. e. A stock insurer is one that is incorporated with capital contributed by stockholders, to whom the earnings are distributed as dividends on their shares. f. An unauthorized entity or nonadmitted insurer is one that has not been granted a certificate of authority by the Commissioner to transact insurance business in Connecticut. CT L&H Law Supplement.indb 2 9/19/ :32:17 AM

5 Connecticut Law Supplement 3 2. Insurance producer [Sec. 38a-702a] An insurance producer is a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance. 3. Insurance agent [Sec. 38a-702a] An insurance agent is defined by regulation as an insurance producer appointed by an insurer to act on the insurer s behalf. An agent is licensed as a producer and holds a written appointment (or contract) with an insurance company. Agents do not include persons acting as executive officers or traveling salaried employees of an insurance company. 4. License requirements [Secs. 38a-702f(a), 769] Any person, partnership, association, or corporation that is a resident, or has its principal place of business in this state, desiring to act within the state as an insurance producer, public adjuster, casualty adjuster, motor vehicle physical damage appraiser, certified insurance consultant, or surplus lines broker, or desiring to engage in any insurance-related occupation for which a license is deemed necessary by the Commissioner, may make a written application to the Commissioner for a resident license. A nonresident license applicant must hold an equivalent license in the applicant s resident state. An insurance producer may receive qualification for a license in one or more of the following lines of authority: Life insurance (including endowment and annuities) Accident and health or sickness Property Casualty Variable life and variable annuity products Personal lines (property and casualty coverage sold to individuals and families for noncommercial purposes) Credit: limited line credit insurance Any other line of insurance permitted under state law a. The application for a producer s license must be accompanied by a nonrefundable filing fee of $50. b. The producer license and renewal fee is $160 for a two-year period. c. Each applicant for a license in this state will furnish satisfactory evidence to the Commissioner that the applicant is a person of good moral character and financially responsible. d. License examination [Secs. 38a-702d, 702e, 702f(c)] All potential licensees are required to pass a written examination administered by the Commissioner or, at his discretion, designate an independent testing service to prepare and administer such an examination. Each applicant for a license must prove to the satisfaction of the Commissioner that the applicant: has successfully completed a course approved by the Commissioner requiring not less than 40 hours for each line of insurance for which he desires to be licensed or has equivalent experience or training determined by the Commissioner (the Commissioner may require a waiting period not exceeding six months, before reexamining any applicant who has failed to pass any licensing examination); CT L&H Law Supplement.indb 3 9/19/ :32:17 AM

6 4 Connecticut Law Supplement is at least 18 years of age; has not committed any act that is a ground for denial, suspension, or revocation; has paid the appropriate fees; and has passed the examinations for the appropriate lines of authority. 1.) The Commissioner may waive the examination requirement for applicants: for a temporary producer s license; for a nonresident producer s license; and who have held the type of license being applied for any time within 12 months preceding the date of application (a license may be reinstated within 12 months of expiration without having the producer complete new prelicensing and exam requirements). 2.) The Commissioner may waive the prelicensing education and examination requirements for a person who was previously licensed for the same lines of authority in another state if he applies for a Connecticut license within 90 days of cancelling his previous license and the other state certifies that the applicant was in good standing for the line of authority he transacted. 3.) A producer who moves to Connecticut must apply for a new license within 90 days of becoming a resident. e. Expiration and renewal [Secs. 38a-702f(b), (c), 784, 786(b)] A producer s license renews biennially (every two years) on the producer s birthday. Any producer who fails to renew must pay double the $160 renewal fee (a total of $320) to reinstate. Any insurer that cancels or nonrenews an appointment must notify the agent, the agency, and the Insurance Department, in writing, within 30 days. Producers have a one-year grace period in which to reinstate a lapsed license. A certified insurance consultant license renews every two years on September 30 in odd-numbered years. An insurance producer license shall remain in effect unless revoked or suspended provided the fee is paid and the continuing education requirements for resident individual producers are met by the due date. f. Any person impersonating another in taking or attempting to take a state exam for another may be fined not more than $500, imprisoned for not more than six months, or both. g. Salaried officers and employees of an insurance company or producer whose duties are administrative or clerical in nature and do not involve any insurance contract sales or negotiation are exempt from the licensing requirement. 5. Changes in licensee status [Sec. 38a-771(a)(b), 702f(f)] Any person, firm, partnership, association, or corporation holding a license within this CT L&H Law Supplement.indb 4 9/19/ :32:17 AM

7 Connecticut Law Supplement 5 state or holding a license in the name of a trade name shall notify the Insurance Commissioner, in writing, no later than 30 days after any: change of business or residence address; change in employer; change in name; change in licensed members of a firm, partnership, corporation, and so forth; any bankruptcy proceeding; conviction of a felony; or any administrative action taken against the licensee in another state. a. An insurance producer doing business under any name other than the producer s legal name shall notify the Commissioner prior to using the assumed name. [Sec. 38a-702i] b. A producer must report any administrative action taken against that producer in another jurisdiction or by another governmental agency in this state not later than 30 days after it final disposition. Similarly, not later than 30 days after the initial pretrial hearing date, a producer must report any criminal prosecution taken against him/her in any jurisdiction to the Commissioner. [Sec. 38a-702o] c. Violation of this regulation will be subject to the same fines and penalties as described in the following. 6. Suspension and revocation [Secs. 38a-702k, 774] The Commissioner may, after reasonable notice, for cause shown, and after a hearing, revoke or suspend a license. The Commissioner may, in addition to or in lieu of a suspension or revocation, impose a fine not to exceed $5,000. The licensee may appeal the Commissioner s action in court. The Commissioner may place on probation, suspend, revoke, or refuse to issue or renew an insurance producer s license for: providing incorrect, misleading, incomplete, or materially untrue information in the license application; violating any insurance laws or any regulation, subpoena, or order of the Commissioner or of another state s Commissioner; obtaining or attempting to obtain a license through misrepresentation or fraud; improperly withholding, misappropriating, or converting any monies or properties received in the course of doing insurance business; intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance; having been convicted of a felony; having admitted or been found to have committed any insurance unfair trade practice or fraud; using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere; having an insurance producer license or its equivalent denied, suspended, or revoked in any other state, province, district, or territory; CT L&H Law Supplement.indb 5 9/19/ :32:17 AM

8 6 Connecticut Law Supplement forging another s name to an application for insurance or to any document related to an insurance transaction; improperly using notes or any other reference material to complete an examination for an insurance license; knowingly accepting insurance business from an individual who is not licensed; failing to comply with an administrative or court order imposing a child support obligation; or failing to pay state income tax or comply with any administrative or court order directing payment of state income tax. 7. Temporary license [Sec. 38a-702j] The Commissioner may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Commissioner deems that the temporary license is necessary for the servicing of an insurance business in the following cases: To the surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes mentally or physically disabled to allow adequate time for the sale of the insurance business owned by the producer or for the recovery or return of the producer to the business or to provide for the training and licensing of new personnel to operate the producer s business To a member or employee of a business entity licensed as an insurance producer, upon the death or disability of an individual designated in the business entity application or the license To the designee of a licensed insurance producer entering active service in the armed forces of the United States In any other circumstance in which the Commissioner deems that the public interest will best be served by the issuance of the license a. The Commissioner may limit the authority of any temporary licensee in any way deemed necessary to protect insureds and the public. b. The Commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and who assumes responsibility for all acts of the temporary licensee, and the Commissioner may impose other similar requirements designed to protect insureds and the public. c. The Commissioner may revoke a temporary license if the interests of insureds or the public are endangered. d. A temporary license may not continue after the owner or the personal representative disposes of the business. 8. Nonresident producers [Secs. 38a-702g, 702n] A nonresident person may receive a nonresident producer license if: the person is currently licensed as a resident and in good standing in the person s home state; the person has submitted the proper request for licensure and has paid the required fees; CT L&H Law Supplement.indb 6 9/19/ :32:17 AM

9 Connecticut Law Supplement 7 the person has submitted to the Commissioner the application for licensure that the person submitted to the person s home state or a completed uniform application; and the person s home state awards nonresident producer licenses to residents of Connecticut on the same basis. a. The Commissioner may verify the producer s licensing status through the producer database maintained by the National Association of Insurance Commissioners, its affiliates, or subsidiaries. b. A nonresident producer who moves to this state from another state or a resident producer who moves from this state to another must file a change of address and provide certification from the new resident state not later than 30 days after the change of legal residence. No licensing fee or application may be required from a producer moving to this state pursuant to this section. c. The Commissioner may waive any prelicensing requirements for a nonresident license applicant with a valid license from the applicant s home state if the applicant s home state awards nonresident licenses to residents of Connecticut on the same basis and if the application is received no later than 90 days from the date of cancellation of the previous license. d. A nonresident producer s satisfaction of the producer s home state s continuing education requirements for licensed insurance producers may constitute satisfaction of Connecticut s continuing education requirements if the nonresident producer s home state recognizes the satisfaction of its continuing education requirements imposed upon producers from this state on the same basis. 9. Certified insurance consultants (CIC) [Secs. 38a-731 to 734, 735, 786] No person may, for a fee received or to be received (a consultant may not receive commissions or other compensation from insurers or producers), offer to examine in the policy of insurance for the purpose of giving any advice, counsel, recommendation, or information in respect to the terms, conditions, benefits, coverage, or premium of any policy unless that person holds a license as a certified insurance consultant under Connecticut law. a. No person may advertise in business cards, circulars, letters, pamphlets, or elsewhere and use the title CIC or certified insurance adviser, specialist, counselor, analyst, or any similar title unless that person holds a license as a certified insurance consultant. Any person who acts as a certified insurance consultant without such license or during a suspension of the person s license shall be fined not less than $250 or more than $2,500 or be imprisoned not more than six months, or both. b. The required examination may be waived for property or casualty insurance if the person holds a CPCU designation and for life insurance if the person holds a CLU designation. c. Licenses expire each odd-numbered year on September 30. CT L&H Law Supplement.indb 7 9/19/ :32:17 AM

10 8 Connecticut Law Supplement d. No contract or agreement with a certified insurance consultant may be enforceable by the consultant unless: it is in writing and executed, in duplicate, by the person to be charged (client); it is delivered to, or retained by, the client when it is signed by him; the contract plainly specifies the amount of the fee paid by the client and the services to be rendered by the certified insurance consultant; and it is in a form currently approved by the Commissioner. e. All licensees have a fiduciary responsibility to the public and any insurer they represent. Any person who violates any provision of this section shall be fined not less than $250 or more than $2,500. f. No person, acting in the capacity of a certified insurance consultant, shall directly or indirectly receive any part of any commission or compensation paid by any insurer or producer in connection with the sale or writing of any insurance. C. COMPANY REGULATION One of the Commissioner s duties includes the regulation of insurance companies. 1. Certificate of authority [Sec. 38a-41] All insurance companies who wish to do business within this state must obtain a certificate (license) of authority. It must also file its charter or articles of incorporation with the Commissioner as well as a financial statement. Evidence of timely claim settlement must also be provided. a. Each license will expire on the first day of May succeeding the date of its issuance (and may be renewed annually). b. The Commissioner may suspend or revoke this certificate for cause shown and may impose a fine not to exceed $50, Unfair claim settlement practices [Sec. 38a-816(6)] Committing any of the following acts, if done without just cause and if performed with the frequency indicating a general business practice, will be deemed to be an unfair claim settlement practice: Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under insurance policies Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear Compelling insureds to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered CT L&H Law Supplement.indb 8 9/19/ :32:17 AM

11 Connecticut Law Supplement 9 Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration Attempting settlement or compromise of claims on the basis of applications that were altered without notice to, or knowledge or consent of, insureds Attempting to settle a claim for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made a part of an application Attempting to delay the investigation or payment of claims by requiring an insured and the insured s physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which contain substantially the same information Failing to affirm or deny coverage of claims within a reasonable time after a proof of loss has been completed Refusing payment of claim solely on the basis of the insured s request to do so without making an independent evaluation of the insured s liability based on all available information 3. Capital and surplus requirements [Sec. 38a-72] No insurer may continue to do business in Connecticut unless it maintains the minimum capital and surplus amounts required. a. Minimum capital and surplus for a stock insurance company, that must be maintained: Line Capital Surplus Health $ 500,000 $ 500,000 Life $1,000,000 $2,000,000 Liability (Casualty) $ 500,000 $ 500,000 Fidelity and Surety $ 500,000 $ 500,000 Property $ 500,000 $ 250,000 Workers Comp. $ 500,000 $ 500,000 b. The minimum surplus for a mutual insurance insurance company: Line Surplus Health $1,000,000 Life $3,000,000 Liability (Casualty) $1,000,000 Fidelity and Surety $1,000,000 Property $ 750,000 Workers Comp. $1,000,000 c. Surplus is the excess of qualified assets (such as securities, installment premiums, deferred premiums, cash, or currency) over the sum of paid-in capital and liabilities. CT L&H Law Supplement.indb 9 9/19/ :32:18 AM

12 10 Connecticut Law Supplement D. PRODUCER REGULATION No person in the state of Connecticut may engage in any trade practice defined under Connecticut state law as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. The purpose of legislation regarding unfair trade practices is to ensure truthful and adequate disclosure of all material and relevant information in the advertisement of insurance. 1. Rebating [Secs. 38a-816(9), 825] No company, officer, or producer may pay or allow, or offer to pay or allow, in connection with placing or negotiating any policy of insurance, any valuable consideration or inducement not specified in the policy or contract. Insurance personnel may not give, sell, or purchase, or offer to give, sell, or purchase anything of value whatsoever not specified in the contract. Any individual offering or accepting a rebate will be deemed guilty of rebating. a. The most common form of rebating involves a producer offering to share commissions with a prospective insured in return for that insured purchasing a policy. An insurer offering securities, stocks, or bonds in return for the purchase of policies is another example of rebating. b. The following are not considered rebating: Paying bonuses to policyholders or abating their premiums out of surplus accumulated from nonparticipated insurance, provided such abatement is fair and equitable For industrial policies, making allowance to policyholders who have continuously made premium payments directly to an office of the insurer in an amount that fairly represents the saving in collection expense Readjusting the premium rate for a group insurance policy based on loss, expense experience, or both at the end of the first or subsequent policy year, which may be done retroactively for the year 2. Misrepresentation, twisting [Secs. 38a-816(1), (8), 826] No company, officer, or producer may make, issue, circulate, or use, or cause to permit to be made, any written or oral statement misrepresenting the terms of any insurance policy or contract. In addition, these parties may not misrepresent the terms of a contract to induce a person to lapse, forfeit, or surrender the policy issued to him (illegal inducement), or to alter or convert it for any other policy or contract (twisting). Anyone engaged in misrepresentation or twisting may be subject to a fine of no more than $5,000, up to 30 days in prison, or both. a. There can be no misrepresentation of policy dividends. [Sec 38a-816(1)(b)] b. Misrepresentation also consists of making false or fraudulent statements or representations on or relative to an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, producer, or individual. CT L&H Law Supplement.indb 10 9/19/ :32:18 AM

