Chapter Ins 2

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.

Ins 2.17(6)(a)7. 7. If the illustration shows any non-guaranteed 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 non-guaranteed.

Ins 2.17(6)(a)8. 8. The guaranteed elements, if any, shall be shown before corresponding non-guaranteed elements. Any page of an illustration that shows or describes only the non-guaranteed elements shall include a reference to the page where guaranteed elements are shown and a statement that guaranteed elements are found on that page.

Ins 2.17(6)(a)9. 9. 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 on the same page in close proximity to the corresponding value available upon surrender.

Ins 2.17(6)(a)10. 10. 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 policy owner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable.

Ins 2.17(6)(a)11. 11. Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.

Ins 2.17(6)(a)12. 12. Any illustration of non-guaranteed elements shall be accompanied by a statement indicating that the benefits and values are not guaranteed, that the assumptions on which they are based are subject to change, and that actual results may be more or less favorable.

Ins 2.17(6)(a)13. 13. If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration shall clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up.

Ins 2.17(6)(a)14. 14. If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, 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.

Ins 2.17(6)(b) (b) A basic illustration shall include the following narrative summary:

Ins 2.17(6)(b)1. 1. A brief description of the policy being illustrated, including a statement that it is a life insurance policy.

Ins 2.17(6)(b)2. 2. A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code.

Ins 2.17(6)(b)3. 3. A brief description of any policy features, riders or options, guaranteed or non-guaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy.

Ins 2.17(6)(b)4. 4. Identification and a brief definition of column headings and key terms used in the illustration.

Ins 2.17(6)(b)5. 5. A statement containing in substance the following: “This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown.”

Ins 2.17(6)(c) (c) A basic illustration shall include the following numeric summary, following the narrative summary:

Ins 2.17(6)(c)1. 1. A summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values shall be based on the contract premium. This summary shall be shown for at least policy years 5, 10 and 20 and at age 70, if applicable, on the three bases shown below in subds. 2., 3., and 4. For multiple life policies the summary shall show policy years 5, 10, 20 and 30.

Ins 2.17(6)(c)2. 2. Policy guarantees.

Ins 2.17(6)(c)3. 3. Insurer’s illustrated scale.

Ins 2.17(6)(c)4. 4. Insurer’s illustrated scale used but with the non-guaranteed elements reduced as follows:

Ins 2.17(6)(c)4.a. a. Dividends at 50% of the dividends contained in the illustrated scale used.

Ins 2.17(6)(c)4.b. b. Non-guaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.

Ins 2.17(6)(c)4.c. c. All non-guaranteed charges, including but not limited to, term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.

Ins 2.17(6)(c)5. 5. If coverage would cease prior to policy maturity or age 100, the year in which coverage ceases shall be identified for each of the three bases shown above in subds. 2., 3. and 4.

Ins 2.17(6)(d) (d) Statements substantially similar to the following shall immediately follow the numeric summary and be signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this section.

Ins 2.17(6)(d)1. 1. A statement to be signed and dated by the applicant or policy owner reading as follows: “I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed.”

Ins 2.17(6)(d)2. 2. A statement to be signed and dated by the agent or other authorized representative of the insurer reading as follows: “I certify that this illustration has been presented to the applicant or policy owner and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration.”

Ins 2.17(6)(e) (e) The following elements shall be shown in tabular detail:

Ins 2.17(6)(e)1. 1. A basic illustration shall include the following for at least each policy year from 1 to 10 and for every 5th policy year thereafter ending at age 100, policy maturity or final expiration; and except for term insurance beyond the 20th year, for any year in which the premium outlay and contract premium, if applicable, is to change:

Ins 2.17(6)(e)1.a. a. The premium outlay and mode the applicant plans to pay and the contract premium, as applicable.

Ins 2.17(6)(e)1.b. b. The corresponding guaranteed death benefit, as provided in the policy.

Ins 2.17(6)(e)1.c. c. The corresponding guaranteed value available upon surrender, as provided in the policy.

