Chapter 6: GA Rules and Codes Pertinent to Life Insurance Only
charitable institution
A charitable institution has insurable interest in the life of a donor; and
Corporation
A corporation, either foreign or domestic, has insurable interest in an insured who holds 10% or more of company shares or whose death or physical or mental disability would cause financial loss to the corporation. If a corporation is acquired by another corporation, any insurable interest on an insured will continue through the acquiring corporation.
Ads must CLEARLY ID AND PROMINENTLY DISPLAY THE NAME OF THE INSURER.
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Grace period
An insured is entitled to a grace period of 30 DAYS, in which the policy premium may be paid, and the policy must remain in force;
incontestability
An insurer may not deny a claim due to statements on the application after the policy has been in force for 2 YEARS
Life Insurance Solicitation regulation does not apply to:
Annuities; Credit life insurance; Group life insurance; Variable life insurance policies in which the death benefits and cash values vary according to the investments in a separate account; and Life insurance policies issued in connection with pension and welfare plans that are subject to ERISA.
Prior to soliciting or receiving an application, the insurer must provide, to all prospective purchasers, a
BUYER'S GUIDE. POLICY SUMMARY prior to accepting the applicant's initial premium unless the policy for which application is made contains an unconditional refund provision of at least 10 days.
The act of trying to discourage a policyholder from replacing an existing policy is called
Conservation. Which Policyowners have the right to replace existing life insurance, as long as that is not their intention when originally applying for the policy.
Any misrepresentations, omissions, concealment of facts, or other incorrect statements may NOT prevent recovery under the policy unless:
Fraudulent; Material to the acceptance of risk or to the hazard assumed by the insurer; or The insurer would not have issued the policy in as large an amount or at the premium rate as applied for had misrepresentations been known during the application process.
All life insurance policies issued or delivered in this state must include the following provisions:
GRACE PERIOD RIGHT TO RETURN (FREE LOOK) INCONTESTABILITY MISTATEMENT OF AGE DIVIDENDS POLICY LOAND TABLES OF INSTALLMENTS TABLES OF OPTIONS AND VALUES REINSTATEMENT TITLE STATEMENTS ON APPLICATION ENTIRE CONTRACT PAYMENT OF PREMIUMS PAYMENT OF CLAIMS POLICY EXCLUSIONS
The Georgia Insurance Code designates the following parties as having insurable interest in an insured:
INSURED TRUSTEE CHARITABLE INSITUTION CORPORATION
Tables of Installments
Insurance policies must contain tables detailing changes in benefits or premiums, a statement of the mortality table, interest rates, methods used in calculating cash surrender, and nonforfeiture benefits projected for the next 20 YEARS or for the life of the policy, whichever is shorter;
Statements of Application
Insured's statements on an application for insurance or annuities must be deemed REPRESENTATIONS, not warranties;
advertisements for life insurance policies and annuities must not use as the name or title of a policy or contract any phrase that does not include the words
LIFE INSURANCE OR ANNUITY unless accompanied by other clear language indicating that it is that type of contract.
In life insurance, insurable interest
MUST EXISTS AT THE TIMR OF APPLICATION, and doesn't need to exist at time of the loss.
The purpose of the Life Insurance Solicitation Regulation is to
PROVIDE BUYERS WITH INFORMATION which will improve their ability to select the most appropriate life insurance products to serve their needs, improve their understanding of the basic features of the policy, and improve their ability to evaluate the relative costs of similar plans of life insurance.
Advertisements must be
clearly written, truthful, and not misleading in fact or by implication. The form and content of any advertisement for an annuity contract must be sufficiently complete and clear so as to avoid deception.
What is not considered advertisement?
communications within the insurer's own organization or any communication with the policyholders not intended for a sale or modification of a policy
The Commissioner of Insurance will have the power to
determine whether advertisements are clearly written and can be understood by a person of average education or intelligence for the market segment to which the advertisement is being directed.
The following terms are considered misleading:
investment, investment plan, founder's plan, charter plan, deposit, expansion plan, profits, profit sharing, interest plan, savings plan, private pension plan, retirement plan, risk-free, and similar.
Prior to beginning a life insurance sales presentation, insurance agents must inform a prospective applicant
that they are acting as a life insurance agent and provide the prospect the full name of the insurance company the agent is representing.
