Chapter 15.2: WI Life State Laws

Life Insurance and Annuities: Prohibited Provisions

- No insurer may issue assessable life insurance policies under which assessments or calls may be made upon policyholders or others. - No contract in which the insurer agrees to provide benefits to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to a funeral director or any other person doing business related to burials.

The illustration requirements apply to all group and individual life insurance policies and certificates, except:

- Variable life insurance - Individual and group annuity contracts - Credit life insurance - Life insurance policies with no illustrated death benefits on any individual exceeding $10,000

Contestability

After a life insurance policy has been in force for 2 years, it can be contested only for nonpayment of premiums. For group policies, this applies to the coverage on any insured covered by the policy.

Policy Provisions: Credit Life

Individual credit life insurance policies must be for nonrenewable, nonconvertible, term insurance, except when evidence of insurability is required or the credit transaction is for more than 5 years. When the insured debtor has paid or has made an obligation to pay all or any part of the premium under an individual credit life insurance policy, the total charge must be shown in the policy.

The following provisions must be included in every policy of life insurance issued in Wisconsin:

- Separate Benefits - Grace Period - Credit Life - Misstated Age or Sex

Illustrations: basic vs in-force vs supplemental

- Basic Illustration - A proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements. - In-Force Illustration - An illustration furnished at any time after the policy that it depicts as having been in force for 1 year or more. - Supplemental Illustration - An illustration furnished in addition to a basic illustration that can be presented in a format differing from the basic illustration, but can only depict a scale of non-guaranteed elements that is permitted in a basic illustration.

Variable contracts must state:

- Whether they can be amended as to investment policy, voting rights, and conduct of the business and affairs of any segregated account - That the dollar amount of variable benefits will vary to reflect investment experience

Variable contracts must contain:

Variable contracts must contain: - A statement of the procedure to be used by the insurer in determining the dollar amount of the variable benefits - Appropriate nonforfeiture benefits and a grace period provision - A statement that the dollar amount may decrease or increase and an easily noticeable statement that the benefits are on a variable basis

Life Insurance and Annuities: Trust Agreements

- An insurer may hold the proceeds of any policy under a trust or other agreement as a part of its general assets. However, there may be terms and restrictions regarding revocation by the policyholder and control by the beneficiary. There also could be exemptions from claims of creditors of the beneficiary if that has been an agreement the insurer and policyholder have put into writing. - An insurer may also receive funds based upon these conditions, including the right of the policyholder to withdraw unused portions.

Policy Provisions: Grace Period

Every individual life insurance policy must contain a provision entitling the policyholder to a grace period of not less than 31 days for the payment of any premium due except the first, during which the death benefit continues in force.

Policy Provisions: Nonforfeiture (group life)

Group life policies, other than term insurance, must contain nonforfeiture provisions.

Advertising: All advertisements must:

- Be truthful and not misleading in fact or by implication - Prominently describe the type of policy advertised - For policies with non-level premiums, prominently describe the premium changes - Refer to premiums only as a premiums (use of words such as deposit, deposit premium, investment, or other such misleading wording is prohibited) - Clearly identify in all advertisements the insurer's name and, if any specific individual policy is advertised, it must be identified either by form number or other appropriate description

Suitability of Annuity Sales to Consumers: An insurance intermediary (or insurer if no intermediary is involved) must at the time of sale do all of the following:

- Make a record of any recommendation to purchase an annuity - Obtain a customer-signed statement documenting a customer's refusal, if any, to provide suitability information - If a customer decides to enter into an annuity transaction that is not based on the intermediary's or insurer's recommendation, obtain a customer-signed statement acknowledging that the annuity transaction is not recommended by the intermediary or insurer - Not dissuade a consumer from: 1. Truthfully responding to an insurers request for confirmation of suitability information 2. Filing a complaint 3. Cooperating with an investigation of a complaint

Life Insurance Illustrations: An illustration used in the sale of a life insurance policy must be clearly labeled as a life insurance illustration and contain the following basic information:

