An illustration other than an in force illustration shall conform to the requirements set out in paragraphs (1)-(3) of this section. (1) Disclosure and format. An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this Subchapter, be clearly labeled "life insurance illustration" and contain the basic information set out in subparagraphs (A)-(T) of this paragraph, as follows: (A) name of insurer; (B) name and business address of producer or insurer's authorized representative, if any; (C) name, age and sex of proposed insured, except where a composite illustration is permitted under this Subchapter; (D) underwriting or rating classification upon which the illustration is based; (E) generic name of policy, the company product name, if different, and form number; (F) initial death
benefit; (G) dividend option election or application of non-guaranteed elements, if applicable; and (H) illustration date. (I) The illustration shall be prominently labeled "Life Insurance Illustration." (J) Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages"). If a Supplemental illustration is used, it may be numbered either sequentially with or separately from the basic illustration. (K) If the age of the proposed insured is shown as a component of a tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force. (L) If the illustration shows any non-guaranteed elements, they cannot be based on a scale more favorable to the policy owner than
the insurer's illustrated scale at any duration. These elements shall be clearly labeled non-guaranteed. (M) An illustration may show a concept in either a basic or supplemental illustration or both, subject to the following: (i) A concept may be shown in a basic illustration provided an extended numeric summary is used; or (ii) If a basic illustration does not show a concept, the concept may be shown in an extended numeric summary appended to a basic illustration. (iii) If a concept is not illustrated in a basic illustration pursuant to clauses (i) or (ii) of this subparagraph, it can only be shown in: (I) a single supplemental illustration which calculates values based upon both the illustrated and one of the alternative scales set out in clause (iv) of this subparagraph; or (II) a single supplemental illustration which calculates values based upon the
illustrated scale, provided an extended numeric summary is attached which calculates values based upon both the illustrated and one of the alternative scales set out in clause (iv) of this subparagraph; or (III) two supplemental illustrations, one which calculates values based on the illustrated scale, and the other which calculates values based upon one of the alternative scales set out in clause (iv) of this subparagraph; or (IV) a disclosure document explaining in narrative form: (-a-) that the depiction of policy values to pay premiums does not mean that policy premium requirements are canceled, forgiven or waived, that the operation of any plan to use policy values to pay premium is contingent upon non-guaranteed factors remaining unchanged, which may or may not occur; and/or (-b-) that the use of policy cash flows for other purposes is contingent upon the non-guaranteed factors remaining unchanged,
which may or may not occur; and (-c-) such disclosure documents shall include a brief description of the non-guaranteed factors impacting the use of policy values to pay premiums or to generate cash flows and a hypothetical example for issue age 50 showing the impact of reduction in the current non-guaranteed factors of 25% and 50% on the concept. (iv) Alternative scales include: (I) mid-point and guaranteed scales; or (II) the dividend component of the illustrated scale reduced by 50%; or (III) the dividend and/or credited interest component of the illustrated scale reduced by 50% of the interest component of the illustrated scale in excess of policy guarantees. (v) For purposes of this section, an extended numeric summary is the numeric summary set out in §21.2207(3) of this title (relating to Standards for Basic Illustrations) which also, under the
assumptions shown, identifies items and events as set out in subclauses (I)-(III) of this clause, as follows: (I) Suspension of Premium: the first policy year for which out-of-pocket premium is no longer required, and/or the number of policy years for which out-of-pocket premium is no longer required, and/or the number of policy years for which out-of-pocket premium is required. (II) Cash Flow: the first policy year when cash flow ceases, and/or the number of policy years for which cash flow occurs. (III) The assumed payments on which the illustrated benefits and values are based may be identified as premium outlay or contract premium, as applicable, or total outlay. (vi) After January 1, 2001, a concept may not be presented using the option set out in clause (iii)(IV) of this subparagraph, nor may any alternative scale be used other than the mid-point and guaranteed scales unless the option set out in
clause (iii)(IV) of this subparagraph and/or the alternative scales set out in clause (iv)(II) and (III) of this subparagraph are extended by Order of the Commissioner. (vii) An illustration for a proposed policy under which an employer pays all or part of the premium or shares part of the benefits, such as a split dollar plan, or an illustration of executive bonuses or deferred compensation, is exempt from the requirements of this subsection. (N) The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender. (O) The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans and policy loan
interest, as applicable. (P) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form. (Q) A disclaimer shall be set out conspicuously and in close conjunction to any depiction of non-guaranteed elements over a period of years and shall: (i) identify those benefits and values which are not guaranteed; (ii) identify the assumptions upon which the illustration is based; (iii) disclose that the assumptions are not likely to continue unchanged for the years shown and that the assumptions are subject to change by the insurer; (iv) state that actual results may be more or less favorable; and (v) identify generally the factors which may affect future policy performance, such as death claims, investment earnings and overhead costs or make reference to the narrative which identifies these factors.
(R) If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up. (S) If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values. (T) If policy loans
are illustrated on a guaranteed basis, interest charged must be calculated in accordance with provisions of clause (i) or (ii) of this subparagraph, as follows: (i) at the highest numerical rate permitted under the terms of the contract; or (ii) to the extent that the loan interest rate is guaranteed in the contract as a specific constant addition to the actual interest crediting rate used in the determination of guaranteed cash values, the interest charged may be determined by applying that constant addition to the guaranteed minimum interest rate. (2) Prohibited conduct. When using an illustration in the sale of a life insurance policy, an insurer or its producers or other authorized representatives or agents shall not: (A) represent the policy as anything other than a life insurance policy; (B) use or describe non-guaranteed elements in a manner that is misleading or has the capacity
or tendency to mislead; Cont'd... |
