WSR 13-13-021

PERMANENT RULES

OFFICE OF

INSURANCE COMMISSIONER

[Insurance Commissioner Matter No. R 2012-31—Filed June 12, 2013, 10:10 a.m., effective September 1, 2013]

Effective Date of Rule: September 1, 2013.

Purpose: The new rule ensures that policyholders of term life insurance policies receive a notice of options that are available to them when their policy might lapse (and other events) that is more appropriate for the type of life insurance policy that they own. The purpose of these changes is to reduce consumer confusion and reduce unnecessary contacts with life insurers and their insurance producers.

Citation of Existing Rules Affected by this Order: Amending 2.

Statutory Authority for Adoption: RCW 48.02.060, 48.102.100, and 48.102.170.

Adopted under notice filed as WSR 13-07-054 on March 19, 2013.

A final cost-benefit analysis is available by contacting Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7036, fax (360) 586-3109, e-mail rulescoordinator@oic.wa.gov.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 1, Amended 2, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 1, Amended 2, Repealed 0.

Date Adopted: June 12, 2013.

Mike Kreidler

Insurance Commissioner

AMENDATORY SECTION (Amending Matter No. R 2009-14, filed 1/27/10, effective 2/27/10)

WAC 284-97-015 Definitions.

For purposes of this chapter:

(1) "Domestic life settlement provider" means a provider as defined in RCW 48.102.006(19) who if:

(a) A natural person either resides or has their principal place of business in this state, or both; or

(b) A legal entity that either has their principal place of business in this state, or is incorporated in or otherwise formed under the laws of the state of Washington, or both.

(2) "NAIC" means the National Association of Insurance Commissioners.

(3) "Nonresident or foreign life settlement provider" means a provider as defined in RCW 48.102.006(19) who if:

(a) A natural person does not either reside or have their principal place of business in this state, or both; or

(b) A legal entity who does not either have their principal place of business in this state, or is not incorporated in or otherwise formed under the laws of the state of Washington, or both.

(4) "SERFF" means the System for Electronic Rate and Form Filing. SERFF is a proprietary NAIC computer-based application that allows filers to create and submit rate, rule, and form filings electronically to the commissioner.

(5) "Solicitation" means, for example; proposing, negotiating, signing, or doing any act in furtherance of making or proposing to make a life settlement contract. Solicitation specifically includes advertising by mail, use of the print or electronic media, telephone, or any other method of presenting, distributing, issuing, circulating, or permitting to be issued or circulated any information or material in connection with a life settlement contract.

(6) "Term life insurance" means life insurance that provides a death benefit only if the insured dies during the period specified in the policy and coverage ceases without value if the insured survives until the end of the period.

AMENDATORY SECTION (Amending Matter No. R 2009-14, filed 1/27/10, effective 2/27/10)

WAC 284-97-910 Insurance company disclosure form for other than term life insurance policies.

RCW 48.102.100 requires that insurers provide a notice to owners of individual life insurance policies at certain times. The following is the only document approved by the commissioner to give this notice, for life insurance policies other than term life insurance policies.