- Name of insurer -Name and business address of producer -Name, age, and sex of proposed insured, except where a composite illustration is permitted - 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 - Dividend option election or application of non-guaranteed elements, if applicable

Life Insurance and Annuities: Standard Nonforfeiture Law for Life Insurance

No policy of life insurance can be issued or delivered in this state unless it has the following provisions: - In the event of default in any premium payment, the company will grant, upon proper request within 60 days after the premium due date, a paid-up nonforfeiture benefit of a specified amount on a plan stipulated in the policy, effective as of the due date, or an actuarially equivalent paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits, or a greater amount or earlier payment of endowment benefits. - Upon surrender of the policy within 60 days after the due date of any premium payment in default, and after premiums have been paid for at least 3 full years in the case of ordinary insurance or 5 full years in the case of industrial insurance, the company will pay a cash surrender value in lieu of any paid-up nonforfeiture benefit - A specified paid-up nonforfeiture benefit will become effective as specified in the policy unless the person entitled to make such election elects another available option not later than 60 days after the due date of the premium in default

Assignment

The owner of a life insurance policy or annuity contract can assign any of their rights. The rights of a beneficiary under a life insurance policy or annuity contract are subordinate to those of an assignee, unless the beneficiary was designated as an irrevocable beneficiary prior to the assignment. Assignment can be prohibited by any of the following: - A group contract providing annuities as retirement benefits - An annuity contract that is subject to transferability restrictions under any federal or state tax, employee benefit, or securities law

Policy Provisions: Evidence of Insurability (group life)

A group life policy must contain a provision specifying the conditions, if any, under which the insurer can require evidence of insurability.

Life Insurance Illustrations: Policies to be Illustrated

Every insurer marketing life insurance policies is required to notify the Commissioner whether a policy form is to be marketed with or without an illustration. If the insurer identifies a policy form as one to be marketed without an illustration, the insurer cannot use an illustration for that form prior to the first policy anniversary. If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration is required. Potential enrollees of non-term group life must be furnished a quotation with the enrollment materials. The quotation must show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis. In addition, the insurer must provide a basic illustration to any non-term group life enrollee who requests it.

Medical Examinations and Lab Tests (Including HIV Consent)

Under current Wisconsin law, insurers writing individual life insurance in Wisconsin may require applicants for insurance to be tested for the presence of the antibody to HTLV-III, and reveal whether they have obtained a test or the results of such a test. Applicants for group insurance may not be required to take a test or reveal whether they have obtained a test or the results of such a test. Insurers may only use or inquire about FDA-licensed tests. Insurers are prohibited from denying or limiting benefits solely because the insured's death is caused by HIV infection. An insurer may not require or request any individual to reveal whether the individual has undergone a test at an anonymous counseling and testing site or through the use of a home test kit.

Life Insurance Illustrations:

An illustration is any presentation or depiction that includes non-guaranteed elements of a life insurance policy over a period of years and that is 1 of the 3 types defined below: - Basic Illustration - A proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements. - In-Force Illustration - An illustration furnished at any time after the policy that it depicts as having been in force for 1 year or more. - Supplemental Illustration - An illustration furnished in addition to a basic illustration that can be presented in a format differing from the basic illustration, but can only depict a scale of non-guaranteed elements that is permitted in a basic illustration.

Disclosure: The objective of the rule regarding solicitation and disclosure is to: This rule applies to: Unless specifically included, this rule does not apply to:

- Require insurers to deliver information to purchasers of life insurance that will improve the buyer's ability to select the most appropriate plan for the buyer's needs - Improve the buyer's understanding of the basic features of the policy that has been purchased - Improve the ability of the buyer to evaluate the relative costs of similar plans of insurance This rule applies to: - Any solicitation, negotiation, or procurement of life insurance occurring within this state - Any issuer of life insurance contracts, including fraternal benefit societies Unless specifically included, this rule does not apply to: - Annuities - Credit life insurance - Group life insurance - Life insurance policies issued in connection with pension and welfare plans subject to ERISA - Variable life insurance under which the amount or duration of the life insurance varies according to the investment experience of a separate account

Policy Provisions: grace period

Group life policies must contain a provision that the policyholder is entitled to a grace period of not less than 31 days for the payment of any premium due except the first. During the grace period the death benefit coverage remains in force, unless the policyholder gives the insurer advance written notice of discontinuance.

