Chapter 19

Sales material

A sales illustration and any other written, printed, or electronic information used in the sales presentation.

Jurisdictional licensing

Companies must be authorized to advertise in Alabama. This includes other states that run advertisements in Alabama. Advertisements cannot state or otherwise imply that a company or policy is endorsed by a governmental agency, unless such is the case. Advertisements cannot state they are approved by the Alabama Insurance Department, unless such is the case.

Enrollment requirements

HMOs must offer an open enrollment period at least once annually.

HMO Power

An HMO may: -purchase, lease or build HMO clinics, hospitals and office space -provide medical care through contracted medical practitioners -establish contracts with marketing companies offer health care services as a supplement to basic health care

LTC required disclosures

-Policyholders must be provided with a 30-day free look period. -Benefit triggers -Renewability provision -Limitations and exclusions -Tax implications -How benefits are paid

Important policy owner notice:

You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department." Upon request, the insurance company will provide an in force illustration of current and future benefits and values based on the insurer's present illustrated scale. If the insurance company has made an adverse change in non-guaranteed elements that could affect the policy since the last annual report, the annual report must state this fact.

Penalties

-Revocation or suspension of a producer's or insurance company's license -Monetary fines -Forfeiture of any commissions or compensation paid with respect to the replacement transaction -Payment of restitution with interest (insurance company)

Colorectal cancer exam

All group health plans must offer coverage for colorectal cancer exams for insureds age 50 and over and high risk persons under age 50.

LTC Incontestability

An insurance company may contest any material misrepresentation on long-term care policies that have been in force for 6 months or less. For policies that have been in force for more than 6 months but less than 2 years, the policy may be contested only if related to a claim. After 2 years, policies are incontestable.

Right of return and refund

Medicare supplement policies or certificates will have a notice prominently printed on the first page of the policy or certificate or attached stating that the applicant has the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason.

Testimonials

Testimonials must disclose whether or not the person giving the testimonials as a financial interest in the company - "This is a paid advertisement." Testimonials cannot imply that it is endorsed by a particular group or organization, unless such is the case.

Industrial policies and medicaid

A private insurer may not deny coverage or limit benefits to an individual because the person is eligible for Medicaid.

Franchise

An employer intending to purchase franchise health insurance must plan on covering at least 3 employees. An association must insure at least 10 members.

Minors and Insurance

Any minor age 15 or older may purchase life, health, and most other types of insurance, on his own life or on the life of another person to whom he has insurable interest. Minors may receive death benefits from a life insurance policy beginning at age 18, up to $3,000 per year. At age 19 there are no limits.

Inflation protection

The minimum inflation protection for long-term care policies is 5% annually.

Examinations

The Commissioner has authority to examine HMOs at any time; however, the Commissioner must examine each HMO at least once every three years.

Replacement

A transaction in which a new policy or contract is to be purchased, and it should be known that an existing policy or contract 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 use of nonforfeiture benefits or other policy values; -Amended to reduce benefits or policy coverage; Reissued with any reduction in cash value; or -Used in a financed purchase.

Coverage for medically necessary inpatient care for mother and newly born child

All health plans that provide maternity coverage will provide coverage for the following: -All medically necessary inpatient care for a mother and her newly born child including the administration of medical tests. -Benefits for any hospital length of stay of not less than 48 hours in connection with childbirth for the mother or newborn child, following a normal vaginal delivery. -Benefits for any hospital length of stay of not less than 96 hours in connection with childbirth for the mother or newborn child, following a cesarean section.

Prescription drug coverage

All health plans that provide prescription drug coverage must allow the insured to choose what pharmacy they want to use, as long as it is licensed in Alabama.

LTC advertising

Companies selling long-term care policies must file all advertising materials with the Commissioner prior to use.

Advertising obligations for producers:

-Inform prospective purchasers of their identity as insurance producers -Provide the full name of the company they are representing -Not state they are financial planners, investment advisers or financial consultants, unless such is the case

LTC prohibited practices

Agents cannot use twisting, high pressure tactics or cold lead advertising in the transaction of LTC or Medicare Supplement policies.

