WSR 12-01-108

PROPOSED RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2011-21 -- Filed December 21, 2011, 9:23 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 11-17-129.

Title of Rule and Other Identifying Information: The use of senior and professional designations in the sale of life insurance and annuities.

Hearing Location(s): OIC Tumwater Office, Training Room 120, 5000 Capitol Boulevard, Tumwater, WA, http://www.insurance.wa.gov/about/directions.shtml, on January 24, 2012, at 9:00 a.m.

Date of Intended Adoption: January 31, 2012.

Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail kacys@oic.wa.gov, fax (360) 586-0139, by January 23, 2012.

Assistance for Persons with Disabilities: Contact Lorrie [Lorie] Villaflores by January 23, 2012, TTY (360) 586-0241 or (360) 725-7087.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These proposed rules set forth standards to protect consumers from misleading and fraudulent marketing practices with respect to the use of senior-specific designations in the solicitation, sale or purchase of, or advice made in connection with a life insurance or annuity product.

Reasons Supporting Proposal: Consumers have been mislead by producers using designations that imply a senior-specific expertise in financial matters that is not reflected in reality by either training or experience. The National Association of Insurance Commissioner's adopted Model 278 on this subject in October of 2008. Since that time thirty-four states have adopted either the entire model or portions of it.

Statutory Authority for Adoption: RCW 48.02.060 and 48.30.010.

Statute Being Implemented: RCW 48.30.010.

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: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7041; Implementation: John Hamje, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7262; 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 amendment makes several small and insubstantial, but clarifying, changes in the wording of the rules in WAC 284-23-240 and 284-23-360; these wording changes will not cause producers to incur any noteworthy new costs.

In addition, this proposed rule amendment will add a new section (WAC 284-17-605) to the rules governing licensing requirements and procedures as they apply to life insurance or annuity marketing practices involving the use of senior specific certifications and professional designations. The primary cost in complying with this proposed rule amendment would be the cost of new stationery if the current stationery being used by a life insurance or annuity firm or producer would not be compliant with the proposed rule. The costs of changing such stationery or eliminating noncompliant certificates and awards from an office are below the threshold required to justify a small business economic impact statement (SBEIS). Therefore no SBEIS is needed.

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, fax (360) 586-3109, e-mail kacys@oic.wa.gov.

December 21, 2011

Mike Kreidler

Insurance Commissioner

OTS-4349.3


NEW SECTION
WAC 284-17-605   Purpose.   (1) The purpose of this section is to set forth standards to protect consumers from misleading and fraudulent marketing practices with respect to the use of senior-specific certifications and professional designations in the solicitation, sale or purchase of, or advice made in connection with a life insurance or annuity product. Consumers are misled and harmed when insurance producers use designations and certifications that imply the existence of a level of expertise in senior affairs and financial matters that, in fact, does not exist.

(2) It is an unfair or deceptive practice pursuant to RCW 48.30.010 for an insurance producer to use a senior-specific certification or professional designation that indicates or implies in such a way as to mislead a purchaser that the insurance producer has special certification or training in advising or servicing seniors in connection with the solicitation, sale, or purchase of a life insurance or annuity product or in the provision of advice as to the value of or the advisability of purchasing or selling a life insurance or annuity product, either directly or indirectly through publications or writings, or by issuing or promulgating analyses or reports related to a life insurance or annuity product.

(3) The prohibited use of senior-specific certifications or professional designations includes, but is not limited to, the following:

(a) Use of a certification or professional designation by an insurance producer who has not actually earned or is otherwise ineligible to use such certification or designation;

(b) Use of a nonexistent or self-conferred certification or professional designation;

(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the insurance producer using the certification or designation does not have; and

(d) Use of a certification or professional designation that was obtained from a certifying or designating organization that:

(i) Is primarily engaged in the business of instruction in sales or marketing;

(ii) Does not have reasonable standards or procedures for assuring the competency of its certificants or designees;

(iii) Does not have reasonable standards or procedures for monitoring and disciplining its certificants or designees for improper or unethical conduct; or

(iv) Does not have reasonable continuing education requirements for its certificants or designees in order to maintain the certificate or designation.

(4) There is a rebuttable presumption that a certifying or designating organization is not disqualified solely for purposes of subsection (3)(d) of this section when the certification or designation issued from the organization does not primarily apply to sales or marketing and when the organization or the certification or designation in question has been accredited by:

(a) The American National Standards Institute (ANSI);

(b) The National Commission for Certifying Agencies; or

(c) Any organization that is on the U.S. Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes."