13 Connecticut Law Supplement False information in advertising generally [Sec. 38a-816(2)] Making, publishing, disseminating, circulating, or placing before the public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in any other way, an advertisement, announcement, or statement containing any assertion or a statement with respect to the business of insurance which is untrue, deceptive, or misleading is known as false information in advertising and is illegal. This includes all types of media presentations, sales talks, and any other material used in soliciting insurance. The identity of the insurer must be provided to the public without any deception. 4. Defamation [Sec. 38a-816(3)] Making, publishing, disseminating, or circulating directly or indirectly or aiding, abetting, or encouraging any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of any person, which is calculated to injure any person engaged in the business of insurance, is known as defamation and is illegal. 5. Boycott, coercion, and intimidation [Sec. 38a-816(4)] Entering into any agreement to commit or by any concerted action committing any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of or monopoly in the business of insurance is illegal. 6. Unfair discrimination [Secs. 38a-816(12), (13)] Making or permitting any unfair discrimination between individuals of the same class and life expectancy and the rates charged for any life insurance contract or a life annuity or in the dividends or other benefits payable thereon, or in any other of the terms or conditions of the contract, is prohibited. Unfair discrimination also includes making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of the contract. It is illegal to discriminate on the basis of race, religion, or national origin. 7. False financial statements [Sec. 38a-816(5)] Filing with any supervisory or other public official or making, publishing, disseminating, circulating, or placing before the public any false statement regarding the financial condition of any person or insurer with intent to deceive is illegal. This may also involve making any false entry in any book, report, or statement with the intent to deceive any agent or examiner lawfully appointed to conduct an exam into its condition or into any of its affairs; or willfully omitting to make a true entry of any material fact pertaining to the business of the person in any book, report, or statement. 8. Compensation of licensees [Sec. 38a-734; 702l] An insurance company or insurance producer must not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance if the person is required to be licensed and is not. a. A person may not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance in this state if the person is required to be licensed and is not. CT L&H Law Supplement.indb 11 9/19/ :32:18 AM

14 12 Connecticut Law Supplement b. Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance in this state if the person was required to be licensed at the time of the sale, solicitation, or negotiation and was at that time. c. A producer may pay or assign commissions, to an insurance agency or to persons who do not sell, solicit or negotiate insurance in this state, unless the payment would violate the state s insurance rebating law. 9. Producer license, controlled business [Sec. 38a-782] The lines of authority granted to a producer by exam qualification are indicated on the producer s license. An applicant for a producer s license may not use the license for the purpose of obtaining commissions on policies or bonds on which the producer, the producer s spouse, the producer s employer, or any corporation controlled by the producer, the producer s spouse, and the producer s employer pays the premiums. To conform with this regulation against writing controlled business, premiums for policies written for the general public must exceed nine times the premiums on policies paid for by the producer, spouse, employer, or corporation controlled by those persons. 10. Examination of books and records [Sec. 38a-769(f)] All licensees in this state are required to maintain adequate and up-to-date records of insurance transactions in which they engaged. The Commissioner has the option of inspecting or examining any books, accounts, or records of any producer at any time. 11. Appointment of producer as agent [Sec. 38a-702m] An insurance producer may not act as an agent of an insurer unless the producer becomes an appointed agent of the insurer. To appoint a producer as its agent, an insurer must file a notice of appointment not later than 15 days after the date the agency contract is executed or the first insurance application is submitted. a. Notice to Commissioner When the Commissioner receives a notice of appointment, the Commissioner must within 30 days verify that the producer is eligible for appointment. If the Commissioner finds that the producer is ineligible for appointment, the Commissioner must notify the insurer not later than five days after making the determination. 12. Acting as a consultant without a license [Sec. 38a-735] A person who acts as a certified insurance consultant without a license or during a suspension of the person s license shall be fined between $250 and $2,500 and/or be imprisoned up to six months. 13. Unauthorized insurance contracts unenforceable, liability of agent [Secs. 38a-275, 714] Any contract entered into by an unauthorized insurer is unenforceable by the insurer. If an unauthorized insurer fails to pay a claim or loss, any person who assisted or aided in the procurement of such insurance contract is liable to the insured for the full amount of claim or loss. Any person making insurance contracts on behalf of an insurer not licensed in Connecticut is personally liable to the insured for the performance of such contract. CT L&H Law Supplement.indb 12 9/19/ :32:18 AM

15 Connecticut Law Supplement Representing an unauthorized insurer [Secs. 38a-703, 777] No person may solicit or procure insurance, except with regard to that person s own property or person, with or by any insurance company that does not hold an active certificate authority from the Commissioner authorizing the insurance company to do business in this state. Any person who aids any corporation, association, or person not authorized to do insurance business in this state in soliciting this type of business from Connecticut residents, by means of any advertisement published in this state or by any other means, may be fined no more than $2,000, imprisoned no more than six months, or both. Any surplus lines broker who negotiates, continues, or renews insurance contracts in an unauthorized company and fails to file the required affidavit, or who willfully makes a false statement, or who negotiates, continues or renews any such contract of insurance after the revocation or during the suspension of the licensee s license, is subject to license revocation and a fine of up to $4,000, imprisonment of no more than six months, or both. 15. Failure to remit premiums [Sec. 38a-712] If, upon investigation of a report from an insurer concerning a failure of a producer to remit premiums, the Commissioner determines that a producer has received premiums directly or indirectly from insureds and has failed to remit them to the proper company, its state agent, or managing general agent, the Commissioner may, following a hearing, suspend or revoke the license of the producer. Upon receipt of a report concerning a dishonored check issued by a producer to the Connecticut Department of Insurance, the Commissioner must notify the producer issuing the check. If an arrangement for payment of funds is not made to the satisfaction of the Commissioner by the producer within 15 days of receipt of the notice, the license of the producer will be automatically suspended. Within 60 days of receipt of the notice, the producer may submit a written demand for a hearing to show cause why the suspension should be terminated. This hearing must be held within 30 days from the date of receipt of the written demand. If, by the end of the 60-day period, no hearing has been demanded, the license of the producer may be revoked. The failure of a producer to remit premiums to the insurer within 30 days may result in license suspension or revocation. 16. Failure to maintain complaint record [Sec. 38a-816 (7)] Failure of an insurer to maintain a complete record of all the complaints received since the date of its last examination is an unfair trade practice. The complaint record must indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of the complaint, and the time it took to process each complaint. Complaint means any written communication primarily expressing a grievance. E. CONTINUING EDUCATION [REGS. 38a-782a-2, 10, 13 to 15] Every resident and nonresident producer must complete 24 hours of continuing education each biennium (two year period). 1. A minimum of three of those credit hours must be on Connecticut insurance law and regulations or ethics. 2. Of the total 24 hours, a minimum of six credit hours must be taken through course work applicable to the line of authority held (such as a life insurance license). CT L&H Law Supplement.indb 13 9/19/ :32:18 AM

16 14 Connecticut Law Supplement 3. No credit hours may be carried over from one biennium to the next. 4. Exemptions from the continuing education requirements are as follows. a. Producers who seek reinstatement of their license within one year after the license expiration date shall be required to complete any deficient continuing education credit hours for the previous biennium and successfully complete 24 credit hours of continuing education during the current biennium. b. Producers who become Connecticut residents and are granted a license based on their previous home state licensure shall not be required to complete Connecticut continuing education during the initial biennium. c. Producers who hold a license in states requiring continuing education for their insurance producers, and who furnish evidence of their compliance with the continuing education requirements in such states are exempt from meeting this state s continuing education requirements provided that the insurance supervisory official of the state in which the producer completes the continuing education requirements will grant similar exemptions to Connecticut residents licensed therein who have satisfied Connecticut s continuing education requirements. d. Producers whose only line of authority is credit insurance, which includes credit life, credit accident and health, and mortgage guaranty; or travel accident and travel baggage insurance are exempt from the 24 hours of continuing education credits requirement. e. Producers whose licenses are renewed by the Commissioner for one year according to the transitional process shall be required to complete 12 credit hours of continuing education during the transitional period. 5. Nonresident agents who reside in states requiring continuing education for their resident insurance producers and furnish evidence of their compliance with the continuing education requirements in their state of residence are exempt from meeting Connecticut s continuing education requirements provided that the insurance supervisory official of the nonresident producer s state of residence will grant similar exemptions to Connecticut residents who have satisfied Connecticut s continuing education requirements. 6. Deadlines a. Extensions for cause In general, producers will not be granted extensions of time in which to earn continuing education credits. The only exception is for those whose military service prevents them from completing required continuing education within their compliance period. b. Failure of a producer granted an extension to satisfy the requirement by the last day of the extension period may result in the immediate suspension of his insurance producer license. CT L&H Law Supplement.indb 14 9/19/ :32:18 AM

17 Connecticut Law Supplement 15 c. No resident or nonresident producer whose license has been suspended under the terms of this section may have the suspension removed for a period of at least 90 days from the date of suspension. The Commissioner may provide a reasonable means whereby any person aggrieved by the action of the Commissioner may appeal the suspension, in person or by an authorized representative to review the grievance. F. CONNECTICUT LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION [SEC. 38A-859] To provide protection for policyowners, insureds, beneficiaries, annuitants, payees, and assignees against failure in the performance of contractual obligations due to the financial impairment of the insurer, the Life and Health Insurance Guaranty Association was created. The association is made up of admitted insurers in this state. Member companies are assessed to provide funds. The association also assists the Commissioner in the detection and prevention of insurer impairments. 1. Prohibited advertising of Life and Health Insurance Guaranty Association [Sec. 38a-871(e)] No company or producer may advertise, as an inducement for an individual to purchase insurance, the fact that the company is a member of the Association. G. CONNECTICUT INSURANCE INFORMATION AND PRIVACY PROTECTION ACT [SECS. 38a-975 to 999a] An insurance company or producer must provide a written notice of information practices to all applicants and policyholders. The insurer must distinguish those questions designed solely to obtain information for marketing or research purposes from an individual in connection with an insurance transaction. 1. The insurer must obtain a disclosure authorization from the applicant or insured. The disclosure authorization form must: be written in plain language; be dated; specify the types of persons authorized to disclose information concerning the individual; specify the nature of the information authorized to be disclosed; identify the insurance institution or agent and the types of representatives of the insurance institution to whom the individual has authorized the information to be disclosed; specify the purposes for which the information is collected; specify the length of time such authorization will remain valid, which may be no longer than 30 months from the date the authorization is signed if the application or request involves life, health, or disability insurance, or one year from the date the authorization is signed if the application or request involves property or casualty insurance; and advise the individual or a person authorized to act on his behalf that he is entitled to receive a copy of the authorization form. CT L&H Law Supplement.indb 15 9/19/ :32:18 AM

18 16 Connecticut Law Supplement 2. No request for information with respect to an employer s employee benefit plan may be made that relates to a period of time more than 24 months before the date the request was made. 3. An insurer must inform the individual if it intends to prepare or request an investigative consumer report. 4. If an individual requests access to personal information obtained by an insurer, it must be provided within 30 days of the request. A reasonable fee for a copy of the information may be charged by the insurer. 5. An individual may request the correction, amendment, or deletion of information; the insurer must act on the written request, within 30 business days, by changing the information or refusing to make the requested changes. Whenever an individual disagrees with the information and the insurer refuses to make the requested changes, the individual may file a concise statement specifying what he believes to be correct information and why he disagrees with the insurer s refusal to change the information. 6. In the event of an adverse underwriting decision, the insurer must either provide the reason in writing or notify the individual that the reason may be obtained upon written request made within 90 business days from the receipt of the notification. The insurer must provide the reason within 21 business days from the date of receipt of the individual s written request. 7. Insurers may not seek information concerning previous adverse underwriting decisions unless the reasons for the decisions are also requested. Insurers are prohibited from considering previous adverse underwriting decisions or past residual market mechanism (assigned risk) coverage. 8. Information obtained by an insurer may not be disclosed unless the disclosure is: authorized by the individual; reasonably necessary to perform a business or professional function in determining an individual s eligibility for a benefit payment or in detecting or preventing a criminal activity; made to a regulatory authority; made to a law enforcement or other government authority; in response to an administrative or judicial order; or made for the purposes of conducting actuarial or research studies. 9. Penalties for the violation of various sections of this act are as follows. a. In any case in which a hearing results in the finding of a negligent violation, the Commissioner may, in addition to the issuance of a cease and desist order, order payment of a penalty of not more than $2,000 for each violation but not to exceed $20,000 in the aggregate for multiple violations. b. In any case in which a hearing results in the finding of an intentional violation, the Commissioner may, in addition to issuing of a cease and desist order, order payment of a penalty of not more than $20,000 for each violation but not to exceed $100,000 in the aggregate for multiple violations. CT L&H Law Supplement.indb 16 9/19/ :32:18 AM

19 Connecticut Law Supplement 17 c. Any person who violates a cease and desist order (issued in connection with this act) of the Commissioner may, after notice and hearing and upon order of the Commissioner, be subject to one or more of the following, at the discretion of the Commissioner: A penalty of not more than $20,000 for each violation A penalty of not more than $100,000 if the Commissioner finds that violations have occurred with such frequency as to indicate a general business practice Suspension or revocation of an insurance institution s or agent s license d. No action under this act may be brought unless it is done within two years from the date the alleged violation is or should have been discovered. e. Any person who knowingly and wilfully obtains information concerning an individual from an insurance institution, agent, or insurance-support organization under false pretenses may be fined not more than $20,000. f. No person may disclose individually identifiable medical record information with the malicious intent to damage an individual s reputation or character. Any person who violates this section may be fined no more than $500, imprisoned no more than three months, or both for the first offense and may be fined no more than $2,000, imprisoned no more than one year, or both for each subsequent offense. II. CONNECTICUT LAWS AND REGULATIONS PERTINENT TO LIFE INSURANCE A. LIFE INSURANCE SOLICITATION [REGS. 38a to 39, APPENDIX] The purpose of life insurance solicitation regulations is to require insurers to deliver to purchasers information that will improve the buyer s ability to select the most appropriate plan and to improve their understanding of the features and benefits of the policy. These regulations do not apply to annuities, credit life, group life, life insurance issued in connection with pension and welfare plans, or variable life. 1. Disclosure requirements The insurer must provide a Buyer s Guide to all prospective purchasers. A Policy Summary must also be provided. Both of these items must be provided before an application or initial premium is accepted unless the policy has a free-look provision of at least 10 days; in this case, the Buyer s Guide and Policy Summary can be provided before policy delivery. [38a (G), Appendix] 2. Policy cost indexes The life insurance surrender cost index must be disclosed by determining the guaranteed cash surrender value, if any, available at the end of the 10th and 20th policy years. [Reg. 38a (F), Appendix] 3. Producers must advise each of their customers that they are an insurance producer (agent) and provide the full name of the insurance company being represented. Producers must not use a title such as financial planner, investment advisor, financial consultant, or financial counselor, which might imply that a fee is charged for their advice. [Reg. 38a ] CT L&H Law Supplement.indb 17 9/19/ :32:19 AM

20 18 Connecticut Law Supplement B. ADVERTISING [REGS. 38a to 31] 1. Purpose of advertising regulations [Reg. 38a ] Minimum standards and guidelines for life insurance advertising are evaluated by the Insurance Department to ensure truthful disclosure of all material and relevant information in the advertising of life insurance and annuity contracts. 2. Definition [Reg 38a , 23] a. Advertising includes any material designed to: create public interest in an insurance product or company; or induce members of the public to purchase, increase, or modify a policy. b. Advertisements may assume the forms of: printed and published material, audiovisual material, and descriptive literature used in direct mail, newspapers, magazines, television scripts, billboards, and similar displays; descriptive literature and sales aids; material used for recruiting, training, and educating an insurer s sales personnel; and prepared sales talks, presentations, and materials for use by sales personnel, agents, solicitors, and brokers. 3. Testimonials [Reg 38a (k)] Testimonials must be genuine. If the person giving the testimonial is compensated in any way or has a financial interest in the insurance company, it must be stated in the advertisement. 4. Dividends [Reg 38a (i)] Advertisements may not describe dividends in a way that is misleading or implies that dividends are in any way guaranteed. Dividend illustrations must be based on the current dividend scale and must include a statement that they are not to be construed as guarantees or estimates of future dividends. 5. Form and content of advertisements [Reg 38a ] a. Advertisements must be truthful and must not mislead. 1.) The form and content of all advertisements must be clear enough to avoid deception. 2.) The Commissioner is responsible for determining whether an advertisement might mislead or deceive a person of average education and intelligence in the segment of the public to which it is directed. b. Advertisements must not use the terms investment, profits, or other similar terms that might mislead a purchaser to believe that he may receive something that is not available to other persons of the same class and life expectancy, unless it is the truth. CT L&H Law Supplement.indb 18 9/19/ :32:19 AM

