Chapter Ins 3

Ins 3.26 History History: Cr. Register, October, 1972, No. 202, eff. 11-1-72; emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249, eff. 10-1-76; am. (1) and (2), Register, March, 1979, No. 279, eff. 4-1-79; correction in (1) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436.

Ins 3.27 Ins 3.27 Advertisements of and deceptive practices in accident and sickness insurance.

Ins 3.27(1) (1) Purpose. The interest of prospective purchasers of accident and sickness insurance must be safeguarded by providing such persons with clear and unambiguous statements, explanations, advertisements and written proposals concerning the policies offered to them. This purpose can best be achieved by the establishment of and adherence to certain minimum standards of and guidelines for conduct in the advertising and sale of such insurance which prevent unfair competition among insurers and are conducive to the accurate presentation and description to the insurance buying public of policies of such insurance. This rule interprets and implements, including but not limited to, the following Wisconsin Statutes: ss. 628.34 and 601.01 (3), Stats.

Ins 3.27(2) (2) Scope. This rule shall apply to any solicitation, representation or advertisement in this state of any insurance specified in s. Ins 6.75 (1) (c) or (2) (c), made directly or indirectly by or on behalf of any insurer, fraternal benefit society, nonprofit service plan subject to ch. 613, Stats., voluntary nonprofit sickness care plan organized under s. 185.981, Stats., interscholastic benefit plan organized under s. 616.08, Stats., or agent as defined in ch. 628, Stats.

Ins 3.27(3) (3) Interpretation of requirements applicable to advertisements.

Ins 3.27(3)(a) (a) The proper promotion, sale and expansion of accident and sickness insurance are in the public interest. This rule is to be construed in a manner which does not unduly restrict, inhibit or retard such promotion, sale and expansion.

Ins 3.27(3)(b) (b) In applying this rule, it shall be recognized that advertising is essential in promoting a broader distribution of accident and sickness insurance. Advertising necessarily seeks to serve this purpose in various ways. Some advertisements are the direct or principal sales inducement and are designed to invite offers to contract. In other advertisements the function is to describe coverage broadly for the purpose of inviting inquiry for further information. Other advertisements are for the purpose of summarizing or explaining coverage after the sale has been made. Still other advertisements are solely for the purpose of promoting the interest of the reader in the concept of accident and sickness insurance or of promoting the insurer sponsoring the advertisement. These differences shall be considered in interpreting this rule.

Ins 3.27(3)(c) (c) When applying this rule to a specific advertisement, the type of policy to which the advertisement refers and the detail, character, purpose, use and entire content of the advertisement shall be taken into consideration.

Ins 3.27(3)(d) (d) This rule applies to individual, franchise, group and blanket accident and sickness insurance. Because these types of coverage differ in some respects, one interpretation will not always suffice; a specific interpretation for individual, franchise, group or blanket coverage may be indicated.

Ins 3.27(3)(e) (e) The extent to which policy provisions need be disclosed in an advertisement will depend on the content, detail, character, purpose and use of the advertisement and the nature of the exceptions, reductions, limitations and other qualifications involved. The principal criterion is whether the advertisement has the capacity and tendency to mislead or deceive if such a provision is not disclosed.

Ins 3.27(3)(f) (f) Whether an advertisement has the capacity and tendency to mislead or deceive shall be determined by the commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

Ins 3.27(4) (4) Coverage types.

Ins 3.27(4)(a) (a) An advertisement which is an invitation to apply shall clearly and prominently designate and at least briefly describe the type or types of coverage provided by the policy advertised. The level and extent of benefits provided by or available under the coverage shall also be clearly indicated.

Ins 3.27(4)(b) (b) The following are the standard types of coverage designations and the minimum adequate form of description that must be used. Any type of coverage authorized by Wisconsin Statutes which is not reasonably included within one or more of the standard coverage types listed shall be similarly and appropriately named and described so as to clearly disclose the benefits provided.

Ins 3.27(4)(b)1. 1. ‘Basic hospital expense benefits.’ This coverage provides benefits for hospital room and board and miscellaneous hospital charges, based upon actual expenses incurred, up to stated maximum amounts.

Ins 3.27(4)(b)2. 2. ‘Basic medical expense benefits.’ This coverage provides benefits for medical benefits based upon actual expenses incurred, up to stated maximum amounts.

Ins 3.27(4)(b)3. 3. ‘Basic surgical expense benefits.’ This coverage provides benefits for surgical benefits based upon actual expenses incurred up to stated maximum amounts.

