R590. Insurance, Administration.R590-98. Unfair Practice in Payment of Life Insurance and Annuity Policy Values.
R590-98-1. Authority.
This rule is promulgated by the commissioner pursuant to Sections 31A-2-201 and 31A-23a-402.
R590-98-2. Purpose and Scope.
(1) The purpose of this rule is to:
(a) require a prompt response to a policyholder's request for policy values; and
(b) limit the exercise of the statutory deferral option to a situation where the financial stability of the insurer is at risk.
(2) This rule applies to an insurer engaged in the business of insurance.
R590-98-3. Definitions.
Terms used in this rule are defined in Section 31A-1-301. Additional terms are defined as follows:
(1)(a) "Deferral" means withholding or delaying payment of policy values to the policyholder.
(b) "Deferral" does not include withholding or delaying payment of variable life insurance and variable annuity payments when the value of investment assets on which payments are based cannot be obtained because:
(i) the Securities and Exchange Commission (SEC) has restricted trading;
(ii) the stock exchange is closed; or
(iii) the SEC permits deferral to protect the policyholder.
(2) "Policyholder" includes a certificate holder under a group policy.
(3) "Policy value" means any value to which the policyholder is entitled, upon request, for a policy loan, withdrawal, or surrender of a policy, and includes:
(a) cash values;
(b) accumulated dividends;
(c) coupons; and
(d) other similar values.
R590-98-4. Unfair or Deceptive Acts or Practices.
Unfair or deceptive acts or practices include:
(1) Failing to comply with a policyholder request for a policy value within 20 days of receiving the request.
(2) Exercising the nonforfeiture deferral option of Subsections 31A-22-408(2)(h), 31A-22-409(3)(d), or 31A-22-420(5), in response to a request for policy values unless the financial stability of the insurer is at risk.
R590-98-5. Requirements.
(1) Before an insurer exercises the right to defer payment of any policy value, the insurer shall file with the commissioner a written request that shall include:
(a) an explanation of the reason for the deferment;
(b) the steps to be taken by the insurer to alleviate the situation;
(c) the way the deferment is being imposed fairly and equitably on all policyholders;
(d) the notice to policyholders as to why the insurer is deferring payment; and
(e) the anticipated date the policy values are expected to be available.
(2)(a) If the policy does not specify a policy value between policy anniversaries, the policy value shall be:
(i) the value shown in the policy nonforfeiture value table as of the end of the policy year; or
(ii) computed by the interpolation of values between policy years.
(b) If the method in Subsection (2)(a)(i) is used:
(i) the insurer may deduct from the policy value any premium required to pay the policy to the next succeeding anniversary date; and
(ii) a premium may not be deducted that advances the paid-to date past the next succeeding anniversary date.
(3) A surrender or service charge assessed by an insurer may not be deducted from the policy value unless specifically provided for in the policy.
(4) With the consent of the policyholder, an insurer may process a policy loan in lieu of cash surrender to conserve business, but only if the following criteria are followed:
(a) the computation of policy values and premium deductions, if any, shall be calculated on the same basis as enumerated in Subsection (2);
(b) the policyholder shall receive:
(i) the reason the insurer is sending the proceeds of a policy loan as opposed to the cash surrender value;
(ii) an explanation of the effect the loan will have on the policyholder's interest charge, premium, and death benefit; and
(iii) the procedures for the repayment of the loan; and
(c) if a policy loan check is issued in lieu of a cash surrender value:
(i) the loan shall be processed within 20 days of receiving the request to surrender;
(ii) the check for the policy loan value shall be immediately negotiable;