21 Connecticut Law Supplement Identity of insurer [Reg.38a , 26] a. The insurer s name must be clearly identified in all advertisements. b. Advertisements for specific policies must be identified by either the form number or other appropriate description. c. Advertisements must not use any combination of words or symbols that may mislead prospective insureds into believing that an insurer is connected with a government program or agency. 7. Advertising records [Reg. 38a ,30] a. Insurers must keep files of all advertisements used in Connecticut, which must note the manner and extent of distribution and the form number of any advertised policy. b. Advertising files are subject to inspection by the Insurance Department and must be kept either for four years or until the next regular examination by the Department, whichever is longer. c. All insurers must file a certificate of compliance with their annual statements, stating that their advertisements comply with these regulations. d. The Commissioner may require the filing for review prior to use of all advertising material proposed for use by an insurer. Such advertising material must be filed by the insurer with this Department not less than 30 days prior to the date the insurer desires to use the advertisement. C. POLICY SUMMARY [REG. 38A (g)] Policy Summary means a written statement describing the elements of the policy including, but not limited to: a prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION; the name and address of the producer, or, if no producer is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the Policy Summary; the full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written; the generic name of the basic policy and each rider; the following amounts, for the first five policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, the years for which life insurance cost indexes are displayed and at least one age from 60 through 65 or maturity, whichever is earlier The annual premium for the basic policy The annual premium for each optional rider Guaranteed amount payable upon death, at the beginning of the policy year regardless of the cause of death other than suicide, or other specifically enumerated exclu- CT L&H Law Supplement.indb 19 9/19/ :32:19 AM

22 20 Connecticut Law Supplement sions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately Total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider Cash dividends payable at the end of the year with values shown separately for the basic policy and each rider (dividends need not be displayed beyond the 20th policy year) Guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values above the effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears (if the policy loan interest rate is variable, the Policy Summary includes the maximum annual percentage rate); life insurance cost indexes for 10 and 20 years but in no case beyond the premiumpaying period; the equivalent level annual dividend, in the case of participating policies and participating optional term life insurance riders, under the same circumstances and for the same durations at which life insurance cost indexes are displayed; a Policy Summary which includes dividends shall also include a statement that dividends are based on the company s current dividend scale and are not guaranteed; a statement in close proximity to the life insurance cost indexes as follows: An explanation of the intended use of these indexes is provided in the Life Insurance Buyer s Guide; and the date on which the Policy Summary is prepared. D. BUYER S GUIDE [REG. 38A ] A Buyer s Guide is a guide given to prospective clients that contains the following: the cost indexes, the different types of policies, amount of coverage needed, and the suitability of the coverage. E. LIFE INSURANCE POLICY COST COMPARISON METHODS [REG. 38A (F)] The Life Insurance Surrender Cost Index and the life insurance net payment cost index method are two ways to find a policy cost comparisons. These comparisons shall be made at the end of the 10th year and the 20th year. F. LIFE INSURANCE ILLUSTRATIONS [REGS. 38a to 69] Each insurer must notify the Commissioner whether a policy form is to be marketed with or without an illustration. If the insurer identifies a policy as one to be marketed without an illustration, any use of an illustration for that form is prohibited. If a policy form is to be marketed with an illustration, a basic illustration must be submitted to the Commissioner. 1. Basic illustrations must include the following. The illustration shall include the date it was prepared. Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified. CT L&H Law Supplement.indb 20 9/19/ :32:19 AM

23 Connecticut Law Supplement 21 If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force. The assumed payments on which the illustrated benefits and values are based shall be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments shall be identified as premium outlay. Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium shall be shown and clearly labeled guaranteed. If the illustration shows any nonguaranteed elements, they cannot be based on a scale more favorable to the policy owner than the insurer s illustrated scale at any duration. These elements shall be clearly labeled nonguaranteed. The guaranteed elements, if any, shall be shown before corresponding nonguaranteed elements and shall be specifically referred to on any page of an illustration that shows or describes only the nonguaranteed elements The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender. The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policyowner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable. Any illustration of nonguaranteed elements shall be accompanied by a statement indicating that the benefits and values are not guaranteed, the assumptions on which they are based are subject to change by the insurer, and actual results may be more or less favorable. If the applicant plans to use dividends or policy values, guaranteed or nonguaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values. G. REPLACEMENT OF LIFE INSURANCE AND ANNUITIES [SEC. 38a-435] The Insurance Commissioner may make regulations governing the sale or offer of sale of life insurance and annuities when the sale or offer involves the replacement of existing life insurance/annuities policies, or borrowing on or lapsing existing life insurance policies. These regulations may prescribe the form in which the offer or proposal should be made, the form of notice to the insurance companies involved, the questions to be contained in the application forms for life insurance pertaining to existing insurance, and the form of notice to the purchaser. 1. According to Connecticut law regarding replacement, the Commissioner may suspend or revoke the license of any insurance producer violating any replacement regulations. CT L&H Law Supplement.indb 21 9/19/ :32:19 AM

24 22 Connecticut Law Supplement 2. Replacement involves a transaction in which new life insurance or annuities coverage replaces previous coverage. The following are not covered under this provision: replacement of credit life, group life, existing insurance or annuities with the same company; any insurance with employee pension plans; immediate annuity contract, any direct response companies, structured settlements, and any non-convertible term life insurance that expires within five years. 3. Any transaction in which new life insurance protection is to be purchased and it is known or should be known by a producer or insurer that existing insurance is to be lapsed, surrendered, converted to a reduced paid-up type, continued as extended term insurance, reissued with a reduction in cash value, or converted so that either the amount or the coverage period is reduced is known as replacement. Replacement regulations do not generally apply regarding policies whose face amounts are less than $5, When replacement is involved, it is generally required that every authorized insurer supply a written comparison of the policy terms, conditions, and benefits to an insured upon his request only. The written comparisons must be supplied on the third working day following the request in most cases. a. Each insurer (except for a direct response insurer) must provide a Buyer s Guide to any prospective purchaser before accepting the application for life insurance from the prospective purchaser. 5. Duties of producers with regard to replacement Producers have several duties when soliciting life insurance or if a replacement of a life insurance policy is involved including but not limited to the following. a. The producer must make a reasonable effort to determine if the transaction will involve the replacement of the existing life insurance. b. If a replacement is involved, the producer will obtain, with or as a part of each application for life insurance, a statement signed by the applicant verifying that the applicant understands that a replacement is taking place. c. When replacement is present, a producer should secure a list of all existing policies being replaced. d. The producer must provide a Notice Regarding Replacement of Life Insurance to the applicant when replacement is involved and obtain the applicant s signature on this form to verify that he received it. e. Comparison forms must be provided by the producer when requested by the applicant. f. The producer must leave copies of all sales proposals or other sales material with the applicant. CT L&H Law Supplement.indb 22 9/19/ :32:20 AM

25 Connecticut Law Supplement Duties of insurers with regard to replacement Insurance companies are required to inform all producers soliciting insurance on their behalf of the duties of a producer with regard to replacement. a. Insurance companies must require that their producers collect a statement signed by the applicant that the applicant realizes a replacement is taking place. b. An insurer must require that its producer provide a Notice to the Applicant when replacement is involved. c. An insurer will provide comparative information forms when necessary. H. CONVERSION TO INDIVIDUAL POLICY [BULLETIN S-4(8) to (10)] If a group life insurance policy ceases because of termination of employment or membership in the class eligible for coverage, a person is entitled to have issued by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided an application and first premium are submitted to the insurer within 31 days after such termination. 1. The individual policy may be on any one of the forms customarily issued by the insurer (except term insurance) at the age and for the amount applied for. 2. The individual policy may be in an amount not in excess of the amount of life insurance which ceases because of the termination. 3. The premium should be at the insurer s customary rate applicable to the form and amount of the individual policy, to the class of risk to which the person then belongs, and to his age on the effective date of the individual policy. I. ASSIGNMENT OF OWNERSHIP [SEC. 38a-455] A person insured under group life insurance may assign all or part of his rights of ownership in the insurance. This includes the right to name a beneficiary and to have an individual policy issued upon termination of employment with the group. However, the insurer or group policyholder may prohibit or limit the assignment. J. DISCLOSURE OF INSURANCE INFORMATION [SEC. 38a-988] Insurers and agents may not disclose any personal or privileged information concerning an individual collected or received from an insurance transaction unless the disclosure is: made with the individual s written authorization; made to a person other than an insurance institution, agent, or insurance-support organization and is necessary to enable a person to perform a business, professional, or insurance function for the disclosing insurance institution to determine an individual s eligibility for insurance benefits or payments, or in detecting or preventing criminal activity, fraud, material misrepresentation, or material nondisclosure; CT L&H Law Supplement.indb 23 9/19/ :32:20 AM

26 24 Connecticut Law Supplement made to an insurance institution, agent, insurance-support organization, or self-insurer provided the disclosure is limited to that necessary to detect or prevent criminal activity, fraud, material misrepresentation, or material nondisclosure in connection with insurance transactions or to help the organization perform its function in connection with an insurance transaction involving the individual; made to a medical-care institution or professional to verify coverage or benefits, inform an individual of a medical problem, or conduct an operations or services audit; made to an insurance regulatory authority; made to a law enforcement or other government entity to prevent the perpetration of insurance fraud or if an insurer believes an individual has been conducting illegal activities; otherwise permitted or required by law; in response to an administrative or judicial order; made to conduct actuarial or research studies; made to a party involved in a sale, transfer, merger, or consolidation of the insurance institution s business; made to a person who will only use such information in marketing a product or service; made to an affiliate who will use the information only in connection with an audit of the insurance institution or agent; made by a consumer reporting agency; made to a group policyholder to report claims experience or to conduct an audit; made to a professional peer review organization to review the service or conduct of a medical-care institution or professional; made to a governmental authority to determine an individual s eligibility for health benefits for which the governmental authority may be liable; made to a certificate holder or policyholder to provide information regarding the status of an insurance transaction; or made to a lienholder, mortgagee, assignee, lessor, or other person that has a legal or beneficial interest in a policy. K. NOTICE OF INFORMATION PRACTICES [SECS. 38a-979, 981] 1. An insurance company or agent must provide a notice of information practices to all applicants or policyholders at the: time of policy delivery, in the case of applications for insurance; renewal date, in the case of renewal policies; or time a request for a policy reinstatement or change in insurance benefits is received by the insurance institution, in the case of policy reinstatement or change in insurance benefits. 2. The notice must be in writing and must state: whether personal information may be collected from persons other than the individual proposed for coverage; the types of personal information that may be collected, the kinds of investigative techniques that may be used to collect such information, and the sources used; CT L&H Law Supplement.indb 24 9/19/ :32:20 AM

27 Connecticut Law Supplement 25 a description of the insured s rights; and that information obtained from a report prepared by an insurance-support organization may be retained by the organization and disclosed to other persons. L. INVESTIGATIVE CONSUMER REPORTS [SEC. 38a-982] Insurance institutions, agents, and insurance-support organizations may not prepare or request an investigative consumer report pertaining to an individual in connection with an insurance transaction involving an insurance application, policy renewal, reinstatement, or change in insurance benefits unless the individual is informed that: the individual may request to be interviewed in connection with the preparation of the investigative consumer report; and upon request, the individual is entitled to receive a copy of the investigative consumer report. M. MEDICAL EXAMINATIONS AND LAB TESTS [RL 19a-583, 586] 1. An insurer must obtain an applicant s informed consent before conducting an HIVrelated test. 2. A person who obtains confidential HIV-related information may not disclose or be compelled to disclose such information, except to: the individual, his legal guardian, or person authorized to consent to health care for such individual; any person who secures a release of confidential HIV-related information; a federal, state, or local health officer when the disclosure is required by federal or state law; a health care provider or facility when knowledge of HIV-related information is necessary to provide appropriate care or treatment to the individual or individual s child; a medical examiner to help determine the cause of death; health facility staff committees or accreditation or oversight review organizations conducting program monitoring, evaluation, or service reviews; a health care provider who has had a significant exposure to HIV infection in the course of his occupational duties; employees of hospitals for mental illness if the patient s behavior poses a significant risk of transmission to another patient; employees of facilities operated by the Department of Correction to provide services related to HIV infection or if the inmate s behavior poses a significant risk of transmission to another inmate; any person allowed access to such information by a court order; life and health insurers, government payers, and health care centers and their affiliates, reinsurers, and contracts, except agents and brokers, in connection with underwriting and claim activity; and any health care provider specifically designated by the individual to receive such information received by a life or health insurer or health care center pursuant to an application for life, health, or disability insurance. CT L&H Law Supplement.indb 25 9/19/ :32:20 AM

28 26 Connecticut Law Supplement N. POLICY CLAUSES AND PROVISIONS 1. Dating back of policies prohibited [Sec 38a-442] No policy of life insurance shall be issued or delivered in this state if it purports to be issued or to take effect on a date more than six months before the application for the insurance was made; if doing so rates the applicant at an age younger than he or she is at the date of application. 2. Free-look period [Sec. 38a-436] Every individual life insurance policy must have a notice printed on it stating that the policyholder has the right to return the policy within 10 days of its delivery and to have the premium refunded if he is not satisfied for any reason. 3. Interest on proceeds [Sec. 38a-452] If an action to recover proceeds due under a life insurance policy or annuity results in a judgment against the insurer, interest must be paid from the date of the insured s death to the date the verdict or decision is made. In the event no action has been commenced, interest upon the principal sum paid to the beneficiary shall be computed daily at the rate of interest currently paid by the insurer on proceeds left under the interest settlement option, commencing no later than 10 days after the date of the death of an insured and shall be added to and be a part of the total sum paid. O. DISCRIMINATION PROHIBITED [SECS. 38a-446, 447] No life insurance company doing business in this state may make any distinction or discrimination as to the premiums or rates charged for policies upon the lives of individuals within the same class and life expectancy. 1. Any insurer (or the officer or an agent of an insurer) violating state law regarding discrimination may be fined up to $100. P. REGULATION OF VARIABLE PRODUCTS [SECS. 38a-433; REGS. 38A to 11] An insurer may establish one or more separate accounts into which it pays any money it receives. These accounts are used to pay benefits in variable dollar amounts and to pay benefits in fixed and guaranteed dollar amounts. 1. The income or losses of the separate accounts are credited to or charged against those accounts and do not affect the general income or losses of the insurer. The assets of the separate accounts must be valued at least monthly. 2. Insurers may not deliver or issue variable life insurance contracts or annuities unless licensed to do so. 3. Insurers must file all variable life insurance policies, riders, endorsements, and applications with the Commissioner before their use or delivery. Insurers also must file all sales and advertising material with the Commissioner 30 business days before use. CT L&H Law Supplement.indb 26 9/19/ :32:20 AM