Life Insurance Illustrations: Standards for Supplemental Illustrations

A supplemental illustration must: - Be accompanied by or preceded by a basic illustration - Not show non-guaranteed elements as more favorable to the policy owner than the non-guaranteed elements used in the basic illustration - Contain a statement that non-guaranteed elements are not guaranteed - Show the premium equal to the premium shown in the basic illustration A supplemental illustration must refer the insured to the basic illustration for guaranteed elements and other important information.

Policy Provisions: Misstated Age or Sex

If the age or sex of the person whose life is at risk is misstated in an application for a policy of life insurance and the error is not adjusted during the person's lifetime, the amount payable under the policy is what the premium paid would have purchased if the age or sex had been stated correctly. If the person whose life is at risk was, at the time the insurance was applied for, beyond the maximum age limit designated by the insurer, the insurer must refund at least the amount of the premiums collected under the policy.

Life settlement includes all of the following:

- The transfer for compensation, value of ownership, or beneficial interest in a trust or other entity that owns a policy that insures the life of a person residing in this state, if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more policies or certificates of insurance - A written agreement for a loan or other lending transaction, secured primarily by an individual or group policy - A premium finance loan made for a policy on, before, or after the date of issuance of the policy if: 1. The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing 2. The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy 3. The owner agrees on the date of the premium finance loan to sell the policy or any interest in its death benefit on any date following the issuance of the policy

Unfair Trade Practices: Rules Regarding Discrimination Based on Domestic Abuse

In addition to prohibitions against other types of discrimination, an insurer cannot use domestic abuse as the only reason to refuse to insure or continue to insure; limit the amount, extent, or kind of coverage under a disability insurance policy available to an individual; or charge a different rate for the same coverage. However, with respect to an individual or group life insurance policy, an insurer may do any of the following on the basis of information in medical, law enforcement, or court records, or on the basis of information provided by the insured, policyholder, or applicant: - Deny or limit benefits under such a policy or certificate to a beneficiary who is the perpetrator of abuse that results in the death of the insured - Refuse to issue such a policy or certificate that names as a beneficiary a person who is or was, or who the insurer has reason to believe is or was, a perpetrator of abuse or domestic abuse against the person who is to be the insured under the policy - Refuse to name as a beneficiary under such a policy or certificate a person who is or was, or who the insurer has reason to believe is or was, a perpetrator of abuse or domestic abuse against the insured under the policy - Refuse to issue such a policy or certificate to a person who is or was, or who the insurer has reason to believe is or was, a perpetrator of abuse or domestic abuse against the person who is to be the insured under the policy - Refuse to issue such a policy or certificate to a person who lacks an insurable interest in the person who is to be the insured under the policy

Variable Contracts

Variable contracts must contain: - A statement of the procedure to be used by the insurer in determining the dollar amount of the variable benefits - Appropriate nonforfeiture benefits and a grace period provision - A statement that the dollar amount may decrease or increase and an easily noticeable statement that the benefits are on a variable basis Variable contracts must state: - Whether they can be amended as to investment policy, voting rights, and conduct of the business and affairs of any segregated account - That the dollar amount of variable benefits will vary to reflect investment experience Any person selling or offering for sale a variable contract must have a valid license authorizing the solicitation of variable life insurance and variable annuity products.

