Procedure for Life Insurance Policy Illustrations

Transcription

1 No May 5, 2016 To: General Agents Procedure for Life Insurance Policy Illustrations This Agency Managers Bulletin supersedes Bulletin No. 3960, dated June 17, The National Association of Insurance Commissioners (NAIC) Model Illustration Regulation (referred to herein as the Regulation ) is in effect for the following states: Alabama, Alaska, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Washington, Wisconsin and West Virginia. Effective dates of the Regulation vary by state. The purpose of this Bulletin is to stress to all general agents and producers selling in these states that strict compliance with the Regulation is mandatory. Failure to comply with the Regulation could result in severe penalties to the general agent, producer, and the Company. Which Sales Require Illustrations? Every term and universal life product that we identify as illustratable must be sold with an illustration that conforms to the Regulation as adopted by the applicable jurisdiction. Only products that our illustration actuary explicitly deems non-illustratable can be sold without an illustration. In addition, the Regulation is not applicable to variable life insurance, annuities, credit life insurance or policies for which there are no non-guaranteed elements. Periodically, the Company publishes a list of applicable illustratable products that meet the standard requirements specified by the Regulation. The list is as follows: Alliance UL, Accumulation UL, Financial Foundation IUL, Dynamax, Flex7 Accumulation UL, TransACE CV (for conversions only), TransNavigator IUL Freedom IUL II NY, Freedom Global IUL II NY, TFLIC Financial Foundation IUL, TransACE CV NY (for conversions only) Policies sold as part of a group coverage plan in the states listed, and life insurance sold through direct mail or quote services, are included in the Regulation.

2 To assist you in complying with state illustration regulations and Company requirements, a quick checklist of things to review when submitting an illustration is on the last page of this document. The Regulation The goal of the Regulation is to prescribe standards to be followed when policy illustrations are used in order to help the applicant better understand the type of insurance contract whether it be a policy or certificate that he or she is purchasing. (Please note: Throughout this Bulletin, the term applicant means the proposed or actual contract or policy owner.) The Regulation dictates the way producers must do business in several ways. The Regulation prescribes certain numerical tests that limit the nonguaranteed values or assumptions that may be used in illustrations. For instance, our actuaries certify annually that the contracts we illustrate are self-supporting and are not subsidized by unrealistic lapse assumptions. Our actuaries have performed these tests and have used the fully allocated expense method in doing so. For every life insurance product which the Company declares illustratable under the Regulation, the applicant must receive an illustration conforming to the policy as issued. For illustratable products, a complete, unaltered illustration must be dated and signed by the producer and the applicant. Where a producer uses an illustration in the sale of a life insurance policy, and the policy is applied for as illustrated, a copy of the signed illustration must be submitted to the Company with the application. If no illustration is used by a producer, or if the policy applied for is other than as illustrated, the producer and applicant must both certify to that fact in writing. (Note: For individually sold insurance, please use the Illustration Certification form DIS T. For policies sold in New Jersey, use DIS TNJ; for New York, use DIS 99NY-803.) The complete and signed illustration or illustration certification must be submitted with the application to the Cedar Rapids administrative office. This illustration signed by the applicant must exactly match the contract applied for on the basis of the application which it accompanies (i.e., the same face amount, age, sex, premium amount, mode, class of risk, etc.). Any handwritten notes, comments, circling, underlining or other forms of highlighting on an illustration will create the need for a revised illustration. Non-guaranteed numbers or policy values cannot be shown without providing the applicant a basic compliant illustration. It is important to note that even a handwritten summary on a napkin, if it contains non-guaranteed numbers, could be considered a non-compliant illustration. In addition to the basic illustration, certain supplemental illustrations which provide additional information to the required basic illustration format, may be used. For instance, our illustration software provides the option to include a supplemental illustration for universal life policies. This enables you to illustrate policy values at a third assumed interest rate that is between the guaranteed minimum rate and the current declared interest rate.

3 Any type of supplemental illustration must include a specific notice referring to the basic illustration for guaranteed elements and other information. At all times, a supplemental illustration must be accompanied by a full basic illustration from the Transamerica illustration system. Any supplemental illustration must also use the same premium payment pattern as the basic illustration that accompanies it. Producers are strictly prohibited from writing their own illustration software or from giving applicants incomplete or altered illustrations. The use of Transamerica-approved illustrations is mandatory. General Procedures All illustrations must include the name of the proposed insured(s), the name and business address of the insurer (whether it s [TLIC] or any other Transamerica company), as well as the name and business address of the producer. This must be a street address. Post office boxes are not allowed. Remember to use the correct Issue State. The producer must certify that the information in the illustration has been discussed with the applicant and the policy has not been sold in a way that is inconsistent with the illustration. In addition, please note the following. All pages of the signed illustration must be submitted to the Cedar Rapids administrative office, and a copy of the completed, signed illustration must be given to the applicant. The Company will retain a copy of all signed illustrations in our files for the length of time required by the Regulation. The Regulation contains a description of the specific items that must be included in the illustrations. These items are already in our illustration software. Products that have been declared to be non-illustratable by the Company will not be included in the illustration software, except in a generic sense quoting only the guaranteed aspects of the policy. While our illustration software can generate a ledger for certain non-illustratable products, only the guaranteed rates are shown. These rates are based on the insured s individual information and should be considered quotes, not illustrations. Guidelines on Completing an Illustration Many scenarios are possible in the sales process; however, they generally fall into one of the following three generic types. 1. Everything matches, and both the applicant and the producer sign the illustration. When the illustration matches the policy applied for, the illustration should be signed by both applicant and producer and submitted at the time the application is signed and submitted.