Ins 3.27(4)(b)4. 4. ‘Major medical or comprehensive expense benefits.’ These coverages provide high maximum benefit amounts covering almost all types of medical care and contain deductible and co-insurance features.

Ins 3.27(4)(b)5. 5. ‘Disability income benefits.’ This coverage provides periodic benefit payments to help replace income when the insured is unable to work as a result of illness or injury.

Ins 3.27(4)(b)6. 6. ‘Hospital confinement indemnity benefits.’ This coverage provides benefits in a stated amount for confinement in a hospital, regardless of the hospital expenses actually incurred by the insured, due to such confinement.

Ins 3.27(4)(b)7. 7. ‘Accident only benefits.’ This coverage provides benefits for losses for accidental bodily injury.

Ins 3.27(4)(b)8. 8. ‘Specified disease or treatment benefits.’ This coverage provides benefits for treatment of a specific disease or diseases named in the policy or for specified treatment.

Ins 3.27(5) (5) General definitions.

Ins 3.27(5)(a) (a) An advertisement relating to accident and sickness insurance for the purpose of this rule includes the following:

Ins 3.27(5)(a)1. 1. Printed and published material, audio visual material and descriptive literature of an insurer used in newspapers, magazines, other periodicals, radio and TV scripts, the internet, web pages, electronic or computer presentations, billboards and similar displays, excluding advertisements prepared for the sole purpose of obtaining employees, agents or agencies.

Ins 3.27(5)(a)2. 2. Descriptive literature and sales aids of all kinds issued by an insurer or agent for presentation to members of the public, including but not limited to circulars, leaflets, booklets, depictions, illustrations and form letters.

Ins 3.27(5)(a)2.a. a. Including material used in the solicitation of renewals and reinstatements except for communications or notices which mention the cost of the insurance but do not describe benefits,

Ins 3.27(5)(a)2.b. b. Excluding material in house organs of insurers, communications within an insurer’s own organization not intended for dissemination to the public, individual communications of a personal nature, and correspondence between a prospective group or blanket policyholder and an insurer in the course of negotiating a group or blanket policy,

Ins 3.27(5)(a)2.c. c. Including group and blanket booklets, summaries of coverage and other explanatory material issued to insured persons, and

Ins 3.27(5)(a)2.d. d. Excluding general announcements from group or blanket policyholders to eligible individuals that a contract has been written.

Ins 3.27(5)(a)3. 3. Prepared sales talks, presentations of material for use by agents and representations made by agents in accordance therewith, excluding materials to be used solely by an insurer for the training and education of its employees or agents, and

Ins 3.27(5)(a)4. 4. Envelopes used in connection with the above.

Ins 3.27(5)(b) (b) A policy for the purpose of this rule includes any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits whether on a cash indemnity, reimbursement or service basis,

Ins 3.27(5)(b)1. 1. Except such benefits contained in a policy providing another kind of insurance other than life, and

Ins 3.27(5)(b)2. 2. Except disability and double indemnity benefits included in life insurance, endowment or annuity contracts or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as

Ins 3.27(5)(b)2.a. a. Provide additional benefits in case of death or dismemberment or loss of sight by accident or

Ins 3.27(5)(b)2.b. b. Operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity if the insured or annuitant becomes totally and permanently disabled, as defined by the contract or supplemental contract.

Ins 3.27(5)(c) (c) An insurer for the purpose of this rule includes any person, individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, nonprofit service plan subject to ch. 613, Stats., voluntary nonprofit sickness care plan organized under s. 185.981, Stats., interscholastic benefit plan organized under s. 616.08, Stats., and any other legal entity engaged in advertising a policy as herein defined.

Ins 3.27(5)(d) (d) An exception for the purpose of this rule means any provision in a policy whereby coverage for a specified hazard is entirely eliminated. It is a statement of a risk not assumed under the policy.

Ins 3.27(5)(e) (e) A reduction for the purpose of this rule means any provision in a policy which reduces the amount of the benefits. A risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction clause not been used.

Ins 3.27(5)(f) (f) A limitation for the purpose of this rule means any provision in a policy which restricts coverage under the policy other than an exception or a reduction.

Ins 3.27(5)(g) (g) An invitation to apply means an advertisement which is the direct or principal sales inducement and is designed to invite an offer to contract. Such an advertisement, which usually describes benefits in considerable detail, attempts to persuade the reader or listener to make application for the policy advertised. Such an advertisement would indicate what coverage the purchaser would receive and what such coverage would cost.

