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Virginia Administrative Code
Title 14. Insurance
Agency 5. State Corporation Commission, Bureau of Insurance
Chapter 30. Rules Governing Life Insurance and Annuity Replacements

14VAC5-30-20. Definitions.

The following words and terms when used in this chapter shall have the following meaning unless the context clearly indicates otherwise:

"Agent" or "producer" means an individual or business entity that sells, solicits, or negotiates contracts of insurance or annuity in this Commonwealth.

"Commission" means the State Corporation Commission.

"Direct-response solicitation" means a solicitation through a sponsoring or endorsing entity or individually, made solely through mail, telephone, the Internet or other mass communication media.

"Existing insurer" means the insurance company whose policy or contract is or will be changed or affected in a manner described within the definition of "replacement."

"Existing policy or contract" means an individual life insurance policy (policy) or annuity contract (contract) in force, including a policy under a binding or conditional receipt or a policy or contract that is within an unconditional refund period.

"Financed purchase" means the purchase of a new policy involving the actual or intended use of funds obtained by the withdrawal or surrender of, or by borrowing from values of an existing policy to pay all or part of any premium due on the new policy. For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same company within four months before or 13 months after the effective date of the new policy, it will be deemed prima facie evidence of the policyholder's intent to finance the purchase of the new policy with existing policy values. This prima facie standard is not intended to increase or decrease the monitoring obligations contained in 14VAC5-30-60 A 5.

"Guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance or an annuity contract that are guaranteed and determined at issue.

"Illustration" means a presentation or depiction that includes nonguaranteed elements of a life insurance policy or an annuity contract over a period of years.

"Insurer" means any insurance company required to be licensed under the laws of this Commonwealth.

"Marketing communication" or "sales material" means printed, written, electronic, or other material of any type from any source which is used by an agent or insurer and which is designed to create or has the effect of creating public interest in life insurance or annuities, or in an insurer or agent, or induces or tends to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy or contract including, but not limited to:

1. Printed or published material, audiovisual material, mailing envelopes, descriptive literature of an insurer or agent used in direct mail, newspapers, magazines, radio, Internet, telephone and television scripts, billboards or similar displays;

2. Descriptive literature and sales aids of all kinds, authored by the insurer, its agents, or third parties, issued, distributed, or used by an insurer or agent including but not limited to circulars, leaflets, booklets, depictions, illustrations, pictures, form letters, electronic solicitations, pamphlets, brochures, and books or portions thereof;

3. Materials, statements, or communications of any type used for the recruitment, training, and education of an insurer's sales personnel and agents which are designed to be used or are used to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy or contract; and

4. Prepared or extemporaneous sales talks, presentations, and material for use or used by sales personnel or agents.

"Marketing communication" or "sales material" for the purpose of this chapter does not include:

1. Communications or materials used within an insurer's own organization, not used as a sales aid, and not disseminated to the public;

2. Communications with policy or contract holders other than material urging them to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy or contract; or

3. A general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged; provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage.

"Nonguaranteed elements" means the premiums, benefits, values, credits, or charges under a life insurance policy or an annuity contract that are not guaranteed or not determined at issue.

"Policy summary" means:

1. For policies or contracts other than universal life policies, a written statement regarding a policy or contract that shall contain to the extent applicable, but need not be limited to, the following information: current death benefit; annual contract premium; current cash surrender value; current dividend; application of current dividend; and amount of outstanding loan.

2. For universal life policies, a written statement that shall contain at least the following information: the beginning and end date of the current report period; the policy value at the end of the previous report period and at the end of the current report period; the total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders); the current death benefit at the end of the current report period on each life covered by the policy; the net cash surrender value of the policy as of the end of the current report period; and the amount of outstanding loans, if any, as of the end of the current report period.

"Replacing insurer" means the insurance company that issues or proposes to issue a new policy or contract that replaces an existing policy or contract or is a financed purchase.

"Registered contract" means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933 (15 USC § 77a et seq.).

"Replacement" means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing agent, or the proposing insurer if there is no agent, that by reason of the transaction, an existing policy or contract has been or is to be:

1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated;

2. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

3. Amended to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

4. Reissued with any reduction in cash value;

5. Used in a financed purchase.

"Universal life policy" means a life insurance policy in which separately identified interest credits (other than in connection with dividend accumulation, premium deposit funds, or other supplementary accounts) and mortality and expense charges are made to the policy. A universal life policy may provide for other credits and charges, such as charges for the cost of benefits provided by the rider.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation No. 7, Case No. INS810114, Section III, eff. March 1, 1982; amended, Volume 23, Issue 09, eff. April 1, 2007.

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