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Subject 120-2-24 REPLACEMENT OF LIFE INSURANCE POLICIES

Rule 120-2-24-.01 Statutory Authority

This Regulation is made and promulgated by the Insurance Commissioner pursuant to the authority set forth in Section 33-2-9 and Section 33-6-12 of the Georgia Insurance Code.

Rule 120-2-24-.02 Purpose

The purpose of this Regulation is to protect the interests of life insurance policyholders by establishing minimum standards of conduct to be observed in the replacement or proposed replacement of existing life insurance.

Rule 120-2-24-.03 Definitions

The following words and terms, when used in this Regulation shall have the following meanings, unless the context clearly indicates otherwise:

(1) "Advertisement" shall be defined as set forth in Chapter 120-2-11 of the Rules and Regulations of the Georgia Insurance Department, entitled "Advertising of Life Insurance and Annuity Contracts," at Rule 120-2-11-.03.
(2) "Agent" means any person licensed by this state as a life insurance agent or counselor.
(3) "Annuity" means a contract by which one party in return for a stipulated payment or payments promises to pay periodic installments for a stated certain period of time or for the life or lives of the person or persons specified in the contract, but does not cover the proceeds of life insurance no matter how payable.
(4) "Commissioner" means the Insurance Commissioner of the State of Georgia.
(5) "Conservation" means any attempt by the existing insurer, its agent or a counselor to discourage a policyowner from the replacement of existing life insurance. A conservation does not include routine administrative procedures such as late payment reminders or late payment or reinstatement offers.
(6) "Direct response insurer" means an insurer that does not utilize an agent or counselor in the sale or delivery of the policy.
(7) "Existing insurer" means the insurer whose policy is or is proposed to be replaced.
(8) "Existing life insurance" means any in-force life insurance, including life insurance under a binding or conditional receipt or within the unconditional refund period.
(9) "Insurer" shall include any individual, corporation, association, partnership, or any other legal entity which is defined as an "Insurer" in the Georgia Insurance Code or issues life insurance or annuity contracts for delivery in this State.
(10) "Policy Summary" shall be defined as set forth in Chapter 120-2-31 of the Rules and Regulations of the Georgia Insurance Department, entitled "Life Insurance Solicitation Regulation," at Rule 120-2-31-.04(8), and as required under Rule 120-2-31-.05.
(11) "Replacing insurer" means the insurer that issues or is proposed to issue a new policy or annuity that is a replacement of existing life insurance.
(12) "Replacement" means any transaction in which new life insurance or an annuity has been or is to be purchased, and the proposing agent or counselor or the proposing insurer if no agent or counselor is involved, knows or should know that because of such transaction, existing life insurance has been or is to be:
(a) lapsed, forfeited, surrendered, or otherwise terminated;
(b) changed to reduced paid-up or extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits, policy loans, or other policy values.
(c) amended to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force; or
(d) reissued with any reduction in cash value.

Rule 120-2-24-.04 Exemptions

Unless otherwise specifically included, this Regulation shall not apply to:

(1) Replacement of annuity contracts;
(2) Credit life insurance;
(3) Group life insurance;
(4) Life insurance issued in connection with a pension, profit-sharing or other benefit plan qualifying for tax deductibility of premiums, provided that
(a) a portion or all of the premium is paid by someone other than the policyholder, certificate holder, insured, beneficiary, or no individual underwriting is required with respect to any proposed insurance policy, and
(b) as to any plan otherwise qualifying for exemption by this subsection, full and complete disclosure of all material facts shall be provided the administrator of the plan subject to replacement.