Proposal

This rule applies to the solicitation of or negotiation for any life insurance or annuity where it is known to the insurer or the agent that the sale of any mutual fund or other security can become or is a part of the transaction. In any such solicitation or sale, the prospect or policyholder must be furnished with a copy of a clear and unambiguous written proposal not later than at the time the solicitation or proposal is made Any proposal must: - Be dated and signed by the insurance agent or by the insurer if no agent is involved - State the name of the insurer - Be accurate and complete - Contain no misrepresentations or false, deceptive, or misleading statements - Show the premium charge for life insurance separately from any other charge (otherwise, it will be considered a misrepresentation and an unfair trade practice) - Show the amount of the death benefit for the life insurance separately from any other benefit that can accrue upon the death of the insured - Show matters pertaining to life insurance separately from any matter not pertaining to life insurance - Contain only such representations as will accurately reflect the actual conditions applicable to the insured

Policies Not Dated Back To Lower Insurance Age

Companies cannot issue for delivery in this state any policy or contract of life insurance that takes effect as of a date more than 6 months before the application for it was made, if it would cause the premium on the policy to be reduced. The date of application must be considered to be the date on which the application (Part I) or the medical examination (Part II) is completed, whichever is the later. This ruling does not prohibit the exchange, alteration, or conversion of policies of life insurance as of the original date of such policies if the amount of insurance provided under the new policy does not exceed the amount of insurance under the original policy or the amount of insurance which the premium paid for the original policy would have purchased if the new policy had been originally applied for, whichever is greater; nor prohibit the exercise of any conversion privilege contained in any policy or contract.

The following provisions must be included in every group life insurance policy issued in Wisconsin:

- Evidence of Insurability - Misstatement of Age - Facility of Payment - Nonforfeiture - Grace Period

Policy Provisions: Facility of Payment (group life)

Group life policies must contain a provision that any sum becoming due by reason of the death of an insured person is payable to the designated beneficiary. If there is no designated beneficiary, the insurer reserves the right to pay up to $1,000 to any person appearing to be entitled by reason of having incurred funeral or other expenses incidental to the last illness or death of the insured.

Unfair Trade Practices: Prohibited Uses of Senior-Specific Designations

It is an unfair and deceptive trade practice for an insurance producer to use a senior-specific certification or professional designation that misleads a purchaser or prospective purchaser to believe the insurance producer has special certification/training in advising or providing services to seniors. In determining whether a combination of words or an acronym constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing seniors, factors to be considered must include: - Use of words such as senior, retirement, elder, or like words combined with words such as certified, registered, chartered, advisor, specialist, consultant, planner, or like words, in the name of the certification or professional designation - The manner in which those words are combined For purposes of this section, a job title within a licensed or registered organization is not considered a certification or professional designation. However, job titles are subject to these standards if they are used in a manner that would confuse or mislead a reasonable consumer, when the job title: - Indicates seniority or standing within the organization - Specifies an individuals area of specialization within the organization

Policy Provisions: Misstatement of Age (Group Life)

Group life policies must contain a provision specifying that an equitable adjustment of premiums, benefits, or both will be made if the age of an insured person has been misstated.

Policy Provisions: Separate Benefits

very life insurance policy must specify each benefit promised in the policy separately.

Life Settlements:

A life settlement is an agreement regarding the terms under which compensation—less than the policy's expected death benefit but greater than the policy's cash surrender value or accelerated death benefit available at the time of the life settlement application—will be paid, in return for the owner's assignment, transfer, or sale of the death benefit or any interest in a policy. Life settlement contract forms and disclosure statement forms are subject to prior approval by the Commissioner and must allow the owner a right to rescind the contract before the earlier of 30 calendar days after the contract is executed by all parties or 15 calendar days after the life settlement proceeds have been paid to the owner. Providers and brokers are required to be licensed; give proper disclosures to owners, purchasers, and insurers; and follow statutory standards for truthful advertising and fair marketing practices.

Annuity (Benefit) Payment Options

Upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company must grant a paid-up annuity on a plan stipulated in the contract of such value.

Disclosure: Buyer's Guide

- At the time the application is taken, the insurer must provide a copy of the Life Insurance Buyer's Guide to all prospective purchasers of life insurance policies. - An insurer not marketing policies through an intermediary may provide the Buyer's Guide at the time the policy is delivered, provided the policyholder is guaranteed a 30-day right to return the policy for a full refund of premium. - A Buyer's Guide and a policy summary must be provided to any prospective purchaser upon request.