(5) In determining if a combination of words, or an acronym standing for a combination of words, constitutes a certification or professional designation indicating or implying that a person has special skill, knowledge, experience or qualifications in advising or servicing seniors, factors implying such include, but are not limited to, the following:

(a) Use of the word "senior," "retirement," "elder," or similar words combined with one or more words such as "certified," "registered," "chartered," "advisor," "specialist," "consultant," "planner," or similar words in the name of the certification or professional designation; and

(b) The manner in which those words are combined.

(6) For purposes of this section, a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency is not a certification or professional designation, unless it is used in a manner that would confuse or mislead a reasonable consumer, when the job title:

(a) Indicates seniority or standing within the organization; or

(b) Specifies an individual's area of specialization within the organization.

(7) A person licensed pursuant to chapter 48.17 RCW must not, in the conduct of business, use terms such as financial planner, investment advisor, financial consultant, or financial counselor unless the person is engaged in an advisory business and receives a substantial part of their compensation from that source unrelated to the sale of insurance.

[]

OTS-4370.1


AMENDATORY SECTION(Amending Matter No. R 97-04, filed 5/6/98, effective 6/6/98)

WAC 284-23-240   General rules.   (1) Each insurer ((shall)) must maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use under this regulation. The file ((shall)) must contain one copy of each authorized form for a period of three years following the date of its last authorized use unless otherwise provided by this regulation.

(2) An ((agent shall)) insurance producer must inform the prospective purchaser, prior to commencing any presentation that may lead to the sale of life insurance((,)) that the ((agent)) insurance producer is acting as ((a life)) an insurance ((agent)) producer with a life insurance line of authority. In sales situations in which an ((agent)) insurance producer is not involved, the insurer ((shall)) must identify its full name.

(3) Terms such as financial planner, investment advisor, financial consultant or financial counselor ((shall)) must not be used by an ((agent)) insurance producer unless the ((agent)) insurance producer is ((generally)) engaged in an advisory business and receives a substantial part of their compensation from that source unrelated to the sale of insurance.

(4) There ((shall)) must be no reference to a dividend or nonguaranteed element in the policy summary. Any reference to a dividend or a nonguaranteed element in the sales process must comply with the provisions of chapter 48.23A RCW.

(5) Any statement regarding the use of the life insurance cost comparison indexes ((shall)) must include an explanation to the effect that the indexes are useful only for the comparison of the relative costs of two or more similar policies.

[Statutory Authority: RCW 48.02.020 and 48.30.010. 98-11-003 (Matter No. R 97-04), 284-23-240, filed 5/6/98, effective 6/6/98. Statutory Authority: RCW 48.02.060, 48.30.010, and 48.30.090. 79-07-053 (Order R 79-2), 284-23-240, filed 6/25/79, effective 1/1/80.]


AMENDATORY SECTION(Amending Order R 79-1, filed 6/25/79, effective 4/1/80)

WAC 284-23-360   General rules.   (1) Each insurer ((shall)) must maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use pursuant to this regulation. Such file ((shall)) must contain one copy of each authorized form for a period of at least three years following the date of its last authorized use.

(2) An ((agent shall)) insurance producer must inform the prospective purchaser, prior to commencing a sales presentation, that the ((agent)) insurance producer is acting as ((a life)) an insurance ((agent)) producer with a life insurance line of authority and ((shall)) must inform the prospective purchaser of the full name of the ((insurance company)) insurer which the ((agent)) insurance producer is representing ((to the buyer)). In sales situations in which an ((agent)) insurance producer is not involved, the insurer ((shall)) must identify its full name.

(3) Terms such as financial planner, investment advisor, financial consultant, or financial ((counseling shall)) counselor must not be used by an ((agent)) insurance producer unless ((he)) the insurance producer is ((generally)) engaged in an advisory business and receives a ((material)) substantial part of ((his)) their compensation from that source unrelated to the sale of insurance.

(4) Any reference to dividends or to excess interest credits must include a statement that such dividends or credits are not guaranteed.

(5) A presentation of benefits ((shall)) must not display guaranteed and nonguaranteed benefits as a single sum unless guaranteed benefits are shown separately in close proximity thereto and with equal prominence.

(6) Sales promotion literature and contract forms ((shall)) must not state or imply that annuity contracts or deposit funds are the same as savings accounts or deposits in banking or savings institutions. The use of passbooks which resemble savings bank passbooks is prohibited.

[Statutory Authority: RCW 48.02.060, 48.30.010, and 48.30.090. 79-07-052 (Order R 79-1), 284-23-360, filed 6/25/79, effective 4/1/80.]

Washington State Code Reviser's Office