Are you Lobbying in MA When You Talk to the Division?
Without specifics, it is very tough to know, so I'll just pass [this] along for your reading pleasure.
New Consumer Protection Law in MA
While companies continue to wrestle with the implications of MA's new unisex law for annuities, there is another new law that may impact the application process, underwriting and claims.
MA has amended Chapter 175, sections 186 and 186A to add a materiality requirement when there is a purported misrepresentation as well as to add clarity in when it can be deemed that there is a material misrepresentation. Section 186A now states that in litigation, where there is a factual issue regarding the health of the insured at policy issuance, there is a presumption that the insured was in good health if the insurer in fact delivered the policy. Section 186 (b) states that a "misrepresentation or warranty shall be deemed material if knowledge or ignorance of it would otherwise have influenced the insurer in making the contract at all, or in estimating the degree and character of the risk, or in fixing the rate of premium."
This change appears to put a greater burden on an insurer at policy delivery to inquire as to the insured's good health. However, an open question seems to be how much inquiry into health status can be made at that time, particularly if money was collected with the application.
Commissioner Burnes on Unisex Annuities at LHCA
Speaking at the LHCA Conference in Boston on Friday, Commissioner Burnes addressed a participant question regarding the unisex annuity legislation, discussed here previously. The commissioner wanted to make sure that all attendees realized this was not a Division initiative and that they were doing what they could to mitigate the challenges of the fast-approaching implementation date of 1/1/09, but she also advised that companies would need to go to the legislature for relief as the Division's hands are tied by the terms of the new law. She indicated that she would be meeting with LIAM Representatives tomorrow and directly with companies later in the week.
As I continue to talk to companies about this, it is clear that there are those who do not realize that this legislation differs significantly from that in Montana, in that it is extra-territorial with respect to MA residents. In this forum, I previously addressed some extra-territorial situations, but another that seems to be equally troublesome would occur when an individual has purchased an annuity in another state but then moves into MA. The law appears to require that individual get a new contract with unisex rates at that time.
With the well-known exception of NY's compensation laws, I do not think there has ever before been a state law that so directly challenged the standard provision in all life and annuity contracts, that the contract is subject to the laws of the state in which it is delivered. Even NY's compensation requirements are at least set at the time of issue, even though they are extra-territorial. Here, there is no certainty. What would happen to the person's contract described above if, after living in MA for a couple of years, s/he moves and is no longer a resident of MA? Does s/he retain the unisex rates? Does her/his contract revert to the original? Does it matter whether the original rates are more favorable or the unisex ones are? These are but a few of the questions that are likely to arise under the law scheduled to go into effect on January 1.
Gender Equity in MA Annuities
The Massachusetts legislature recently prohibited, as of January 1, 2009, the use of sex-distinct mortality tables for individual or group annuities or pure endowment contracts. Several sections of the Mass Insurance Law were revised to state that "a mortality table shall only be applied to an individual or group annuity or pure endowment contract on a gender-neutral or gender-blended so-called basis in accordance with regulations promulgated by the commissioner." In addition, recognition of a difference in life expectancy in the terms or conditions of a group or individual annuity, pure endowment contract or certificate covering residents of the commonwealth which is issued or delivered within or without the commonwealth on or after January 1, 2009, including but not limited to the amount or method of payment of premiums, rate charges or in the benefits payable, is considered to be an unfair method of competition or an unfair or deceptive act under the new law. (Emphasis mine).
Note that the italicized text appears to expand the usual exercise of jurisdiction. This unfair practices section applies, on its face, to annuity contracts issued anywhere, if a resident is covered by the contract. For some companies this might mean that they need to have unisex annuity contracts approved in several states so that a unisex contract could be issued to a MA resident who legitimately applies for an annuity in another state, e.g. one who is employed in neighboring CT. If a CT application is completed, a CT annuity contract must be issued. However, if the applicant is a MA resident, even if the annuity contract is issued in CT, under the new law it must have unisex purchase rates. Therefore, the company needs an approved unisex contract for use in CT. After January 1, 2009, issuing a contract with sex-specific purchase rates to that MA resident would appear to be a violation of the new provisions of the unfair practices law in MA, even though the sale occurred in CT.
New Policy Form Review Director in MA
Kevin Beagan, Director of the State Rating Bureau of the MA Division, recently announced that Edward Charbonnier has been appointed to the position of Policy Form Review Director, with responsibility of coordinating the staff who review life insurance, annuity and accident and health filing materials. In addition, Beagan indicated that Policy Forms meetings will resume after being discontinued in October 2007. It appears that the intent is to hold the meetings on a quarterly basis as they were previously held.
MA Issues SERFF Bulletin
Earlier this month, I indicated here that Massachusetts would be issuing a Bulletin eliminating the use of the lockbox and going to mandatory SERFF. That Bulletin 2008-8, has now been issued and it provides very useful information about new filing procedures in Mass and provides an implementation date of 1/1/09 for mandatory SERFF.
SERFF Becomes Mandatory in MA
Those of us who attended the recent AICP NE Chapter Education Day at UNH experienced a great day in a beautiful location. The hotel and conference center were set in the woods as I have never seen before! As always it was a fun and informative event and more about it will be posted here in the days to come!
And while there were many substantive issues discussed, one announcement that made a lot of people's day was that MA is joining the growing number of states where SERFF is mandatory. However, it really wasn't the SERFF portion of the announcement that drew the most appreciation - it was the fact that at long last, MA is doing away - once and for all - with the lock box!!! Along with the move to mandatory SERFF, MA is going to mandatory EFT and thereby eliminating the administrative nightmare and the delays caused by the antiquated lock box procedure. A Bulletin was promised soon.