Disability (accident and health) insurance is generally defined as any type of insurance that covers policy claims involving:

- Medical and surgical expenses - Indemnities for loss of income due to accident and health - Accidental death and disability - Hospital care - Long-term care Most disability policies offer a wide range of coverages and limits. Insurance laws establish statutory standards to protect the insured and to give the Commissioner authority to set specific standards and provisions for the terms of insurance contracts through rule-making powers.

Life Insurance Illustrations: When using an illustration in the sale of a life insurance policy, an insurer or its producers cannot:

- Represent the policy as anything other than a life insurance policy - Use non-guaranteed elements in a manner that is misleading - Imply that the payment or amount of non-guaranteed elements is guaranteed - Use an illustration that does not comply with the requirements of this Regulation - Use an illustration that shows policy performance as more favorable than that produced by the illustrated scale of the insurer - Provide an applicant with an incomplete illustration - Represent that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless it is true - Use the term vanish or vanishing premium, or a similar term that implies the policy becomes paid up for using non-guaranteed elements to pay a portion of future premiums - Use an illustration that is lapse-supported, except for policies that can never develop nonforfeiture values - Use an illustration that is not self-supporting

Policy Replacement: Each existing insurer must:

- Retain all replacement notifications for at least 5 years or until the next regular examination - Send a letter to the policy or contract owner of the right to receive information of the right to receive information about existing policy or contract values including, if available, an in-force illustration or policy summary - Upon receipt of a request to borrow, surrender, or withdraw any policy values, send a notice advising the policy owner that the release of policy values may affect the guaranteed and non-guaranteed elements, face amount, or surrender value of the policy

Policy Replacement: Each replacing insurer must:

- Secure with or as part of each application the statements as to whether the new insurance or annuity will replace existing insurance or an annuity on the same life - Secure with the application a completed Notice - Notify each insurer whose insurance is being replaced within 5 working days - Produce copies of the Notice Regarding Replacement for at least 5 years - Provide a 20-day free look provision for the policy owner - Retain all replacement notifications received for at least 5 years

Advertising: All advertisements must not:

- Utilize or describe dividends in a misleading manner - Imply that the payment or amount of dividends is guaranteed - Imply that illustrated dividends under a participating policy or pure endowments, or both, will be sufficient to cover any future premiums - Imply that prospective purchasers become a group of members who enjoy special rates or privileges ordinarily associated with group insurance - Make any statement to interest a prospect in the purchase of shares of stock in the insurance company rather than in the purchase of a life insurance policy

Life Insurance Illustrations: Delivery of Illustration/Record Retention

A copy of an illustration used in the sale of life insurance must be signed accordingly and submitted to the insurer at the time of application. A copy must also be provided to the applicant. If a policy is issued other than as applied for, a revised basic illustration relating to the policy as issued must be sent with the policy. The revised illustration must be signed and dated by the applicant and producer no later than the time the policy is delivered. If no illustration is used in the sale of life insurance or if the policy is applied for other than as illustrated, the producer must certify to that effect in writing on a form provided by the insurer at the time of application. The applicant must acknowledge on the same form that no illustration conforming to the policy applied for was provided and that an illustration conforming to the policy will be provided no later than at the time of policy delivery. This form must be submitted to the insurer at the time of policy application. A basic illustration must be sent with the policy and signed no later than the time the policy is delivered. A copy must be provided to the insurer and the policy owner. A copy of the basic illustration and any revised basic illustration, along with any certification, must be retained by the insurer until 3 years after the policy is no longer in force. An insurer must provide an in-force illustration of current and future benefits and values at the policy owner's request. The annual report must contain a notice of any adverse change in non-guaranteed elements since the last annual report that could affect the policy.

