Life Bureau Filing Guidance Note
Guidance Date: September 11, 2019
Supplemental Guidance Regarding Section 224.6(h) of Regulation 187.
This guidance supplements section II of the Procedural Guidance for Insurers Filing Disclosure Pursuant to Sections 224.4(m) and 224.6(h) of Regulation 187 or for adding Producer Attestations or Certifications to Application Policy Forms dated May 29, 2019.
I. Clarification of when Section 224.6(h) Disclosure is Required
Disclosure pursuant to section 224.6(h) of Regulation 187 is required where a producer is dually licensed as both an agent and a broker and may sometimes sell the commission-based version of the product and sometimes sell the fee-based version of the product for the same insurer. The disclosure is not required where a producer only sells the fee-based version of the insurer’s product and not the commission-based version of the insurer’s product. Similarly, the disclosure is not required where a producer only sells the commission-based version of the insurer’s product and not the fee-based version of the insurer’s product.
II. Continued Sales while Disclosure Filing Pending
A couple insurers have asked whether they would need to suspend sales of the fee-based version of their product while they work in good faith to implement one of the disclosure options set forth in section III below. Insurers do not need to suspend sales and insurers and producers will not be considered out of compliance with Section 224.6(h) while they are working in good faith to implement one of the below disclosure options.
III. Handling Disclosure where there are Multiple Commission-Based Versions of the Product in addition to the Fee-Based Version
The May 29, 2019 filing guidance contemplated that insurers would have one commission-based version of a product and one fee-based version of the product and that each of those two versions would be set forth in the comparison disclosure required by section 224.6(h) of Regulation 187. A few insurers have indicated that they have multiple commission-based versions of a product and use a single fee-based contract as the fee-based version of all the commission-based versions of the product.
Some insurers filed a single disclosure showing the fee-based version as well as each of the commission-based versions of the product. The Department approved these disclosures.
However, a few other insurers filed multiple versions of the disclosure each comparing the same fee-based version of the product to a different commission-based version of the product. Under that proposed structure, consumers with identical needs/goals or personal/financial circumstances would receive different versions of the disclosure and different versions of the product. This raised concerns under Insurance Law section 4224, which provides that no insurance insurer shall “make or permit any unfair discrimination between individuals of the same class and of equal expectation of life, in the amount or payment or return of premiums, or rates charged for policies of life insurance or annuity contracts, or in the dividends or other benefits payable thereon, or in any of the terms and conditions thereof”.
In consultation with interested parties, the Department has developed the following options for handling disclosure where there are multiple commission-based versions of the product in addition to the fee-based version:
- The disclosure may be structured to show a comparison of the differences between the fee-based version and all commission-based versions of the same product in a single disclosure; or
- The disclosure may be structured to show a comparison of the differences between the fee-based version and the commission-based version or versions of the same product that the producer is authorized to sell, provided that the disclosure contains the following prominently displayed language and the single disclosure document referenced in option 1 is available from the insurer on its website and by telephone request as discussed in the language below.
[Insert Name of Insurer] offers through other distributors other versions of this product not shown in this comparison that may have different costs and/or benefit levels such as [Insert areas of difference such as annual fee, surrender charge, bonus level, etc.]. A full comparison of these differences can be viewed at [website location] or can be obtained by calling [phone number].