Virginia Law

Article 6. Regulation.

Except as herein provided, societies shall be governed by this chapter and §§ 38.2-100 through 38.2-134, Chapters 2 (§ 38.2-200 et seq.) through 9 (§ 38.2-900 et seq.), §§ 38.2-1300 through 38.2-1315, 38.2-1315.1, 38.2-1317 through 38.2-1340, and 38.2-1367, Chapters 14 (§ 38.2-1400 et seq.), 15 (§ 38.2-1500 et seq.), and 18 (§ 38.2-1800 et seq.), §§ 38.2-3100 through 38.2-3125 and 38.2-3300 through 38.2-3317, Chapter 34 (§ 38.2-3400 et seq.), §§ 38.2-3500 through 38.2-3520, Chapter 36 (§ 38.2-3600 et seq.), Chapter 52 (§ 38.2-5200 et seq.), and Chapter 55 (§ 38.2-5500 et seq.), and shall be exempt from all other provisions of this title unless expressly designated therein, or unless they are specifically made applicable by this chapter.

1986, c. 562; 1987, cc. 565, 655; 1993, c. 158; 1994, c. 308; 2000, cc. 46, 532; 2004, c. 315; 2012, c. 156; 2014, c. 571.

Every society organized or licensed under this chapter is hereby declared to be a charitable and benevolent institution, and all of its funds shall be exempt from every state, county, district, municipal and school tax other than taxes on real estate and office equipment.

Code 1950, §§ 38-262, 38.1-577; 1952, c. 317, § 38.1-638.9; 1968, c. 654; 1986, c. 562.

A. The report of valuation shall show, as reserve liabilities, the difference between the present midyear value of the promised benefits provided in the certificates of the society in force and the present midyear value of the future net premiums as they are in practice actually collected, not including any value for the right to make extra assessments and not including any amount by which the present midyear value of future net premiums exceeds the present midyear value of promised benefits on individual certificates. At the option of any society, the valuation may show the net tabular value instead of the above value. The net tabular value as to certificates issued prior to June 28, 1969, shall be determined in accordance with the provisions of law applicable prior to June 28, 1968, and as to certificates issued on or after June 28, 1969, shall not be less than the reserves determined according to the Commissioners' reserve valuation method as defined in subsection C of this section. If the premium charged is less than the tabular net premium according to the basis of valuation used, an additional reserve equal to the present value of the deficiency in the premiums shall be set up and maintained as a liability. The reserve liabilities shall be properly adjusted in the event that the midyear or tabular values are not appropriate.

B. A society may value its certificates in accordance with valuation standards authorized by the laws of this Commonwealth for the valuation of policies issued by life insurers.

C. Reserves according to the Commissioners' reserve valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be any excess of the present value, at the date of valuation, of the future guaranteed benefits provided for by those certificates, over the then present value of any future modified net premiums therefor. The modified net premiums for any such certificate shall be a uniform percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the certificate, of all modified net premiums shall equal the sum of the then present value of the benefits provided for by the certificate and the excess of 1 over 2, as follows:

1. A net-level premium equal to the present value, at the date of issue, of the benefits provided for after the first certificate year, divided by the present value, at the date of issue, of an annual annuity of one dollar payable on each anniversary of the certificate on which a premium falls due. However, the net-level annual premium shall not exceed the net-level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at any age one year higher than the age at issue of the certificate; and

2. A net one-year term premium for the benefits provided for in the first certificate year. Reserves according to the Commissioners' reserve valuation method for (i) life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums, (ii) annuity and pure endowment benefits, (iii) disability and accidental death benefits in all certificates and contracts, and (iv) all other benefits except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of this subsection.

D. The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon mortality and interest standards prescribed in subsections E through G of this section.

E. The valuation and underlying data shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

F. The minimum standards of valuation for certificates issued prior to June 28, 1969, shall be those provided by the law applicable immediately prior to June 28, 1968, but not lower than the standards used in the calculating of rates for those certificates.