Important information about your life insurance policy

from the State of Washington Office of the Insurance Commissioner


Life insurance is a critical part of a broader financial plan. There are many options available, and you have the right to shop around and seek advice from different financial advisers in order to find the options best suited to your needs.
You are encouraged to consider the following possible alternatives to [requesting a surrender of your life insurance policy, requesting accelerated death benefits under your life insurance policy, or letting your life insurance policy lapse*]. These alternatives include, but are not limited to:
•	Accelerated Death Benefit: Your policy may provide an early or accelerated discounted benefit payment if you have a terminal or chronic illness.
•	Cash Surrender: Your policy may have a cash surrender value your life insurer would pay you if you cancel it.
•	Gift: You may be able to gift your policy to your beneficiary, who would then assume responsibility for paying premiums.
•	Life Settlement: You may be able to sell your life insurance policy to a third party for an amount that, under Washington law must be greater than the cash surrender value or accelerated death benefits under your policy. You pay no further premium. The third party becomes the policyholder and receives the benefit upon the insured's death.
•	Maintain Your Policy: You may be able to maintain your life insurance policy in force by paying the premiums directly or using your current policy values to pay the premiums.
•	Policy Changes: You may be able to reduce or eliminate future premium payments by obtaining a paid-up policy, by reducing optional coverages, or through other options available from your life insurer.
•	Policy Loan: You may be able to take out a loan from your life insurance company using the cash value of your policy as collateral. Loan proceeds can be used to pay the premiums or for other purposes.
•	Third-Party Loan: You may be able to get a loan from another party to pay your policy's premiums. In return, the lender may require an assignment of a portion or all of the policy's death benefits.
These options may or may not be available depending on your circumstances and the terms of your life insurance policy. Please see your policy or contact your life insurance company, financial advisor, ((agent or broker)) insurance producer to determine your particular options.
If you're a Washington state resident and have questions about life insurance and your rights, contact the Office of the Insurance Commissioner at 1-800-562-6900, or go to www.insurance.wa.gov. Ask questions if you don't understand your policy. Here's a list of commonly used terms:
Accelerated death benefit: A benefit allowing terminally ill or chronically ill life insurance policyholders to receive cash advances of all or part of the expected death benefit. The accelerated death benefit can be used for health care treatments or any other purpose.
Cash surrender value: This term is also called "cash value," "surrender value," and "policyholder's equity." The amount of cash due to a policyholder who requests the insurance company cancel their life insurance policy before it matures or death occurs.
Expected death benefit: The face amount of the policy, less any policy loan amounts, that the insurance company is expected to pay the beneficiaries named in the life insurance policy upon the death of the insured.
Lapse: Refers to a life insurance policy ending or expiring when a policyholder stops making premium payments.
Life settlement: Refers to a contract in which the policyholder sells his or her life insurance policy to a third party for a one-time cash payment which is greater than the cash surrender value, but less than the death benefit of the policy. A life settlement includes a viatical settlement, defined below.
Policy loan: A loan issued by an insurance company using the cash value of a person's life insurance policy as collateral.
Viatical settlement: An arrangement in which someone with a terminal illness sells his or her life insurance policy at an amount less than the death benefit. The ill person receives cash, and the buyer receives the full amount of the death benefit. This death benefit is payable once the former policyholder dies.
This brochure is for informational purposes only and does not constitute an endorsement of any of the options described above.
*	A life insurance company should choose among these three phrases to state the appropriate phrase that fits the situation of the particular policy owner to whom the notice is being sent.

Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency.

NEW SECTION

WAC 284-97-925 Insurance company disclosure form for term life insurance policies.

Important information about your term life insurance policy

from the State of Washington Office of the Insurance Commissioner


Life insurance is a critical part of a broader financial plan. There are options available to you rather than letting your policy lapse, and you have the right to shop around and seek advice from different financial advisers in order to find the option best suited to your needs.
You are encouraged to consider the following possible alternatives to letting your term life insurance policy lapse. These alternatives include, but are not limited to:
•	Life Settlement: You may be able to sell your term life insurance policy to a third party. You pay no further premium. The third party becomes the policyholder and receives the benefit upon the insured's death.
•	Maintain Your Policy: You may be able to maintain your term life insurance policy in force by paying the premiums directly.
•	Third-Party Loan: You may be able to get a loan from another party to pay your policy's premiums. In return, the lender may require an assignment of a portion or all of the policy's death benefits.
These options may or may not be available depending on your circumstances and the terms of your life insurance policy. Please see your policy or contact your life insurance company, financial advisor, insurance producer to determine your particular options. If you're a Washington state resident and have questions about life insurance and your rights, contact the Office of the Insurance Commissioner at 1-800-562-6900, or go to www.insurance.wa.gov. Ask questions if you don't understand your policy. Here's a list of commonly used terms: Expected death benefit: The face amount of the policy, less any policy loan amounts, that the insurance company is expected to pay the beneficiaries named in the life insurance policy upon the death of the insured.
Lapse: Refers to a life insurance policy ending or expiring when a policyholder stops making premium payments.
Life settlement: Refers to a contract in which the policyholder sells his or her life insurance policy to a third party for a one-time cash payment. A life settlement includes a viatical settlement, defined below.
Viatical settlement: An arrangement in which someone with a terminal illness sells his or her life insurance policy at an amount less than the death benefit. The ill person receives cash, and the buyer receives the full amount of the death benefit. This death benefit is payable once the former policyholder dies.
This brochure is for informational purposes only and does not constitute an endorsement of any of the options described above.