Ins 2.17(6)(e)2. 2. For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender shall correspond to the contract premium.

Ins 2.17(6)(e)3. 3. Non-guaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer’s current practice is to pay terminal dividends. If any non-guaranteed elements are shown they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a non-guaranteed benefit or value is shown, a zero shall be displayed in the guaranteed column.

Ins 2.17(7) (7) Standards for supplemental illustrations.

Ins 2.17(7)(a) (a) A supplemental illustration may be provided so long as it complies with all of the following:

Ins 2.17(7)(a)1. 1. It is appended to, accompanied by or preceded by a basic illustration that complies with this section.

Ins 2.17(7)(a)2. 2. The non-guaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration.

Ins 2.17(7)(a)3. 3. It contains the same statement required of a basic illustration that non-guaranteed elements are not guaranteed.

Ins 2.17(7)(a)4. 4. For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration. For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration shall be equal to the premium outlay shown in the basic illustration.

Ins 2.17(7)(b) (b) The supplemental illustration shall include a statement informing the reader to consult the basic illustration for guaranteed elements and the other important information it contains.

Ins 2.17(8) (8) Delivery of illustration and record retention.

Ins 2.17(8)(a) (a) If a basic illustration is used by an agent or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this section, shall be submitted to the insurer at the time of policy application. A copy also shall be provided to the applicant. If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy. The revised illustration shall conform to the requirements of this section, shall be labeled “Revised Illustration” and shall be signed and dated by the applicant or policy owner and agent or other authorized representative of the insurer no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

Ins 2.17(8)(b) (b) If no illustration is used by an agent or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the agent or representative shall certify to that effect in writing on a form provided by the insurer. On the same form the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form shall be submitted to the insurer at the time of policy application. If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

Ins 2.17(8)(c) (c) If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it shall include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer’s obligation under this subsection shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

Ins 2.17(8)(d) (d) A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, shall be retained by the insurer until 3 years after the policy is no longer in force. A copy need not be retained if no policy is issued.

Ins 2.17(9) (9) Annual report; notice to policy owners.

Ins 2.17(9)(a) (a) Except as provided in par. (b), in the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policy owner with an annual report on the status of the policy that shall contain at least the following information:

Ins 2.17(9)(a)1. 1. For universal life policies, the report shall include the following:

Ins 2.17(9)(a)1.a. a. The beginning and end date of the current report period.

Ins 2.17(9)(a)1.b. b. The policy value at the end of the previous report period and at the end of the current report period.

Ins 2.17(9)(a)1.c. c. The total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders).

Ins 2.17(9)(a)1.d. d. The current death benefit at the end of the current report period on each life covered by the policy.

Ins 2.17(9)(a)1.e. e. The net cash surrender value of the policy as of the end of the current report period.

Ins 2.17(9)(a)1.f. f. The amount of outstanding loans, if any, as of the end of the current report period.

Ins 2.17(9)(a)1.g. g. For fixed premium policies, in addition to the information described in subd. 1. a. through f. if, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy’s net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect shall be included in the report.

Ins 2.17(9)(a)1.h. h. For flexible premium policies, in addition to the information described in subd. 1. a. through f. if, assuming guaranteed interest, mortality and expense loads, the policy’s net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

Ins 2.17(9)(a)2. 2. For all other policies, where applicable:

Ins 2.17(9)(a)2.a. a. Current death benefit.

Ins 2.17(9)(a)2.b. b. Annual contract premium.

Ins 2.17(9)(a)2.c. c. Current cash surrender value.

Ins 2.17(9)(a)2.d. d. Current dividend.

Ins 2.17(9)(a)2.e. e. Application of current dividend.

Ins 2.17(9)(a)2.f. f. Amount of outstanding loan.

Ins 2.17(9)(b) (b) Insurers writing life insurance policies that do not build nonforfeiture values shall only be required to provide an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer.