Chapter Ins 2

Ins 2.16(26)(b) (b) No advertisement may contain as the name or title of a life insurance policy any phrase which does not include the words“life insurance” unless accompanied by other language clearly indicating it is life insurance.

Ins 2.16(26)(c) (c) An advertisement shall prominently describe the type of policy advertised.

Ins 2.16(26)(d) (d) No advertisement of an insurance policy marketed by direct response techniques may state or imply, unless the condition is true, that because there is no intermediary or commission involved there will be a cost saving to prospective purchasers.

Ins 2.16(26)(e) (e) No advertisement may state or imply in any way that interest charged on a policy loan or the reduction of death benefits by the amount of outstanding policy loans is unfair, inequitable, or in any manner an incorrect or improper practice.

Ins 2.16(26)(f) (f) If nonforfeiture values are shown in any advertisement, the advertisement shall show the values either for the entire amount of the basic life policy death benefit or for each $1,000 of initial death benefit.

Ins 2.16(26)(g) (g) No advertisement may contain the words “free,” “no cost,” “without cost,” “no additional cost,” “at no extra cost,” or words of similar import with respect to any benefit or service being made available with a policy, unless the insured is not charged for any benefit or service. If the insured is not charged, then the advertisement shall prominently disclose the identity of the payor.

Ins 2.16(27) (27) Method of disclosure of required information.

Ins 2.16(27)(a) (a) A person subject to this section shall set out all information required to be disclosed by this section clearly, conspicuously and in close proximity to the statements to which the information relates or under appropriate captions of sufficient prominence that it shall be readily noticed and not minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of the advertisements so as to be confusing or misleading.

Ins 2.16(27)(b) (b) No person subject to this section may set out information required by this section under inappropriate captions or headings or under inappropriate questions where a question and answer format is used.

Ins 2.16(28) (28) Form number. A person subject to this section shall identify by form number an advertisement other than an institutional advertisement defined in sub. (3) (h) which is mass-produced. The form number shall be sufficient to distinguish it from any other advertising form or any policy, application or other form used by the insurer.

Ins 2.16(29) (29) Insurer’s responsibility for advertisements.

Ins 2.16(29)(a) (a) The insurer whose policy is advertised has responsibility for the content, form and method of dissemination of all advertisements, regardless of by whom designed, created, written, printed or used.

Ins 2.16(29)(b) (b) An insurer shall require its intermediaries and all other persons or agencies acting on its behalf in preparing advertisements to submit proposed advertisements to it for approval prior to use.

Ins 2.16(30) (30) Insurer’s advertising file. Each insurer shall maintain at its home or principal office a complete file containing every printed, published or prepared advertisement of its policies hereafter disseminated in the state. With respect to group, blanket and franchise policies, all proposals prepared on the same printed form need not be included in the file; only typical examples of these proposals shall be included. A notation shall be attached to each such advertisement in the file indicating the manner and extent of distribution and the form number of any policy, amendment, rider, or endorsement form advertised. The file shall be subject to regular and periodic inspection by the office of the commissioner of insurance. A person subject to this section shall maintain all of these advertisements in the file while in use and for a period of 3 years after an advertisement’s authorized use. If applicable, a person subject to this section shall also maintain files in accordance with ss. Ins 2.14 (5) (a) and 2.15 (9) (a).

Ins 2.16 History History: Cr. Register, October, 1982, No. 322, eff. 11-1-82; r. (5) (b) 1. and 2. and (6) (b), Register, May, 1984, No. 341, eff. 6-1-84; r. (7) under s. 13.93 (2m) (b) 16., Stats., Register, December, 1984, No. 348; r. and recr. Register, July, 1989, No. 403, eff. 8-1-89; am. (1) and (3) (a) 2., Register, March, 1998, No. 507, eff. 4-1-98; CR 14-075: am. (3) (a) 2. Register August 2015 No. 716, eff. 9-1-15.

Ins 2.17 Ins 2.17 Life insurance illustrations.

Ins 2.17(1) (1) Purpose. This section provides rules for life insurance policy illustrations that will protect consumers and foster consumer education. This section provides illustration formats, prescribes standards to be followed when illustrations are used, and specifies the disclosures that are required in connection with illustrations. The goals of this rule are to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable. Insurers will, as far as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed. The requirements of this section are in addition to and not a substitute for the requirements set forth in ss. Ins 2.14 and 2.16.

Ins 2.17(2) (2) Scope. This section applies to all group and individual life insurance policies and certificates except:

Ins 2.17(2)(a) (a) Variable life insurance.

Ins 2.17(2)(b) (b) Individual and group annuity contracts.

Ins 2.17(2)(c) (c) Credit life insurance.

Ins 2.17(2)(d) (d) Life insurance policies with no illustrated death benefits on any individual exceeding $10,000.

Ins 2.17(3) (3) Definitions. In this section:

Ins 2.17(3)(a) (a) “Actuarial standards board” means the board established by the American academy of actuaries to develop and promulgate standards of actuarial practice.

Ins 2.17(3)(b) (b) “Basic illustration” means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.

Ins 2.17(3)(c) (c) “Contract premium” means the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

Ins 2.17(3)(d) (d) “Currently payable scale” means a scale of non-guaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next 95 days.

Ins 2.17(3)(e) (e) “Disciplined current scale” means a scale of non-guaranteed elements that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer.

Ins 2.17(3)(f) (f) “Generic name” means a short title descriptive of the policy being illustrated such as “whole life,” “term life” or “flexible premium adjustable life.”

Ins 2.17(3)(g) (g) “Guaranteed elements” means the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue.