Disclosure: Policy Summary

A policy summary is a written statement, in substantially the same format for all companies, that describes only the guaranteed elements of the policy, including but not limited to: - A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION - The name and address of the insurance intermediary, or, if no insurance intermediary is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the policy summary - The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written - The generic name of the basic policy and each rider - The following amounts, where applicable, for the first 20 policy years and at least one age from 60-65, or maturity, whichever is earlier: -- The annual premium for the basic policy -- The annual premium for each optional rider -- Guaranteed amount payable upon death, at the beginning of the policy year, regardless of the cause of death other than suicide, or other specifically enumerated exclusions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately -- Total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider -- Guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values - The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or at the end of the policy year. If the policy loan interest is variable, the policy summary must include the maximum annual percentage rate. - The date on which the policy summary is prepared

Designation of Beneficiary

A policyholder or certificate holder has a right to make an irrevocable designation of beneficiary, effective at once or at some subsequent time. If the designation of beneficiary is not irrevocable, a policyholder or certificate holder has the right to change the beneficiary without the consent of the previously designated beneficiary. An insurer has notice of a change in beneficiary if it has been requested in the form prescribed by the insurer and delivered to an intermediary representing the insurer.

Participating and Nonparticipating Policies

A stock insurer may issue both participating and nonparticipating life insurance policies and annuity contracts. A fraternal or mutual insurer issuing life insurance policies may issue only participating policies, except for the following situations in which it may issue nonparticipating policies: - Paid-up, temporary, pure endowment insurance, and annuity settlements provided in exchange for lapsed, surrendered, or matured policies - Annuities beginning within 1 year of the making of the contract - Such term insurance policies as the Commissioner may exempt by rule Every participating policy shall by its terms make its holder eligible to share annually in the part of the surplus to be distributed. No life insurance policy or certificate may be issued in which the distribution of dividends, if any, is deferred for a period longer than 1 year. Every insurer doing a participating business must annually ascertain the surplus over required reserves and other liabilities. After setting aside amounts as is lawful and considered necessary by the insurer's board of directors for providing for the growth of the company and for protecting the ability to meet ongoing and future claims, and after making provision for the payment of reasonable dividends upon capital stock as determined by the insurer's board of directors, an insurer must distribute as dividends the remaining surplus, if any, attributable to participating life insurance and annuity policies in such amounts as its board of directors determines to be reasonably proportioned to the policy's contribution to the distributable surplus. A dividend may be conditioned on the payment of the succeeding year's premium only on the first and second anniversaries of the policy.

Life Insurance Illustrations: Standards for Basic Illustrations

An illustration must show the date it was prepared Each page must be numbered and show its relationship to the total number of pages in the illustration The assumed dates of payment receipt and benefit pay-out within a policy year must be clearly identified Assumed payments on which the illustrated benefits and values are based must be identified as premium outlay or contract premium Guaranteed death benefits and values must be shown and labeled guaranteed Any non-guaranteed elements cannot be based on a scale more favorable to the policy owner than the insurer's illustrated scale The surrender value must be identified by the name the value is given in the policy being illustrated Illustrations can show benefits and values in graphic or chart form in addition to tabular form Illustration of non-guaranteed elements must indicate that: - The benefits and values are not guaranteed - The assumptions on which they are based can be changed by the insurer - Actual results might be more or less favorable Illustrations showing that policy charges can be paid using non-guaranteed values, must disclose that a charge continues to be required and that the insured might need to continue or resume premium payments A basic illustration must include: - A brief description of the policy being illustrated - A brief description of the premium outlay for the policy - A brief description of any policy features, riders, or options shown and the impact they can have on the benefits and values of the policy - Identification and a brief definition of column headings and key terms - The following statement: "This illustration assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results can be more or less favorable than those shown." Illustrations provided at policy delivery must include the following statement to be signed and dated by the applicant: "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." Illustrations provided at policy delivery must include the following statement to be signed and dated by the insurance producer: "I certify that this illustration has been presented to the applicant 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."

