Circular Letter No. 3 (1996)

March 11, 1996

Several life insurance companies have submitted group life insurance forms that provide employees or members whose coverage would otherwise terminate with the option to continue term life coverage. The continuation coverage would be provided under either the existing group life policy or a group life policy established solely for the purpose of making portable coverage available. The continuation/portability option will be offered in addition to the conversion option required by Sections 3220 and 4216 of the Insurance Law. The insurers believe that such option should be easier for covered persons to understand, have a lower initial cost and experience a greater participation rate than the statutory conversion option.

The Department has previously accepted a group long term disability trust as a qualifying group under Section 4235(c)(1)(M) of the Insurance Law. The rationale is also compelling for accepting a group life portability trust established by a life insurance company solely for the purpose of making continued term life insurance coverage available to employees or members whose coverage would otherwise terminate under another group life policy. As such, the Department will review group life portability submissions and give consideration to accepting a group life portability trust as a qualifying group under Section 4216(b)(14) of the Insurance Law.

The Department will also give consideration to the approval of a contract provision which provides the right to continue term life insurance coverage under the existing group life insurance policy after termination of employment or membership on the basis that the right of continuation is "more favorable to certificateholders or not less favorable to certificateholders and more favorable to the policyholder" within the meaning of Section 3220(a) of the Insurance Law as long as the terminated employee or member can exercise the statutory conversion right at any time.

Please direct all inquiries and requests concerning this circular letter to Ralph D. Spaulding, Associate Insurance Attorney, Life and Health Bureau, Empire State Plaza, Agency Building One, Albany, New York 12257.