29 Connecticut Law Supplement 27 Q. ACCELERATED BENEFITS [SEC. 38a-457; REGS. 38a to 11] An accelerated benefits provision is a common feature of life insurance policies that allows for the early payment of part of the policy s face amount if the insured suffers from a terminal illness or injury. The death benefit, less the accelerated payment, is still payable. Accelerated payment can be made in a lump sum or in monthly installments over a specific period. 1. Qualifying event A qualifying event, for purposes of permitting the payment of the benefit amount, is: a. a medical condition that can be expected to result in death in a relatively short period of time, such as 12 months or less, and may include but is not limited to coronary artery disease, myocardial infarction, stroke, kidney failure, or liver disease; b. a medical condition which, in the absence of extensive or extraordinary medical treatment, would result in death in a relatively short period of time, such as 12 months; or c. a medical condition suffered by the insured which has caused the insured to be confined for at least six months in an institution that provides necessary care or treatment of an injury, illness, or loss of functional capacity rendered by a certified or licensed health care provider in a setting other than an acute care hospital, and it has been medically determined that such insured is expected to remain confined in such institution until death. 2. Disclosure requirements a. The face of every accelerated benefit must contain a description of coverage that: uses the terminology accelerated; and contains the following statement: Benefits as specified under this policy will be reduced upon receipt of an accelerated benefit. b. Prior to or with the application, the applicant must be given a written disclosure containing at least: a brief description of the accelerated benefit; the effect of the payment of an accelerated benefit on the policy s cash value, death benefit, premium, policy loans, and policy liens; and definitions of the conditions or occurrences triggering payment of the accelerated benefits. R. LIFE SETTLEMENTS [38A-465, 465A, 465F, 465G; REG 38A ] Life settlement contract means a written agreement between a provider and a policyowner, establishing the amount to be paid (which is less than the expected death benefit) in return for the owner s assignment, transfer, sale, devise or bequest of the death benefit or any portion of an insurance policy. The minimum value for a life settlement contract must be greater than the policy s cash surrender value or currently available accelerated death benefit. CT L&H Law Supplement.indb 27 9/19/ :32:20 AM

30 28 Connecticut Law Supplement 1. Licensing of life settlement providers and brokers Life settlement brokers must be licensed. Life insurance producers licensed more than one year may serve as life settlement brokers. All life settlement brokers must notify the Commissioner and pay a license fee within 30 days of operating as a broker. Attorneys, CPAs, or accredited financial planners who are retained to represent the policy owner and who are not compensated by the life settlement provider may negotiate life settlement contracts on behalf of the owner without a broker license. Life settlement brokers must complete, every 2 years, 15 hours of training related to life settlements and life settlement transactions. Life insurance producers acting as viatical settlement brokers are not subject to these requirements. 2. Required disclosures The provider or broker shall provide, in writing, in a separate document that is signed by the owner and provider, the following disclosures by the date the life settlement contract is signed by all parties. a. The disclosure document shall contain the following language: All medical, financial or personal information solicited or obtained by a provider or broker about an insured, including the insured s identity or the identity of family members, a spouse or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and the provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years. b. The written disclosures must provide at least the following disclosures: That there are possible alternatives to life settlement contracts including, but not limited to, accelerated death benefits in the life insurance policy That some or all of the proceeds of a life settlement contract may be taxable, and assistance should be sought from a professional tax advisor That receipt of the life settlement contract proceeds may adversely affect the recipient s eligibility for public assistance or other government benefits or entitlements, and advice should be obtained from the appropriate agencies That the owner has the right to rescind a life settlement contract for 15 calendar days after the contract is executed by all parties and the owner has received the disclosures specified herein. Such rescission is effective only if both notice of rescission is given to the provider and the owner repays all proceeds and any premiums, loans and loan interest. If the insured dies during the rescission period, the settlement contract shall be deemed to have been rescinded That proceeds from the life settlement contract may be subject to the claims of creditors That proceeds will be sent to the owner within 3 business days after the provider has received acknowledgment that ownership has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract That entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits, to be forfeited by the owner, and assistance should be sought from a financial advisor CT L&H Law Supplement.indb 28 9/19/ :32:20 AM

31 Connecticut Law Supplement 29 That the insured may be contacted by either the provider or broker or its authorized representative to determine the insured s health status or verify the insured s address. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less The amount and method of calculating the compensation paid or to be paid to the broker or to any other person acting for the owner in connection with the transaction, wherein the term compensation includes anything of value paid or given The date by which the funds will be available to the owner and the transmitter of the funds That a buyer s guide or a similar consumer advisory package must be delivered during the solicitation process That the applications and life settlement contract must include a fraud warning, as follows: Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison. The affiliation, if any, between the provider and the issuer of the insurance policy to be settled That a broker represents the owner exclusively, and not the insurer, the provider or any other person, and owes a fiduciary duty to the owner, including a duty to act according to the owner s instructions and in the best interest of the owner The name, address and telephone number of the provider The name, business address and telephone number of the independent thirdparty escrow agent, and the fact that the owner may inspect or receive copies of the relevant escrow or trust agreements or documents That a change of ownership could limit the insured s ability to purchase future insurance on the insured s life because there is a limit to how much coverage insurers will issue on one life c. Failure to provide these disclosures or rights set forth in this section is an unfair practice. d. The broker shall provide the owner and the provider with the following disclosures by the date the life settlement contract is signed by all parties: The name, business address, and telephone number of the broker A full, complete, and accurate description of all the offers, counter-offers, acceptances, and rejections relating to the proposed life settlement contract A written disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contract The name of each broker who receives compensation and the amount of compensation received by said broker, which compensation includes anything of value paid or given to the broker in connection with the life settlement contract CT L&H Law Supplement.indb 29 9/19/ :32:20 AM

32 30 Connecticut Law Supplement A complete reconciliation of the gross offer or bid by the provider to the net amount of proceeds or value to be received by the owner. For the purpose of this section, gross offer or bid means the total amount or value offered by the provider for the purchase of one or more life insurance policies, inclusive of commissions and fees e. Failure to provide these disclosures is an unfair practice. f. Before entering into a life settlement contract with an insured who is terminally ill or chronically ill, a provider shall obtain the following information. 1.) If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into the settlement contract; and a document in which the insured consents to the release of the his or her medical records, and, if the policy was issued less than two years from the date of application for a settlement contract, to the insurance company that issued the policy. g. The insurer shall respond to a request for verification of coverage within 30 days of receiving the request. The insurer must indicate whether, based on the medical evidence and documents provided, it intends to pursue an investigation regarding the validity of the policy. h. The provider must obtain a witnessed document in which the owner consents to the settlement contract, represents that the he or she has a full and complete understanding of the settlement contract, understands the benefits of the policy, acknowledges that the owner is entering into the settlement contract freely and voluntarily and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness or condition and that the terminal or chronic illness or condition was diagnosed after the life insurance policy was issued. i. The insurer shall not unreasonably delay effecting change of ownership or beneficiary with any life settlement contract lawfully entered into in this state or with a resident of this state. j. Not later than 20 days after an owner executes the life settlement contract, the provider shall give written notice to the insurer that the policy has become subject to a life settlement contract. k. All medical information solicited or obtained is subject to applicable laws regarding confidentiality of medical information. l. Each life settlement contract entered into in this state shall provide a right to rescind the policy within 15 days of execution. m. Not later than 3 business days after receiving the documents from the owner to effect the transfer of the insurance policy, the provider shall pay or transfer the CT L&H Law Supplement.indb 30 9/19/ :32:20 AM

33 Connecticut Law Supplement 31 proceeds of the settlement into an escrow or trust account. Not later than 3 business days after receiving acknowledgment of the transfer of the insurance policy from the issuer of the policy, said trustee or escrow agent shall pay the settlement proceeds to the owner. Failure to tender the life settlement contract proceeds to the owner within this time frame renders the viatical settlement contract voidable by the owner until the proceeds are paid. n. Any fee paid to a broker in exchange for procuring the life settlement contract must be calculated as a percentage of the offer obtained and not as a percentage of the face value of the policy. o. Each broker shall disclose to the owner anything of value received in connection with a life settlement contract. p. Connecticut law prohibits entering into a life settlement contract within 2 years of the issuance of a policy, unless the policy was converted from existing group coverage that was in place at least 24 months, or unless the owner or insured is terminally or chronically ill, the owner s spouse dies, the owner gets divorced, the owner retires, or becomes physically or mentally disabled, or becomes bankrupt. 3. Viatical/life settlements [Regs. 38A to 10] a. Life settlement providers must file an annual statement detailing: for each policy settled, the date that the life settlement was entered into; the life expectancy of the insured at the time of the contract; the face amount of the policy; the amount paid by the provider and the percentage that amount represents of the face amount; and if the insured has died, the date, the total insurance premiums paid by the viatical settlement provider to maintain the policy in force and the primary diagnosis code; a breakdown of applications received, accepted, and rejected, by disease category; a breakdown of purchased policies by issuer, year of policy issuance, and policy type; the number of secondary market versus primary market transactions; the total number of policies settled, the total policy premiums paid, the total paid to all owners, and the total commissions paid to brokers; the source and amount of outside borrowing or financing; and the name and address of each broker through whom the reporting company purchased a policy from an owner who resided in Connecticut at the time of contract. These reports cannot identify any insured except with the insured s express written consent or that of his or her estate or representative. Similarly, patient identifying information may not be disclosed or released without the insured s consent. CT L&H Law Supplement.indb 31 9/19/ :32:20 AM

34 32 Connecticut Law Supplement b. Brokers must file an annual statement on or before March 1 of each year verifying that the providers from which the broker receives commission are licensed in Connecticut. c. A broker or provider shall not enter into a life settlement contract that provides payment to the owner that is unreasonable, unjust, or inequitable. In determining whether a payment is unreasonable, unjust, or inequitable, the Commissioner may consider, among other factors, the life expectancy of the insured, the applicable rating of the insurance company that issued the subject policy by a rating service generally recognized by the insurance industry, regulators and consumer groups, and the prevailing discount rates in the life settlement contract market in Connecticut, or if sufficient data is unavailable for Connecticut, the prevailing discount rates nationally or in other states that maintain this data. A viatical settlement provider shall not use a longer life expectancy than is realistic in order to reduce the payout. d. Proceeds of a settlement must be made by wire transfer to the account of the insured or by certified check or cashier s check. Payment must be made in a lump sum except where the life settlement provider has purchased an annuity or similar financial instrument. e. Discrimination is prohibited on the basis of race, age, gender, national origin, creed, religion, occupation, marital or family status, sexual orientation, or based on whether the insured has children. f. A finder s fee commission or other compensation may not be paid to any insured s physician, attorney, accountant, or any other person providing financial planning services, legal services or medical services, or to any other person acting as an agent of the insured with respect to the viatical settlement transaction. A broker shall not, without the written agreement of the owner obtained prior to performing any services in connection with a life settlement contract, seek or obtain any compensation from the owner. g. Advertising related to the life settlement shall be truthful and not misleading. If the advertiser references the speed with which the settlement will occur, the advertising must disclose the average time frame from completed application to the date of offer and from acceptance of the offer to receipt of the funds. If the advertising references the dollar amounts available to owners, the advertising shall disclose the average purchase price as a percentage of face value during the past six months. h. If a provider enters a life settlement contract that allows the owner to retain an interest in the policy, the life settlement contract shall contain: a provision that the provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount settled. Benefits in excess of the amount settled shall be paid directly to the owner or their beneficiary by the insurance company; CT L&H Law Supplement.indb 32 9/19/ :32:20 AM

35 Connecticut Law Supplement 33 a provision that the provider will, upon acknowledgment of the perfection of the transfer, either advise the insured, in writing that the insurance company has confirmed the owner s interest in the policy, or send a copy of the instrument sent from the insurance company to the provider that acknowledges the owner s interest in the policy; and a provision that apportions the premiums to be paid by the provider and the owner. It is permissible for the life settlement contract to specify that all premiums shall be paid by the provider. The contract may also require that the owner reimburse the provider for the premiums attributable to the retained interest. If a provider enters a life settlement contract that pertains to a contract with benefits that are in addition to the basic face amount of the life insurance, including but not limited to, benefits such as accidental death or double indemnity, the owner shall retain an interest in the policy to the extent of such rights. The owner may sell these additional rights to the provider if the life insurance policy does not prohibit the sale of such rights and the life settlement contract discloses or acknowledges the purchase of such rights. i. A disclosure document containing the disclosures required in life settlements shall be provided before or concurrent with taking an application for a life settlement contract. S. MARKET VALUE ADJUSTED ANNUITIES (MODIFIED GUARANTEED ANNUITIES) [REGS. 38a to 22] 1. A modified guaranteed annuity is a deferred annuity contract, the underlying assets of which are held in a separate account, and the values of which are guaranteed if held for specified periods. The assets underlying the contract must be in a separate account during the period when the contractholder can surrender the contract. 2. No company may deliver or issue modified guaranteed annuities unless licensed to conduct life insurance or annuity business in Connecticut and the Commissioner is satisfied that its condition or method of operation will not render its operation hazardous to the public or its policyholders. 3. No modified guaranteed annuity may be delivered or issued until a copy of the forms have been filed with and approved by the Commissioner. 4. Insurers authorized to transact modified guaranteed annuity business must submit to the Commissioner: a separate account annual statement which must include the business of their modified guaranteed annuities; and any additional information concerning their modified guaranteed annuity operations or separate accounts as the Commissioner deems necessary. 5. Companies must annually provide their contractholders with a report showing both the account value and the cash surrender value. The report must clearly indicate the account value before the application of any surrender charges or market value adjustment formula. CT L&H Law Supplement.indb 33 9/19/ :32:21 AM

36 34 Connecticut Law Supplement 6. Required provisions Modified guaranteed annuities must state how the insurance company determines the dollar amount of nonforfeiture benefits. When the annuitant is required to make periodic payments for the annuity, the insurer must provide the following: 30-day grace period or one month in which the payment may be made while the contract remains in force That within one year from date of default, the contract may be reinstated by payment to the insurer of the overdue payments and of any outstanding debts owed to the insurer, including interest The market value adjustment formula used to determine the nonforfeiture benefits That the annuitant s assets in any separate account are not subject to the insurer s liabilities arising from its other business transactions T. LONG-TERM CARE (AS IT APPLIES TO LIFE PRODUCTS) [REGS. 38a to 12] Any life insurer conducting business in Connecticut may issue life insurance policies or certificates (or riders or endorsements) which provide, within the terms and conditions of the policy or certificate, long-term care benefits provided that the insurer is licensed to sell both life and accident and health insurance in this state. 1. Long-term care (LTC) coverage is designed to provide benefits on an expenseincurred, indemnity, or prepaid basis for necessary care or treatment of an injury, illness, or loss of functional capacity provided by a certified or licensed health care provider in a setting other than an acute care hospital, for at least one year after a reasonable elimination period. This type of coverage must also provide benefits for confinement in a nursing home, confinement in the insured s own home, or both. 2. LTC coverage may not include any coverage that is offered primarily to provide basic Medicare supplement coverage, basic medical surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income protection coverage, accident only coverage, specified accident coverage, or limited benefit health coverage. 3. No insurance producer shall sell any policy, certificate, rider, or endorsement unless the producer is licensed to sell both life and health insurance in this state. U. PROTECTION IN ANNUITY TRANSACTIONS [REGS. 38A-432a-1 to 7, 38a-432b-1-4] The State of Connecticut will require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transactions involving annuities, or annuity products, so that the insurance needs and financial objectives of the consumers known at the time of the transaction are appropriately addressed. These rules apply to any recommendation to purchase, exchange, or replace an annuity made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase, replacement, or exchange recommended. These rules do not apply to transactions involving: direct response solicitations where the recommendation is not based on; contracts used to fund an ERISA plan, a tax-sheltered or qualified employee retirement plan (401a, 401k, 403b, 408k, or 408p), a governmental or church plan (457), a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor; CT L&H Law Supplement.indb 34 9/19/ :32:21 AM

