Chapter Ins 2

Ins 2.13(8)(c)10. 10. For any modified guaranteed annuity contract which provides in the same contract, by rider or supplemental contract provision, both annuity benefits and life insurance benefits that exceed the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall equal the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the insurance portion computed as if each portion were a separate contract. Notwithstanding subd. 2., in determining the minimum nonforfeiture amounts and paid-up annuity, cash surrender and death benefits required by this paragraph, the insurer shall disregard additional benefits payable in the event of the total and permanent disability of the contract holder, as reversionary annuity or deferred reversionary annuity benefits or as other policy benefits additional to life insurance, endowment and annuity benefits and considerations for all such additional benefits. The inclusion of such additional benefits is not required in any paid-up benefits unless the additional benefits would, if provided separately, require minimum nonforfeiture amounts and paid-up annuity, cash surrender and death benefits.

Ins 2.13(8)(d) (d) The application for a modified guaranteed annuity shall contain, immediately before the signature line, a prominent statement that amounts payable under the contract are subject to a market-value adjustment before a date or dates specified in the contract.

Ins 2.13(9) (9) Provisions applicable to modified guaranteed life insurance and annuities.

Ins 2.13(9)(a) (a) Before any insurer issues any modified guaranteed life insurance policy or modified guaranteed annuity contract in this state, the commissioner may require the insurer to file a copy of any prospectus or other sales material to be used in connection with the marketing of the modified guaranteed life insurance policy or modified guaranteed annuity contract. The sales material shall clearly illustrate that there can be both upward and downward adjustments due to the application of the market-value adjustment formula in determining nonforfeiture benefits.

Ins 2.13(9)(b) (b) An insurer issuing a modified guaranteed life insurance policy or a modified guaranteed annuity in this state shall submit to the commissioner all of the following:

Ins 2.13(9)(b)1. 1. A separate account annual statement which shall include the business of these policies or contracts.

Ins 2.13(9)(b)2. 2. Any additional information required by the commissioner.

Ins 2.13(9)(c) (c) The commissioner may disapprove any material required to be filed if the commissioner finds that the material does not comply with this section.

Ins 2.13(9)(d) (d) The statutes and administrative rules governing individual life insurance and individual annuity form filings also apply to modified guaranteed life insurance policies and modified guaranteed annuity contracts. Each filing shall demonstrate in a form satisfactory to the commissioner that the nonforfeiture provisions of the policy or contract comply with this section.

Ins 2.13(9)(e) (e)

Ins 2.13(9)(e)1. 1. An insurer shall establish reserve liabilities in accordance with actuarial procedures that recognize all of the following:

Ins 2.13(9)(e)1.a. a. The market-value basis of the assets of the separate account.

Ins 2.13(9)(e)1.b. b. The variable nature of the benefits provided.

Ins 2.13(9)(e)1.c. c. Any mortality guarantees.

Ins 2.13(9)(e)2. 2. The separate account liability shall equal the surrender value based on the market-value adjustment formula contained in the modified guaranteed life insurance policy or modified guaranteed annuity contract. If that liability is greater than the market value of the assets, the insurer shall transfer assets into the separate account so that the market value of the assets at least equals that of the liabilities. The insurer shall establish any additional reserve that is needed to cover future guaranteed benefits.

Ins 2.13(9)(e)3. 3. An insurer shall consider the market-value adjustment formula, the interest guarantees and the degree to which projected cash flow of assets and liabilities are matched. The statement of actuarial opinion accompanying each annual statement shall include an opinion on whether the assets in the separate account are adequate to provide all future guaranteed benefits.

Ins 2.13(9)(e)4. 4. An insurer shall maintain in the general account reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable incidental insurance benefits.

Ins 2.13(10) (10) Required reports.

Ins 2.13(10)(a) (a) Each insurer issuing individual variable contracts shall mail to each contractholder, at least once in each contract year after the first, at his or her last address known to the insurer, a statement reporting the investments held in the separate account and, in the case of contracts under which payments have not yet commenced, a statement reporting either of the following as of a date not more than 4 months before the date of mailing:

Ins 2.13(10)(a)1. 1. The number of accumulation units credited to the contract and the dollar value of a unit.

Ins 2.13(10)(a)2. 2. The value of the contractholder’s account.