Ins 3.27(5)(h) (h) An invitation to inquire means an advertisement which is designed to attract the reader’s or listener’s interest in the policy so that he or she will inquire for further information or details. Such an advertisement describes the policy broadly and withholds some information regarding the policy without which the reader or listener would not reasonably decide to apply for the policy.

Ins 3.27(5)(i) (i) An institutional advertisement means one which is prepared solely to promote the reader’s or listener’s interest in the concept of accident and sickness insurance or of promoting the insurer sponsoring the advertisement.

Ins 3.27(5)(j) (j) A testimonial means any statement made by a policyholder, certificate holder or other person covered by the insurer which promotes the insurer and its policy by describing such person’s benefits, favorable treatment or other experience under the policy.

Ins 3.27(5)(k) (k) An endorsement for the purposes of sub. (13) means any statement promoting the insurer and its policy made by an individual, group of individuals, society, association or other organization which makes no reference to the endorser’s experience under the policy.

Ins 3.27(5)(L) (L) An outline of coverage means an appropriately and prominently captioned portion of a printed advertisement which is clearly set off from the rest of the advertisement by means such as placing it within a prominent border or box or printing it in contrasting color, or a separate appropriately captioned or titled printed statement, which advertisement portion or printed statement contains only a summary of the benefits provided, a designation of the applicable type or types of coverage as defined in sub. (4) and, under appropriate captions, the information required by subs. (10) and (11).

Ins 3.27(5)(m) (m) An individual policy issued on a group basis means an individual policy or contract issued where:

Ins 3.27(5)(m)1. 1. Coverage is provided to employees or members or classes thereof defined in terms of conditions pertaining to employment or membership in an association or other group which is eligible for franchise or group insurance as provided in s. 600.03 (22) and (23), Stats.,

Ins 3.27(5)(m)2. 2. The coverage is not available to the general public and can be obtained and maintained only because of the covered person’s membership in or connection with the group,

Ins 3.27(5)(m)3. 3. Premiums or subscription charges are paid to the insurer by the employer, association or some designated person acting on behalf of the employer, association or covered persons, and

Ins 3.27(5)(m)4. 4. The insurance plan is sponsored by the employer or association.

Ins 3.27(6) (6) Advertisements and representations in general.

Ins 3.27(6)(a) (a) Advertisements and representations shall be truthful and not misleading in fact or in implication and shall accurately describe the policy to which they apply. Words or phrases the meaning of which is clear only by implication or by familiarity with insurance terminology shall not be used.

Ins 3.27(6)(b) (b) Oral representations shall conform to the requirements of this rule.

Ins 3.27(7) (7) Suitability of policies. No agent or insurer shall recommend to a prospective buyer the purchase of any individual policy without reasonable grounds to believe that the recommendation is not unsuitable to the applicant. The agent or insurer shall make such inquiry as may be necessary under the circumstances to determine that the purchase of such insurance is not unsuitable for the prospective buyer. This requirement shall not apply to an individual policy issued on a group basis.

Ins 3.27(8) (8) Outline of coverage.

Ins 3.27(8)(a) (a) Every advertisement of a specific individual policy or policies which constitutes an invitation to apply shall include an outline of coverage as defined in sub. (5) (L).

Ins 3.27(8)(b) (b) Every agent at the time of taking an application for an individual policy shall furnish the applicant an outline of coverage as defined in sub. (5) (L).

Ins 3.27(8)(c) (c) The requirement for an outline of coverage shall not apply to an advertisement or the taking of an application for an individual policy issued on a group basis or an individual conversion policy issued under a group or franchise insurance plan.

Ins 3.27(9) (9) Deceptive words, phrases or illustrations.

Ins 3.27(9)(a) (a) An advertisement shall not exaggerate a benefit or minimize cost by overstatement, understatement or incompleteness. Information shall not be omitted or words, phrases, statements, references or illustrations shall not be used if such omission or use has the capacity and tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. An advertisement referring to any policy benefit payable, loss covered or premium payable shall be sufficiently complete and clear as to avoid deception or the capacity and tendency to mislead or deceive.

Ins 3.27(9)(b) (b) The words and phrases “all,” “full,” “complete,” “comprehensive,” “unlimited,” “up to,” “as high as,” “this policy will pay your hospital and surgical bills,” “this policy will fill the gaps under Medicare and your present insurance” or “this policy will replace your income,” or similar words and phrases shall not be used so as to exaggerate any benefit beyond the terms of the policy, but may be used only in such manner as fairly to describe such benefit.

