WSR 06-24-121




[ Insurance Commissioner Matter No. R 2004-03 -- Filed December 6, 2006, 9:35 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 04-13-153.

Title of Rule and Other Identifying Information: Corporate-owned life insurance in Washington state.

Hearing Location(s): Insurance Commissioner's Office, 302 Sid Snyder Avenue, Room 200, Olympia, WA 98504, on January 10, 2007, at 2:00 p.m.

Date of Intended Adoption: February 12, 2007.

Submit Written Comments to: Kacy Scott, P.O. Box 40255, Olympia, WA 98504-0258, e-mail, fax (360) 586-3109, by January 9, 2007.

Assistance for Persons with Disabilities: Contact Lorie Villaflores by January 8, 2007, TTY (360) 586-0241 or (360) 725-7087.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: ESB 5196 was enacted during the 2005 legislative session. This law directed the commissioner to adopt rules to implement RCW 48.18.010, 48.18.030, 48.18.060, 48.18.580, and 48.18.583. These proposed rules will require that an employee be a key person and the employer must obtain and keep evidence that the employer has an "insurable interest" in the life of the employee.

Reasons Supporting Proposal: In the past, despite the existence of a strict insurable interest requirement for group life insurance, corporations have purchased policies on employees in whom there exists no clear insurable interest. These proposed rules will provide a clearer understanding that the carrier must obtain and keep evidence that an insurable interest exists for every employee upon whose life insurance is purchased and that the person's mere status as an employee is insufficient to meet the insurable interest requirement. The employee must be a "key person."

Statutory Authority for Adoption: RCW 48.02.060 and 48.18.586.

Statute Being Implemented: RCW 48.18.010, 48.10.030 [48.18.030], 48.18.060, 48.18.580, and 48.18.583.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Mike Kreidler, insurance commissioner, governmental.

Name of Agency Personnel Responsible for Drafting: Melodie Bankers, P.O. Box 40258, Olympia, WA 98504-0255, (360) 725-7039; Implementation: Beth Berendt, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.

No small business economic impact statement has been prepared under chapter 19.85 RCW. This proposed rule will have negligible or minor impact on small businesses regulated by the office of the insurance commissioner.

A cost-benefit analysis is not required under RCW 34.05.328. This proposed rule is an interpretive rule as defined by RCW 34.05.328(5).

December 6, 2006

Mike Kreidler

Insurance Commissioner


WAC 284-23-580   Insurer must obtain and keep evidence that insured is a key person -- Definition of "key person."   (1) If a business entity seeks to be the owner or beneficiary of a contract of life insurance on an employee, the insurer must obtain and keep evidence that the business entity had an "insurable interest" in the life of the insured as required by RCW 48.18.030(3) and was a "key person" at the time the contract was made.

(2) The term "key person" means a "highly compensated individual" where, during the year the contract was made, the employee:

(a) Was one of the five highest paid officers of the employer;

(b) Was a shareholder who owned more than ten percent in value of the stock of the employer; or

(c) Was among the highest paid ten percent of all employees.


Washington State Code Reviser's Office