Ins 2.13(10)(b) (b) The insurer shall submit annually to the commissioner a statement of the business of each of its separate accounts in the form as required by the annual statement form designated as Life and Accident and Health Association Edition-Variable Life Insurance Separate Account.

Ins 2.13(11) (11) Foreign companies. If the law or regulation in the place of domicile of a foreign insurer provides protection to the policyholders and the public which is substantially equal to that provided by this section, the commissioner, to the extent he or she considers appropriate, may consider compliance with that law or regulation as compliance with this section.

Ins 2.13(12) (12) Agent qualifications. Prior to April 1, 2010, any person selling or offering for sale a variable contract shall have a valid license under s. Ins 6.59 (4) (an) authorizing the solicitation of variable life insurance and variable annuity products as defined in s. Ins 6.50 (2) (a) 6. or a valid license under s. Ins 6.59, authorizing the solicitation of life insurance as listed in s. Ins 6.50 (2) (a), and shall provide verification of required registration by the Financial Industry Regulatory Authority (FINRA) registered for Series 6 or Series 7.

Ins 2.13(12)(a) (a) General Securities Registered Representation Examination.

Ins 2.13(12)(b) (b) Investment Company Products/Variable Contracts Limited Representative Qualification Examination.

Ins 2.13(12)(c) (c) NASD Non-Member General Securities Examination.

Ins 2.13(12)(d) (d) General Securities Principal Qualification.

Ins 2.13(12)(e) (e) Investment Company Products/Variable Contracts Limited Principal Qualification Examination.

Ins 2.13(12m) (12m) Agent qualifications. On or after April 1, 2010, any person selling or offering for sale a variable contract shall have a valid license under s. Ins 6.59 (4) (an), authorizing the solicitation of variable life insurance and variable annuity products as defined in s. Ins 6.50 (2) (a) 6.

Ins 2.13(13) (13) Nonapplicability. To the extent that any provision of sub. (7) or (8) is inconsistent with a provision of sub. (6) or (10), sub. (6) or (10) does not apply to a policy or contract described in sub. (7) or (8).

Ins 2.13 History History: Cr. Register, October, 1968, No. 154, eff. 11-1-68; emerg. am. (1), (2) (a), (4) (a) and (g), eff. 6-22-76; am. (1), (2) (a), (4) (a) and (g), Register, September, 1976, No. 249, eff. 10-1-76; am. (6) (e), Register, March, 1979, No. 279, eff. 4-1-79; r. (2) (d) 5., (9) (g), to (m) and (p), am. (2) (b) to (d) (intro.), (6) (a), (9) (a) to (f), cr. (9) (g) to (i), renum. (9) (n) and (o) to be (9) (j) and (k), Register, May, 1979, No. 281, eff. 6-1-79; r. and recr. (2) and (9), Register, October, 1981, No. 310, eff. 11-1-81; am. (1), (3) (a) (intro.) and 2., (b), (c) (intro.), 2. and 3., (4) (a) to (g), (5) (a), (b) 2., (d), (e) and (6), renum. (2) (a) and (b), (7) to (9) to be (2) (b) and (a), (10) to (12) and am. (2) (a) and (b), (10) (a) (intro.) and 1., (b), (11) and (12), cr. (2) (intro.), (c) to (g), (7) to (9) and (13), Register, April, 1990, No. 412. eff. 5-1-90; CR 09-022: am. (12) (intro.), cr. (12m) Register August 2009 No. 644, eff. 9-1-09; CR 14-076: am. (6) (d) 2. Register August 2015 No. 716, eff. 9-1-15.

Ins 2.14 Ins 2.14 Life insurance solicitation.

Ins 2.14(1) (1) Purpose. The purpose of this section is to require insurers to deliver to purchasers of life insurance information which will improve the buyer’s ability to select the most appropriate plan of life insurance for the buyer’s needs, improve the buyer’s understanding of the basic features of the policy, and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance. This section does not prohibit the use of additional material which is not in violation of this section or any other Wisconsin statute or rule. This section interprets ss. 628.34 and 628.38, Stats. This section is in addition to and not a substitute for the requirements set forth in ss. Ins 2.16 and 2.17.

Ins 2.14(2) (2) Scope.

Ins 2.14(2)(a) (a) Except as stated in par. (b), this section applies to any solicitation, negotiation, or procurement of life insurance occurring within this state. This section applies to any issuer of life insurance contracts including fraternal benefit societies and the state life Insurance fund.

