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DEPARTMENT OF CONSUMER AND BUSINESS SERVICES,
INSURANCE DIVISION

 

DIVISION 51

LIFE, INDIVIDUAL AND GROUP; ANNUITIES

Life Disclosure Requirements

836-051-0005

Statutory Authority; Purpose; Applicability

(1) OAR 836-051-0005 to 836-051-0020 are adopted by the Director pursuant to general rulemaking authority in ORS 731.244, and specific authority in 742.009 to issue rules requiring disclosures to prospective insurance purchasers.

(2) The purpose of OAR 836-051-0005 to 836-051-0020 is to require insurers that are not electing to illustrate life insurance policies under 836-051-0500 to 836-051-0600 to deliver to prospective buyers of life insurance guaranteed policy information that will improve the buyer's ability to select the most appropriate plan of life insurance for the buyer's needs, improve the buyer's understanding of the basic features of the policy that has been purchased or that is under consideration and improve the buyer's ability to evaluate the relative costs of similar plans of life insurance. OAR 836-051-0005 to 836-051-0020 do not prohibit the use of additional material that is not in violation of these or other rules of the Director or provisions of the Insurance Code.

(3) OAR 836-051-0005 to 836-051-0020 apply to all transactions of life insurance in this state except with respect to:

(a) Annuities;

(b) Credit life insurance;

(c) Group life insurance;

(d) Life insurance policies issued in connection with employee benefit plans as defined by Section 3(3) of the federal Employee Retirement Income Security Act of 1974 (ERISA) as amended from time to time; and

(e) Life insurance policies that comply with OAR 836-051-0500 to 836-051-0600.

Stat. Auth.: ORS 731.244 & 742.009
Stats. Implemented: ORS 742.009
Hist.: IC 3-1978, f. & ef. 6-9-78; ID 15-1996, f. & cert. ef. 11-12-96; ID 5-1997, f. 5-27-97, cert. ef. 7-1-97; ID 19-2006, f. & cert. ef. 9-26-06

836-051-0010

Definitions

As used in OAR 836-051-0005 to 836-051-0020:

(1) "Buyer's Guide" means a document that contains, and is limited to, the wording contained in Exhibit 1 or other wording approved by the Director.

(2) "Cash Dividend" means the currently illustrated dividend that can be applied toward payment of the gross premium.

(3) "Equivalent Level Annual Dividend" means the amount calculated by the following steps:

(a) Accumulate the annual cash dividends at five percent interest, compounded annually, to the ends of the 10th and 20th policy years;

(b) Divide each accumulation of step (a) by an interest factor that converts it into the equivalent level annual amount that, if paid at the beginning of each year, would accumulate to the value in step (a) over the respective period. If the period is 10 years, the factor is 13.207 and if the period is 20 years, the factor is 34.719;

(c) Divide the results of step (b) by the number of thousands of the Equivalent Level Death Benefit to arrive at the Equivalent Level Annual Dividend for each of the respective periods.

(4) "Equivalent Level Death Benefit" of a policy or term life insurance rider means the amount calculated by the following steps:

(a) Accumulate the guaranteed amount, that does not depend on the cause of death, payable upon death at the beginning of each policy year for 10 and 20 years at five percent interest, com-pounded annually, to the ends of the 10th and 20th policy years respectively;

(b) Divide each accumulation of step (a) by an interest factor that converts it into the equivalent level annual amount that, if paid at the beginning of each year, would accumulate to the value in step (a) over the respective period. If the period is 10 years, the factor is 13.207 and if the period is 20 years, the factor is 34.719.

(5) "Generic Name" means a short title that is descriptive of the premium and benefit patterns of a policy or a rider.

(6) "Life Insurance Net Payment Cost Index" means the amount calculated in the same manner as the Life Insurance Surrender Cost Index except that the cash surrender value and any terminal dividend are set at zero.

