Subject 120-2-95 MILITARY SALES PRACTICES
This Regulation is made and promulgated by the Commissioner
of Insurance pursuant to the authority set forth in Sections O.G.G.A.
§§ 33-2-9,
33-6-12,
and
33-6-4(b)(14.1).
| (1) |
The purpose of
this regulation is to set forth standards to protect active duty service
members of the United States Armed Forces from dishonest and predatory
insurance sales practices by declaring certain identified practices to be
dishonest, unfair, or deceptive. |
| (2) |
Nothing herein shall be construed to
create or imply a private cause of action for a violation of this
regulation. |
This regulation shall apply only to the solicitation or sale
of any life insurance or annuity product by an insurer or insurance producer to
an active duty service member of the United States Armed
Forces.
| (1) |
This regulation
shall not apply to solicitations or sales involving:
| (b) |
Group life insurance or group annuities
where there is no in-person, face-to-face solicitation of individuals by an
insurance producer or where the contract or certificate does not include a side
fund; |
| (c) |
An application to the
existing insurer that issued the existing policy or contract when a contractual
change or a conversion privilege is being exercised; or, when the existing
policy or contract is being replaced by the same insurer pursuant to a program
filed with and approved by the commissioner; or, when a term conversion
privilege is exercised among corporate affiliates; |
| (d) |
Individual stand-alone health policies,
including disability income policies; |
| (e) |
Contracts offered by Servicemembers'
Group Life Insurance (SGLI) or Veterans' Group Life Insurance (VGLI), as
authorized by
38
U.S.C. Section 1965et seq.,
and contracts offered by State Sponsored Life Insurance (SSLI) as authorized by
37 U.S.C. Section
707et seq.; |
| (f) |
Life insurance contracts offered through
or by a non-profit military association, qualifying under Section 501(c)(23) of
the Internal Revenue Code (IRC), and which are not underwritten by an insurer;
or |
| (g) |
Contracts used to fund:
| 1. |
An employee pension or welfare benefit
plan that is covered by the Employee Retirement and Income Security Act
(ERISA); |
| 2. |
A plan described by
Sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the IRC, as amended, if
established or maintained by an employer; |
| 3. |
A government or church plan defined in
Section 414 of the IRC, a government or church welfare benefit plan, or a
deferred compensation plan of a state or local government or tax exempt
organization under Section 457 of the IRC; |
| 4. |
A nonqualified deferred compensation
arrangement established or maintained by an employer or plan sponsor; |
| 5. |
Settlements of or assumptions of
liabilities associated with personal injury litigation or any dispute or claim
resolution process; or |
| 6. |
Prearranged funeral contracts. |
|
|
| (2) |
Nothing herein shall be construed to
abrogate the ability of nonprofit organizations (and/or other organizations) to
educate members of the United States Armed Forces in accordance with Department
of Defense DoD Instruction 1344.07 - Personal Commercial Solicitation on DoD
Installations or successor directive. |
| (3) |
For purposes of this regulation, general
advertisements, direct mail and internet marketing shall not constitute
"solicitation." Telephone marketing shall not constitute "solicitation"
provided the caller explicitly and conspicuously discloses that the product
concerned is life insurance and makes no statements that avoid a clear and
unequivocal statement that life insurance is the subject matter of the
solicitation. Provided however, nothing in this subsection shall be construed
to exempt an insurer or insurance producer from this regulation in any
in-person, face-to-face meeting established as a result of the "solicitation"
exemptions identified in this subsection. |
| (1) |
"Active Duty"
means full-time duty in the active military service of the United States and
includes members of the reserve component (National Guard and Reserve) while
serving under published orders for active duty or full-time training. The term
does not include members of the reserve component who are performing active
duty or active duty for training under military calls or orders specifying
periods of less than 31 calendar days. |
| (2) |
"Department of Defense (DoD) Personnel"
means all active duty service members and all civilian employees, including
nonappropriated fund employees and special government employees, of the
Department of Defense. |
| (3) |
"Door to
Door" means a solicitation or sales method whereby an insurance producer
proceeds randomly or selectively from household to household without prior
specific appointment. |
| (4) |
"General
Advertisement" means an advertisement having as its sole purpose the promotion
of the reader's or viewer's interest in the concept of insurance, or the
promotion of the insurer or the insurance producer. |
| (5) |
"Insurer" means an insurance company
required to be licensed under the laws of this state to provide life insurance
products, including annuities. |
| (6) |
"Insurance producer" means a person required to be licensed under the laws of
this state to sell, solicit or negotiate life insurance, including
annuities. |
| (7) |
"Known" or
"Knowingly" means, depending on its use herein, the insurance producer or
insurer had actual awareness, or in the exercise of ordinary care should have
known, at the time of the act or practice complained of, that the person
solicited:
| (a) |
is a service member;
or |
| (b) |
is a service member with a
pay grade of E-4 or below. |
|
| (8) |
"Life Insurance" means insurance coverage
on human lives including benefits of endowment and annuities, and may include
benefits in the event of death or dismemberment by accident and benefits for