Coverage for mammography

Every health benefit plan which provides coverage for surgical services for a mastectomy will provide coverage for screening mammography as follows: -For women ages 40 to 49, inclusive, a mammogram at least every two years or more frequently based on the recommendation of a woman's physician. -For women age 50 or over, a mammogram every year or more frequently based on the recommendation of a woman's physician.

Coverage for alcoholism

Group, blanket, franchise and association health insurance policies must provide the option of coverage for treatment of alcoholism. The benefits for alcoholism treatment will include inpatient or residential treatment and outpatient treatment provided by licensed medical providers.

Industrial life insurance provisions

Industrial life insurance has face amounts of $2,500 or less in Alabama. It is sold by debit agents who collect premiums weekly or monthly. Grace period: 30 days for monthly-premium policies; 4 weeks for weekly-premium policies Reinstatement: 2 years from date of overdue premium

Policy provisions

No policy or certificate may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare. No Medicare supplement policy or certificate may use waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions. No Medicare supplement policy or certificate in force in the state will contain benefits that duplicate benefits provided by Medicare.

Existing policy or contract

The insurance company whose policy will be replaced.

Annual report

When a policy is sold with an illustration, the insurance company must provide each policyowner with an annual report on the status of the policy. The annual report will include information about death benefit, cash values, etc. If the annual report does not include an in force illustration, it shall contain the following notice displayed prominently:

Obstetricians and Gynecologists as Primary Care Physicians

All individual and group health plans must allow a woman to select an obstetrician or gynecologist as her primary care physician.

Chiropractor

All individual and group health plans providing chiropractic care must subject such care to the same deductibles and copayments as other benefits covered by the plan.

Advertisement

An advertisement is material designed to create public interest to persuade the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy. It includes pamphlets, brochures, letters, illustrations, sales presentations, newspaper ads, radio and t.v. ads. Advertisements do not include: -Communications or materials used internally within an insurance company; -Administrative communications with policyholders; and -A general announcement from a group or blanket policyholder that coverage has been arranged.

LTC Replacement

For replacement transactions involving long-term care policy, the agent must provide the applicant a Notice Regarding Replacement explaining the replacing coverage in comparison to the existing coverage. Included in the Notice, the applicant must be provided a 30-day free look period for the replacing coverage. The replacing insurance company must notify the existing company within 5 working days of a replacement.

Records

Records must be maintained for inspection by the Commissioner for 3 years after the insurance transaction is completed.

Delivery of buyer's guide and disclosure document

When the application for the annuity is taken in a face-to-face meeting, the applicant must at or before the time of application be given both the disclosure document and the Buyer's Guide. When the application for the annuity is taken by means other than in a face-to-face meeting, the applicant must be sent both the disclosure document and the Buyer's Guide no later than 5 business days after the completed application is received by the insurer. If the annuity provides a free look period of 15 days, the Buyer's Guide and disclosure document may be delivered either with the contract or at any time prior to delivery of the contract. Any violation of the Regulation 129 is considered an unfair trade practice.

Deferred annuities--Advance premium funds

Illustrations that refer to higher than guaranteed rates must provide equal reference to guaranteed rates. Advertisements referencing the premium accumulation rate must also state the relationship between gross and net premium. Illustrations for annuities that do not provide cash surrender prior to annuitization must state cash surrender benefits are not provided by the policy.

Prohibited provisions

No policy of industrial life insurance shall contain any of the following provisions: A provision by which the insurer may deny liability under the policy because the insured has previously obtained other insurance from the same insurer; A provision giving the insurer the right to declare the policy void because the insured has had a disease, or because the insured has received institutional, hospital, medical, or surgical treatment or attention after two years from policy issuance, and the insured provides evidence that the condition for which medical treatment was sought was not serious or material to the risk; or A provision giving the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract.

Continuation and Conversion

Alabama requires all group long-term care policies provide conversion and continuation for insureds leaving the group. Conversion to an individual policy must be elected within 31 days of leaving the group.