(7) "Life Insurance Surrender Cost Index" means the amount calculated by the following steps:

(a) Determine the guaranteed cash surrender value, if any, available at the ends of the 10th and 20th policy years;

(b) For participating policies, add to the respective amount determined in step (a) the accumulation of the annual Cash Dividends at five percent interest, compounded annually, to the end of the period selected, and the respective terminal dividend, if any, payable upon surrender;

(c) Divide the result of step (b), or step (a) for guaranteed cost policies, by an interest factor that converts it into the equivalent level annual amount that, if paid at the beginning of each year, would accumulate to the value in step (b), or step (a) for guaranteed cost policies, over the period selected. If the period is 10 years, the factor is 13.207 and if the period is 20 years, the factor is 34.719;

(d) Determine the equivalent level annual premium for each of the respective periods in step (a) by accumulating each annual premium payable for the basic policy or rider at five percent interest, compounded annually, to the end of the respective period and dividing the result by the respective period factor stated in step (c). (For a level premium plan, the result of this step equals the annual premium.);

(e) Subtract the result of step (c) from the result of step (d);

(f) Divide the result of step (e) by the number of thousands of the Equivalent Level Death Benefit to arrive at the Life Insurance Surrender Cost Index.

(8) "Policy Summary" means a written statement describing the elements of the policy, including but not limited to items in subsections (a) to (k) of this section. The Policy Summary is a separate document. All information must be set out in such a manner as not to minimize or obscure any portion. Any amounts that remain level for two or more years of the policy may be represented by a single number if it is clearly indicated which amounts are applicable for each policy year. If more than one insured is covered under the policy or a rider, guaranteed death benefits shall be displayed separately for each insured, or for each class of insureds if death benefits do not differ within the class. Zero amounts shall be expressed rather than being represented by a blank space:

(a) A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION;

(b) The name and address of the insurance producer or, if no insurance producer is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the Policy Summary;

(c) The full name and home office or administrative office address of the insurer in which the life insurance policy is to be or has been written;

(d) The Generic Name of the basic policy and each policy rider;

(e) The following amounts, where applicable, on a total basis rather than on a per thousand or a per unit basis, for the first five policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, but not necessarily limited to, the years for which Life Insurance Net Payment or Surrender Cost Indexes are displayed and at least one age from 60 through 65 or policy maturity, whichever is earlier:

(A) Annual premium for the basic policy;

(B) Annual premium for each optional rider;

(C) Guaranteed amount payable upon death at the beginning of the policy year, without regard to the cause of death other than suicide and other specific exclusions, that is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately;

(D) Total guaranteed cash surrender values at the end of the year, with values shown separately for the basic policy and each optional rider;

(E) Cash Dividends payable at the end of the year, with values shown separately for the basic policy and each optional rider. (Dividends need not be displayed beyond the 20th policy year.);

(F) Guaranteed endowment amounts payable under the policy that are not included under guaranteed cash surrender values above.

(f) If the policy contains a loan provision, the effective policy loan interest rate and the annual percentage interest rate applied in advance or in arrears, whichever is specified. If the policy loan interest rate is variable, the Policy Summary shall include the maximum effective and annual percentage rates;

(g) Life Insurance Net Payment and Surrender Cost Indexes for 10 and 20 years but in no case beyond the premium-paying period. Separate Indexes shall be displayed for the basic policy and for each optional term life insurance rider. The Indexes need not be included for optional riders that are limited to such benefits as accidental death benefits, disability waiver of premium, preliminary term life insurance coverage of less than 12 months and guaranteed insurability benefits, nor for a basic policy or optional rider covering more than one life;

(h) The Equivalent Level Annual Dividend, in the case of participating policies and participating optional term life insurance riders, under the same circumstances and for the same durations for which Life Insurance Net Payment and Surrender Cost Indexes are displayed;

(i) A statement, in the case of a Policy Summary that shows dividends, that dividends are based on the insurer's current dividend scale and are not guaranteed, and a statement in close proximity to the Equivalent Level Annual Dividend as follows: "An explanation of the intended use of the Equivalent Level Annual Dividend is included in the Life Insurance Buyer's Guide";

(j) A statement in close proximity to the Life Insurance Net Cost and Surrender Cost Indexes as follows: "An explanation of the intended use of these Indexes is provided in the Life Insurance Buyer's Guide";

(k) The date on which the Policy Summary is prepared.