G. The minimum standard of valuation for certificates issued after June 28, 1969, shall be 3 1/2 percent interest and the following tables:

1. For certificates of life insurance, American Men Ultimate Table of Mortality, with Bowerman's or Davis' Extension thereof or with the consent of the Commission, the Commissioners 1941 Standard Ordinary Mortality Table, the Commissioners 1941 Standard Industrial Mortality Table or the Commissioners 1958 Standard Ordinary Mortality Table, using actual age of the insured for male risks and an age not more than three years younger than the actual age of the insured for female risks;

2. For annuity and pure endowment certificates, excluding any disability and accidental death benefits in the certificates, the 1937 Standard Annuity Mortality Table or the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Commission;

3. For total and permanent disability benefits in or supplementary to life insurance certificates, Hunter's Disability Table, or the Class III Disability Table (1926) modified to conform to the contractual waiting period, or the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries with due regard to the type of benefit. Any of these tables shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance certificates;

4. For accidental death benefits in or supplementary to life insurance certificates, The Inter-Company Double Indemnity Mortality Table or the 1959 Accidental Death Benefits Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance certificates; and

5. For noncancellable accident and health benefits, the Class III Disability Table (1926) with conference modifications or, with the consent of the Commission, tables based upon the society's own experience.

H. The Commission may, in its discretion, accept other standards for valuation if it finds that the reserves produced by those standards will not be less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed in this section. The Commission may, in its discretion, vary the standards of mortality applicable to all certificates of insurance on substandard lives or other extra hazardous lives by any society licensed to do business in this Commonwealth. Whenever the mortality experience under all certificates valued on the same mortality table exceeds the expected mortality according to that table for a period of three consecutive years, the Commission may require additional reserves that it deems necessary on account of the certificates.

I. Any society, with the consent of the commissioner of insurance of the state of domicile of the society and under any conditions he may impose, may establish and maintain reserves on its certificates in excess of the reserves required by the state. However, the contractual rights of any insured member shall not be affected by the excess reserves.

Code 1950, §§ 38-316, 38.1-624; 1952, c. 317, § 38.1-638.45; 1968, c. 654; 1975, c. 262; 1986, c. 562.

A. Every society doing business in this Commonwealth shall annually, by March 1, unless the Commission extends the time for cause shown, file with the Commission a true statement of its financial condition, transactions and affairs for the preceding calendar year. The statement shall be in general form and content as approved by the National Association of Insurance Commissioners for fraternal benefit societies or other form required by the Commission and as supplemented by additional information required by the Commission.

B. As part of the required annual statement, each society shall, by March 1, file with the Commission a valuation of its certificates in force on December 31 of the previous year, provided the Commission may, in its discretion for cause shown, extend the time of filing such valuation for not more than two calendar months. Such valuation shall be done in accordance with the standards specified in § 38.2-4125. Such valuation and underlying data shall be certified by a qualified actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

Code 1950, §§ 38-316, 38.1-624; 1952, c. 317, §§ 38.1-638.44, 38.1-638.45; 1968, c. 654; 1975, c. 262; 1986, c. 562.

Societies now authorized to do business in this Commonwealth may continue such business until June 30, 1987. The authority of such societies and all societies hereafter licensed may thereafter be renewed annually, but in all cases will terminate on June 30. However, a license so issued shall continue in effect until the new license is issued or specifically refused. For each such license or renewal the society shall pay the Commission twenty dollars. A duly certified copy or duplicate of such license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this chapter.

Code 1950, §§ 38-271, 38.1-588; 1952, c. 317, § 38.1-638.20; 1968, c. 654; 1978, c. 4; 1986, c. 562.

A. The Commission, or any person the Commission may appoint, may examine any domestic, foreign or alien society doing business or applying for admission to do business in this Commonwealth in the same manner as authorized for examination of domestic, foreign or alien insurers. Requirements of notice and an opportunity to respond before findings are made public, as provided in the laws regulating insurers, shall also be applicable to the examination of societies.

B. The expense of each examination and of each valuation, including compensation and actual expense of examiners, shall be paid by the society examined or whose certificates are valued, upon statements furnished by the Commission.

Code 1950, §§ 38-319 through 38-321, 38.1-627, 38.1-629, 38.1-630; 1952, c. 317, §§ 38.1-638.48 through 38.1-638.51; 1968, c. 654; 1986, c. 562.