Complaint System

All HMOs must have a complaint system. Each HMO must submit an annual report to the Commissioner that includes the following: -Explanation of the complaint system -Total number of complaints including reasons for complaints -Total number of malpractice claims including amount of claims and final disposition of claims

Student policies

Envelopes containing insurance solicitation materials to students cannot use any words that may imply the school's endorsement of policies, unless such is the case. The phrase "Student Insurance Forms Enclosed" must appear on one continuous line. The soliciting agent or insurance company's name appearing on the envelope must be accompanied by a complete address. Any slogans used on the envelope cannot relate to education. Example of a prohibited slogan: "Be smart! Insure your education with ABC Insurance!" Prohibitions relating to the envelope also apply to its contents.

Replacing insurer

The insurance company issuing the new policy.

Filing and approval of policies

All life insurance policies and annuity contracts issued in Alabama must be filed with and approved by the Commissioner prior to use. For group policies issued and delivered outside of Alabama, but which provide coverage to residents of Alabama, the certificate must be filed with the Commissioner for information purposes only, at the Commissioner's request. Each filing must be submitted at least 30 days in advance of delivery. The Commissioner will approve or disapprove the form within the 30-day period. Policy forms are considered approved if no affirmative approval or disapproval occurs, unless the Commissioner requires a 30-day extension to review the form(s).

Individual and A&H policies standard provisions:

Grace period: 7 days Incontestability: 2 years Reinstatement: 45 days from the date of request for reinstatement for the insurance company to decide if it wants to reinstate a policy; the insurance company can only collect up to 60 days of past due premium, and can exclude loss due to sickness for only 10 days after the policy's reinstatement date. Notice of claim: claimant must notify the company within 20 days of loss Proof of loss: claim forms must be submitted to the company within 90 days of the loss Legal action: the insured has between 60 days and 3 years to file legal action against the insurance company Payments to mental patients - both individual and group policies providing psychiatric care cannot exclude benefits for patients that are treated in a state facility that is supported by tax dollars Free look: 10 days

General rules

A life insurance policy illustration must be clearly labeled "life insurance illustration" and contain the following basic information: -Name of insurer; -Name and business address of producer or insurer's authorized representative, if any; -Name, age and sex of proposed insured, except where a composite illustration is permitted under this chapter; -Underwriting or rating classification upon which the illustration is based; -Generic name of policy, the company product name, if different, and form number; -Initial death benefit; and -Dividend option election or application of non-guaranteed elements, if applicable.

Requirements for advertisements

Advertisements must be truthful and not misleading in fact or by implication. The form and content of an advertisement of a policy will be sufficiently complete and clear so as to avoid deception. It will not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive will be determined by the Commissioner of Insurance 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. No advertisement will use the terms "investment," "investment plan," "founder's plan," "charter plan," "deposit," "expansion plan," "profit," "profits," "profit sharing," "interest plan," "savings," "savings plan," "private pension plan," "retirement plan" or other similar terms in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of such policy to believe that he will receive, or that it is possible that he will receive, something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.

Evidence of coverage

Each member enrolled in an HMO must be provided an evidence of coverage, which must include the following: -Certificate of coverage -Benefits provided by the HMO -Coverage limitations -Deductibles and copayments -How and where medical services may be obtained Premiums -Explanation of the complaint system

Review of advertisements

Every insurer of Medicare supplement insurance policies or certificates in this state will provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio, or television medium to the Commissioner of Insurance of this state for review or approval by the Commissioner.

Penalties

HMOs found not to be in compliance with Alabama law may be subject to suspension or revocation of their certificate of authority. The Commissioner may impose an administrative fine of $500 to $5,000 if written notice and adequate time to correct the problem is provided to the HMO, but correction is not taken.

Penalties

In addition to other penalties, an insurance company or producer that violates Regulation 114 will be guilty of twisting.