Nonforfeiture values are
the benefits of a life insurance policy that the policyowner does not forfeit even if the policy lapses.
Adjustable maximum policy loan interest rates cannot exceed
the cash surrender value calculation rate, plus 1% per annum, or the monthly average for the two months preceding the rate change, whichever is higher.
This consent includes an acknowledgement that
the corporation may maintain life insurance coverage on the individual if their employment with the corporation is terminated.
Individual life insurance contracts cannot be made unless
the individual is of competent legal capacity, applies for the contract, or consents in writing to the contract
Replacing insurer
the insurance company that issues or proposes to issue a new policy or contract that is a replacement of existing life insurance or annuity.
Payment of Premiums
A policy must specify when premiums are due and the premium mode;
Title
An insurance policy must contain a title that briefly describes the nature and form of the policy;
All life insurance policies that allow for policy loans must contain at least one of the following interest rate provisions:
The rate of interest on policy loans is not to exceed 8% per annum; or The maximum policy loan interest rate is adjustable.
If a publicly-owned corporation effectuates life insurance upon its employees, the insurer must give
WRITTEN NOTICE TO THE EMPLOYEES, and provide them with the opportunity to refuse to participate. The insurer must also obtain the written consent of each proposed insured.
If a policy sale is through an agent, the advertisement must clearly disclose the full names of all insurers that the agent is authorized to represent.
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The replacement regulation does not apply to the following:
* Replacement of annuity contracts; * Credit life insurance; * Group life insurance; and Life insurance issued in connection with a pension, profit-sharing or other benefit plan qualifying for tax deductibility of premiums.
Result of replacement, an existing policy has been or will be:
- Lapsed, forfeited, surrendered, or otherwise terminated; - Reissued with any reduction in cash value; - Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values; or - Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid.
Policies must contain a provision stipulating the frequency at which interest rates are determined. Maximum interest rates must be determined on an annual basis, but no more than three times a month.
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Insured
An insured has an unlimited insurable interest in his or her own life, health, and bodily safety, and may designate beneficiaries, regardless of insurable interest;
There are specific disclosure requirements that apply to advertisements for life insurance products distributed in this state: PART ONE
Information that is required to be disclosed cannot be minimized, obscured, or presented in an ambiguous way; Omissions of material information is not allowed; Advertisements that do not guarantee policy issue but use the terms nonmedical, no medical examination required, or similar terms must also clearly and prominently state that the policy issuance may depend on answers to health questions; Advertisement may not use as the name or title of a policy any phrase which does not include the words "life insurance" or "annuity" unless accompanied by other language clearly indicating it is life insurance or an annuity; Prominently describe the specific type of policy being advertised; For policies marketed by direct response: not imply that there will be a cost savings to purchasers because there is no agent or commission involved, unless that is true; For graded or modified policies must prominently display any limitations of benefits;
When a policy is to be replaced..
REPLACING INSURERS must perform the following duties: * Maintain copies of the replacement notice, all required written communications, the applicant's signed statement regarding replacement and a replacement register in their home office for at least 3 years, or until the conclusion of the next regular examination by the Insurance Department, whichever is later; * Receive from the agent a list of the applicant's existing life insurance policies to be replaced and a copy of the replacement notice provided to the applicant; and * Send each existing insurer a copy of the replacement notice and a written communication advising of the proposed replacement within 3 working days of receipt of the application or the date the policy issued, whichever is earlier.
Patterns of policy replacement by policyowners who purchase the replacing policies from the same insurer or agent will be deemed
evidence of the insurer's or agent's knowledge that replacement was intended in connection with the sale of those policies, and that the insurer or agent intended to violate state regulations regarding replacement.
Advertisement cannot use any of the terms that
may lead the consumer to believe that he or she will receive any benefit not available to other persons of the same class and equal life expectancy
Advertisements may use a government entity endorsement
only if the entity has endorsed a policy and authorized the insurer to use that endorsement in its advertisement.
Each insurer is required to maintain a compete file of all
printed, published, or prepared advertisements of the insurer's policies . These files are subject to inspection by the Insurance Department and must be kept either for 4 YEARS or until the next regular examination by the Department, whichever is longer.
