Unnecessary Requirements Placed On Replacing Insurers By Replaced Insurers

(September 24, 2007)

It has come to the Department’s attention that some insurers are imposing unnecessary requirements on replacing insurers when requested to provide information necessary to complete a “Disclosure Statement” as required under Department Regulation No. 60. Replacing insurers should not be required to provide any documentation other than a properly completed authorization form, which includes the name of the replacing insurer, the policy or contract number of the policies or contracts that are proposed to be replaced, the signature of the owner/applicant of the proposed replaced policies or contracts authorizing release of the information, and information regarding where to send the information necessary to complete the "Disclosure Statement". Information such as the following should not be requested or required from the replacing insurer: 1) signatory guarantees, 2) copies of an executed "IMPORTANT NOTICE REGARDING REPLACEMENT OR CHANGE OF LIFE INSURANCE POLICIES OR ANNUITY CONTRACTS", 3) copies of an executed "DEFINITION OF REPLACEMENT", or 4) information from the replacing insurer regarding the proposed new life insurance or annuity.

Insurers that place unnecessary requirements on a replacing insurer before providing the information necessary to complete a “Disclosure Statement” may be in violation of Section 51.6(c)(2) of Department Regulation No. 60.

In addition the following improper replacement behavior by insurers has come to the Department’s attention:

  • Supplemental documents (e.g., illustrations) are provided by replaced insurers without appropriate explanation to replacing insurers in lieu of completing the required "Description of Transaction" and "Summary Result Comparison" parts of the "Disclosure Statement" for the existing life insurance or annuity. Supplemental documents provided by replaced insurers must include the information necessary to complete the required parts of the “Disclosure Statement” in a readily identifiable format.
  • Replacement transactions are being delayed by replaced insurers who do not receive properly completed "Disclosure Statements", pursuant to Section 51.6(b)(4) of Department Regulation No. 60. Replaced insurers are reminded that if the policyholder has provided the proper forms to surrender their policy (according to the replaced insurers’ written procedures), the transaction should be processed. A replaced insurer should not place additional surrender requirements on a policyholder surrendering their coverage in a replacement transaction as compared with a policyholder surrendering their coverage where no replacement is involved.

If a replacing insurer believes it is being subjected to unnecessary requirements, or if a replaced insurer believes that the replacing insurer has not provided the applicant with a properly completed "Disclosure Statement", the insurer should contact the Life Bureau of the Department.

Replacing insurers are reminded that a properly completed authorization form should be mailed (or faxed, if a fax number has been provided) to the replaced insurer’s address shown in the Regulation 60 Life Companies Contacts listing on the Department’s web-site.

If you have any questions regarding this, please call Sharon Ma at (212) 480-4659 or Pauline Hall at (212) 480-5015.