Suitability duties

In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction, the insurance producer or insurer, must have reasonable grounds for believing that the recommendation is suitable for the consumer based on the facts disclosed by the consumer regarding his/her investments, other insurance products, financial situation and needs. Prior to the purchase or exchange of an annuity resulting from a recommendation, a producer or insurance company must make reasonable efforts to obtain the following information: -The consumer's financial status. -The consumer's tax status. -The consumer's investment objectives.

Alterations and representations on the application

The applicant's statements on the application are representations made to the best of the applicant's knowledge. A misrepresentation, omission, concealment of facts or incorrect statements will not void the contract unless they are fraudulent or material to the risk (which means important enough that the insurance company would not have issued the policy if they had the correct information).

Annuity suitability

The following annuity suitability and disclosure regulations have been established so recommendations to purchase or exchange an annuity made to a consumer are fair. The following contracts are not subject to this regulation: direct response solicitations; contracts used to fund an employee pension or welfare benefit plan covered by ERISA; 401, 403 and 408 plans of the Internal Revenue Code; government or church plans; nonqualified deferred compensation plans; or formal prepaid funeral contracts.

Life insurance and annuity advertisement

The purpose of life insurance and annuity advertisement regulations is to set forth minimum standards and guidelines to assure a full and truthful disclosure to the public of all material and relevant information in the advertising of life insurance policies and annuity contracts. It assures that advertisements are not in violation of the public's best interest. It also assures that advertisements are complete and clear and avoid confusion.

Illustration

a presentation that includes non-guaranteed elements of a policy of life insurance over a period of years.

In-force illustration

an illustration provided at any time after the policy that it depicts has been in force for one year or more.

Life and annuity replacement

The following replacement regulation does not apply to credit life insurance, group life insurance or group annuities in cases where there is no direct solicitation of individuals by an insurance producer, group life insurance and annuities used to fund prearranged funeral contracts, life insurance policies used to fund retirement plans subject to ERISA, nonconvertible term life insurance that will expire in five years or less and is nonrenewable, immediate annuities, and structured settlements.

Nonforfeiture laws

Policyowners of permanent life insurance policies must be provided nonforfeiture options, in the event that premium payments cease before the policy is paid up. The three nonforfeiture options are 1.) cash, 2.) reduced paid-up, and 3.) extended term. Nonforfeiture laws apply to all individual life insurance policies that build cash value. The law does not apply to group insurance, variable life, annuity contracts, reinsurance, pure endowments and term policies. In Alabama, the cash nonforfeiture option is not required for ordinary life insurance policies until the policyowner has paid premiums for at least 3 years. For industrial life policies, premiums must have been paid for at least 5 years. For both types of policies, the insurance company is legally permitted to defer payment of cash surrender for up to 6 months from the date of request.

Life insurance solicitations

The following applies to all life insurance and excludes individual and group annuity contracts, credit life, group life, life insurance policies used as retirement plans, variable life insurance, and life policies with death benefit less than $5,000 or annual premium less than $200.

Rules for producers

When using an illustration, producers must not: -Represent the policy as anything but life insurance; -Describe non-guaranteed elements in a misleading way; -State or imply that non-guaranteed elements are guaranteed; -Use an illustration that does not comply with -Regulation 114; -Use an illustration that exaggerates policy values ; -Provide an incomplete illustration; -Represent premium payments as not required for each year of the policy to maintain the illustrated death benefits, unless such is the case; -Use the term "vanish" or "vanishing premium," to describe a plan for using non-guaranteed elements to pay a portion of future premiums; or -Use an illustration that is not "self-supporting." -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.

Payment of claims

The Commissioner will designate a standard claim form for all health claims. All insurance companies must accept the Uniform Health Insurance Claim Form approved by the Council on Medical Service of the American Medical Association. Health insurance companies must pay clean claims within 45 calendar days of receipt of claim. A clean claim is one in which all relevant information for processing the claim has been submitted to the insurance company. For clean claims submitted electronically, insurance companies have 30 calendar days to pay claims. For claims that the insurance company intends to deny or dispute, the claimant must be notified within the same time frames noted. If the insurance company receives additional information regarding such claim, it must pay or decline payment within 21 calendar days.