Existing insurer
the insurance company whose policy is being replaced
When a producer uses written or printed advertising material in a conservation effort
the producer must leave an original copy of the written or printed material with the applicant.
If advertisements are used beyond the LIMITS OF JURISDICITION in which the insurer is licensed
they may not imply insurer licensing outside of that jurisdiction.
In addition, the following solicitation requirements apply:
A reference to policy dividends must include a statement that dividends are not guaranteed. A presentation of benefits cannot display guaranteed and nonguaranteed benefits as a single sum, unless they also are shown separately nearby. A statement regarding the use of the Life Insurance Cost Indexes must include a prominent explanation to the effect than the indexes are useful only for the comparison of the relative costs of two or more similar policies.
Trustee
A trustee of a trust has insurable interest in a policyowner;
Existing life insurance or annuity
Any life insurance or annuity in force, including LI under a binding or conditional receipt or a LI policy/annuity that's within an unconditional refund period.
Policy Exclusions
The insurer may deny coverage if the insured's death occurred as a result of war, aviation, or specified hazardous occupation, or while the insured is a resident outside the continental United States and Canada, or as a result of suicide (while sane or insane) within 2 years from the date of policy issues.
In a replacement situation, new life insurance may exceed the insurance being surrendered when
an entity has a proper insurable interest and the authority to effectuate life insurance contracts on others, and to the extent that the cash surrender value of the old policy, if applied to the premium of the new policy, would require a larger amount of insurance to qualify as life insurance, and not be treated as a Modified Endowment Contract for federal income tax purposes.
Conservation
any attempt by the existing insurer or its producer, or by a broker, to dissuade a current policyowner from the replacement of existing life insurance or annuity
What does Conservation not include?
such routine administrative procedures as late payment reminders, late payment offers or reinstatement offers.
Required provisions would apply to
single premium or term policies.
In Georgia, any person of competent legal capacity may contract for insurance.
A minor who is at least 15 YEARS OLD may purchase life insurance, annuities, or health insurance on their own life or body, or on the life or body of any person in whom the minor has an insurable interest. The minor will be able to exercise all rights and powers of a policyowner.
When fulfilling a premium loan request, an insurer must provide a policyowner with:
A notice regarding the interest rate at the time a cash loan is made; A notice specifying the interest rate and the frequency of rate determination; and Advance notice of interest rate increases.
Misstatement of age
If an applicant misstates his or her age on an application, the insurer may adjust benefits payable based on the correct age;
Dividends
In participating policies, beginning no later than the end of the 3RD POLICY YEAR, an insurer must determine and pay divisible surplus to the insured;
A life insurance policy cannot be terminated as a direct result of
a change in interest rates.
increased amount of insurance may be allowed when
a former employee elects to use the cash value of the policy to restructure the term, face amount, or investment options under the policy, and the restructuring may result in an increase in the amount of insurance.
The insurer reserves the right to defer the payment of any cash surrender value for a period of 6 MONTHS after demand with surrender of the policy.
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Advertisements may not use words, symbols, or any combination of words or symbols similar to those of state or federal government agencies if they could mislead or deceive as to the true identity of the insurer, or imply that the solicitation is connected with a government agency.
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Each insurer must maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use in sales presentations. The file must contain one copy of each authorized form for a period of
3 YEARS following the date of its last authorized use.
Reinstatement
A lapsed policy may be reinstated after 3 years, once the policyowner pays all back premiums, outstanding loans, and interest of no more than 6% per annum;
All cash value life insurance policies issued in this state must include nonforfeiture provisions that are at least as favorable as the following:
In the event of default in any premium payment for at least 1 year, a paid-up nonforfeiture benefit will become effective as specified in the policy unless the person entitled to it elects another option within 60 days after the due date of the premium in default; Upon policy surrender within 60 days after the due date of any premium payment in default (after the premium has been paid for at least 3 full years in ordinary insurance or 5 years in industrial policies), the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value; If the policy is paid-up or is continued under a paid-up nonforfeiture benefit, the insurer will pay a cash surrender amount if the policy is surrendered within 30 days after the policy anniversary; A mortality table, interest rate and method used in calculating cash surrender values and the paid-up nonforfeiture benefits must be available under the policy; and A statement that the policy's cash surrender values and a paid-up nonforfeiture benefits meet the minimum value and benefit requirement for the state in which the policy is delivered.