No foreign or alien society shall do business in this Commonwealth without a license issued by the Commission. Any such society desiring admission to this Commonwealth shall comply substantially with the requirements and limitations of this chapter applicable to domestic societies. Any such society may be licensed to do business in this Commonwealth upon showing that its assets are invested in accordance with the provisions of this chapter and filing with the Commission:

1. A duly certified copy of its articles of incorporation;

2. A copy of its bylaws, certified by its secretary or corresponding officer;

3. A statement of its business in a form prescribed by the Commission, duly verified by an examination made by the supervising insurance official of its home state or other state, territory, province or country, satisfactory to the Commission;

4. Certification from the proper official of its home state, territory, province or country that the society is legally incorporated and licensed to do business therein;

5. Copies of its certificate forms; and

6. Such other information as the Commission may deem necessary.

Code 1950, §§ 38-272 through 38-274, 38.1-589 through 38.1-591; 1952, c. 317, §§ 38.1-638.21 through 38.1-638.23; 1956, c. 431; 1968, c. 654; 1978, c. 4; 1986, c. 562.

No domestic society shall:

1. Exceed its powers;

2. Fail to comply with any provisions of this chapter;

3. Fail to fulfill its contracts in good faith;

4. Have a membership of less than 400 after an existence of 1 year or more; or

5. Conduct business fraudulently or in a manner hazardous to its members, creditors, the public or the business.

If the Commission, upon investigation, finds such deficiencies, it shall issue a written notice to the society citing the deficiencies, stating the reasons for dissatisfaction, and requiring that the deficiencies be corrected within the period it designates. The period shall be at least thirty days but not more than six months from the service of the notice. If the Commission believes the interest of the certificate holders of the society will be best served by extending the period of time beyond six months, it may do so for the period of time it considers best. If the society does not correct the deficiency to the satisfaction of the Commission, the Commission may institute delinquency proceedings against the society in the manner set out in Chapter 15 (§ 38.2-1500 et seq.) of this title. If the Commission institutes a delinquency proceeding, all the provisions of Chapter 15 of this title with respect to the rehabilitation, liquidation, conservation and reorganization of insurers generally shall be applicable to the society.

Code 1950, §§ 38-261, 38-275, 38-319, 38.1-592, 38.1-628; 1952, c. 317, §§ 38.1-638.24, 38.1-638.49; 1968, c. 654; 1986, c. 562.

No foreign or alien society doing business or applying to do business in this Commonwealth shall:

1. Exceed its powers;

2. Fail to comply with any of the provisions of this chapter;

3. Fail to fulfill its contracts in good faith; or

4. Conduct its business fraudulently or in a manner hazardous to its members or creditors or the public.

If the Commission, upon investigation, finds such deficiencies, it shall notify the society in writing of its findings, and after reasonable notice require the society to show cause on a date designated in the notice why its license should not be suspended, revoked or refused. If, on the date named in the notice, the grounds for the proposed suspension, revocation or refusal of the society's license have not been removed to the satisfaction of the Commission, or the society does not present good and sufficient reasons why its authority to do business in this Commonwealth should not at that time be suspended, revoked, or refused the Commission may suspend, revoke or refuse the license of the society to do business in this Commonwealth.

Code 1950, §§ 38-322, 38.1-631; 1952, c. 317, § 38.1-638.52; 1968, c. 654; 1986, c. 562.

A. Agents of societies shall be licensed as life and health agents in accordance with Chapter 18 (§ 38.2-1800 et seq.) of this title regulating the licensing, revocation, suspension or termination of licenses of resident and nonresident agents.

B. No examination or license shall be required of any regular salaried officer, employee or member of a licensed society who devotes substantially all of his or her services to activities other than the solicitation of fraternal insurance contracts from the public, and who receives for the solicitation of such contracts no commission or other compensation directly dependent upon the amount of business obtained.

1968, c. 654, § 38.1-638.37; 1986, c. 562.

Every society authorized to do business in this Commonwealth shall be subject to the provisions of Chapter 5 (§ 38.2-500 et seq.) of this title. However, nothing in such provisions shall be construed as applying to or affecting the right of any society to determine its eligibility requirements for membership, or be construed as applying to or affecting the offering of benefits exclusively to members or persons eligible for membership in the society by a subsidiary corporation or affiliated organization of the society.

1968, c. 654, § 38.1-638.60; 1986, c. 562.

A. Any person who willfully makes a false or fraudulent statement in or relating to an application for membership or for the purpose of obtaining money from or a benefit in any society shall upon conviction be fined not less than $100 nor more than $500 or be imprisoned not less than 30 days nor more than 1 year, or both.