Genetic testing

Health plans cannot use genetic testing to establish an applicant's likelihood of getting cancer. Insurance companies cannot use genetic tests to discriminate against applicants for coverage.

LTC Renewability

Long-term care policies must be at least guaranteed renewable, but may be noncancellable.

Right to return

Every individual disability insurance policy, except single premium nonrenewable policies or contracts, will have a 10-day right to return the policy and have the premium paid refunded if, after examination of the policy, the purchaser is not satisfied with it for any reason.

HMOs

HMOs must hold a certificate of authority to transact in Alabama. HMOs must provide the following records with their application for a certificate of authority: -Certified copies of company documents including bylaws, and names and addresses of company officers -Description of how the HMO will be marketed -Power of attorney for foreign or alien companies must appoint the Alabama Commissioner as the lawful attorney -Designation of service area -Explanation of complaint process -Other information required by the Commissioner

LTC freelook

Long-term care policies must provide a 30-day free look period. The first page of the policy must contain a notice of the 30-day free look period.

General standards

-A Medicare supplement policy cannot 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 or certificate will 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. -A Medicare supplement policy cannot indemnify against losses resulting from sickness on a different basis than losses resulting from accidents. -A Medicare supplement policy must provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with such changes. -Medicare supplement policies must be at least guaranteed renewable, but may be noncancelable. -An insurer will neither cancel nor nonrenew a Medicare supplement policy or certificate for any reason other than nonpayment of premium or material misrepresentation. -Termination of a Medicare supplement policy must be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or to payment of the maximum benefits. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.

Advertising obligations for insurers:

-Control the content and distribution of its advertisements; inform producers of advertisement rules -Retain copies of every advertisement used by its home office for at least 4 years; advertisements are subject to inspection by the Commissioner -Submit a certificate of compliance from the company's executive officer stating all advertisements are in compliance

Introductory or special offers

Advertisements cannot promote special introductory or limited offers unless the policy will be available. Advertisements cannot state there are only a few policies left, and that such policies will be discontinued because they offer special advantages to consumers. Advertisements cannot mention open enrollments, unless the policy has had an open enrollment during the last 6 months. Additionally, the advertisement must state when consumers can enroll, which cannot be less than 10 days nor more than 40 days from the date the open enrollment is first advertised. Policies with reduced initial rates cannot be exaggerated.

Alcoholism treatment

All group plans must offer the option to cover the medically necessary treatment of alcoholism. Benefits must include outpatient and at least 30 days of inpatient care.

Coverage for annual screening for prostate cancer

All individual and group health plans must offer to cover annual screenings for the early detection of prostate cancer in men over age 40. This benefit must be subject to the same copayments and deductibles as other coverages.

LTC Limitations and exclusions

Following are a list of common exclusions found in LTC policies: -Preexisting conditions -Injuries due to war or acts of war -Self-inflicted injuries including attempted suicide Mental illnesses; however, Alzheimer's disease is covered -Alcoholism or drug dependencies -Treatments provided by Workman's Compensation, Medicare, veteran's hospital, etc.

Alabama Health Insurance Plan

The purpose of the Alabama Health insurance plan (AHIP) is to provide adequate health care protection to people who by reason of economic, physical, or other related causes, cannot obtain health insurance through the traditional market. It is high risk pool insurance. Coverage provided by AHIP is comprehensive major medical without preexisting condition limitations or probationary periods. A person is eligible for AHIP if he/she has had continuous health insurance without more than a 63-day gap in coverage before applying for AHIP. He/she must have had at least 18 months of continuous coverage under a prior health plan. A person who had coverage through COBRA must exhaust COBRA coverage before applying for coverage under AHIP. Premiums can be no more than 125% of standard premium rates.

Basic illustration

a proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.