Replacement
any transaction in which new life insurance or a new annuity is to be purchased
Advertisement regulation applies to
ALL life insurance policies or annuities.
Policy Loan
After a policy has been in effect for 3 YEARS, has accrued cash surrender value, and if there are currently no defaults in premiums, the insurer may loan money from the policy's cash value to the insured;
If a spouse effectuates life insurance on the other spouse, the insurer must also provide WRITTEN NOTICE OF INSURANCE. However, insurers are not required to provide this notice with respect to:
Any application for credit life insurance; Any insured who is older than the age of majority and who has acknowledged the application in writing; Any application for insurance covering the life of a minor; or Any application for a life insurance policy with a face amount of less than $10,000.
There are specific disclosure requirements that apply to advertisements for life insurance products distributed in this state: PART TWO
Any comparisons between participating and nonparticipating policies must be accurate; Advertisements for policies with non-level premiums must prominently display premiums changes; Not make unfair or incomplete comparisons with another insurer's policies, benefits, dividends or rates, or unfairly describe the other insurer's services or marketing methods; Not state or imply that prospective insured must be or become members of a special class or group to take advantage of special rates, dividends, or underwriting privileges (unless that is true); Advertisements that use testimonials must ensure that the testimonials are genuine, accurately reproduced and represent the author's current opinion. If the person is compensated, the testimonial must clearly state that it's a paid endorsement; and If targeting students, disclose that the correspondence is not coming from the school, and that the insurer or agent is not affiliated with the school. The use of school's official letterhead or stationery is prohibited.
Existing insurers must provide policyowners with a policy summary for the existing life insurance within
10 working days of receiving the written communication and replacement if requested.
Entire Contract
The policy, application, and potential riders and amendments make up the entire contract, which must be agreed on and signed by both parties;
Insurers are required to establish and maintain
a system of control over the content of all advertisement. Advertisements are always the responsibility of the insurer, regardless of who wrote, created, designed, or presented them.
Advertisement
any material designed to persuade the public to purchase life insurance, including the following: * Printed and published material, audiovisual material and descriptive literature used in mail, newspapers, magazines, radio and television, billboards and others; * Descriptive literature and sales aids of all kinds used by an insurer, agent, or broker for presentation to member s of the public including leaflets, booklets, and form letters; and * Prepared sales talks, presentation and material for use by insurance agents.
Payment of Claims
After receiving written proof of loss, the insurer must pay death claims as quickly as possible, but no later than 2 MONTHS ; and
When a replacement is involved...
a PRODUCER must perform the following duties: * Have applicant sign a Replacement Notice and leave a copy with applicant; * Sign the Replacement Notice and keep a copy for the agent's records; * Provide a list to the replacing insurer of all existing life insurance being replaced, including the name of the insurer, the name of the insured and the policy number (or application receipt number if a policy has not been issued); * Leave all brochures/sales material used in the sale; Take the new application, submit copy of replacement notice, and attach this to the application; and *The replacing company (new insurer) notifies the replacement company (old insurer).
Life Insurance Solicitation regulation applies to
applies to any issuer of life insurance contracts.
Individual life insurance contracts cannot be made unless the individual is of competent legal capacity, applies for the contract, or consents in writing to the contract, except in the following cases:
A spouse may purchase insurance on the other spouse; Any person having an insurable interest in the life of a minor or any person upon whom a minor is dependent for support and maintenance can purchase insurance on a minor's life; An application for a family policy may be signed by either parent, by a step-parent, or by a husband or wife; A publicly-owned corporation may purchase insurance on any employees in whom it has an insurable interest; Any other corporation, including those under a parent corporation, which cover at least two employees; or Any corporation which has been transferred coverage on an employee from another corporation.
Right to return (Free-Look)
After examination of the policy, the insured has a right to return the policy within 10 DAYS after receipt if not satisfied for any reason, and have full premium refunded;
Tables of Installments
If a policy allows proceeds to be paid in installments, it must include a table showing the amounts of guaranteed installments.
Although advertisements may state that an insurer is licensed within a state,
they may not imply that competing insurers may not be so licensed.