Ins 2.14(2)(b) (b) Unless otherwise specifically included, this section does not apply to:

Ins 2.14(2)(b)1. 1. Annuities.

Ins 2.14(2)(b)2. 2. Credit life insurance.

Ins 2.14(2)(b)3. 3. Group life insurance.

Ins 2.14(2)(b)4. 4. Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the federal employee retirement income security act of 1974 (ERISA), 29 U.S.C. sections 1001 to 1461.

Ins 2.14(2)(b)5. 5. Variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account.

Ins 2.14(3) (3) Definitions. For the purposes of this section, the following definitions shall apply:

Ins 2.14(3)(a) (a) “Cost comparison index” means a number corresponding to the cost of a policy, which can be used to compare similar policies within a company or between companies.

Ins 2.14(3)(b) (b) “Equivalent level death benefit” of a policy or term life insurance rider is an amount calculated as follows:

Ins 2.14(3)(b)1. 1. Accumulate the guaranteed amount payable upon death, regardless of the cause of death, at the beginning of each policy year for 10 and 20 years at 5% interest compounded annually to the end of the tenth and twentieth policy years, respectively.

Ins 2.14(3)(b)2. 2. Divide each accumulation of subd. 1. by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in subd. 1. over the respective periods stipulated in subd. 1. If the period is 10 years, the factor is 13.207 and if the period is 20 years, the factor is 34.719.

Ins 2.14(3)(c) (c) “Generic name” means a short title which is descriptive of the premium and benefit patterns of a policy or a rider.

Ins 2.14(3)(d) (d) “Life insurance buyer’s guide” means the document published by the national association of insurance commissioners entitled life insurance buyer’s guide.

Ins 2.14(3)(e) (e) “Net payment cost index” means a cost comparison index calculated in the same manner as the comparable surrender cost index except that the cash surrender value is set at zero.

Ins 2.14(3)(f) (f) “Policy summary” means a written statement in substantially the same format for all companies and describing only the guaranteed elements of the policy including but not limited to:

Ins 2.14(3)(f)1. 1. A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION.

Ins 2.14(3)(f)2. 2. The name and address of the insurance intermediary, or, if no insurance intermediary is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the policy summary.

Ins 2.14(3)(f)3. 3. 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.

Ins 2.14(3)(f)4. 4. The generic name of the basic policy and each rider.

Ins 2.14(3)(f)5. 5. The following amounts, where applicable, for the first 20 policy years and at least one age from 60 through 65 or maturity whichever is earlier:

Ins 2.14(3)(f)5.a. a. The annual premium for the basic policy.

Ins 2.14(3)(f)5.b. b. The annual premium for each optional rider.

Ins 2.14(3)(f)5.c. c. 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 exclusions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately.

Ins 2.14(3)(f)5.d. d. Total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider.

Ins 2.14(3)(f)5.e. e. Guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values in subd. 5. d.

Ins 2.14(3)(f)6. 6. 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 is variable, the policy summary shall include the maximum annual percentage rate.

Ins 2.14(3)(f)7. 7. The date on which the policy summary is prepared.

Ins 2.14(3)(g) (g) “Surrender cost index” means a cost comparison index calculated by applying the following steps:

Ins 2.14(3)(g)1. 1. Determine the guaranteed cash surrender value, if any, available at the end of the tenth and twentieth policy years.

Ins 2.14(3)(g)2. 2. Divide the result of subd. 1. by an interest factor that converts it into an equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in subd. 1. over the respective periods stipulated in subd. 1. If the period is 10 years, the factor is 13.207 and if the period is 20 years, the factor is 34.719.

Ins 2.14(3)(g)3. 3. Determine the equivalent level premium by accumulating each annual premium payable for the basic policy or rider (if the annual premium includes supplemental benefits without a separate identifiable charge, a reasonable adjustment may be made) at 5% interest compounded annually to the end of the period stipulated in subd. 1. and dividing the result by the respective factors stated in subd. 2. This amount is the annual premium payable for a level premium plan.

Ins 2.14(3)(g)4. 4. Subtract the result of subd. 2. from subd. 3.

Ins 2.14(3)(g)5. 5. Divide the result of subd. 4. by the number of thousands of the equivalent level death benefit to arrive at the surrender cost index.

Ins 2.14(4) (4) Disclosure requirements.