Rule 120-2-24-.05 Duties of Agents

(1) Each agent shall submit to the insurer to whom an application for life insurance is presented, with or as part of the application:
(a) a statement signed by the applicant as to whether replacement of existing life insurance is involved in the transaction; and
(b) a statement signed by the agent as to whether the agent knows replacement is or may be involved in the transaction.
(2) Where a replacement is involved, the agent shall:
(a) Present to the applicant, not later than at the time of taking the application, a Replacement Notice as described in Exhibit A or other substantially similar form approved by the Commissioner. The Replacement Notice shall be signed by both the applicant and the agent and left with the applicant.
(b) Obtain with or as part of each application a list of all existing life insurance to be replaced. Such existing life insurance shall be identified by name of insurer, insured, and policy number. If a policy number has not been assigned by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.
(c) Leave with the applicant the original or a copy of all written or printed advertisement used in the presentation to the applicant.
(d) Submit to the replacing insurer with the application a copy of the Replacement Notice provided pursuant to Section 120-2-24-.05(2)(a) of this Regulation and a statement containing the information described in Section 120-2-24-.05(2)(b) of this Regulation.
(3) Each agent who uses written or printed advertisement material in a conservation shall leave with the applicant the original or a copy of the written or printed advertisement used in the conservation.

Rule 120-2-24-.06 Duties of All Insurers

Each insurer shall:

(1) Inform its agents and other personnel responsible for compliance with this Regulation of the requirements of this Regulation.
(2) Require with or as a part of each completed application for life insurance or annuity a statement signed by the applicant as to whether such proposed insurance or annuity will replace existing life insurance.
(3) Maintain copies of the Replacement Notice, all written communications required under Rule 120-2-24-.07 and -.08, the applicant's signed statement with respect to replacement, and a replacement register, cross indexed, by replacing agent and existing insurer to be replaced, in its home office for at least three years or until the conclusion of the next succeeding regular examination by the Insurance Department of its state of domicile, whichever is later.
(4) Any insurer which receives a Replacement Notice and written communication that its existing insurance may be replaced shall maintain copies thereof on its premises, indexed by insurer, notifying it of such replacement, for three years or until the conclusion of the next regular examination conducted by the Insurance Department of its state of domicile, whichever is later.
(5) Any insurer which receives a Replacement Notice and written communication that its existing insurance may be replaced shall, within ten (10) working days after receipt thereof, furnish a policy summary statement to their present policyholder if so indicated or requested.

Rule 120-2-24-.07 Duties of Insurers That Use Agents

Each insurer that uses an agent in a life insurance or annuity sale shall:

(1) Require with or as part of each completed application for life insurance or annuity, a statement signed by the agent as to whether he or she knows replacement is or may be involved in the transaction.
(2) Where a replacement is involved:
(a) Require from the agent with the application for life insurance or annuity (i) a list of all of the applicant's existing life insurance to be replaced and (ii) a copy of the Replacement Notice provided the applicant pursuant to Section 120-2-24-.05(2)(a). Such existing life insurance shall be identified by name of insurer, insured, and policy number. If a policy number has not been assigned by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.
(b) Send to the existing insurer a copy of the Replacement Notice and written communication advising of the replacement or proposed replacement, including the name of the replacing insurer, the insured, and the identification information with respect to the existing life insurance to be replaced obtained pursuant to Section 120-2-24-.07(2)(a). The Replacement Notice and written communication shall be mailed within three (3) working days of the date the application is received in the replacing insurer's home or regional office, or the date the proposed policy is issued, whichever is sooner.

Rule 120-2-24-.08 Duties of Replacing Insurers That Are Direct Response Insurers

Each replacing insurer that is a direct response insurer shall:

(1) Provide to applicants or prospective applicants with or as a part of the application a Replacement Notice as described in Exhibit A or other substantially similar form approved by the Commissioner.

Such Replacement Notice shall not be required to contain paragraph three, the signature blanks and related information, nor the "Items to Consider" on the reverse side of the Replacement Notice, where the original solicitation contains the application for insurance and it appears in a newspaper, magazine, or similar type of publication.

(2) Request from the applicant with or as a part of the application, a list of all existing life insurance to be replaced. Such existing life insurance shall be identified by name of insurer, insured and policy number.
(3) If the applicant furnishes the name of existing insurers, send to the existing insurer a copy of the Replacement Notice and written communication advising of the replacement or proposed replacement, including the name of the replacing insurer, the insured, and the identification information with respect to the existing life insurance to be replaced obtained pursuant to subsection (2) above. The Replacement Notice and written communication shall be mailed within three (3) working days of the date the application is received in the replacing insurer's home or regional office, or the date the proposed policy is issued, whichever is sooner.

Exhibit A.