Ins 3.27(9)(c) (c) A policy covering only one disease or a list of specified diseases shall not be advertised so as to imply coverage beyond the terms of the policy. A particular disease shall not be referred to by more than one term so as to imply broader coverage than is the fact.

Ins 3.27(9)(d) (d) The benefits of a policy which pays varying amounts for the same loss occurring under different conditions, or which pays benefits only when a loss occurs under certain conditions, shall not be advertised without disclosing the limited conditions under which the benefits referred to are provided by the policy.

Ins 3.27(9)(e) (e) The maximum benefit available under a policy shall not be emphasized in a manner which exaggerates its relationship to any internal limits or other conditions of the policy.

Ins 3.27(9)(f) (f) The aggregate amounts or the monthly or weekly benefits payable under coverages such as hospital or similar facility confinement indemnity or private duty nursing shall not be emphasized unless the actual amounts payable per day are disclosed with substantially equal prominence and in close conjunction with such statement. Any limit in the policy on the number of days of coverage provided shall be disclosed.

Ins 3.27(9)(g) (g) Phrases such as “this policy pays $1800 for hospital room and board expenses” are incomplete without indicating the maximum daily benefit and the maximum time limit for hospital room and board expenses.

Ins 3.27(9)(h) (h) An advertisement shall not state or imply that each member under a family policy is covered as to the maximum benefits advertised when such is not the fact.

Ins 3.27(9)(i) (i) The importance of diseases rarely or never found in the class of persons to whom the policy is offered shall not be exaggerated in an advertisement.

Ins 3.27(9)(j) (j) Examples of what benefits may be paid under a policy shall be shown only for losses from common illnesses or injuries rather than exceptional or rare illnesses or injuries.

Ins 3.27(9)(k) (k) When a range of hospital room expense benefits is set forth in an advertisement, it shall be made clear that the insured will receive only the benefit indicated in the policy purchased. It shall not be implied that the insured may select his or her room expense benefit at the time of hospitalization.

Ins 3.27(9)(L) (L) An advertisement shall not imply that the amount of benefits payable under a loss of time policy may be increased at time of disability according to the needs of the insured.

Ins 3.27(9)(m) (m) The term “confining sickness” is an abbreviated expression and shall be explained if used in an advertisement.

Ins 3.27(9)(n) (n) An advertisement shall not state that the insurer “pays hospital, surgical, medical bills,” “pays dollars to offset the cost of medical care,” “safeguards your standard of living,” “pays full coverage,” “pays complete coverage,” “pays for financial needs,” “provides for replacement of your lost paycheck,” “guarantees your paycheck,” “guarantees your income,” “continues your income,” “provides a guaranteed paycheck,” “provides a guaranteed income” or “fills the gaps in Medicare” or use similar words or phrases unless the statement is literally true. Where appropriate, such or similar words or phrases may properly be used if preceded by the words “help,” “aid,” “assist,” or similar words.

Ins 3.27(9)(o) (o) An advertisement shall not state that the premiums will not be changed in the future unless such is the fact.

Ins 3.27(9)(p) (p) An invitation to apply advertisement shall clearly indicate the provisions of any deductible under a policy.

Ins 3.27(9)(q) (q) An advertisement shall not refer to a policy as a doctors policy or use words of similar import unless:

Ins 3.27(9)(q)1. 1. The advertisement includes a statement that the plan of benefits is not endorsed by or associated with any national, state or local medical society, or

Ins 3.27(9)(q)2. 2. The policy has been so endorsed by such a society and the advertisement meets the requirements of sub. (13).

Ins 3.27(9)(r) (r) If a policy contains any of the following or similar provisions, an advertisement referring to such policy shall not state that benefits are payable in addition to other insurance unless the statement contains an appropriate reference to the coverage excepted:

Ins 3.27(9)(r)1. 1. An other insurance exception, reduction, limitation or deductible;

Ins 3.27(9)(r)2. 2. A coordination of benefits or non-duplication provision;

Ins 3.27(9)(r)3. 3. An other insurance in this company provision;

Ins 3.27(9)(r)4. 4. An insurance in other insurers provision;

Ins 3.27(9)(r)5. 5. A relation of earnings to insurance provision;

Ins 3.27(9)(r)6. 6. A workers’ compensation or employers’ liability or occupational disease law exception, reduction, or limitation;

Ins 3.27(9)(r)7. 7. A reduction based on social security benefits or other disability benefits; or

Ins 3.27(9)(r)8. 8. A Medicare exception, reduction, or limitation.