Unfair Trade Practices: The following are deemed to be unfair trade practices:

Effecting or attempting to effect a personal financial transaction with a customer unless any of the following apply: - The customer is a relative of the agent or affiliate - The customer is a person residing in the household of the agent or affiliate at the time of the transaction - The transaction is a bona fide arm's length business transaction where the customer is either qualified to understand and assess the transaction or has been advised or represented in the transaction by a qualified individual who is not the agent or affiliate - The agent or affiliate is acting lawfully pursuant to authority given under federal or state law governing the securities or investment advisory business Knowingly being listed as a beneficiary of any proceeds of a life insurance policy or annuity issued to a customer unless the agent or affiliate has an insurable interest in the life of the customer Engaging in transactions with a customer in violation of the Wisconsin Uniform Securities Law, the Wisconsin Franchise Investment Law, the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, or the U.S. Investment Company Act of 1940 Making misleading statements to a customer regarding or otherwise misrepresenting one's qualifications or services. This includes using terms such as "financial," "investment," or "retirement" in conjunction with terms such as "planner," "planning," or "consulting" when, under the circumstances, the statements, representations, or use of these terms do not accurately describe the nature of the services offered or the qualifications of the person offering the services. Selling, soliciting the sale, or assisting the sale of health coverage that is: - Provided by a person who is not licensed as an insurer in this state - Represented to be authorized under, or exempt from state insurance regulation under, the Federal Employee Retirement Income Security Act

Suitability of Annuity Sales to Consumers:

In recommending the purchase or exchange of an annuity to a consumer, an insurer or producer must have reasonable grounds for believing that the recommendation is suitable on the basis of the facts disclosed by the consumer as to their investments, other insurance products, financial situation, and needs. Prior to the execution of a purchase or exchange of an annuity, the producer must make reasonable efforts to determine suitability. The information required includes all the following: - Age - Annual income - Financial situation and needs, including the financial resources used for the funding of the annuity - Financial experience - Financial objectives - Intended use of the annuity - Financial time horizon - Existing assets, including investment and life insurance holdings - Liquidity needs - Liquid net worth - Risk tolerance - Tax status However, there is no requirement to determine suitability if the consumer decides to purchase an annuity that is not based on the recommendation of the insurer or producer. An intermediary must complete an approved 4-hour annuity suitability training course before soliciting and selling annuity products. A provider of an annuity training course must register as a continuing education provider in this state and comply with the rules and guidelines applicable to insurance intermediary continuing education courses. Providers of annuity training must comply with the reporting requirements and issue certificates of completion. Satisfaction of the training requirements of another state that are substantially similar to Wisconsin's requirements satisfy the training requirements of this state.

Policy Replacement: Each insurer must do all of the following:

Maintain a system of supervision and control to ensure compliance with replacement requirements that must at a minimum: - Inform its producers of the requirements using training manuals prepared by the insurer - Provide to each producer a written statement of the insurer's position with respect to the acceptability of replacements providing guidance to its producer as to the appropriateness of these transactions - Establish and maintain a system to review each replacement transaction the producer indicates isn't appropriate for replacement - Establish and maintain procedures to detect transactions that are replacements of existing policies or contracts by the existing insurer, but that have not been reported by the applicant or producer (for example, systematic customer surveys, interviews, confirmation letters, or programs of internal monitoring) Have the capacity to monitor each producer's life insurance policy and annuity contract replacements for that insurer, and upon request, make such records available to the Commissioner. The capacity to monitor includes the ability to produce records for each producer's replacements, including financed purchases, a percentage of the producer's total annual sales for life insurance, number of lapses of policies by the producer as a percentage of the producer's total annual sales for life insurance, annuity contract replacements as a percentage of the producer's total annual annuity contract sales, number of transactions that are unreported replacements of existing policies or contracts by the existing insurer detected by the insurer's monitoring system, and replacements, indexed by replacing producer and existing insurer. Require with or as a part of each application for life insurance or annuity a signed statement by the applicant and the producer as to whether the applicant has existing policies or contracts Require with each application for life insurance or annuity that indicates an existing policy or contract a completed Notice Regarding Replacement When the applicant has existing policies or contracts, produce copies upon the Commissioner's request of: - Any sales material - The basic illustration - Any supplemental illustrations related to the specific policy or contract that is purchased - The producer's and applicant's signed statements with respect to financing and replacement for at least 5 years after the termination or expiration of the proposed policy or contract Make sure that the sales material and illustrations meet the requirements of this section and are complete and accurate for the proposed policy or contract If an application does not meet the requirements of this section, notify the producer and applicant and fulfill the outstanding requirements