Replacement Notice

EXHIBIT A

REPLACEMENT NOTICE

(Name, Address and Telephone Number of Company)

REPLACING YOUR LIFE INSURANCE POLICY?

Are you thinking about buying a new policy and discontinuing or changing an existing policy? If you are, your decision could be a good one - or a mistake. You will not know for sure unless you make a careful comparison of your existing policy and the proposed policy.

Make sure you understand the facts. Georgia law gives you the right to obtain a policy summary statement from your existing insurer at any time. Ask the company or agent that sold you your existing policy to give you information about it.

The reverse side contains a check list of some of the items you should consider in making your decision. TAKE TIME TO READ IT.

Do not let one agent or insurer prevent you from obtaining information from another agent or insurer which may be to your advantage.

Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.

[] If you wish a policy summary statement from your existing insurer, or insurers, check this box.

We are required to notify your existing company that you may be replacing their policy.


                image: ga/admin/2020/120-2-24-.08_001.jpg

ORIGINAL TO APPLICANT - COPY TO REPLACING INSURER - COPY TO REPLACED INSURER

[The bracketed information below is provided for the insurer and is not a part of the Replacement Notice.]

[Note to insurers: information concerning existing coverage(s) can be required on this form, on the application, or on a separate form at the company's discretion.]

[Direct response insurers may delete paragraph three, and the signature blanks and related information, and the reverse side of this Exhibit where the original solicitation contains the application for insurance and it appears in a newspaper, magazine or similar type publication, and still be in compliance with this Regulation.]

ITEMS TO CONSIDER

1. If the policy coverages are basically similar, premiums for a new policy may be higher because rates increase as your age increases.

2. Cash values and dividends, if any, may grow slower under a new policy initially because of the initial costs of issuing a policy.

3. Your present insurance company may be able to make a change on terms which may be more favorable than if you replace existing insurance with new insurance.

4. If you borrow against an existing policy to pay premiums on a new policy, death benefits payable under your existing policy will be reduced by the amount of any unpaid loan, including unpaid interest.

5. Current interest rates are not guaranteed. Guaranteed interest rates are usually considerably lower than current rates. What rates are guaranteed?

6. Are premiums guaranteed or subject to change - up or down?

7. Participating policies pay dividends that may materially reduce the cost of insurance over the life of the contract. Dividends, however, are not guaranteed.

8. CAUTION, you are urged not to take action to terminate, assign, or alter your existing life insurance coverage until after you have been issued the new policy, examined it and have found it to be acceptable to you.

and

REMEMBER, you have ten (10) days following receipt of any individual life insurance policy to examine its contents. If you are not satisfied with it for any reason, you have the right to return it to the insurer at its home or branch office or to the agent through whom it was purchased, for a full refund of premium.

Rule 120-2-24-.09 Relationship to Other Rules and Regulations

If any portion of this Regulation is inconsistent with any provision of any other regulation dealing with life insurance or annuity marketing practices or disclosure, said inconsistent portion shall be interpreted so as to provide the greatest information or protection to the policyholder.

Rule 120-2-24-.10 Severability

If any section, term, or provision of these rules and regulations shall be adjudged invalid for any reason, such judgment shall not affect, impair, or invalidate any other section, term, or provision of these rules and regulations and the remaining sections, terms, and provisions shall be and remain in full force.

Rule 120-2-24-.11 Penalties

(1) Any insurer, agent, representative, officer, employee of an insurer, or counselor failing to comply with the requirements of this Regulation shall be subject to such penalties as may be appropriate under the Insurance Laws of Georgia and the Rules and Regulations of the Georgia Insurance Department.
(2) This Regulation does not prohibit the use of additional material other than that which is required that is not in violation of this Regulation or any other Georgia statute or regulation.
(3) Policyholders have the right to replace existing life insurance after indicating in or as part of the application for life insurance or annuity that such is not their intention. However, patterns of such action by policyholders who purchase the replacing policies from the same insurer, agent or counselor shall be deemed prima facie evidence of the insurer's, agent's or counselor's knowledge that replacement was intended in connection with the sale of those policies, and such patterns of action shall be deemed prima facie evidence of the insurer's, agent's or counselor's intent to violate this Regulation.