Original Notice.

     Preproposal statement of inquiry was filed as WSR 09-13-035.

     Title of Rule and Other Identifying Information: Juvenile life insurance standards safeguarding against purchase of policies for speculative or fraudulent purposes (WAC 284-23-800 through 284-23-806).

     Hearing Location(s): Office of the Insurance Commissioner, 5000 Capitol Boulevard, Tumwater, WA, on March 22, 2010, at 9:00 a.m.

     Date of Intended Adoption: March 29, 2010.

     Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504, e-mail kacys@oic.wa.gov, fax (360) 586-3109, by March 19, 2010.

     Assistance for Persons with Disabilities: Contact Lorrie [Lorie] Villaflores by March 19, 2010, TTY (360) 586-0241 or (360) 725-7087.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Purpose: Amend the current rules for clarity and ease of compliance.

     Anticipated Effects:

     • Definition of insurable interest is identical to statutory definition.

     • Insurers have greater latitude in developing standards to prevent speculative or fraudulent purchase of juvenile life [insurance].

     Statutory Authority for Adoption: RCW 48.02.060 (3)(a).

     Statute Being Implemented: RCW 48.23.345.

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

     Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: Note that the rule does not apply to group life policies.

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

     Name of Agency Personnel Responsible for Drafting: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7041; Implementation: Beth Berendt, P.O. Box 40254, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: Carol Sureau, P.O. Box 40254, Olympia, WA 98504-0255, (360) 725-7150.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The impacted businesses do not meet the definition of small business for purposes of chapter 19.85 RCW.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7041, e-mail kacys@oic.wa.gov.

December 21, 2009

Mike Kreidler

Insurance Commissioner

OTS-2875.1

AMENDATORY SECTION(Amending Matter No. R 2007-09, filed 1/21/09, effective 2/21/09)

WAC 284-23-800   Purpose and scope.   The purpose of these rules is to ((prevent)) set standards for detecting and preventing the purchase of juvenile life insurance for speculative or fraudulent reasons, by ensuring that insurance underwriting practices consider such risk, and by setting forth the minimum practices required to insure the life of a juvenile. These rules apply to ((any)) life insurance ((issued in Washington state on)) policies governed by chapter 48.23 RCW that insure the life of a juvenile.

[Statutory Authority: RCW 48.02.060 and 48.23.345. 09-03-104 (Matter No. R 2007-09), § 284-23-800, filed 1/21/09, effective 2/21/09.]

     (1) "Insurable interest" means a relationship to the insured at the time of application ((congruent with the continuance of the life of the insured, and)) as ((further)) defined in RCW 48.18.030 and 48.18.060(2).

     (2) "Juvenile" means a person younger than eighteen years of age.

     (3) "Juvenile Life Insurance Contract" means a life insurance policy or contract issued on the life of a juvenile.

     (4) "Parent or legal guardian" means a natural parent, an adoptive parent whose status is documented in a final court order of adoption or a court appointed legal guardian for the juvenile. Step-parents who have not legally adopted the juvenile, foster parents, noncustodial parents or relatives acting in loco parentis are not considered parents or legal guardians of the juvenile for purposes of this rule.

[Statutory Authority: RCW 48.02.060 and 48.23.345. 09-03-104 (Matter No. R 2007-09), § 284-23-803, filed 1/21/09, effective 2/21/09.]

     (1) An insurer may refuse an applicant's request for life insurance when the combined life insurance-in-force exceeds the issuing insurer's maximum for juveniles.

     (2) Life insurance upon a juvenile ((may)) must not be made or take effect unless at the time the contract is made, the applicant is a person having an insurable interest in the life of ((a minor or is a person upon whom the minor is dependent for support and maintenance)) the juvenile. The insurer must obtain and keep documentation sufficient to demonstrate that the ((person applying)) applicant for the policy has an insurable interest in the life of the ((insured)) juvenile.

     (3) In addition to the signature of the applicant, the ((following consent as evidenced by signature must be obtained before submitting the application for underwriting:

     (a) The parent or legal guardian with whom the juvenile resides must sign the application if the applicant is not a parent or legal guardian.

     (b))) consent of the parent or legal guardian with whom the juvenile resides, as evidenced by signature, must be obtained before submitting the application for underwriting. Any juvenile age fifteen or older must sign the ((initial)) application for insurance on the juvenile's life.

     (4) An insurer must have justification for ((selling)) issuing a life insurance policy on the life of a juvenile ((in excess of reasonably anticipated costs associated with the juvenile's funeral, other death expenses or costs of mental health treatment for family members or loss of income to the family. The insurer must provide the insurance commissioner with documentation from its records and files to support the justification upon request)). The justification must ((contain)) address the following elements:

     (a) The ((justification)) issued policy must conform to the insurer's established standards and practices for underwriting juvenile life insurance or explain any variance.

     (b) As part of its underwriting practice, the insurer must identify the amount, if any, of other life insurance contracts on the life of the juvenile which are in force or applied for at the time of application.

     (c) ((Whether and to what extent the beneficiary or applicant is dependent on the juvenile for income or other support.

     (d) The value of life insurance or accidental death benefits issued for other siblings or immediate family members, and if not grossly proportional to the underwritten policy benefit or individually equivalent to coverage on other family members, why proportionality or equivalency was not required.

     (e) Whether the overall amount of insurance on the juvenile exceeds the annual household income, and if so, why such an amount was approved.)) The insurer must confirm that the policy death benefit is grossly proportional to the value of life insurance or accidental death benefits issued for other siblings or immediate family members, and if not, justify why proportionality or equivalency was not required.

     (d) The insurer must have good cause to underwrite when the overall amount of insurance on the juvenile exceeds the annual household income, and if it does so, justify why such an amount was approved. The extent to which the beneficiary or applicant is dependent on the juvenile for income or other support is an example of such a justification.

     (5) For each application for juvenile life insurance rejected by an insurer, each insurer must maintain at its home or principal office a complete file containing the original signed application, underwriting analysis, correspondence with the applicant and any other documents pertinent to the decision to reject the applicant as an insured, for a period of not less than ten years from the date the application was signed by the applicant. Such file shall be subject to inspection by the insurance commissioner.

[Statutory Authority: RCW 48.02.060 and 48.23.345. 09-03-104 (Matter No. R 2007-09), § 284-23-806, filed 1/21/09, effective 2/21/09.]

© Washington State Code Reviser's Office