disability income and unless otherwise specifically excluded, includes
individually issued annuities. |
| (9) |
"Military Installation" means any federally owned, leased, or operated base,
reservation, post, camp, building, or other facility to which service members
are assigned for duty, including barracks, transient housing, and family
quarters. |
| (10) |
"MyPay" is a Defense
Finance and Accounting Service (DFAS) web-based system that enables service
members to process certain discretionary pay transactions or provide updates to
personal information data elements without using paper forms. |
| (11) |
"Service Member" means any active duty
officer (commissioned and warrant) or enlisted member of the United States
Armed Forces. |
| (12) |
"Side Fund"
means a fund or reserve that is part of or otherwise attached to a life
insurance policy (excluding individually issued annuities) by rider,
endorsement or other mechanism which accumulates premium or deposits with
interest or by other means. The term does not include:
| (a) |
accumulated value or cash value or
secondary guarantees provided by a universal life policy; |
| (b) |
cash values provided by a whole life
policy which are subject to standard nonforfeiture law for life insurance;
or |
| (c) |
a premium deposit fund
which:
| 1. |
contains only premiums paid in
advance which accumulate at interest; |
| 2. |
imposes no penalty for
withdrawal; |
| 3. |
does not permit
funding beyond future required premiums; |
| 4. |
is not marketed or intended as an
investment; and |
| 5. |
does not carry a
commission, either paid or calculated. |
|
|
| (13) |
"Specific Appointment" means a
prearranged appointment agreed upon by both parties and definite as to place
and time. |
| (14) |
"United States Armed
Forces" means all components of the Army, Navy, Air Force, Marine Corps, and
Coast Guard. |
| (1) |
The following acts or practices when
committed on a military installation by an insurer or insurance producer with
respect to the in-person, face-to-face solicitation of life insurance are
declared to be dishonest, unfair, or deceptive:
| (a) |
Knowingly soliciting the purchase of any
life insurance product "door to door" or without first establishing a specific
appointment for each meeting with the prospective purchaser. |
| (b) |
Soliciting service members in a group or
"mass" audience or in a "captive" audience where attendance is not
voluntary. |
| (c) |
Knowingly making
appointments with or soliciting service members during their normally scheduled
duty hours. |
| (d) |
Making appointments
with or soliciting service members in barracks, day rooms, unit areas, or
transient personnel housing or other areas where the installation commander has
prohibited solicitation. |
| (e) |
Soliciting the sale of life insurance without first obtaining permission from
the installation commander or the commander's designee. |
| (f) |
Posting unauthorized bulletins, notices
or advertisements. |
| (g) |
Failing to
present DD Form 2885, Personal Commercial Solicitation
Evaluation, to service members solicited or encouraging service
members solicited not to complete or submit a DD Form 2885. |
| (h) |
Knowingly accepting an application for
life insurance or issuing a policy of life insurance on the life of an enlisted
member of the United States Armed Forces without first obtaining for the
insurer's files a completed copy of any required form which confirms that the
applicant has received counseling or fulfilled any other similar requirement
for the sale of life insurance established by regulations, directives or rules
of the DoD or any branch of the Armed Forces. |
|
| (2) |
The following acts or practices when
committed on a military installation by an insurer or insurance producer
constitute corrupt practices, improper influences or inducements and are
declared to be dishonest, unfair, or deceptive:
| (a) |
Using DoD personnel, directly or
indirectly, as a representative or agent in any official or business capacity
with or without compensation with respect to the solicitation or sale of life
insurance to service members. |
| (b) |
Using an insurance producer to participate in any United States Armed Forces
sponsored education or orientation program. |
|
| (1) |
The following
acts or practices by an insurer or insurance producer constitute corrupt
practices, improper influences or inducements and are declared to be dishonest,
unfair, or deceptive:
| (a) |
Submitting,
processing or assisting in the submission or processing of any allotment form
or similar device used by the United States Armed Forces to direct a service
member's pay to a third party for the purchase of life insurance. The foregoing
includes, but is not limited to, using or assisting in using a service member's
"MyPay" account or other similar internet or electronic medium for such
purposes. This subsection does not prohibit assisting a service member by
providing insurer or premium information necessary to complete any allotment
form. |
| (b) |
Knowingly receiving funds
from a service member for the payment of premium from a depository institution
with which the service member has no formal banking relationship. For purposes
of this section, a formal banking relationship is established when the
depository institution:
| 1. |
provides the
service member a deposit agreement and periodic statements and makes the
disclosures required by the Truth in Savings Act,
12 U.S.C. § 4301et seq. and the
regulations promulgated thereunder; and |
| 2. |
permits the service member to make
deposits and withdrawals unrelated to the payment or processing of insurance
premiums. |
|
| (c) |
Employing
any device or method or entering into any agreement whereby funds received from
a service member by allotment for the payment of insurance premiums are