Stat. Auth.: ORS 731 & 743
Stats. Implemented: ORS 742.009(2)
Hist.: IC 3-1978, f. & ef. 6-9-78; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05; ID 19-2006, f. & cert. ef. 9-26-06

836-051-0015

Disclosure Requirements

(1) An insurer shall provide to each prospective buyer of life insurance a Buyer's Guide and a Policy Summary prior to accepting the applicant's initial premium or premium deposit, except that if the policy for which application is made contains an unconditional refund provision effective for at least ten days or if the Policy Summary contains such an unconditional refund provision, the Buyer's Guide and Policy Summary must be delivered with the policy or prior to delivery of the policy.

(2) An insurer shall provide a Buyer's Guide and a Policy Summary to any prospective buyer upon request of the prospective buyer.

(3) In the case of policies for which the Equivalent Level Death Benefit does not exceed $5,000, the Policy Summary need include only the information described in the items in OAR 836-051-0010(8)(b), (c), (d), (e)(A), (e)(B), (e)(C), (f), (g), (j), and (k).

Stat. Auth.: ORS 731 & 743
Stats. Implemented: ORS 742.009(2)
Hist.: IC 3-1978, f. & ef. 6-9-78; ID 19-2006, f. & cert. ef. 9-26-06

836-051-0020

General Requirements

(1) An insurer shall maintain at its home office or principal office a complete file containing one copy of each document authorized by the insurer for use pursuant to OAR 836-051-0005 to 836-051-0020. Each such document shall be retained in the file for at least three years following the date of its last authorized use.

(2) An insurance producer shall inform a prospective buyer, prior to the beginning a life insurance sales presentation, that the insurance producer is acting as a life insurance producer, and shall inform the prospective buyer of the full name of the insurer that the insurance producer is representing to the buyer. In sales situations in which an insurance producer is not involved, the insurer shall identify its full name.

(3) Such terms as "financial planner," "investment advisor," "financial consultant," or "financial counseling" shall not be used in such a way as to imply that the insurance producer is generally engaged in an advisory business in which compensation is unrelated to sales, unless such is actually the case.

(4) Any reference to policy dividends must include a statement that dividends are not guaranteed.

(5) A presentation that does not recognize through the use of appropriate interest adjustments the time value of money shall not be used for comparing the cost of two or more life insurance policies. Such a presentation may be used for the purpose of demonstrating the cash-flow pattern of a policy if it is accompanied by a statement disclosing that the presentation does not recognize that a dollar in the future has less value than a dollar today because of interest.

(6) A presentation of benefits shall not display guaranteed and non-guaranteed benefits as a single sum unless they are also shown separately in close proximity to the single sum.

(7) A statement regarding the use of the Life Insurance Net Cost and Surrender Cost Indexes shall include a explanation to the effect that the Indexes are useful only for the comparison of the relative costs of two or more similar policies.

(8) A statement of a Life Insurance Net Cost or Surrender Cost Index that reflects dividends, and an Equivalent Level Annual Dividend, shall be accompanied by a statement that it is based on the insurer's current dividend scale and is not guaranteed.

(9) For the purposes of OAR 836-051-0005 to 836-051-0020, the annual premium for a basic policy or optional rider for which the insurer reserves the right to change the premium shall be the maximum annual premium.