Disclosure requirements

-An advertisement will not omit material information or use words, phrases, statements, references or illustrations if the omission or use has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, premium payable, or state or federal tax consequences. -An advertisement will not use as the name or title of a life insurance policy any phrase that does not include the words "life insurance" unless accompanied by other language clearly indicating it is life insurance. -An advertisement for a policy with non-level premiums will prominently describe the premium changes. -An advertisement will not use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan using nonguaranteed elements to pay a portion of future premiums. -An advertisement will not state or imply that the payment or amount of nonguaranteed elements is guaranteed. -If the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the insurer or related entity as a stockholder, director, officer, employee or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact will be prominently disclosed in the advertisement. -The name of the insurer will be clearly identified in all advertisements about the insurer or its products.

General accident and health plan provisions

-Entire contract; changes: The policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. No change in the policy will be valid until approved by an executive officer of the insurer and unless such approval is endorsed and attached. No agent has authority to change a policy or to waive any of its provisions. -Time limit on certain defenses: After two years from the date of issue of the policy, no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy will be used to void the policy or to deny a claim for loss incurred or disability commencing after the expiration of such two-year period. -Grace period: 7 days for weekly-paid premiums, 10 days for monthly-paid premiums, and 31 days for all other premium payment modes. -Misstatement of age: If the age of the insured has been misstated, all amounts payable under this policy will be such as the premium paid would have purchased at the correct age.

LTC Underwriting requirements

-Use clear language on the application -The application must include a statement stating that false statements on the application may result in voided coverage -Prior to issuing long-term coverage to a person age 80 or older, the insurance company must obtain one of the following: physical exam report, assessment of functional capabilities, the attending physician's statement, or copies of medical records.

Basic illustration narrative summary

A basic illustration must include a narrative summary which includes the following: -A brief description of the policy illustrated, including a statement that it is a life insurance policy; -A brief description of the premium outlay. For policies not requiring payment of a specific premium, the illustration will show the premium outlay that must be paid to guarantee coverage for the term of the contract; -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; -Identification and a brief definition of column headings and key terms used in the illustration; and -A statement containing 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."

Basic illustration standards

A basic illustration must include the following: -The illustration must be labeled with the date it was prepared. -Each page must be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages"). -The assumed dates of payment receipt and benefit pay-out within a policy year must be clearly identified. -If the age of the proposed insured is shown. -Premium amount is identified. -Guaranteed death benefits and values available upon surrender must be shown and clearly labeled guaranteed. -The guaranteed elements must be shown before corresponding non-guaranteed elements. -Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.

Duties of producers:

A producer who initiates an application will submit to the insurer, with or as part of the application, a statement signed by both the applicant and the producer as to whether the applicant owns existing, in-force policies or contracts on the same insured or annuitant. If the answer is "no," the producer's duties with respect to replacement are complete. If the applicant answered "yes" to the question regarding existing coverage, the producer will present and read to the applicant, not later than at the time of taking the application, a Notice Regarding Replacements. However, no approval will be required when amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. The notice will be signed by both the applicant and the producer and left with the applicant. If the notice is presented electronically, the insurance company must mail the applicant a copy of the notice within 3 business days after receipt of the application. The notice will list all life insurance policies or annuities proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and policy or contract number if available; and will include a statement as to whether each policy or contract will be replaced or whether a policy will be used as a source of financing for the new policy or contract. If a policy or contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, will be listed. In connection with a replacement transaction the producer will leave with the applicant at the time an application for a new policy or contract is completed the original or a copy of all sales material. With respect to electronically presented sales material, it will be provided to the policy or contract owner in printed form no later than at the time of policy or contract delivery.

Mental illness coverage

All group health plans covering over 50 members must offer to provide additional benefits for a person receiving medical treatment for any of the following mental illnesses: -Schizophrenia, schizophrenia form disorder, schizo affective disorder. -Bipolar disorder. -Panic disorder. -Obsessive-compulsive disorder. -Major depressive disorder. -Anxiety disorders. -Mood disorders. -Coverage must include inpatient and outpatient care. -Mental illness must be covered on the same basis as other physical illnesses.

Coverage of newly born children in health insurance policies

All individual and group health insurance policies that cover dependent children must cover newborns from the moment of birth.