identified on the service member's Leave and Earnings Statement or equivalent
or successor form as "Savings" or "Checking" and where the service member has
no formal banking relationship as defined in subsection (1)(b) above. |
| (d) |
Entering into any agreement with a
depository institution for the purpose of receiving funds from a service member
whereby the depository institution, with or without compensation, agrees to
accept direct deposits from a service member with whom it has no formal banking
relationship. |
| (e) |
Using DoD
personnel, directly or indirectly, as a representative or agent in any official
or unofficial capacity with or without compensation with respect to the
solicitation or sale of life insurance to service members who are junior in
rank or grade, or to the family members of such personnel. |
| (f) |
Offering or giving anything of value,
directly or indirectly, to DoD personnel to procure their assistance in
encouraging, assisting or facilitating the solicitation or sale of life
insurance to another service member. |
| (g) |
Knowingly offering or giving anything of
value to a service member with a pay grade of E-4 or below for his or her
attendance to any event where an application for life insurance is
solicited. |
| (h) |
Advising a service
member with a pay grade of E-4 or below to change his or her income tax
withholding or State of legal residence for the sole purpose of increasing
disposable income to purchase life insurance. |
|
| (2) |
The following acts or practices by an
insurer or insurance producer lead to confusion regarding source, sponsorship,
approval or affiliation and are declared to be dishonest, unfair, or deceptive:
| (a) |
Making any representation, or using any
device, title, descriptive name or identifier that has the tendency or capacity
to confuse or mislead a service member into believing that the insurer,
insurance producer or product offered is affiliated, connected or associated
with, endorsed, sponsored, sanctioned or recommended by the U.S. Government,
the United States Armed Forces, or any state or federal agency or government
entity. Examples of prohibited insurance producer titles include, but are not
limited to, "Battalion Insurance Counselor," "Unit Insurance Advisor,"
"Servicemen's Group Life Insurance Conversion Consultant" or "Veteran's
Benefits Counselor." Nothing herein shall be construed to prohibit a person
from using a professional designation awarded after the successful completion
of a course of instruction in the business of insurance by an accredited
institution of higher learning. Such designations include, but are not limited
to, Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC),
Certified Financial Planner (CFP), Master of Science in Financial Services
(MSFS), or Masters of Science Financial Planning (MS). |
| (b) |
Soliciting the purchase of any life
insurance product through the use of or in conjunction with any third party
organization that promotes the welfare of or assists members of the United
States Armed Forces in a manner that has the tendency or capacity to confuse or
mislead a service member into believing that either the insurer, insurance
producer or insurance product is affiliated, connected or associated with,
endorsed, sponsored, sanctioned or recommended by the U.S. Government, or the
United States Armed Forces. |
|
| (3) |
The following acts or practices by an
insurer or insurance producer lead to confusion regarding premiums, costs or
investment returns and are declared to be dishonest, unfair, or deceptive:
| (a) |
Using or describing the credited interest
rate on a life insurance policy in a manner that implies that the credited
interest rate is a net return on premium paid. |
| (b) |
Excluding individually issued annuities,
misrepresenting the mortality costs of a life insurance product, including
stating or implying that the product "costs nothing" or is "free." |
|
| (4) |
The following acts or
practices by an insurer or insurance producer regarding SGLI or VGLI are
declared to be dishonest, unfair, or deceptive:
| (a) |
Making any representation regarding the
availability, suitability, amount, cost, exclusions or limitations to coverage
provided to a service member or dependents by SGLI or VGLI, which is false,
misleading or deceptive. |
| (b) |
Making
any representation regarding conversion requirements, including the costs of
coverage, or exclusions or limitations to coverage of SGLI or VGLI to private
insurers which is false, misleading or deceptive. |
| (c) |
Suggesting, recommending or encouraging a
service member to cancel or terminate his or her SGLI policy or issuing a life
insurance policy which replaces an existing SGLI policy unless the replacement
shall take effect upon or after the service member's separation from the United
States Armed Forces. |
|
| (5) |
The following acts or practices by an insurer and or insurance producer
regarding disclosure are declared to be dishonest, unfair, or deceptive:
| (a) |
Deploying, using or contracting for any
lead generating materials designed exclusively for use with service members
that do not clearly and conspicuously disclose that the recipient will be
contacted by an insurance producer, if that is the case, for the purpose of
soliciting the purchase of life insurance. |
| (b) |
Failing to disclose that a solicitation
for the sale of life insurance will be made when establishing a specific
appointment for an in-person, face-to-face meeting with a prospective
purchaser. |
| (c) |
Excluding
individually issued annuities, failing to clearly and conspicuously disclose
the fact that the product being sold is life insurance. |
| (d) |
Failing to make, at the time of sale or
offer to an individual known to be a service member, the written disclosures
required by Section 10 of the "Military Personnel Financial Services Protection
Act,"
Pub.