Stat. Auth.: ORS 731 & 743
Stats. Implemented: ORS 742.009(2)
Hist.: IC 3-1978, f. & ef. 6-9-78; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05; ID 19-2006, f. & cert. ef. 9-26-06

Disclosure for Small Face Amount Life Insurance Policies

836-051-0030

Purpose and Applicability

(1) The purpose of OAR 836-051-0030 to 836-051-0040 is to establish rules that ensure meaningful information is provided to the purchasers of small face amount policies.

(2) OAR 836-051-0030 to 836-051-0040 apply to insurance policies and certificates issued on or after July 1, 2011.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0032

Definition

"Small face amount policy" means a life insurance policy or certificate with an initial face amount of $15,000 or less.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0034

Exemptions

OAR 836-051-0030 to 836-051-0040 apply to all group and individual life insurance policies and certificates except:

(1) Variable life insurance;

(2) Individual and group annuity contracts;

(3) Credit life insurance;

(4) Group or individual policies of life insurance issued to members of an employer group or other permitted group where:

(a) Every plan of coverage was selected by the employer or other group representative;

(b) Some portion of the premium is paid by the group or through payroll deduction; and

(c) Group underwriting or simplified underwriting is used; or

(5) Policies and certificates where an illustration has been provided pursuant to the requirements of OAR 836-051-0500 to 836-051-0600.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0036

Disclosure Requirements

(1) An insurer issuing a small face amount policy, where over the term of the policy the cumulative policy premiums paid may exceed the face amount of the policy, shall clearly and prominently disclose, on or before policy delivery, the length of time until the cumulative policy premiums paid may exceed the face amount of the policy.

(2) If an insurer is required to provide a disclosure under section (1) of this rule, the insurer shall clearly and prominently disclose, on or before policy delivery, available premium payment plans.

(3) Cumulative premiums shall include premiums paid for riders. However, the face amount shall not include the benefit attributable to the riders.

(4) Each policy subject to the disclosure requirements of this section shall contain a provision that allows the policyholder to cancel the policy within 10 days following the delivery of the policy with full premium refund to the consumer and with no charge or penalty. The free-look period shall be clearly and prominently disclosed to the consumer.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0038

Insurer Duties

The insurer and its producers shall provide additional information to any policyholder or certificate holder who asks questions about the disclosure statement.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0040

Trade Practice Regulation

Violation of any provision of OAR 836-051-0030 to 836-051-0040 is an unfair trade practice under ORS 746.240.

Stat. Auth.: ORS 731.244 &746.240
Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240
Hist.: ID 6-2011, f. & cert. ef. 2-23-11

Mortality Tables Authorized for Use in Determining Nonforfeiture and Reserve Values

836-051-0101

Statutory Authority; Purpose; Applicability; and Effective Date

(1) OAR 836-051-0101 to 836-051-0115 are adopted pursuant to the general rulemaking authority of the Director in ORS 731.244, and specific authority of 733.306 and 743.215 for approving mortality tables adopted by the National Association of Insurance Commissioners for use in determining minimum valuation and nonforfeiture standards.

(2) OAR 836-051-0101 to 836-051-0115 apply to policies of ordinary life insurance issued on the standard basis.

Stat. Auth.: ORS 731.244, 733.306 & 743.215
Stats. Implemented: ORS 733.306
Hist.: IC 5-1985, f. & ef. 11-20-85; ID 15-1996, f. & cert. ef. 11-12-96; ID 15-1997, f. & cert. ef. 10-29-97; ID 9-2003, f. 12-26-03, cert. ef. 1-1-04

836-051-0106

Life Insurance Valuation and Nonforfeiture Standards

(1) The following definitions apply in this rule:

(a) "2001 CSO Mortality Table" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the NAIC in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise, the "2001 CSO Mortality Table" includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearest-birthday and the age-last-birthday bases of the mortality tables.

(b) "2001 CSO Mortality Table (F)" means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.

(c) "2001 CSO Mortality Table (M)" means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.

(d) "Composite mortality tables" means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.

(e) "Smoker and nonsmoker mortality tables" means mortality tables with separate rates of mortality for smokers and nonsmokers.

