Life Insurance Law Blog : New York Life Insurance Compliance Lawyer & Attorney : Currin Compliance Services LLC : Annuity Compliance & Insurance Regulation

 Many companies have been asking us questions about the Maine 3^rd Party Notice of Cancellation requirements provided in Rule 585.  That Rule’s third-party notice provisions allow policyholders to establish --in advance -- a line of communication that will increase the likelihood that adequate notice is given if an insurer intends to terminate coverage for nonpayment of premiums. The second part of the rule establishes conditions and procedures to reduce the danger that persons suffering from organic brain disease will lose life insurance coverage because of their disease.

 A Third Party Notice needs to be filed with the Maine department for approval and must become part of the policy. The notice may become part of the application or may be a separate form. If a separate form it must clearly state it becomes a part of the policy.  

Though many companies are currently looking at Maine’s requirements some have asked what other states have similar requirements. There are currently 4 other states with similar requirements for Third Party Notices: Alaska, Florida, New Jersey and Vermont.

Because none of these states require the Third Party Notice be filed, the notice will not become a part of the contract. Unfortunately, this difference means the Maine Notice can not be used in these 4 states. Maine specifically says the notice must become part of the policy and must say so on the form. This brings us to a second Third Party Notice to be used in states that do not require a filing of such form.

We recommend taking the strictest requirements from the states above and create one form to be used in all 4 states. The only differences from the Maine form is the removal of the sentence about the form becoming a part of the contract and the addition of a signature line for the Designee (required by NJ).

We suggest doing a mailing to all current contract holders age 62 or older in these states. This shows the states the company made every effort to notify in-force contract holders.  Because 2 of the states require the notice be sent annually, going forward we would suggest making the Notice a part of the annual report for these 4 states. If your system can send the notices based on age to anyone 62 or older, this would be ideal.

 We also suggest in FL and VT the Notice become part of the documentation given to the client at time of application.

For more information, please contact Anne Martin, amartin@currincompliance.com or see the posting on our website:  www.currincompliance.com.  We have forms available that are consistent with the recommendations set forth above.  Anne will be happy to provide you with copies upon request.  

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We have certainly noticed a big change in the turn around time for certified filings!  While we used to be able to count on getting approvals back within a few  days, our office now has some that have been pending for a couple of weeks and it is unclear just when they might be looked at.  I was recently advised that half (2)  of the staff that used to review these certified filings have left the Department for promotions in other state agencies!  No matter how hard the 2 remaining staff members work, they can't pick up a doubled work load! 

While the state's financial situation has an impact, I'm sure, let's hope those administrative positions are filled quickly because their loss is being directly felt in the longer approval times!!   With new laws, 2001 CSO filings and major product development efforts keeping us all busy,  we need to be able to count on full staffing at the Department to get the industry's new products to market in a timely manner!  

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The NYSID has posted Filing Guidance for equity indexed annuities on its website, now that changes have been made to the nonforfeiture law to specifically address these products.  Most important is the explicit prohibition against using the CL6 certification process for these filings.  Properly marked, the Department states that submissions will be given priority in the prior approval queue.  

Because the "Deemer" process is statutorily mandated, it remains available.  It is worth noting that this guidance indicates that deemer filings "will be handled within the time frames specified by statute."  This may be a filing strategy worth seriously considering because experience has shown that priority given innovative product submissions often does not result in a very speedy review.   If EIAs move at a similar pace, the statutory time frames of the deemer law may be an attractive alternative and yet still result in a full review prior to marketing the product. 

In addition to this guidance, the Department has provided an important warning in preparing these submissions to which companies will want to pay close attention.  NY's new law (which will be effective October 8, 2008) requires submission of a demonstration that the present value of the possible 1% reduction in the guaranteed minimum interest rate does not exceed the market value of the benefit.  The Department notes here that the Memorandum of Variable Material (where some companies have placed their GMIR procedures under the current nonforfeiture law) is a publicly available document. If your company seeks confidential treatment of that present value demonstration, it must be separate from the other filing material and a specific request for confidentiality is required. 

Finally, the NY Insurance Department asks that EIA submissions include a sample sales illustration.  They further indicate that, on a case-by-case basis, marketing material may be requested. 

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