B. Any person who willfully makes a false or fraudulent statement in any report or declaration required or authorized by this chapter, or of any material fact or thing contained in a statement concerning the death or disability of an insured for the purpose of procuring payment of a benefit named in the certificate, shall be guilty of perjury and shall be subject to the penalties therefor prescribed by law.

C. Any person who solicits membership for, or in any manner assists in procuring membership in, any society not licensed to do business in this Commonwealth shall upon conviction be fined not less than $50 nor more than $200.

D. Any other violation of this chapter shall be subject to § 38.2-218.

Code 1950, §§ 38-263, 38.1-578; 1952, c. 317, § 38.1-638.10; 1968, c. 654; 1986, c. 562.

A. Nothing contained in this chapter shall be construed to affect or apply to:

1. Grand or subordinate lodges of Masons, Odd Fellows, or Knights of Pythias, exclusive of the insurance department of the Supreme Lodge Knights of Pythias, or the Junior Order of United American Mechanics, exclusive of the beneficiary degree or insurance branch of the National Council, Junior Order of United American Mechanics;

2. Similar societies which do not issue insurance certificates;

3. An association of local lodges of a society now doing business in this Commonwealth which provides death benefits of not more than $500 to any 1 person, or disability benefits of not more than $300 in any 1 year to any 1 person, or both;

4. Contracts of reinsurance business on benefits of fraternal benefit societies in this Commonwealth;

5. Grand or subordinate lodges of societies, orders or associations now doing business in this Commonwealth which provide benefits exclusively through local or subordinate lodges;

6. Orders, societies or associations which admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members and their families, and the ladies' societies or ladies' auxiliaries to such orders, societies or associations;

7. Domestic societies which limit their membership to employees of a particular city or town, designated firm, business house or corporation and which provide for a death benefit of not more than $400 to any 1 person, or disability benefits of not more than $350 to any 1 person in any 1 year, or both;

8. Domestic societies or associations of a purely religious, charitable or benevolent description, which provide for a death benefit of not more than $100 or for disability benefits of not more than $150 to any 1 person in any 1 year, or both; or

9. Any association, whether a fraternal benefit society or not, which was organized before 1880 and whose members are officers or enlisted, regular or reserve, active, retired, or honorably discharged members of the Armed Forces or Sea Services of the United States, and a principal purpose of which is to provide insurance and other benefits to its members and their dependents or beneficiaries.

B. Any such society or association described in subdivisions 7 and 8 of subsection A which provides for death or disability benefits for which benefit certificates are issued, and any such society or association included in subdivision 8 of subsection A which has more than 1,000 members, shall comply with all provisions of this chapter.

C. No society which, by the provisions of this section, is exempt from the requirements of this chapter, except any society described in subdivision 6 of subsection A of this section, shall give or allow, or promise to give or allow to any person any compensation for procuring new members.

D. Every society which provides for benefits in case of death or disability resulting solely from accident, and which does not obligate itself to pay natural death or sick benefits, shall have all privileges and be subject to the applicable provisions and regulations of this chapter except that the provisions relating to medical examination, valuations of benefit certificates, and incontestability shall not apply to such society.

E. The Commission may require from any society or association, by examination or otherwise, such information as will enable the Commission to determine whether such society or association is exempt from the provisions of this chapter.

F. Societies, orders or associations exempted under the provisions of this section shall also be exempt from all other provisions of the insurance laws of this Commonwealth.

Code 1950, §§ 38-258, 38.1-573; 1952, c. 317, § 38.1-638.5; 1968, c. 654; 1986, c. 562; 1995, c. 321.

Any incorporated society doing business in this Commonwealth on June 19, 1914, may exercise all of the rights conferred by this chapter, and all of the rights, powers and privileges exercised or possessed by it under its charter or articles of incorporation not inconsistent with law; or, if a voluntary association, it may incorporate as provided herein. No society organized prior to June 19, 1914, shall be required to reincorporate under this section. Any society may amend its certificate of incorporation in the manner provided by law.

Code 1950, §§ 38-269, 38.1-580; 1952, c. 317, § 38.1-638.12; 1968, c. 654; 1986, c. 562.

The provisions of § 38.2-4132 shall not apply to the member representatives of any society organized or licensed under this chapter which insures its members against death, dismemberment and disability resulting from accident only, and which pays no commission or other compensation for the solicitation and procurement of such contracts.

1968, c. 654, § 38.1-638.38; 1986, c. 562.