Ins 2.17(3)(h) (h) “Illustrated scale” means a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

Ins 2.17(3)(h)1. 1. The disciplined current scale; or

Ins 2.17(3)(h)2. 2. The currently payable scale.

Ins 2.17(3)(i) (i) “Illustration” means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and is one of the three illustrations described in pars. (b), (k), and (s).

Ins 2.17(3)(j) (j) “Illustration actuary” means an actuary meeting the requirements of sub. (10).

Ins 2.17(3)(k) (k) “In force illustration” means an illustration furnished at any time after the policy that it depicts has been in force.

Ins 2.17(3)(L) (L) “Lapse-supported illustration” means an illustration of a policy form failing the test of self-supporting as defined in this section, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first 5 years and 100% policy persistency thereafter.

Ins 2.17(3)(m) (m) “Minimum assumed expenses” means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

Ins 2.17(3)(m)1. 1. Fully allocated expenses.

Ins 2.17(3)(m)2. 2. Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.

Ins 2.17(3)(m)3. 3. A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the commissioner.

Ins 2.17(3)(n) (n) “Non-guaranteed elements” means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

Ins 2.17(3)(o) (o) “Non-term group life” means a group policy or individual policies of life insurance issued to members of an employer group or other permitted group under all of the following conditions:

Ins 2.17(3)(o)1. 1. Every plan of coverage was selected by the employer or other group representative.

Ins 2.17(3)(o)2. 2. Some portion of the premium is paid by the group or through payroll deduction.

Ins 2.17(3)(o)3. 3. Group underwriting or simplified underwriting is used.

Ins 2.17(3)(p) (p) “Policy owner” means the owner named in an individual policy or the certificate holder in the case of a group policy.

Ins 2.17(3)(q) (q) “Premium outlay” means the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket.

Ins 2.17(3)(r) (r) “Self-supporting illustration” means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value includes cash surrender values and any other illustrated benefit amounts available at the policy owner’s election.

Ins 2.17(3)(s) (s) “Supplemental illustration” means an illustration furnished in addition to a basic illustration.

Ins 2.17(4) (4) Policies to be illustrated.

Ins 2.17(4)(a) (a) Each insurer marketing policies to which this section is applicable shall notify the commissioner whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on January 1, 1998, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after January 1, 1998, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the commissioner.

Ins 2.17(4)(b) (b) If an insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first anniversary is prohibited.

Ins 2.17(4)(c) (c) If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this section is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

Ins 2.17(4)(d) (d) Potential enrollees of non-term group life subject to this regulation shall be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation shall not be considered an illustration for purposes of this section, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.

Ins 2.17(5) (5) General rules and prohibitions.

Ins 2.17(5)(a) (a) An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this section, be clearly labeled “life insurance illustration” and contain all of the following basic information:

Ins 2.17(5)(a)1. 1. Name of insurer.

Ins 2.17(5)(a)2. 2. Name and business address of agent or insurer’s authorized representative, if any.

Ins 2.17(5)(a)3. 3. Name, age and sex of proposed insured, except where a composite illustration is permitted under this section.

Ins 2.17(5)(a)4. 4. Underwriting or rating classification upon which the illustration is based.

Ins 2.17(5)(a)5. 5. Generic name of policy, the insurer’s product name, if different, and form number.

Ins 2.17(5)(a)6. 6. Initial death benefit.

Ins 2.17(5)(a)7. 7. Dividend option election or application of non-guaranteed elements, if applicable.

Ins 2.17(5)(b) (b) When using an illustration in the sale of a life insurance policy, an insurer or its agent or other authorized representatives shall not:

Ins 2.17(5)(b)1. 1. Represent the policy as anything other than a life insurance policy.

Ins 2.17(5)(b)2. 2. Use or describe non-guaranteed elements in a manner that is misleading or has the capacity or tendency to mislead.

Ins 2.17(5)(b)3. 3. State or imply that the payment or amount of non-guaranteed elements is guaranteed.

Ins 2.17(5)(b)4. 4. Use an illustration that does not comply with the requirements of this section.

Ins 2.17(5)(b)5. 5. Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated.

Ins 2.17(5)(b)6. 6. Provide an applicant with an incomplete illustration.

Ins 2.17(5)(b)7. 7. Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact.

Ins 2.17(5)(b)8. 8. Use the term “vanish” or “vanishing premium,” or a similar term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums.

Ins 2.17(5)(b)9. 9. Except for policies that can never develop nonforfeiture values, use an illustration that is “lapse-supported”.

Ins 2.17(5)(b)10. 10. Use an illustration that is not “self-supporting.”

Ins 2.17(5)(c) (c) If an interest rate used to determine the illustrated non-guaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.

Ins 2.17(5)(d) (d) In determining the disciplined current scale an insurer may use standards established by the actuarial standards board that meet all of the following criteria:

Ins 2.17(5)(d)1. 1. Are consistent with all provisions of this section.

Ins 2.17(5)(d)2. 2. Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred.

Ins 2.17(5)(d)3. 3. Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date.

Ins 2.17(5)(d)4. 4. Do not permit assumed expenses to be less than minimum assumed expenses.

Ins 2.17(6) (6) Standards for basic illustrations.

Ins 2.17(6)(a) (a) A basic illustration shall conform with the following requirements:

Ins 2.17(6)(a)1. 1. The illustration shall be labeled with the date on which it was prepared.

Ins 2.17(6)(a)2. 2. Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration.

Ins 2.17(6)(a)3. 3. The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified.

Ins 2.17(6)(a)4. 4. 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.

Ins 2.17(6)(a)5. 5. 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.

Ins 2.17(6)(a)6. 6. 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.