37 Connecticut Law Supplement 35 settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or formal prepaid funeral contracts. 1. Definitions a. Recommendation means advice provided by an insurance producer or an insurer where no producer is involved, to an individual consumer that results in a purchase, replacement, or exchange of an annuity in accordance with that advice. b. Replacement means a transaction in which a new annuity 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 annuity 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 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; or reissued with any reduction in cash value or used in a financed purchase. c. Suitability information means information needed in determining the recommendation of the annuity product; includes the following: age, annual income, financial situation and needs, the resources to fund the annuity, financial experience, financial objective, intended use of the annuity, time horizon, existing assets, including investments and life insurance holdings, liquidity needs, risk tolerance, and tax status. 2. Duties of insurers, agencies, and insurance producers In recommending to a consumer the purchase, replacement, or exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no insurance producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments and other insurance products and as to his or her financial situation and needs, including the consumer s suitability information and that there is a reasonable basis for the producer or insurer to believe all of the following. The consumer has been informed of various features of the annuity, such as surrender charges, tax liabilities, mortality and expenses fees, potential charges for features and riders, investment returns, and market risk. The consumer would benefit from certain features of the annuity. The annuity as a whole is suitable for the consumer based on information provided regarding the purchase, replacement, or exchange of the annuity. CT L&H Law Supplement.indb 35 9/19/ :32:21 AM

38 36 Connecticut Law Supplement If an annuity is replaced or exchanged, the consumer must be made aware of the surrender charges for the existing annuity. Risks of exchanging or replacing for a new contract include starting a new surrender period, loss of existing benefits, and possible increased fees and expenses, such as the cost for riders. Additionally, it must be determined whether the consumer benefits from the exchange or replacement. A producer must also ask the consumer if an annuity was purchased, replaced, or exchanged in the last 36 months. Prior to the execution of a purchase, replacement, or exchange of an annuity resulting from a recommendation made to a consumer, an insurance producer, or an insurer (where no producer is involved), shall make reasonable efforts to obtain information concerning: the consumer s financial status; the consumer s tax status; the consumer s investment objectives; and such other information used or considered to be reasonable by the insurance producer, or the insurer where no insurance producer is involved, in making recommendations to the senior consumer. An insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer s needs. There is no obligation to a consumer who: refuses to provide relevant information requested by the insurer or insurance producer; decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance producer; or fails to provide complete or accurate information. An insurer or insurance producer s recommendation must be reasonable under all the circumstances actually known to the insurer or insurance producer at the time of the recommendation. An insurance producer, or the responsible insurer representative, shall at the time of sale: make a record of any recommendations; obtain a signed statement documenting the customer refusal to provide suitability information; and obtain a signed statement that an annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the producer s or insurer s recommendations. An insurer must establish a supervision system for annuity purchase recommendations and ensure that these rules are being followed. The system must include: maintaining written procedures; and conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations. The insurer shall maintain reasonable procedures to inform its insurance producers of the requirements of this law. The insurer shall establish standards for producer product training and shall maintain reasonable procedures to require its producers to comply with these requirements. CT L&H Law Supplement.indb 36 9/19/ :32:21 AM

39 Connecticut Law Supplement 37 The insurer should provide product-specific training and materials to explain all features of its annuity products. The insurer should maintain procedures for review of each recommendation prior to issuance of an annuity that are designed to ensure that there is a reasonable basis for recommendation. The insurer is also expected to aid and detect any recommendations where an annuity is not suitable. A report must be submitted to senior management on an annual basis. Compliance with the Financial Industry Regulator Authority (FINRA) Conduct Rules pertaining to suitability shall satisfy these requirements for the recommendation of variable annuities. An insurance producer shall not dissuade, or attempt to dissuade, a consumer from: truthfully responding to an insurer s request for confirmation of suitability information; filing a complaint; or cooperating with the investigation of a complaint. 3. Mitigation of responsibility The commissioner may order an insurer to take reasonably appropriate corrective action for any consumer harmed by a violation of these sections. An insurance producer may be ordered to take reasonably appropriate corrective action for any consumer harmed by the insurance producer s violation. An agency that employs or contracts with an insurance producer to sell, or solicit the sale, of annuities to consumers, may also be ordered to take reasonably appropriate corrective action for any consumer harmed by the insurance producer s violation of these rules. Fines/penalties may be reduced or eliminated at the discretion of the commissioner, if corrective action for the consumer was taken promptly after a violation was discovered. The Commissioner may terminate or suspend a producer or insurer s license or pursue other legal or regulatory action. 4. Recordkeeping Insurers, agencies, and insurance producers shall maintain or be able to make available to the commissioner records of the information collected from the consumer and other information used in making annuity purchase recommendations that resulted in insurance transactions for seven years after the insurance transaction is completed by the insurer. An insurer is permitted, but shall not be required, to maintain documentation on behalf of an insurance producer. 5. Prohibited uses of senior-specific certifications and professional designations [Reg. 38a-432b-2] It is a prohibited practice in the business of insurance, and constitutes cause for the suspension or revocation of insurance licenses or fines, for an insurance producer to use a senior-specific certification or professional designation in a way as to mislead a purchaser or prospective purchaser, that the insurance producer has special certification or training in advising or servicing seniors. a. The following uses of senior-specific certifications or professional designations shall be prohibited when soliciting, advising, reviewing, or analyzing any life or annuity product: Use of a certification or professional designation by an insurance producer who has not actually earned or is otherwise ineligible to use such certification or designation CT L&H Law Supplement.indb 37 9/19/ :32:21 AM

40 38 Connecticut Law Supplement Use of a nonexistent or self-conferred certification or professional designation Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the insurance producer using the certification or designation does not have Use of a certification or professional designation that was obtained from a certifying or designating organization that is primarily engaged in the business of instruction in sales or marketing, does not have reasonable standards or procedures for assuring the competency of its certificants or designees, does not have reasonable standards or procedures for monitoring and disciplining its certificants or designees for improper or unethical conduct, or does not have reasonable continuing education requirements for its certificants or designees in order to maintain the certificate or designation. b. Determining factors In determining whether a combination of words or an acronym standing for a combination of words constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing seniors, factors to be considered shall include: use of one or more words such as senior, retirement, elder, or like words combined with one or more words such as certified, registered, chartered, advisor, specialist, consultant, planner, or like words, in the name of the certification or professional designation; and the manner in which those words are combined. c. For purposes of this regulation, a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency is not a certification or professional designation, unless it is used in a manner that would confuse or mislead a reasonable consumer, when the job title: indicates seniority or standing within the organization; or specifies an individual s area of specialization within the organization. III. CONNECTICUT LAWS AND REGULATIONS PERTINENT TO ACCIDENT AND HEALTH INSURANCE A. CONSIDERATIONS IN REPLACING HEALTH INSURANCE [REG. 38a , 38a-546] When accident and health contracts are to be replaced in Connecticut, several policy provisions or parts must be scrutinized to ensure that a producer is not engaged in any misrepresentation. 1. Primary provisions to be scrutinized Several relevant provisions should be scrutinized including preexisting conditions, waiting periods, exclusions, limitations, and insurer underwriting requirements. CT L&H Law Supplement.indb 38 9/19/ :32:21 AM

41 Connecticut Law Supplement 39 For example, many health contracts have a six- to eight-month exclusion for preexisting conditions when a person applies for coverage under a new policy. If a producer is replacing a major medical contract, the producer must be aware of this. 2. Misrepresentation If a producer engages in misrepresentation during the replacement of health insurance contracts in this state, the producer may be exposed to errors and omissions liability. 3. Notice regarding replacement Applications for individual accident and health insurance policies must include questions designed to determine whether the applicant has another accident and health insurance policy in force or whether the policy being applied for is intended to replace any other accident or sickness policy in force. If the sale will involve replacement, the insurer or its producer must give the applicant a Notice Regarding Replacement. The form and content of the notice is set by law. Generally, the notice advises consumers to consider carefully the effect replacement may have on their insurance coverage. 4. Limited benefits [38a-482b, 513d] Insurers are prohibited from replacing a group comprehensive medical coverage with a group limited benefit plan. In addition, individual and group limited benefit policies must contain a conspicuously located notice in at least 12-point type saying that it does not provide comprehensive coverage and stating its benefit limit. B. ADVERTISING [REGS. 38a to 20] 1. Purpose The Connecticut Insurance Department has established rules governing the advertising of accident and health insurance policies. Guidelines regarding permissible and impermissible standards of conduct in the advertising of accident and health insurance have been established to prevent unfair, deceptive, and misleading advertising. 2. Definition of advertisement Advertisements include: printed and published material, audio visual material, and descriptive literature used in direct mail, newspapers, magazines, radio scripts, TV scripts, billboards, and similar displays; descriptive literature, prepared sales presentations, and sales aids of all kinds issued by an insurer, agent, broker, or solicitor for presentation to members of the insurance-buying public; and prepared sales talks, presentations, and material for use by agents, brokers, and solicitors. 3. Form and content Advertisements must: be truthful and not misleading; not use words or phrases known only to people who are familiar with insurance terminology; and include the insurer s name. CT L&H Law Supplement.indb 39 9/19/ :32:22 AM

42 40 Connecticut Law Supplement 4. Prohibited practices a. Words, phrases, statistics, or illustrations may not be used in a way that misleads or deceives anyone about policy premiums, benefits payable, or losses covered. b. Descriptions of policy limitations, exceptions, or reductions must: be accurate; include the negative features of the limitations; and not imply that the limitation, exception, or reduction is a benefit. For example, it is not legal to advertise a waiting period as a benefit builder or state that even preexisting conditions are covered after two years. c. No advertisement may contain or use words or phrases such as all, full, complete, comprehensive, unlimited, up to, as high as, this policy will help fill some of the gaps that Medicare and your present insurance leave out, the policy will help to replace your income (when used to express loss of time benefits), or similar words and phrases meant to exaggerate the benefits of the policy. d. An advertisement for a hospital confinement benefit cannot state that a stated amount for hospital room and board expenses is payable without also stating the maximum daily benefit and time limit for such expenses. e. An advertisement may not use words such as tax free, extra cash, extra income, extra pay, or similar words that may mislead the public into believing that the policy advertised will enable them to make a profit from being hospitalized. f. An advertisement for a policy covering only specified diseases may not imply coverage beyond policy terms. An advertisement for a policy providing benefits for specified illnesses only (such as cancer) or for specified accidents only must state clearly the policy s limited nature. g. An advertisement of a direct response insurer may not imply that because no agent is involved that it is a low-cost plan or use other similar words and phrases, because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product. 5. Method of disclosure of required information All information required to be disclosed must be: set out conspicuously and in close conjunction with the statements to which the information relates; or under appropriate captions so that the information is not minimized, obscured, or presented in a misleading or ambiguous fashion. 6. Testimonials Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised, and be accurately reproduced. If the person that is giving the testimonial is being compensated, the advertisement must disclose this fact. CT L&H Law Supplement.indb 40 9/19/ :32:22 AM

43 Connecticut Law Supplement Use of statistics Statistical information relating to any insurer or policy shall not use irrelevant facts and shall not be used unless it accurately reflects all of the relevant facts. The source of any statistics used in an advertisement shall be identified in such advertisement. 8. Comparisons or statements An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of noncomparable policies of other insurers and shall not disparage competitors, their policies, services, or business methods and shall not disparage or unfairly minimize competing methods of marketing insurance. 9. Jurisdiction An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits. 10. Enforcement procedures a. Advertising file Each insurer shall maintain at its home or principal office a complete file containing every printed, published, or prepared advertisement of its individual policies and typical printed, published, or prepared advertisements disseminated in this or any other state whether or not licensed in such other state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. The file shall be subject to regular and periodical inspection by this Department. All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time. b. Certificate of compliance Each insurer required to file an annual statement with the Insurance Department stating that to the best of their knowledge the advertisements were in compliance with all the regulations with the state. 11. Prior review If required by the Department for review of advertisements, an insurer must file the advertisement not less than 30 days prior to the date the insurer plans to use the advertisement. C. OUTLINES OF COVERAGE [SEC. 38a-505(f); REG. 38a (B) to (K)] In order to provide for full and fair disclosure in the sale of all accident and health policies, these policies must be delivered in this state along with an outline of coverage. An outline of coverage briefly describes the terms and benefits provided by the contract. These outlines generally must meet requirements set forth by the Commissioner. 1. An outline of coverage provided to an insured when basic medical-surgical expense coverage is being provided must include the fact that benefits are being provided for surgical services, anesthesia services, and in-hospital medical services (subject to limitations, deductibles, coinsurance, and so forth). CT L&H Law Supplement.indb 41 9/19/ :32:22 AM

44 42 Connecticut Law Supplement D. OTHER GENERAL PROVISIONS 1. Free look [Reg. 38a (A)(7)] All policies, except single premium nonrenewable policies, must have a notice prominently printed on the first page of the policy stating that the policyholder has the right to return the policy within 10 days of its delivery and to have the premium refunded if the policyholder is not satisfied for any reason. 2. Renewability [Reg. 38a-505-9(A)] The terms noncancellable and guaranteed renewable can only be used in individual health insurance policies in which the insured has the right to continue the policy in force until age 65 or eligibility for Medicare by the timely payment of premiums, during which period the insurer has no right to make unilateral changes in any provisions of noncancellable policies. In guaranteed renewable policies, the insurer can make changes in premium rates by classes. 3. Military suspense provision [Reg. 38a-505-9(A)(5)] If an individual health insurance policy contains a status type military service exclusion which suspends coverage during military service, the policy must provide, upon receipt of written request, for refund of premiums as applicable to such person on a pro-rata basis. 4. Required provisions All of the standard required provisions set forth by NAIC are found in every accident and sickness policy issued in this state: entire contract, time limit on certain defenses, grace period, reinstatement period, claim procedures, notice of claim, claim form, proof of loss, payment of claim, physical examinations and autopsy, legal actions, and change of beneficiary. 5. Optional provisions The following optional provisions may be found in accident and health insurance policies: change of occupation, misstatement of age, other insurance with this insurer, insurance with other insurers for medical and disability, unpaid premiums, cancellation, and conformity with state statutes. E. CONNECTICUT MANDATED BENEFITS AND OFFERS OF COVERAGE FOR INDIVIDUAL AND GROUP POLICIES 1. Non-cancellable and guaranteed renewable policies [Reg. 38a-505-9] A non-cancellable or guaranteed renewable policy cannot terminate coverage for a spouse due only to the occurrence of an event that will terminate coverage for the insured, other than nonpayment of premium. If the insured dies and the spouse is covered by the policy, the policy must make the spouse the insured. 2. Dependent children coverage under individual policies [Secs. 38a- 497, 497a, 554, Bulletin HC-71] Beginning on January 1, 2009, coverage for dependent children under an individual policy may terminate no earlier than the policy anniversary date on or after whichever of the following occurs first: The date on which the child marries The date on which the child ceases to be a resident of the state (except for fulltime attendance at an out-of-state college or university or out-of-state residence with a custodial parent) CT L&H Law Supplement.indb 42 9/19/ :32:22 AM