(2) Except as provided in OAR 836-051-0750 to 836-051-0775, the 2001 CSO Mortality Table may be used as follows:

(a) At the election of the insurer for any one or more specified plans of insurance and subject to the conditions stated in this rule, the 2001 CSO Mortality Table may be used as the minimum standard for policies issued on or after January 1, 2004 and before January 1, 2009 and to which ORS 733.306 and 743.215, and OAR 836-031-0765(1) and (2), are applicable. If the insurer elects to use the 2001 CSO Mortality Table, it shall do so for both valuation and nonforfeiture purposes.

(b) Subject to the conditions stated in this rule, the 2001 CSO Mortality Table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which ORS 733.306 and 743.215, and OAR 836-031-0765(1) and (2), are applicable.

(3) Conditions governing use of tables are as follows:

(a) For each plan of insurance with separate rates for smokers and nonsmokers an insurer may use:

(A) Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

(B) Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by ORS 733.312 and 733.322 and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or

(C) Smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

(b) For plans of insurance without separate rates for smokers and nonsmokers the composite mortality tables shall be used.

(c) For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO Mortality Table may, at the option of the insurer for each plan of insurance, be used in its ultimate or select and ultimate form, subject to the restrictions of section 4 of this rule, ORS 733.306 and 743.215 and OAR 836-031-0770 relative to use of the select and ultimate form.

(d) When the 2001 CSO Mortality Table is the minimum reserve standard for any plan for an insurer, the actuarial opinion in the annual statement filed with the Director shall be based on an asset adequacy analysis as specified in OAR 836-031-0670. The Director may exempt an insurer from this requirement if it only does business in this state and in no other state.

(4) The 2001 CSO Mortality Table applies to OAR 836-031-0750 to 836-031-0775 as follows:

(a) The 2001 CSO Mortality Table may be used in applying OAR 836-031-0750 to 836-031-0775 in the following manner, subject to the transition dates for use of the 2001 CSO Mortality Table in section (2) of this rule:

(A) OAR 836-031-0755(1)(b)(B): The net level reserve premium is based on the ultimate mortality rates in the 2001 CSO Mortality Table.

(B) OAR 836-031-0760(2): All calculations are made using the 2001 CSO Mortality Rate, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in OAR 836-031-0770(1)(d). The value of "qx+k+t-1" is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.

(C) OAR 836-031-0765(1): The 2001 CSO Mortality Table is the minimum standard for basic reserves.

(D) OAR 836-031-0765(2): The 2001 CSO Mortality Table is the minimum standard for deficiency reserves. If select mortality rates are used, they may be multiplied by X percent for durations in the first segment, subject to the conditions specified in OAR 836-031-0765(2)(c). In demonstrating compliance with these conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO Mortality Table, unless the combination is explicitly required by rule or necessary to be in compliance with relevant Actuarial Standards of Practice.

(E) OAR 836-031-0770(3): The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO Mortality Table.

(F) OAR 836-031-0770(5)(d): The calculations specified in OAR 836-031-0770(5) shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

(G) OAR 836-031-0770(6)(d): The calculations specified in OAR 836-031-0770(6) shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

(H) OAR 836-031-0770(7)(b): The calculations specified in OAR 836-031-0770(7) shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

(I) OAR 836-031-0775(1)(a)(B): The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO Mortality Table.

(b) Nothing in this section shall be construed to expand the applicability of OAR 836-031-0750 to 836-031-0775 to include life insurance policies exempted under OAR 836-031-0755(1).

(5) The following provisions apply to an insurer's use of Gender-Blended Tables

(a) For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2004, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (F) may, at the option of the insurer for each plan of insurance, be substituted for the 2001 CSO Mortality Table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this section of this rule.

(b) The insurer may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the NAIC in December 2002.

(c) It shall not, in and of itself, be a violation of ORS 746.015 for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis.

[ED. NOTE: Table referenced are available from the agency.]

Stat. Auth.: ORS 731.244, 733.306 & 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 9-2003, f. 12-26-03, cert. ef. 1-1-04; ID 17-2008, f. & cert. ef. 12-9-08

836-051-0110

Life Insurance Nonforfeiture Standards for Men and Women

(1) Use of the blended tables procedure described in section (2) of this rule shall be limited to situations in which sex neutral benefits are required to comply with the decision of the United States Supreme Courts in Arizona Governing Committee v. Norris, 463 U.S. 1073, 103 S. Ct. 3492, 77 1. Ed 2d 1236 (1983).

(2) In situations of section (1) of this rule, insurers may use the blended tables described in NAIC Proposed Procedures for Permitting Same Minimum Nonforfeiture Standards for Men and Women Insureds Under 1980 CSO and 1980 CET Mortality Tables, NAIC Proceedings, 1984 Volume I, pp. 426–428, as amended in Section 4 by NAIC Proceedings, 1984 Volume 1, p. 395. These procedures establish the method by which select factors are to be obtained for blended 1980 CSO Mortality Tables as described in NAIC Proceedings, 1984 Volume I, p. 457.

[Publications: The publication(s) referred to or incorporated by reference in this rule are available from the agency.]

Stat. Auth.: ORS 731, ORS 733 & ORS 743
Stats. Implemented: ORS 733.306(1) - ORS 733.306(2), ORS 733.306(4) - ORS 733.306(6)
Hist.: IC 5-1985, f. & ef. 11-20-85

836-051-0115

Smoker/Nonsmoker Mortality Tables

Insurers may use the tables as described in Proposed NAIC Model Rule Permitting Smoker/Nonsmoker Mortality Rates for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits. NAIC Proceedings, 1984 Volume I, pp. 458–460. Nothing in this rule permits a company which has elected use of 1980 CSO for all new forms to revert to 1958 CSO for a subsequent form.

[Publications: The publication(s) referred to or incorporated by reference in this rule are available from the agency.]

Stat. Auth.: ORS 731, ORS 733 & ORS 743
Stats. Implemented: ORS 733.306(1) - ORS 733.306(2) & ORS 733.306(4) - ORS 733.306(6)
Hist.: IC 5-1985, f. & ef. 11-20-85

Annuity Mortality Tables

836-051-0200

Authority; Effective Date

OAR 836-051-0200 to 836-051-0250 are adopted by the Director of the Department of Consumer and Business Services pursuant to ORS 733.308.

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

836-051-0210

Purpose

The purpose of OAR 836-051-0200 to 836-051-0250 is to recognize the following mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts:

(1) The 1983 Table "a".

(2) The 1983 Group Annuity Mortality (1983 GAM) Table.

(3) The Annuity 2000 Mortality Table.

(4) The 1994 Group Annuity Reserving (1994 GAR) Table.

[ED. NOTE: The Table(s) referenced in this rule is not printed in the OAR Compilation. Copies are available from the agency.]

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

836-051-0220

Definitions

For the purpose of OAR 836-051-0200 to 836-051-0250, the following terms have the following meanings:

(1) "1983 Table 'a'" means that mortality table developed by the Society of Actuaries Committee to Recommend a New Mortality Basis for Individual Annuity Valuation and adopted as a recognized mortality table for annuities in June 1982 by the National Association of Insurance Commissioners. (See 1982 Proceedings of the NAIC II, page 454.)

(2) "1983 GAM Table" means that mortality table developed by the Society of Actuaries Committee on Annuities and adopted as a recognized mortality table for annuities in December 1983 by the National Association of Insurance Commissioners. (See 1984 Proceedings of the NAIC I, pages 414 to 415.)

(3) "1994 GAR Table" means that mortality table developed by the Society of Actuaries Group Annuity Valuation Table Task Force and shown on pages 866-867 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

(4) "Annuity 2000 Mortality Table" means that mortality table developed by the Society of Actuaries Committee on Life Insurance Research and shown on page 240 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

[ED. NOTE: The Table(s) referenced in this rule is not printed in the OAR Compilation. Copies are available from the agency.]