Violations

Any failure to comply with the replacement regulation will subject producers and/or insurance companies to the Alabama Trade Practices law. Examples of violations include: -Deceptive or misleading information in sales material; -Failing to ask the applicant in completing the application the pertinent questions regarding the possibility of financing or replacement; -The intentional incorrect recording of an answer; -Advising the applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or -Advising the applicant to lie about policy replacement.

Shopper's guide and outline of coverage

Applicants for a long-term care policy must receive a shopper's guide and outline of coverage at the time of initial solicitation, prior to application.

Duties of insurers:

Each insurer will: -Maintain a system of supervision and control to insure compliance replacement regulations -Have the capacity to monitor each producer's life insurance policy and annuity contract replacements and make such records available to the Insurance Department upon request. -Require with or as a part of each application for life insurance or an annuity a signed statement by both the applicant and the producer indicating whether the applicant owns existing in-force policies or contracts on the same insured or annuitant; -Require a Notice Regarding Replacement with each application for life insurance or an annuity that indicates an existing policy or contract is to be replaced; -Notify the existing company of the intent to replace within 5 days of receipt of the application for replacement. Provide the existing company with a policy summary or illustration within 5 business days, upon request. Maintain copies of the Notice Regarding Replacement for at least 5 years. -Provide a 30-day free look period for replacement transactions. -When the applicant owns existing in-force policies or contracts on the sameinsured or annuitant, each insurer will be able to produce copies of any sales material, the basic illustration and any supplemental illustrations related to the specific policy or contract that is purchased, and the producer's and applicant's signed statements with respect to financing and replacement for at least five years after the termination or expiration of the proposed policy or contract.

Required policy provisions-indiv

Grace period: minimum of 30 days Incontestability: 2 years Entire contract: consists of the policy, and the application, if attached Policy loans: life insurance policies that build cash value must provide for policy loans, as long as no premium is in arrears after the grace period. The loan value is equal to the cash surrender value at the end of the current policy year, and the insurer may deduct any existing indebtedness not already deducted with interest. The policy may include a stipulation if the total indebtedness on the policy plus interest equals or exceeds the amount of the policy's cash surrender value then the policy will be terminated after 30 days' notice. Reinstatement: within 3 years Settlement: policy settlement occurs upon the insured's death, once the death certificate has been submitted to the insurance company for payment of benefits. Claims must be paid no later than 2 months from receipt of the death certificate. Misstatement of age or sex: a misstatement of the insured's age or sex results in a an adjustment of the benefit to an amount the premium would have purchased at the correct age or sex Maximum interest rate for policy loans: 8% annual

Sickle-Cell anemia prohibition

Health insurance companies cannot deny coverage to persons diagnosed with Sickle-cell anemia. Sickle-cell anemia must be covered on the same basis as other covered illnesses.

Delivery of basic illustration

If a producer uses a basic illustration in the sale of a life insurance policy, he must submit a copy of the illustration with the application to the applicant and the insurance company. Policies that are issued other than as applied for require a revised illustration, which is signed and dated by the applicant and provided to the applicant upon or prior to policy delivery. The insurance company must also receive a copy. If an illustration is not used, or if the policy is applied for other than as illustrated the applicant and producer must sign attesting to such fact. The insurance company must keep copies of the basic illustration and revised basic illustration for at least 3 years after the policy is no longer in force.

Outline of coverage

In order to provide for full and fair disclosure in the sale of Medicare supplement policies, no Medicare supplement policy will be delivered or issued for delivery in this state and no certificate will be delivered to a group Medicare supplement policy delivered or issued for delivery in this state unless an outline of coverage is delivered to the applicant at the time application is made. The outline of coverage will include all of the following: -A description of the principal benefits and coverage provided in the policy. -A statement of the renewal provisions including any reservation by the insurer of a right to change the premiums and disclosure of the existence of any automatic renewal premium increases based on the policyholder's age. -A statement that the outline of coverage is a summary of the policy issued or applied for and that the policy should be consulted to determine governing contractual provisions.

Industrial conversion privilege

Industrial policies may contain a conversion privilege allowing the insured, upon written request and evidence of insurability, to convert the industrial coverage to any form of life insurance normally issued by the insurance company. The insurance company has the right to approve or deny the request.