45 Connecticut Law Supplement 43 The date on which the child becomes covered under a group health plan through the dependent s own employment The date on which the child attains the age of 26 a. If a child has health insurance coverage through an insurer of a noncustodial parent, the insurer must: provide the information to the custodial parent as necessary for the child to obtain benefits through the coverage; permit the custodial parent, or the health care provider, with the custodial parent s approval, to submit claims for covered services without the approval of the noncustodial parent; and make payments on claims directly to the custodial parent, the health care provider, or the Department of Social Services. b. An insurer may not deny enrollment of a child under the health plan of the child s parent if the child: was born out of wedlock, provided the father of the child has acknowledged paternity or has been adjudicated the father; is not claimed as a dependent on the federal income tax return of the parent; does not reside with the parent or in the insurer s service area; or is receiving or is eligible for benefits under a state medical assistance plan required by the Social Security Act. 3. Coverage of mentally or physically handicapped [Sec. 38a-489, 515] The coverage of any child insured by an accident and health policy who is mentally or physically incapable of earning his own living on the date as of which the dependent status of a covered child would otherwise expire because of age continues under the policy while the policy remains in force or is replaced by another policy as long as the incapacity continues and as long as the dependent remains chiefly financially dependent on the policyholder (parents) provided that due proof of incapacity is received by the insurer within 31 days of the child reaching the limiting age. The insurer may request proof of the child s continuing incapacity and dependency at any time. After two years have passed since the child reached the limiting age, the insurer may continue to require proof of continuing incapacity or dependency, but not more often than once every year. 4. Newborn child coverage [Secs. 38a-490, 516, PA ] All individual and group health insurance policies issued in this state providing coverage on a provision, service, or expense-incurred basis which provide coverage for a family member of the insured or subscriber will, as to the family member s coverage, also provide that the health insurance benefits applicable for children are payable with respect to a newly born child of the insured or subscriber from the moment of birth. a. Coverage for newly born children will consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. CT L&H Law Supplement.indb 43 9/19/ :32:23 AM

46 44 Connecticut Law Supplement b. If payment of a specific premium or subscription fee is required to provide coverage for a child, the policy or contract may require that notification of the birth of a newly born child and payment of the required premium or fee must be furnished to the insurer, nonprofit service, or indemnity corporation within 31 days after the date of the birth in order to have the coverage continue beyond the 31-day period. 5. Adopted and prospective adopted children [Secs. 38a-508, 549] Every individual policy must provide coverage for children legally placed for adoption (even if the adoption is not yet finalized). Coverage for adopted children will consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. The policy may require that notification be provided to the insurer within 31 days. It must cover such children on the same basis as other dependents. It may not contain any provision for preexisting condition, insurability, eligibility, or health underwriting approval for a child who is legally placed for adoption. 6. Infertility coverage [Secs. 38a-509, 536, Bulletin HC-64] Group and individual policies must provide coverage for the diagnosis and treatment of infertility including in-vitro fertilization procedures. Policies may limit coverage to a person until the person s 40th birthday, or to persons who have been insured under the policy for at least 12 months. F. MEDICAL EXAMINATIONS AND HIV TESTING [19A-583, 586] 1. Any insurer who requests an applicant take an HIV-related test for insurance coverage must obtain the applicant s written informed consent. 2. Any person who obtains HIV-related information on an individual may not disclose this information unless: the individual or legal guardian gives consent; a release of confidential HIV-related information is secured; or as mandated or authorized by federal or state law. G. GENETIC INFORMATION [SEC. 38a-816(19)] Insurers are prohibited from refusing to insure, refusing to continue to insure, or limiting the amount, extent, or kind of coverage available to an individual or charging an individual a different rate for the same coverage because of genetic information. H. UNFAIR DISCRIMINATION [SEC. 38a-488] Discrimination between individuals of the same class in the amount of premiums or rates charged for any individual health insurance policy, or in the benefits payable, in the terms or conditions, or in any other manner, is prohibited. I. EXCLUSIONS FROM COVERAGE [REG. 38a-505-7] No health insurance policy may limit or exclude coverage by type of illness, accident, treatment, or medical condition, except: mental or emotional disorders, alcoholism, and drug addiction; pregnancy, except for complications of pregnancy; CT L&H Law Supplement.indb 44 9/19/ :32:23 AM

47 Connecticut Law Supplement 45 illness, treatment, or medical condition arising out of war, participation in a felony, riot, or insurrection, or service in the armed forces or auxiliary units, suicide (sane or insane), attempted suicide, or intentionally self-inflicted injury, aviation, or interscholastic sports, with respect to short-term renewable policies; cosmetic surgery, excluding reconstructive surgery; treatment provided in a government hospital, benefits provided under Medicare or other governmental program, any federal or state workers compensation, employers liability or occupational disease law, or the basic reparations benefits of any motor vehicle no-fault law, services rendered by employees of hospitals, laboratories, or other institutions, or services performed by a member of the covered person s immediate family; dental care or treatment; eyeglasses, hearing aids, and any necessary examinations; rest cures, custodial care, transportation, and routine physical examinations; and territorial limitations. J. INDIVIDUAL DISABILITY INCOME INSURANCE [REGS. 38a-505-9(F)] 1. Definition Disability income protection coverage is a policy that provides for weekly or monthly payment for a specified period during the continuance of disability resulting from sickness, injury, or a combination thereof which: provides that periodic payments payable at ages after 62 and reduced solely on the basis of age are at least 50% of amounts payable immediately prior to age 62; and contains an elimination period no greater than 90 days in the case of coverage providing a benefit period of one year or less, 180 days in the case of coverage providing a benefit of more than one year but not greater than two years, or 365 days in all other cases during the continuance of disability resulting from sickness or injury, and has a maximum period of time for which it is payable during disability of at least six months except in the case of a policy covering disability arising out of pregnancy, childbirth, or miscarriage in which case the period for such disability may be one month. No reduction in benefits may be put into effect because of an increase in Social Security or similar benefits during a benefit period. 2. Relation of earnings to insurance [Sec. 38a-483(b)(6)] No insurer is obligated to pay disability benefits that would exceed what an individual earned before the disability occurred. The relation of earnings to insurance provision protects insurers from paying more than the average monthly earnings based on the two years before the injury or sickness of the insured individual. CT L&H Law Supplement.indb 45 9/19/ :32:23 AM

48 46 Connecticut Law Supplement K. MEDICARE SUPPLEMENT POLICIES This topic was covered extensively in a prior unit; what follows are Connecticut regulations specific to this product. 1. Open enrollment [Regs. 38a-495a-8] A company may not deny coverage because of health status, claims experience, receipt of health care, or medical condition if the applicant submits the application during the six-month period beginning with the first month in which the individual, who is age 65 or older, first enrolled for Medicare Part B. 2. Benefit standards [38a-495a-5, 38a-495a(f)] a. A Medicare supplement policy may not indemnify against losses resulting from a sickness on a different basis than losses resulting from accidents. b. A Medicare supplement policy will provide that benefits designed to cover costsharing amounts under Medicare will be changed automatically (notice of benefit changes) to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with these changes. c. A Medicare supplement policy may not terminate coverage of spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than nonpayment of premium. d. A Medicare supplement policy may not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. 1.) If an insured has creditable coverage from another group or individual health plan or risk sharing plan, there can be no waiting period for preexisting conditions. e. Each policy must be guaranteed renewable and the issuer may not cancel or nonrenew a policy: solely on the grounds of the insured s health status; or for any reason other than nonpayment of premium or material misrepresentation. 3. Termination of the Medicare supplement policy must be without prejudice to any continuous loss which commenced while the policy was in force. 4. No Medicare supplement may provide the same (duplicate) benefits that are provided by Parts A or B of Medicare. 5. A coordination of benefits provision is included in a Medicare supplement policy with regard to primary of policies. 6. Insurers must provide 10 days written notice of cancellation or nonrenewal to an insured according to Connecticut law when terminating coverage. CT L&H Law Supplement.indb 46 9/19/ :32:23 AM

49 Connecticut Law Supplement Required disclosure provisions and other requirements [Secs. 38a-495a, 495a(l)(1) and (2); Regs. 38a-495a-12, 13, 13(a)(5), 13(a)(6)(A), 17] a. Renewal provision Medicare supplement policies must include a renewal, continuation, or non-renewal provision. The language or specifications of these provisions must be consistent with the type of contract to be issued. b. Reduction in benefits Except for riders or endorsements by the insurer that effectuate a request made in writing by the insured or exercises a specifically reserved right under a Medicare supplement policy, all riders or endorsements added to a Medicare supplement policy after the date of issue or at reinstatement or renewal that reduce or eliminate benefits may require a signed acceptance by the insured. c. Preexisting conditions If a Medicare supplement policy contains any limitations with respect to preexisting conditions, these limitations must appear as a separate paragraph of the policy and be labeled as Preexisting Condition Limitations. A Medicare supplement policy may not exclude or limit benefits for losses incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date of coverage. d. Right to return Medicare supplement policies must have a 30-day free-look provision listed prominently on the first page of the policy. e. Outline of coverage Insurers issuing Medicare supplement policies in this state must provide an outline of coverage to all applicants at the time application is made and, except for direct response policies, must obtain an acknowledgment of receipt of the outline from the applicant. If a policy is later issued but the coverage provided is different than applied for, a new outline of coverage must be provided to the applicant or insured which describes the coverage in effect. The outline of coverage must consist of four parts: a cover page, premium information, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage must appear in no less than 12-point type using the wording and format prescribed by regulation. f. Notice requirements Medicare supplement policy benefits must be adjusted to conform with annual changes made to Medicare benefits. Issuers must notify their policyholders of modifications made to their Medicare supplement insurance policies no later than 30 days prior to the annual effective date of any Medicare benefit changes. The notice must: include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement policy; inform each policyholder as to when any premium adjustment is to be made due to changes in Medicare; be in clear and simple terms; and not contain or be accompanied by any solicitation. CT L&H Law Supplement.indb 47 9/19/ :32:23 AM

50 48 Connecticut Law Supplement g. Appropriateness of recommended purchase An agent must make a reasonable effort to determine the appropriateness of the recommended purchase or replacement of a Medicare supplement policy. Any sale of Medicare supplement coverage that will provide an individual more than one Medicare supplement policy or certificate is prohibited. h. Buyer s Guide The only Buyer s Guide that may be distributed is the current edition of Guide to Health Insurance for People with Medicare published jointly by the NAIC and the Health Care Financing Administration; the Buyer s Guide must be distributed at the time of application. i. Permitted compensation First-year commissions may not exceed 200% of the compensation paid for selling or servicing the policy in the second year; renewal commissions must be the same as those paid in the second year and must be provided for no fewer than five renewal years. If a replacement is involved, commissions must not be greater than the renewal commissions paid by the issuer of the policy being replaced. 8. Reporting of multiple policies [Reg. 38a-495a-18] On or before March 1 of each year, an issuer must report to the Commissioner the following information for every individual resident of Connecticut for which the issuer has in force more than one Medicare supplement policy: Policy and certificate number Date of issuance 9. Requirements for replacement [Regs. 38a-495a-14, 19] a. Upon determining that a sale will involve replacement, an insurer or its agent must furnish the applicant with a Notice Regarding Replacement. b. If replacement is involved, the replacing issuer must waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods in the new policy to the extent such time was spent under the original policy. 10. Standards for marketing [Reg. 38a-495a-16] a. All insurers issuing or delivering Medicare supplement insurance policies in Connecticut must comply with the following standards when marketing such policies: Establish marketing procedures to ensure that its producers will fairly and accurately compare policies Establish marketing procedures to ensure that excessive insurance is not sold or issued Display this notice prominently on the first page of the policy: Notice to buyer: This policy may not cover all of your medical expenses CT L&H Law Supplement.indb 48 9/19/ :32:23 AM

51 Connecticut Law Supplement 49 Make every reasonable effort to determine whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the types and amounts of the insurance Establish procedures by which the Commissioner can audit the insurer to ensure compliance with these requirements b. In addition to the unfair marketing practices prohibited by law, insurers may not engage in the following practices when soliciting or selling Medicare supplement policies. Twisting, which is knowingly making any misleading representation or incomplete or fraudulent comparison of insurance policies or insurers to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert an existing policy or to buy a policy with another insurer High-pressure tactics, which consist of any marketing method that induces insurance sales through force, fright, explicit or implied threat, or undue pressure to buy or recommend the purchase of insurance Cold lead advertising, which is the use of any marketing method that fails to clearly disclose that the purpose of the advertisement is to solicit insurance and that the producer or insurance company will contact the prospective applicant 11. Approval of advertisement [Reg. 38a-495a-15] All Medicare supplement advertisements intended for use in the state must first be approved by the Commissioner. 12. Plan of offering to disabled [Sec. 38a-495c] Every insurance company, fraternal benefit society, hospital service corporation, medical service corporation, health care center, or other entity in the state issuing Medicare supplement policies or certificates for plan A, B, or C, or any combination thereof, to persons eligible for Medicare by reason of age must offer for sale the same such policies or certificates to persons eligible for Medicare by reason of disability. 13. Standardized plans [38a-495a-6, 6(a)] All insurers offering Medicare supplement policies must offer a plan that includes only the basic core benefits in Plan A. All other benefit plans must include the basic core benefits. a. Plan A basic core benefits include: 100% of the Part A hospital copayment for days and each of the 60 reserve days; 100% of covered expenses for an additional 365 lifetime inpatient hospital reserve days; and Part B coinsurance and the cost of the first three pints of blood each year. b. Medicare (Medigap) Plans B N will cover the basic core benefits in addition to extra benefits not covered under Plan A. CT L&H Law Supplement.indb 49 9/19/ :32:24 AM

52 50 Connecticut Law Supplement L. LONG-TERM CARE INSURANCE The purpose of long-term care insurance regulations according to Connecticut insurance law is to protect purchasers of coverage from deceptive sales practices and to establish standards for this type of insurance. Many of the NAIC standards, which are also applicable in Connecticut, were previously discussed. 1. Definition LTC insurance is any policy or rider advertised, marketed, offered, or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense-incurred, indemnity, prepaid, or other basis for one or more necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. 2. Marketing standards [Reg. 38a , 17] Selling excessive coverage, high-pressure tactics, and twisting (misleading or incomplete representations or fraudulent comparisons) in an attempt to sell an LTC policy are prohibited practices. Reasonable efforts must be made to determine that the purchase of an LTC policy is suitable for the individual. 3. Outline of Coverage and Shopper s Guide [Regs. 38a , 21(b)] An Outline of Coverage must be provided at the time of application to each person applying for an LTC policy; a Shopper s Guide must be provided to each prospect for a policy. The outline of coverage must be a separate document that is printed in a typeface that is no smaller than 12 points. 4. Replacement [Regs. 38a , 17, 22] Applications are to include questions designed to determine if the applicant has any other LTC coverage in effect. Agents are required to list all health policies they sold to the applicant that are in force and those that were sold in the last five years that are no longer in force. If replacement is involved, a form titled Notice to Applicant Regarding Replacement of Individual Accident and Sickness or Long-Term Care Insurance that contains a notice to the applicant regarding replacements must be signed by the applicant and the agent. If a policy is replaced, all preexisting condition restrictions, waiting periods, and probationary periods must be waived. 5. Inflation protection [Reg. 38a ] Insurers that choose to offer some form of inflation protection must offer each policyholder, at the time of application, the option to purchase the inflation protection; benefit levels may be increased annually or periodically at the insured s option at the rate of at least 5%. 6. Required disclosure provisions [Reg. 38a ] Required disclosure provisions include that riders and endorsements must be agreed to in writing by the insured; when benefits are payable on a reasonable and customary or similar basis, the terms must be defined. Limitations or conditions on eligibility for benefits must be described in a separate paragraph; a brief description of the policy must appear on the first page of the policy at the top or bottom. 7. Free-look period [Reg. 38a (g)] LTC policies must have a notice printed on the first page of the policy or attached thereto stating that the policyholder has the right to return the policy within 30 days of its delivery and have the premium refunded if not satisfied for any reason. CT L&H Law Supplement.indb 50 9/19/ :32:24 AM