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

836-051-0230

Individual Annuity or Pure Endowment Contracts

(1) Except as provided in sections (2) and (3) of this rule, the 1983 Table "a" is recognized and approved as an individual annuity mortality table for valuation and, at the option of the insurer, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after October 4, 1977.

(2) Except as provided in section (3) of this rule, either the 1983 Table "a" or the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1998.

(3) Except as provided in section (4) of this rule, the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1999.

(4) The 1983 Table "a" without projection is to be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after January 1, 1998, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from:

(a) Settlements of various forms of claims pertaining to court settlements or out of court settlements from tort actions;

(b) Settlements involving similar actions such as workers' compensation claims; or

(c) Settlements of long term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.

[ED. NOTE: The Table(s) referenced in this rule is not printed in the OAR Compilation. Copies are available from the agency.]

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

836-051-0240

Group Annuity or Pure Endowment Contracts

(1) Except as provided in sections (1) and (2) of this rule, the 1983 GAM Table, the 1983 Table "a" and the 1994 GAR Table are recognized and approved as group annuity mortality tables for valuation and, at the option of the insurer, any one of these tables may be used for purposes of valuation for an annuity or pure endowment purchased on or after October 4, 1977, under a group annuity or pure endowment contract.

(2) Except as provided in section (3) of this rule, either the 1983 GAM Table or the 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1998.

(3) The 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 2000, under a group annuity or pure endowment contract.

[ED. NOTE: The Table(s) referenced in this rule is not printed in the OAR Compilation. Copies are available from the agency.]

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

836-051-0250

Application of the 1994 GAR Table

In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows: q*x **1994+n** = qx**1994** (1 - AAx)**n** where the qx**1994** and AAxs are as specified in the 1994 GAR Table.

[ED. NOTE: The Table(s) referenced in this rule is not printed in the OAR Compilation. Copies are available from the agency.]

Stat. Auth.: ORS 731.244, ORS 733.306 & ORS 743.215
Stats. Implemented: ORS 733.306
Hist.: ID 15-1997, f. & cert. ef. 10-29-97

Accelerated Benefits Provision for Life Products

836-051-0300

Statutory Authority; Effective Date; Applicability

(1) OAR 836-051-0300 to 836-051-0380 are adopted pursuant to ORS 743.154.

(2) OAR 836-051-0300 to 836-051-0380 become effective on June 1, 1992.

(3) No life insurance policy, certificate or rider containing an accelerated benefit provision may be delivered or issued for delivery in this state on or after June 1, 1992, unless the provision complies with OAR 836-051-0300 to 836-051-0380.

(4) OAR 836-051-0300 to 836-051-0380 apply to individual and group life insurance policies and to riders and certificates issued thereunder. OAR 836-051-0300 to 836-051-0380 apply to all accelerated benefits provisions of life insurance policies except for provisions for advance payment of life insurance proceeds under 836-052-0500 to 836-052-0645.

Stat. Auth.: ORS 731.244 & 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92; ID 1-1996, f. & cert. ef. 1-12-96

836-051-0310

Acknowledgement of Concurrence for Payout from Assignee or Beneficiary

Prior to payment of an accelerated benefit, an insurer shall obtain a signed acknowledgement of concurrence for payout as follows:

(1) From an assignee, when the amount of benefit that is accelerated exceeds the unassigned portion of the death benefit, unless the assignee is the insurer.

(2) From an irrevocable beneficiary, if there is an irrevocable beneficiary.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92

836-051-0320

Payment Options; Filing of Claims; Remaining Benefits

(1) An insurer shall include among payment options for the accelerated benefit an option that allows the policy owner or certificate holder to take the benefit as a lump sum. The insurer shall not make the benefit available as an annuity contingent upon the life of the insured.