Ins 2.14(4)(a) (a) The insurer shall provide a policy summary upon delivery of the policy, if the policy form was identified by the insurer under s. Ins 2.17 (4) as one to be marketed without an illustration.

Ins 2.14(4)(b) (b) The policy summary shall consist of a separate document. All information required to be disclosed shall be set out in a manner that does not minimize any information or make any information obscure. Any amounts which remain level for 2 or more years of the policy may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. If more than one insured is covered under one policy or rider, guaranteed death benefits shall be displayed separately for each insured or for each class of insured if death benefits do not differ within the class. Zero amounts shall be displayed as zero and shall not be displayed as a blank space.

Ins 2.14(4)(c) (c) The insurer shall provide to all prospective purchasers of any policy subject to this section a copy of the latest published version of the life insurance buyer’s guide, at the time the application is taken, except that insurers which do not market policies through an intermediary may provide the life insurance buyer’s guide at the time the policy is delivered provided they guarantee to the policyholder a 30 calendar day right to return the policy for a full refund of premium.

Ins 2.14 Note Note: Copies of the life insurance buyer’s guide can be obtained from the National Association of Insurance Commissioners, 120 West 12th Street, Suite 1100, Kansas City, MO 64105-1925.

Ins 2.14(4)(d) (d) Cost comparison indexes, if illustrated, shall be representative of guaranteed values only.

Ins 2.14(4)(e) (e) The surrender cost index and the net payment cost index are the only cost comparison indexes which may be illustrated.

Ins 2.14(4)(f) (f) Cost comparison indexes, if illustrated, must be shown for year 10 and year 20. Additionally, separate indexes must be displayed for the basic policy and for each optional term life insurance rider. Such indexes need not be included for optional riders which are limited to benefits such as accidental death benefits, disability waiver of premium, preliminary term life insurance coverage of less than 12 months and guaranteed insurability benefits nor for the basic policies or optional riders covering more than one life.

Ins 2.14(4)(g) (g) If cost comparison indexes are illustrated, the insurer shall provide a statement regarding the use of the cost comparison indexes, including an explanation to the effect that indexes are useful only for the comparison of the relative costs of 2 or more similar policies.

Ins 2.14(5) (5) General requirements.

Ins 2.14(5)(a) (a) Each insurer shall maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use pursuant to this section. The file shall contain one copy of each authorized form for a period of 3 years following the date of its last authorized use. The requirements of this paragraph are in addition to the requirements set forth in ss. Ins 2.16 (30) and 2.17 (8) (d).

Ins 2.14(5)(b) (b) An intermediary shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that the intermediary is acting as a life insurance intermediary and inform the prospective purchaser of the full name of the insurance company which the intermediary is representing to the buyer. In sales situations in which an intermediary is not involved, the insurer shall identify its full name.

Ins 2.14(5)(c) (c) Terms such as financial planner, investment advisor, financial consultant, or financial counseling shall not be used in such a way as to imply that the insurance intermediary is generally engaged in an advisory business in which compensation is unrelated to sales unless such is actually the case.

Ins 2.14(5)(d) (d) Any reference to policy dividends shall include a statement that dividends are not guaranteed. If dividends are illustrated, such illustration must comply with the requirements of s. Ins 2.17.

Ins 2.14(5)(e) (e) Any sales presentation subject to this section shall comply with the requirements of s. Ins 2.16 (7) (b) and (c).

Ins 2.14(5)(f) (f) Recommendations made by a person subject to this section concerning the purchase or replacement of any life insurance policy are subject to the requirements of s. Ins 2.16 (6);

Ins 2.14(5)(g) (g) A system or presentation which does not recognize the time value of money through the use of appropriate interest adjustments shall not be used for comparing the cost of 2 or more life insurance policies.

Ins 2.14(5)(h) (h) Except for an illustration as defined in s. Ins 2.17 (3) (i) no presentation of benefits may display guaranteed and nonguaranteed benefits as a single sum unless the guaranteed benefits are shown separately in close proximity and with equal prominence. The requirements of this paragraph are in addition to the requirements set forth in s. Ins 2.16 (21).

Ins 2.14(5)(i) (i) For the purposes of this section, the annual premium for a basic policy or rider, for which the company reserves the right to change the premium, shall be the maximum annual premium.

Ins 2.14(6) (6) Unusual circumstances. Insurers with unique difficulties in implementing provisions of this section may petition the commissioner for allowance to meet the requirements of the section through alternative approaches.