53 Connecticut Law Supplement LTC nonforfeiture benefit offer [Reg. 38a ] No insurer may sell an LTC insurance policy unless the insurer also offers the applicant the option to purchase a policy that provides a nonforfeiture benefit. An insurer meets this requirement by providing a return of premium, full benefits for a reduced benefit period, reduced benefits for the full benefit period, or another benefit that is acceptable to the Commissioner. A policy that provides a nonforfeiture benefit must include a schedule of this benefit. 9. Connecticut partnership for LTC [Regs. 38a to 6; RL 17b-252] The Department of Insurance will only recertify LTC policies that: alert the purchaser to the availability of consumer information and public education provided by the Department on Aging; offer the option of home and community-based services in addition to nursing home care; in all home care plans, offer case management services delivered by a coordination, assessment, and monitoring agency (CAM), or by a home health care agency separately licensed as a coordination, assessment, or monitoring agency; provide automatic inflation protection or optional periodic per diem upgrades until the insured begins to receive LTC benefits; provide for the keeping of records and an explanation of benefit reports on insurance payments which count toward Medicare resource exclusions; and provide the management information and reports necessary to document the extent of Medicaid resource protection offered and to evaluate the Connecticut partnership for LTC. a. No policy may be recertified if it requires prior hospitalization or a prior stay in a nursing home as a condition of providing benefits. b. Coordination, assessment, and monitoring agency (CAM) Connecticut Partnership for Long-Term Care policyholders who have home health care benefit coverage as part of their policy will have their need for home health care services assessed and monitored by this agency. 1.) Following a recommendation by a physician for home health care, CAM will provide case management services that will include the development of a comprehensive and individualized assessment and care plan and, as needed, the coordination of appropriate services and the monitoring of the delivery of these services. 2.) CAM will monitor the services provided to the policyholder after they begin. M. GROUP INSURANCE 1. Continuation of coverage and conversion (liability of group employers) [Secs. 38a-538, 546, 554(d)] Whenever any individual (or spouse) who is covered by a group health plan becomes ineligible for any reason including death or divorce, all benefits (except disability income) may be made available by the employer at the same group rate. These benefits may be made CT L&H Law Supplement.indb 51 9/19/ :32:24 AM

54 52 Connecticut Law Supplement available to the individual (and spouse and dependents) for an extension period up to 104 weeks for any reason other than death, and to the surviving spouse or former spouse (and dependents) upon death of the individual or divorce for an extension period up to 156 weeks. The liability of the employer in these instances is spelled out by the Consolidated Omnibus Budget Reconciliation Act (COBRA). a. The employer must notify in writing those eligible that they are in fact eligible to continue coverage. This notification must be made within 10 days after the covered individual becomes ineligible to participate in the group plan. b. If the individual (and spouse and dependents) elects to continue to participate in the group plan, he must notify the employer in writing within 30 days after becoming ineligible. c. The individual (i.e., member), spouse, and dependents must make premium payments to the employer (i.e., policyholder) throughout the extension period (the amount paid may not exceed 102% of the applicable premium). d. If the employer fails to make the payment to the insurer after receiving the appropriate amount from the individual (member) and the coverage is terminated, the employer will be liable for benefits as the insurer would have been. 2. Group eligibility The term group (group eligibility) means a benefit plan, other than salary budget plans utilizing individual insurance policies or subscriber contracts, which meet the following conditions. a. Coverage is provided through insurance policies or subscriber contracts to classes of employees or members defined in terms of conditions pertaining to employment or membership. b. The coverage is not available to the general public and can only be obtained through one s employment or membership in an association. c. There are arrangements for bulk payment of premiums to the insurer. d. There is sponsorship of the plan by the employer, union, or association. 3. Cancellation of group accident and health insurance [Secs. 38a-537(a), (d)] Notice of cancellation must be provided to any covered employee by the entity (employer) providing coverage within 15 days before the effective date of cancellation or discontinuation. Any individual or entity that fails to provide timely notice may be fined not more than $2,000 for each violation (this regulation also applies to life insurance). a. Whenever an employer stops doing business, any terminated employee whose group health insurance was discontinued and who did not receive notice of such discontinuation is eligible, within 90 days from the date of discontinuation, to purchase as a conversion privilege an individual health insurance plan. The employee must pay the premiums for the period of retroactive coverage. CT L&H Law Supplement.indb 52 9/19/ :32:24 AM

55 Connecticut Law Supplement Connecticut continuation rules [Sec. 38a-546] In the case of discontinuance of a group heath insurance policy and its subsequent replacement with another plan, the new carrier (company) must give credit, in applying any deductible, coinsurance, or waiting period, for the same or similar provisions satisfied under the previous plan. 5. Extension of benefits [Reg. 38a-546-5(a)] Every group insurance policy must provide for the extension of benefits in case of total disability if the group policy is discontinued. a. Any disability benefit extension (such as a premium waiver extension, extended death benefit in the event of a total disability, or payment of income during a total disability) must continue even if the group policy is discontinued. b. A group disability income protection plan or group hospital confinement indemnity plan will not be affected if the group policy is discontinued. c. The group health insurance plan will extend benefits as follows. 1.) If no succeeding insurer is present on the date that a group policy is discontinued, covered persons who were confined to a health care facility or totally disabled on that date will continue to have coverage for that confinement without having to pay premiums. a.) The extension will last until the person is no longer confined to a health care facility or not totally disabled, or until one year after the date the policy was discontinued, whichever is earlier. 2.) If a succeeding insurer replaces the group health insurance plan, covered persons who were confined to a health care facility on the date the first plan was discontinued are entitled to coverage for that confinement from the first plan without having to pay premiums. a.) The extension will last until the person is no longer confined to a health care facility, or until one year after the date the policy was discontinued, whichever is earlier. b.) The succeeding insurer is responsible for all other coverage, including transition of care benefits that let the person use the current health care for a time that is clinically appropriate for the treatment of the condition that led to the confinement. 3.) If a succeeding insurer replaces the group health insurance plan, covered persons who were totally disabled (but not confined to a health care facility on the date the first plan was discontinued) are entitled to continued coverage from the replacing insurer. They may also use their current health care provider(s) for a time that is clinically appropriate for the treatment of the condition that led to the confinement. CT L&H Law Supplement.indb 53 9/19/ :32:24 AM

56 54 Connecticut Law Supplement 6. Continuation of benefits [Reg (b)] A continuation of benefits provision of a group health insurance plan must contain the following provisions. a. An employee who is absent due to illness or injury is entitled to continued coverage for herself and her dependents for the duration of the illness or injury or for up to one year, whichever is sooner. The employee may be required to contribute her usual share of the premium even during her absence from work. An employer is not obligated to pay the employee s share if the employee fails to pay it herself. b. The employee may be required to pay up to the rate allowed by COBRA. 1.) An employee whose coverage has been continued, as of the date the policy is replaced, will be covered by the replacing insurer s plan of benefits for the duration of the continuation of coverage period. However, the employee must pay the premium for this continued coverage within 31 days after the replacement date. 7. Dependent eligibility [Bul IC-21] The term spouse as used in insurance policies includes a same sex spouse, pursuant to a legal marriage entered into Connecticut or another state that recognizes same sex marriages. This definition originally took effect under an insurance department bulletin, but since then it has become part of Connecticut state law. Domestic partners can only be covered if the insurance policy contains specific language that a domestic partner is an eligible dependent. 8. Spousal coverage [Sec. 38a-541] Every health insurance policy issued under a group insurance plan must allow the spouse of any employee participating in the group insurance plan offered by the same employer to be covered as an employee in addition to being covered as a dependent of the participating employee, except that benefits provided under the combined coverage of the employee as an employee and as a dependent may not exceed 100% of the charge for the covered expense or service. This applies only where both spouses are employed by the same employer and by reason of their employment are both participating in a group insurance plan. 9. Certificate of coverage [Sec. 38a-182] An insurer must provide a certificate of coverage to the group contract holder or individual contract holder. 10. Coordination of benefits [Reg. 38a to 6] When an employee has health care coverage under more than one plan, the coordination of benefits provision establishes rules for determining the order in which benefits are paid. a. If a plan is the primary plan, its benefits are determined before those of any other plans. b. When a secondary plan exists, the benefits are paid after the primary plan and may be reduced as a result. c. The benefits of the plan that covers the person as an employee, member, or subscriber are determined before those of the plan that covers the person as a dependent. CT L&H Law Supplement.indb 54 9/19/ :32:24 AM

57 Connecticut Law Supplement 55 N. CONNECTICUT HIPAA ALTERNATIVE HEALTH REINSURANCE ASSOCIATION (CONNECTICUT COMPREHENSIVE HEALTH CARE PLAN) [SECS. 38A-551 to 560] This is a nonprofit legal entity (association) comprised of all insurers and self-insurers selling health insurance in Connecticut. All health insurers in this state must participate in the Association as a condition of their authority to transact health insurance business. 1. Eligibility The Association is a high-risk pool and provides health insurance to those who cannot secure it in the normal market. For example, if a person could not secure health coverage from a health insurance carrier because of an adverse health condition, he would be able to secure coverage through the Association. a. Two types of policies are issued, including individual plans and coverage for those who are converting from a group plan. b. The Association may not issue or reissue comprehensive health care plan coverage with respect to any person who is already covered under any individual or group comprehensive health care plan, is 65 years of age or older and eligible for Medicare, or is not a resident of this state. 2. Coverages and limits The minimum standard benefits include coverage for catastrophic illness with a lifetime maximum of $1 million or, when applicable, the allowance agreed upon between a health care provider (such as a doctor or hospital) for charges actually incurred for the diagnosis or treatment of nonoccupational disease or injury (covered services are comparable to other medical expense policies). 3. Exclusions Standard medical expense exclusions apply, such as injury or disease covered by workers compensation, treatment for cosmetic purposes, charges for a private room, charges for articles that are not considered medically necessary, and charges for dental care. 4. Deductibles and coinsurance The coinsurance participation limit may not exceed 20% (the plan will pay 80%). Plans may include one or more of the following deductible options: Low option deductible $200 per person Middle option deductible $500 per person High option deductible $750 per person a. The sum of any deductible and copayment may not exceed the maximum limit of $1,000 per individual or $2,000 per family. 5. The code section governing the Association contains additional provisions necessary for the Association to qualify as an acceptable alternative mechanism, for the continuation of coverage in accordance with the Public Health Service Act, as set forth in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). CT L&H Law Supplement.indb 55 9/19/ :32:25 AM

58 56 Connecticut Law Supplement O. SMALL GROUP HEALTH PLANS Group health insurance was discussed extensively in an earlier unit. The information presented here is based on Connecticut insurance regulations specifically addressing small group plans. 1. Definition of a small group [Sec. 38a-564(4)] A small group is a business or organization that employs, on at least 50% of its working days, one and up to 50 employees, including owners and self-employed persons. 2. Benefit plans offered [Secs. 38a-565, 568] a. Health care center plans Small group coverage can be provided by health care center plans which include HMOs and health clinics; the health care center is not required to offer coverage if the employer or employee is located outside its approved service area. b. Small employer carrier plans These are offered by insurers that maintain group health insurance plans for one or more small employers. 3. Availability of coverage [Sec. 38a-567] Small group carriers are required to actively market, accept, and renew all small employers for all of the benefits plans they sell in the small employer markets. a. Carriers cannot deny coverage to any person or dependent, or nonrenew the plan, except for: nonpayment of premiums; fraud or misrepresentation; noncompliance with plan provisions; fewer covered employees than the plan s percentage participation requirement; or the small employer being out of business. b. As a condition of transacting business as a small employer carrier, coverage will be offered to small employers; small employers who have 10 or fewer eligible employees may purchase a health care plan from the Health Reinsurance Association. 4. Renewability of coverage [Sec. 38a-567] Every plan must be renewable with respect to all eligible persons and eligible dependents, except for those reasons which permit a carrier to deny issuance of a plan as listed above. 5. Eligibility of employees [Sec. 38a-564(3)] An eligible employee (including a sole proprietor or partner) is one who works a normal work week of 20 or more hours; also included are employees not actively at work but covered by workers compensation benefits or an extension of coverage under COBRA. CT L&H Law Supplement.indb 56 9/19/ :32:25 AM

59 Connecticut Law Supplement 57 P. CONNECTICUT CHILDREN S HEALTH INSURANCE PLAN (HUSKY) [RL 17B A, 295, 297, 299, 300, 301, 303, 304] Children receiving medical assistance under the Medicaid program (in accordance with the eligibility requirements outlined in Section 261) will be participants in the HUSKY Plan Part A, and children receiving assistance under the eligibility requirements outlined in Section 289 will be participants in the HUSKY Plan Part B. For purposes of marketing and outreach, both parts are to be known as the HUSKY Plan. 1. An applicant is an individual over the age of 18 years who is a natural or adoptive parent, foster parent, caregiver relative, or a legal guardian with whom the child resides, or a noncustodial parent under order of a court to provide health insurance who applies for coverage under the HUSKY Plan Part B on behalf of a child, and will include a child who is 18 years of age and who is applying on his own behalf or on behalf of a minor dependent for coverage under the plan. 2. HUSKY Plus programs are two supplemental health insurance programs established for medically eligible enrollees of the HUSKY Plan Part B whose medical needs cannot be accommodated within the basic benefit package offered to enrollees. One program will supplement coverage for those medically eligible enrollees with intensive physical health needs, and the other program will supplement coverage for those medically eligible enrollees with intensive behavioral health needs. 3. A child who has been determined to be eligible for benefits under the HUSKY Plan, either Part A or Part B, will remain eligible for plan benefits for a period of 12 months from the child s determination of eligibility unless the child attains the age of 19 years or is no longer a resident of the state. 4. The HUSKY Plan Part B will provide minimum benefit coverage, including: no copayments for preventive care services; no copayments for inpatient physician and hospital, outpatient surgical, ambulance and emergency medical conditions, skilled nursing, home health, hospice and short-term rehabilitation and physical therapy, occupational and speech therapies, lab and x-ray, preadmission testing, prosthetics, durable medical equipment other than powered wheelchairs, dental exams every six months, x-rays, fillings, fluoride treatments, and oral surgery; outpatient physician visits, hearing examinations, nurse midwives, nurse practitioners, podiatrists, chiropractors, and naturopaths; prescription drugs; eye care and optical hardware; orthodontia; mental health inpatient maximum of 60 days with allowable substitution of alternative levels of care and outpatient maximum of 30 visits with supplemental coverage available under a HUSKY Plus program for medically eligible enrollees, provided coverage under the HUSKY Plan Part B and HUSKY Plus programs will be consistent with provisions of the Mental Health Parity Act; and substance abuse, detoxification, and inpatient for drugs 60 days, alcohol 45 days, and outpatient 60 visits per calendar year maximum with supplemental coverage available under a HUSKY Plus program for medically eligible enrollees. CT L&H Law Supplement.indb 57 9/19/ :32:25 AM