4 2. The exact illustration is not available when the applicant completes an application. If no illustration was presented at or before the time the application was taken, or if there was no illustration presented that exactly matched the policy applied for, the applicant and producer must sign Illustration Certification form DIS T for individually sold life insurance. For New Jersey, please use version DIS TNJ; for New York, use DIS 99NY-803. This completed form does not replace a signed illustration; it only allows you to submit the application prior to presentation of a compliant illustration. The Illustration Certification form, an unsigned illustration of the policy as applied for and the application must be submitted to the Cedar Rapids administrative office together. At the time of contract delivery, there will be an additional requirement of securing the signed illustration. At that time, the producer must obtain the applicant s signature on the compliant illustration and forward the original to the Cedar Rapids administrative office. 3. The policy was issued other than as applied for. If an illustration or Illustration Certification form is given at the time of application, but the approved policy is other than the policy applied for (e.g., different rating, different mode), a new illustration must be prepared, marked Revised, and submitted to the Cedar Rapids administrative office prior to the policy being issued so that the policy may be issued correctly. As the revised illustration can be signed on delivery, it may be submitted unsigned in order for the policy to be issued. (NOTE: In order to Print or Save the Guide To Illustration with REVISED, click on the Print Revised or PDF Revised buttons indicated on the top of the TransWare Illustration System viewer.) a. If the applicant has previously received an illustration. The new illustration that matches the policy as issued must be labeled Revised. (In order to Print or Save the Guide To Illustration with REVISED, click on the Print Revised or PDF Revised buttons indicated on the top of the TransWare Illustration System viewer.) It is the producer s responsibility, however, to generate this Revised illustration and submit it to the Cedar Rapids administrative office so that the policy can be issued. At policy delivery, the producer must obtain the required signatures, provide a copy of the Revised illustration to the policy owner, and submit the signed illustration to Cedar Rapids, along with the required proof of policy delivery. b. If no illustration was presented to the applicant previously. A new illustration should be run to match the policy. As the applicant hasn t yet seen an illustration for the policy, there is no need to print Revised on it. It is the producer s responsibility, however, to produce this illustration and submit it to the Cedar Rapids administrative office so that the policy can be issued. At policy delivery, the producer must obtain the required signatures, provide a copy of the illustration to the policy owner and submit the signed illustration to the Cedar Rapids administrative office, along with the required proof of policy delivery.

5 As a reminder, commissions will not be paid on any case until a copy of the signed illustration is given to the policy owner and the signed original is returned to Cedar Rapids. Questions If you have any questions about the Company s illustration software, please contact Sales Office Technology and Support at (800) For New Business questions, please call or your distribution-specific New Business team. TRANSAMERICA ILLUSTRATION CHECKLIST: All Illustratable Products Item to be checked 1. All pages are numbered and are present. 2. The state shown on the bottom of each page of the illustration is the same state as the state where the application is signed. 3. The signature page is signed by the applicant (who may be someone other than the proposed insured) and the producer. 4. The name, age, sex and class of risk of the proposed insured must be listed on the application and must match the illustration. 5. The face amount must be listed on the application and must match the illustration. 6. The mode of premium payment and billing type checked on the application are the same as indicated on the illustration. 7. Any riders applied for are also indicated on the illustration. 8. The product name on the application matches the one on the illustration. 9. If a revised illustration is required, Revised is printed on the cover of the illustration. 10. There are no handwritten marks, figures, circles, highlighting, or underlining anywhere on the illustration. 11. The producer s name and street address (no P.O. boxes) are on the cover page. Universal Life Products The Premium Outlay illustrated for the first year matches the Planned Premium indicated on the application. 1. The Premium on the illustration and application match. 2. The Non-Guaranteed Interest rates shown on the illustration are less than or equal to the current maximum illustrated rate for the product. 3. For illustration systems other than Mobility: If the policy is to be backdated, the Backdate to date was completed on the Main Input screen and the B is showing on the first policy year of the illustration.