[PART V.] REPLACEMENT OF LIFE INSURANCE POLICIES AND ANNUITIES

 

§431:10D-501  Purpose and scope.  (a) The purpose of this part is to:

(1)  Regulate the activities of insurers and producerswith respect to the replacement of existing life insurance and annuities; and

(2)  Protect the interests of life insurance andannuity purchasers by establishing minimum standards of conduct to be observedin replacement or financed purchase transactions that will:

(A)  Assure that purchasers receive informationwith which a decision can be made in the purchasers' best interests;

(B)  Reduce the opportunity formisrepresentation and incomplete disclosure; and

(C)  Establish penalties for failure to complywith requirements of this part.

(b)  Unless otherwise specifically included,this part shall not apply to transactions involving:

(1)  Credit life insurance;

(2)  Group life insurance or group annuities wherethere is no direct solicitation of individuals by an insurance producer. Direct solicitation shall not include any group meeting held by an insuranceproducer solely for the purpose of educating or enrolling individuals wheninitiated by an individual member of the group assisting with the selection ofinvestment options offered by a single annuity provider in connection withenrolling the individuals.  Group life insurance or group annuity certificatesmarketed through direct-response solicitation shall be subject to section431:10D-507;

(3)  Group life insurance used to fund prearrangedfuneral contracts;

(4)  An application to the existing insurer thatissued the existing policy or contract when a contractual change or aconversion privilege is being exercised; or, when the existing policy orcontract is being replaced by the same insurer pursuant to a program filed withand approved by the commissioner; or, when a term conversion privilege isexercised among corporate affiliates;

(5)  Proposed life insurance that is to replace lifeinsurance under a binding or conditional receipt issued by the same company;

(6)  Policies or contracts used to fund:

(A)  An employee pension or welfare benefitplan that is covered by the Employee Retirement and Income Security Act(ERISA);

(B)  A plan described by sections 401(a),401(k) or 403(b) of the Internal Revenue Code of 1986, as amended, where theplan, for purposes of ERISA, is established or maintained by an employer;

(C)  A governmental or church plan defined insection 414 of the Internal Revenue Code of 1986, as amended, a governmental orchurch welfare benefit plan, or a deferred compensation plan of a state orlocal government or tax exempt organization under section 457 of the InternalRevenue Code of 1986, as amended; or

(D)  A nonqualified deferred compensationarrangement established or maintained by an employer or plan sponsor;

provided that, notwithstanding the exemptionslisted in subparagraphs (A) to (D), this part shall apply to policies orcontracts used to fund any plan or arrangement that is funded solely bycontributions an employee elects to make, whether on a pre-tax or after-taxbasis, and where the insurance company has been notified that plan participantsmay choose from among two or more annuity providers or policy providers andthere is a direct solicitation of an individual employee by an insuranceproducer for the purchase of a contract or policy.  As used in this subsection,direct solicitation shall not include any group meeting held by an insuranceproducer solely for the purpose of educating individuals about the plan orarrangement or enrolling individuals in the plan or arrangement or, wheninitiated by an individual employee assisting with the selection of investmentoptions offered by a single annuity provider in connection with enrolling thatindividual employee;

(7)  Where new coverage is provided under a lifeinsurance policy or contract and the cost is borne wholly by the insured'semployer or by an association of which the insured is a member;

(8)  Existing life insurance that is a non-convertibleterm life insurance policy that will expire in five years or less and cannot berenewed;

(9)  Immediate annuities that are purchased withproceeds from an existing contract; provided that immediate annuities purchasedwith proceeds from an existing policy are not exempted from the requirements ofthis part; and

(10)  Structured settlements.

(c)  Registered contracts shall be exempt fromthe requirements of sections 431:10D-505(a)(2) and 431:10D-506(2) with respectto the provision of illustrations or policy summaries; however, premium or contractcontribution amounts and identification of the appropriate prospectus oroffering circular shall be required instead. [L 2000, c 252, pt of §3; am L2008, c 155, §4]