60 58 Connecticut Law Supplement a. Under the HUSKY Plan Part B, no deductibles may be charged, no preexisting condition exclusion may be applied, and there may be no annual or lifetime benefit maximums and no coinsurance. b. The Commissioner may require the payment of a premium or copayment in connection with services provided under the HUSKY Plan. Q. CONNMAP ConnMAP stands for the Connecticut Medicare Assignment Program. It is administered by the State Department of Social Services (DSS). ConnMAP ensures that physicians and other Part B providers will not charge ConnMAP enrollees more than the reasonable and necessary rate established by Medicare. 1. Medicare beneficiaries who meet the program s eligibility guidelines may obtain a ConnMAP card by submitting an application to DSS. The card is then presented to health care providers prior to treatment. If the service is covered by Medicare, the provider may charge no more than the Medicare approved rate. 2. Individuals are eligible for ConnMAP if they: are enrolled in Medicare Part B; have been residents of Connecticut for at least six months prior to the date of application; and have an annual income under a certain amount. 3. There is no asset restriction on ConnMAP eligibility. R. CONNPACE ConnPACE stands for the Connecticut Pharmaceutical Assistance Contract to the Elderly and Disabled. It is a state-funded program that provides limited assistance in the purchase of prescription drugs. The program is administered by the Connecticut Department of Social Services. 1. Effective July 1, 2011, the ConnPACE program is only available to individuals who are not eligible for Medicare. 2. ConnPACE has an annual open enrollment period for any new applicants to the program from November 15 to December 31 of each year with eligibility beginning January 1. This is the only opportunity for new applicants to be considered for the program. S. FEDERAL PATIENT PROTECTION AND AFFORDABLE CARE ACT (PPACA) President Barack Obama signed the Patient Protection and Affordable Care Act in March These health care reforms aim to expand coverage to millions of Americans and will require many changes to health insurance products and the regulations that govern them. 1. Preexisting conditions Before the Affordable Care Act, plans could refuse to accept anyone because of a preexisting health condition, or they could limit or exclude benefits for that condition. Under the act, health plans cannot limit or deny benefits or deny coverage outright for a child younger than age 19 simply because the child has a preexisting condition. This new rule applies to all employment-based group CT L&H Law Supplement.indb 58 9/19/ :32:25 AM

61 Connecticut Law Supplement 59 health plans and to individual health insurance policies purchased after March 23, This rule may not apply to an individual health insurance policy purchased on or before March 23, 2010, because that plan may be grandfathered or exempted from this part of the Affordable Care Act in order to ensure that people who like the coverage they have can keep it. 2. Essential benefits, and lifetime and annual maximums Beginning on September 23, 2010, insured and self-insured health plans are prohibited from imposing lifetime limits on the dollar value of essential health benefits. Note that after January 1, 2014, plans can still impose lifetime or annual per beneficiary limits on the dollar value of nonessential health benefits. Essential health benefits fall under the following broad general categories: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitation services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care These essential health benefits are the basis for the coverage that will be provided to people enrolled in exchange plans and the individual and small group insurance markets. Like many reforms, this reform measure is being phased in. For plan years starting September 23, 2010 and before January 1, 2014, insured and self-insured group health plans can still impose restricted annual limits on the dollar value of essential health benefits. For plan years starting on or after September 23, 2010, essential health benefits can be capped at or above $750,000. For plan years starting on or after September 23, 2011, the limit is $1.25 million, and for years starting on or after September 23, 2012, the limit is $2 million. For plan years starting after January 1, 2014, annual dollar limits on essential health benefits will not be permitted. 3. Preventative care Beginning September 23, 2010, qualified health plans must cover preventive services that have strong scientific evidence of their health benefits. These plans can t charge patients co-payments, coinsurance, or deductibles for these services when they are delivered by a network provider. Employers can continue to require cost-sharing for preventive services employees receive from out-of-network providers. The preventive care requirements are intended to provide easier access to services such as blood pressure, diabetes, and cholesterol tests; many cancer screenings; routine vaccinations; pre-natal care; and regular wellness visits for infants and children. CT L&H Law Supplement.indb 59 9/19/ :32:25 AM

62 60 Connecticut Law Supplement CONNECTICUT LAW SUPPLEMENT PRACTICE FINAL Following your thorough study of this supplement, take this examination. Grade your performance using the answer key provided. Carefully review the topics pertaining to those questions you answered incorrectly. I. General Insurance 1. Under Connecticut insurance law, what is the distinction between a producer and an agent? A. Agents are producers who act as traveling salaried employees of insurers. B. Agents are executive officers of insurers. C. Agents are producers that have been appointed by an insurer to act on its behalf. D. There is no distinction. 2. All of the following are powers and duties of the Insurance Commissioner EXCEPT A. conducts criminal prosecutions of insurance licensees who break insurance laws B. regulates companies for solvency C. collects fees and issues insurance licenses D. regulates most insurance rates 3. Jake, an insurance producer, publishes a written statement that is false and derogatory about the financial condition of another producer. If Jake intended to injure the other producer s reputation, his action can be considered A. coercion B. misrepresentation C. defamation D. twisting 4. Producers are exempt from the continuing education requirement if their only line of authority is A. personal lines insurance B. credit insurance C. variable life insurance and annuities D. accident and health insurance 5. Each applicant for a license in the state of Connecticut must prove to the satisfaction of the Commissioner that she meets which of the following requirements? A. That she has successfully completed a course approved by the Commissioner requiring at least 40 hours for each line of insurance B. That she has experience as an insurance producer in another state C. That, as a producer, she will be involved with controlled business D. That she provide the Commissioner with a sworn morality oath from a recognized religious official 6. An individual who acts as an insurance consultant without a license may be subject to which of the following penalties? A. A fine of not more than $500 B. Imprisonment for not more than 3 months C. A fine of not more than $2,500 and/or imprisonment for not more than 6 months D. A fine of not more than $1,000 and imprisonment for not more than 6 months 7. In addition to suspension or revocation of their license, persons who make a willful misrepresentation on a producer s license application may be subject to a fine of up to A. $1,000 B. $5,000 C. $7,500 D. $10,000 CT L&H Law Supplement.indb 60 9/19/ :32:26 AM

63 Connecticut Law Supplement The Insurance Commissioner may waive the state licensing examination requirement for all of the following individuals EXCEPT A. nonresident producer B. applicant for a temporary producer s license C. lawyer who wishes to sell insurance D. producer who renews his license within 90 days of expiration 9. An insurance producer offering any valuable consideration or inducement to a prospective insured that is not specified in a policy or contract best describes the practice of A. twisting B. rebating C. misrepresentation D. larceny 10. A producer who provides a policyholder with inaccurate information in order to induce her to lapse or surrender her current policy best describes which of the following practices? A. Rebating B. False information in advertising C. Defamation D. Misrepresentation 11. Making or permitting any inequalities between individuals of the same class with regard to premium rates charged best describes which of the following practices? A. Misrepresentation B. Defamation C. False information in advertising D. Unfair discrimination 12. A licensee who commits an unfair act intentionally may be assessed, by the Commissioner, a monetary penalty of A. $5,000 B. $10,000 C. $15,000 D. $25, A producer must notify the Commissioner within 30 days of a change in all of the following EXCEPT A. business address B. employer C. conviction of a misdemeanor D. name 14. In the state of Connecticut, a temporary license may be issued for a term NOT exceeding A. 30 days B. 60 days C. 90 days D. 180 days 15. Producer licenses renew every two years on A. the producer s birthday B. February 1 C. the last day of the producer s birth month D. March All of the following statements are correct regarding commissions and fees EXCEPT A. renewal commissions may be paid to a person whose license expired but who was licensed at the time of the sale B. commissions may not be paid to a person who is required to be licensed and is not C. a referral fee may not be paid to unlicensed individuals D. commissions may not be accepted by an applicant for an insurance producer s license 17. The penalty for a licensee who fails to remit premiums is A. a $1,000 fine B. license suspension or revocation C. 30 days imprisonment D. a $2,500 fine 18. All of the following are types of unfair trade practices EXCEPT A. boycott, coercion, and intimidation B. unfair discrimination C. defamation D. direct selling CT L&H Law Supplement.indb 61 9/19/ :32:26 AM

64 62 Connecticut Law Supplement 19. All of the following may be considered powers and duties of the Commissioner of Insurance in the state of Connecticut EXCEPT A. may suspend a producer s license if she earns an extraordinary amount of commissions during any calendar year B. issues cease and desist orders for just cause C. delegates examining duties by appointing examiners D. conducts complaint hearings 20. All of the following individuals are required to pass an examination to be licensed in the state of Connecticut EXCEPT A. a nonresident producer B. an insurance producer C. a certified insurance consultant D. a public adjuster 21. All of the following are requirements for license applicants in the state of Connecticut EXCEPT A. licensees are required to pass a written examination B. each applicant must pay the appropriate fee C. each applicant must prove that he has completed a course approved by the Commissioner of not less than 45 hours for each line of insurance for which he desires to be licensed D. every applicant for a license in this state must be at least All of the following acts would be considered a form of rebating EXCEPT A. offering a valuable consideration specified in the contract B. an insurer offering securities to an insured in return for the purchase of a policy C. a producer sharing commissions with an insured in return for purchasing a policy D. a producer offering a policyholder a generous discount in return for purchasing a policy 23. Not attempting in good faith to effectuate prompt, fair, and equitable settlements is an illustration of A. boycott and coercion B. unfair claim practices C. unfair complaint handling procedures D. misrepresentation 24. Violation of a cease and desist order is generally punishable by a fine of up to A. $20,000 B. $50,000 C. $75,000 D. $100, To conform with the regulation against writing controlled business, by how much must the premiums on policies written for the general public exceed the premiums on policies paid for by the producer, spouse, employer, or a corporation controlled by those persons? A. 5 times B. 9 times C. 10 times D. 15 times 26. Producers are required to provide information to the Commissioner regarding a name or address change within A. 10 days B. 30 days C. 60 days D. 90 days II. Life Insurance 27. Within how many days of its execution may a life settlement agreement be rescinded? A. 15 B. 20 C. 30 D. 45 CT L&H Law Supplement.indb 62 9/19/ :32:27 AM

65 Connecticut Law Supplement Life insurance policies may not be back-dated more than how many months? A. 2 B. 3 C. 6 D How many days in advance of their use must advertising materials for variable life insurance products be filed with the Commissioner? A. 15 B. 30 C. 45 D Producers have specific duties when replacement of a life insurance policy occurs. All of the following are included as representative of these duties EXCEPT A. secure a list of all policies being replaced B. obtain a statement from the applicant that he understands a replacement is occurring C. a notice regarding replacement signed only by the producer must be left with the applicant D. leave copies of all sales proposals with the applicant 31. Any transaction in which new life insurance protection is to be purchased and existing coverage is to be surrendered best describes A. rebating B. recision C. conversion D. replacement 32. Which of the following statements is CORRECT regarding the assignment of an individual s incidents of ownership under a group policy? A. A person whose life is insured under a group life policy may have an entire year s premium refunded if the insured dies mid-term. B. A person whose life is insured under a group life policy may assign any or all of her incidents of ownership. C. There are no incidents of ownership under a group policy. D. Group policy incidents of ownership are not assignable. 33. Connecticut s life insurance solicitation regulations apply to which of the following? A. Annuities B. Individual life insurance C. Group life insurance D. Credit life insurance 34. Which of the following statements about accelerated death benefits is CORRECT? A. An accelerated benefits provision allows for the early payment of part of the policy s face amount if the insured suffers from a terminal illness or injury. B. Insureds need not be notified that the policy s death benefit will be reduced by the payment of an accelerated death benefit. C. An insurer may make the accelerated benefit available as a life annuity. D. A policyowner may not take the accelerated benefit as a lump sum. III. Health Insurance 35. All of the following statements are accurate with regard to an outline of coverage EXCEPT A. the Commissioner of Insurance must prescribe the form and content of the outline of coverage B. an Outline of Coverage must be delivered along with an accident and health insurance contract issued in this state C. an Outline of Coverage is only required for group policies D. any deductibles or coinsurance provisions must be described 36. Which of the following factors does NOT need to be taken into consideration when a health insurance policy is being replaced? A. Preexisting conditions B. Waiting periods C. Exclusions and limitations D. Number of dependents covered CT L&H Law Supplement.indb 63 9/19/ :32:27 AM

66 64 Connecticut Law Supplement 37. Which of the following statements is CORRECT concerning the coverage of newborns under accident and health contracts issued in this state? A. In order to have coverage provided, notification of a newborn child must be made within 15 days after the date of birth. B. Coverage for newly born children must consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects. C. Birth abnormalities are not covered. D. This provision applies only to group health insurance contracts. 38. If an employer and provider of group, accident, or health insurance benefits cancels or terminates the benefits, it must provide covered employees and members with at least how many days notice of cancellation? A. 10 B. 15 C. 20 D Which of the following statements is CORRECT with regard to coverage of mentally or physically handicapped individuals? A. Proof of incapacity must be received by an insurer within 90 days of a policy s expiration date. B. A mentally or physically handicapped child over age 18 may continue to receive coverage under a family accident and health policy as long as the dependent remains chiefly financially dependent upon the policyholder/ parents. C. This coverage applies only to group health insurance policies. D. Proof of incapacity must be received by an insurer within 60 days of a policy s expiration date. 40. Which of the following types of insurance provides coverage for not less than 12 consecutive months on an expense-incurred, indemnity, or prepaid basis? A. Medicare supplement B. Long-term care C. Home care services D. Hospice care 41. All of the following are considered to be advertisements according to Connecticut accident and health insurance law EXCEPT A. a prepared sales talk B. an audio visual information C. an insurance policy D. a television advertisement 42. If an individual health insurance policy includes a military suspense provision, the policy must provide A. reinstatement within 3 years B. refund of premiums on a pro-rata basis upon written request C. continuing coverage while the insured is on active duty D. additional benefits while the insured is on active duty 43. Which of the following is a high-risk pool that provides health insurance to those who cannot secure it in the normal market? A. Medicare B. Social Security C. Health Reinsurance Association D. Long-term care 44. Under COBRA, a surviving spouse and dependents are eligible to continue coverage under the deceased s group plan for up to A. 36 weeks B. 96 weeks C. 104 weeks D. 156 weeks CT L&H Law Supplement.indb 64 9/19/ :32:28 AM

67 Connecticut Law Supplement Which of the following policies does NOT include a free-look provision? A. Individual health insurance policy B. Medicare supplement C. Long-term care D. Flight insurance 46. Which of the following statements about Medicare supplement policies is NOT correct? A. Benefits must be adjusted automatically to coincide with changes in Medicare deductibles and copayments. B. Replacing Medicare supplement policies is not permitted under Connecticut law. C. They may not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents. D. Medicare supplement policies must have a 30 day free-look provision. 47. To qualify for small employer health insurance coverage, an employer may employ no more than how many eligible employees? A. 10 B. 15 C. 25 D An individual health and accident insurance policy may exclude coverage for all of the following EXCEPT A. alcoholism B. eyeglasses C. reconstructive surgery D. dental care 49. Which of the following are covered by group accident and health insurance policies? A. Infertility treatment B. Disability income C. Custodial care D. Dental 50. If offered, inflation protection on long-term care insurance policies must increase benefits at a rate of at least A. 2% annually B. 4% annually C. 5% annually D. 7% annually CT L&H Law Supplement.indb 65 9/19/ :32:28 AM

68 66 Connecticut Law Supplement ANSWERS TO CONNECTICUT LAW PRACTICE FINAL 1. C 11. D 21. C 31. D 41. C 2. A 12. D 22. A 32. B 42. B 3. C 13. C 23. B 33. B 43. C 4. B 14. D 24. B 34. A 44. D 5. A 15. A 25. B 35. C 45. D 6. C 16. C 26. B 36. D 46. B 7. B 17. B 27. A 37. B 47. D 8. C 18. D 28. C 38. B 48. C 9. B 19. A 29. B 39. B 49. A 10. D 20. A 30. C 40. B 50. C CT L&H Law Supplement.indb 66 9/19/ :32:28 AM