L. No. 109-290, p.16. |
| (e) |
Excluding individually issued annuities,
when the sale is conducted in-person face-to-face with an individual known to
be a service member, failing to provide the applicant at the time the
application is taken:
| 1. |
an explanation of any
free look period with instructions on how to cancel if a policy is issued;
and |
| 2. |
either a copy of the
application or a written disclosure. The copy of the application or the written
disclosure shall clearly and concisely set out the type of life insurance, the
death benefit applied for and its expected first year cost. A basic
illustration that meets the requirements of Georgia Regulation
120-2-31-.05(2)
shall be deemed sufficient to meet this requirement for a written
disclosure. |
|
|
| (6) |
The following acts or practices by an
insurer or insurance producer with respect to the sale of certain life
insurance products are declared to be dishonest, unfair, or deceptive:
| (a) |
Excluding individually issued annuities,
recommending the purchase of any life insurance product which includes a side
fund to a service member in pay grades E-4 and below unless the insurer has
reasonable grounds for believing that the life insurance death benefit,
standing alone, is suitable. |
| (b) |
Offering for sale or selling a life insurance product which includes a side
fund to a service member in pay grades E-4 and below who is currently enrolled
in SGLI, is presumed unsuitable unless, after the completion of a needs
assessment, the insurer demonstrates that the applicant's SGLI death benefit,
together with any other military survivor benefits, savings and investments,
survivor income, and other life insurance are insufficient to meet the
applicant's insurable needs for life insurance.
| 1. |
"Insurable needs" are the risks associated
with premature death taking into consideration the financial obligations and
immediate and future cash needs of the applicant's estate and/or survivors or
dependents. |
| 2. |
"Other military
survivor benefits" include, but are not limited to: the Death Gratuity, Funeral
Reimbursement, Transition Assistance, Survivor and Dependents' Educational
Assistance, Dependency and Indemnity Compensation, TRICARE Healthcare benefits,
Survivor Housing Benefits and Allowances, Federal Income Tax Forgiveness, and
Social Security Survivor Benefits. |
|
| (c) |
Excluding individually issued annuities,
offering for sale or selling any life insurance contract which includes a side
fund:
| 1. |
unless interest credited accrues from
the date of deposit to the date of withdrawal and permits withdrawals without
limit or penalty; |
| 2. |
unless the
applicant has been provided with a schedule of effective rates of return based
upon cash flows of the combined product. For this disclosure, the effective
rate of return will consider all premiums and cash contributions made by the
policyholder and all cash accumulations and cash surrender values available to
the policyholder in addition to life insurance coverage. This schedule will be
provided for at least each policy year from one (1) to ten (10) and for every
fifth policy year thereafter ending at age 100, policy maturity or final
expiration; and |
| 3. |
which by default
diverts or transfers funds accumulated in the side fund to pay, reduce or
offset any premiums due. |
|
| (d) |
Excluding individually issued annuities,
offering for sale or selling any life insurance contract which after
considering all policy benefits, including but not limited to endowment, return
of premium or persistency, does not comply with standard nonforfeiture law for
life insurance. |
| (e) |
Selling any
life insurance product to an individual known to be an active duty service
member that excludes coverage if the insured's death is related to war,
declared or undeclared, or any act related to military service except for an
accidental death coverage, e.g., double indemnity, which may
be excluded. |
|
If any provision of these sections or the application thereof
to any person or circumstance is held invalid for any reason, the invalidity
shall not affect the other provisions or any other application of these
sections which can be given effect without the invalid provisions or
application. To this end all provisions of these sections are declared to be
severable.
This regulation shall become effective September 1, 2007, and
shall apply to acts or practices committed on or after the effective
date.