Life insurance illustrations

Life insurance illustrations are not literally pictures. They are charts that show nonguaranteed policy values - such as policy cash values that can be expected to grow over time. Interest and dividends cause cash value to grow. Insurance companies cannot guarantee dividends, nor interest rates above the policy's fixed minimum, so illustrations are used to show how the policy values could be expected to perform under favorable circumstances. The purpose of life insurance illustration regulations is to provide rules for life insurance policy illustrations that will protect consumers and foster consumer education. This regulation applies to all types of individual and group life insurance policies except variable, credit, annuities and policies without illustrated death benefits over $10,000.

Protection against unintentional lapse and reinstatement

Long-term care policies must provide protection against unintentional lapse. Long-term care policies cannot be cancelled for nonpayment of premium unless the insurance company provides a 30-day notice to the insured and any person designated by the insured. Lapsed policies must be reinstated within 5 months with payment of all past due premium if evidence of the insured's cognitive impairment or loss of functional capacity can be shown to be the reason for lapse.

Existing insurer

The insurance company whose policy will be replaced.

Disclosure

The insurer will provide a Buyer's Guide to all prospective purchasers, prior to accepting the applicant's initial premium. However, if the policy for which application is made contains an unconditional refund provision of at least 10 days, the Buyer's Guide may be delivered with the policy or prior to delivery of the policy. The insurer will provide a policy summary to prospective purchasers where the insurer has identified the policy form as one that will not be marketed with an illustration. The policy summary will show guarantees only. It will consist of a separate document with all required information set out in a manner that does not minimize or render any portion of the summary obscure. The policy summary will be delivered with the Buyer's Guide. Each insurer will maintain, at its home office or principal office, a complete file containing one copy of each authorized solicitation and disclosure document. The file will contain one copy of each authorized form for a period of 3 years following the date of its last authorized use.

Annuity disclosure

The purpose of regulation 129 is to provide standards for the disclosure of certain minimum information about annuity contracts to protect consumers and foster consumer education. This regulation specifies the minimum information which must be disclosed and the method for disclosing it in connection with the sale of annuity contracts. The goal of this chapter is to ensure that purchasers of annuity contracts understand certain basic features of annuity contracts. Each applicant for an annuity must receive a buyer's guide and a disclosure document. The buyer's guide provides an overview of how annuities work, and the feature and benefits provided. The disclosure document provides specific information about the annuity for purchase, including: -The generic name of the contract; -The insurance company's name and address; -A description of the contract and its benefits, emphasizing that its long-term nature; -Explanation of guaranteed and non-guaranteed elements and how they work; -Explanation of the introductory interest rate, and that interest rates may change from time to time and are not guaranteed; -Guaranteed and non-guaranteed income options; -Any value reductions caused by withdrawals or surrender; -How values in the contract can be accessed; -The death benefit, if available; -A summary of the federal tax status considerations; Impact of any rider; -Specific dollar amount or percentage charges and fees; and -Information about the current guaranteed interest rate for new contracts and a clear notice that the rate is subject to change.

LTC penalty

Violation of Alabama long-term care policies may result in fines up to three times the commission received or $10,000, whichever is greater.

Rules for illustrations

When an insurance company files a form with the Alabama Insurance Department, it must also specify if the policy form will be marketed with or without an illustration. If the insurance company states a policy form will not be marketed with an illustration, then illustrations cannot be used for one year. For policies identified as using illustrations, a basic illustration must be provided in marketing such contracts. When a policy covering multiple lives (e.g. joint life or group life) is sold, the illustration 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. Potential enrollees of permanent group life insurance must be provided a quote with the enrollment materials. The quote must 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 quote will not be considered an illustration, but all information provided in the quote must be consistent with the illustrated scale. A basic illustration must be provided to enrollees who purchase more than the minimum amount of coverage, and the insurance company must make a basic illustration available upon request.

Supplemental illustration

an additional illustration that may be presented in a format differing from the basic illustration, but abiding by the rules of basic illustrations.