(2) An insurer shall not impose any restriction on the use of the proceeds.

(3) If any death benefit remains after payment of an accelerated benefit, any accidental death benefit that is part of the policy shall not be affected by the payment of the accelerated benefit. Any other benefits in force at the time of acceleration shall not be affected by the payment of the accelerated benefit if premiums continue to be paid for those benefits.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92; ID 12-1993, f. & cert. ef. 11-19-93; ID 15-1996, f. & cert. ef. 11-12-96

836-051-0330

Disclosure

(1) An accelerated benefit provision shall include "accelerated benefit" or "accelerated death benefit" as part of the descriptive title. The policy, certificate or rider schedule must:

(a) Include one of the following:

(A) Any premium or cost of insurance charge designated for the accelerated benefit;

(B) The interest rate if fixed; or

(C) The method used by the insurer to establish the interest rate in OAR 836-051-0370(3); and

(b) Disclose any administrative expense charge associated with the exercise of the accelerated benefit.

(2) When a life insurance policy or certificate containing an accelerated benefit provision is applied for or delivered, or when an accelerated benefit rider to a life insurance policy is applied for, delivered or added, the insurer shall give or cause to be given a summary of coverage described in this section to the applicant for the policy, certificate or rider. The description must include all of the following:

(a) A brief summary of the accelerated benefit and definitions of the conditions or occurrences triggering payment of the benefit;

(b) An explanation of any effect of the payment of an accelerated benefit on the cash value, accumulation account, death benefit, premium payments, any loans or liens.

(c) Disclosure of the basis for payment, whether a premium, cost of insurance charge, lien assessment or present value calculation;

(d) A statement that receipt of the accelerated benefit may be taxable and that assistance should be sought from a personal tax advisor.

(3) When an accelerated benefit option is exercised, the insurer shall provide the following to the policy holder or certificate holder and any irrevocable beneficiary:

(a) An illustration that:

(A) Numerically demonstrates any effect the payment of the benefit will have on the cash value, accumulation account, death benefit, premium payments, any loans or liens;

(B) Separately illustrates the loaned amount from the accelerated risk amount if the acceleration is based on a lien and the interest accrued on the two portions are not at the same rate; and

(C) Includes a statement that receipt of accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements, that benefits may be taxable and that assistance should be sought from a personal tax advisor.

(b) An amended schedule page showing any new, reduced in-force face amount and the continuing premium requirements to keep the remaining coverage in force.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92; ID 12-1993, f. & cert. ef. 11-19-93

836-051-0340

Exercise of the Accelerated Benefit

(1) For conditions of eligibility resulting from accident, an accelerated benefit provision must be exercisable on or after the issue date of the accelerated benefit provision.

(2) For conditions of eligibility resulting from illness, an accelerated benefit provision must be exercisable not later than the 30th day after the issued date of the accelerated benefit provision.

(3) For the purpose of defining the qualifying event described in ORS 743.154(2)(c), an insurer shall not require a period of continuous confinement that is greater than 180 days.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92

836-051-0350

Waiver of Premium

(1) An insurer may offer a waiver of premium as part of the accelerated benefit provision in the absence of a regular waiver of premium provision.

(2) When an accelerated benefit is included in an individual term policy or an individually-paid group certificate, the accelerated benefit provision must include a waiver of premium provision for any remaining face amount.

(3) A term rider shall not be affected by the payment of the accelerated benefit if premiums continue to be paid for the rider.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92; ID 1-1996, f. & cert. ef. 1-12-96

836-051-0360

Discrimination

In the payment of accelerated benefits, an insurer shall not unfairly discriminate among insureds with differing qualifying events covered under the policy or among insureds with similar qualifying events covered under the policy. An insurer shall not apply further conditions on the payment of the accelerated benefits other than those conditions specified in the policy or rider. An insurer who provides that its accelerated benefit provision is exercisable in the event of a medical condition to which ORS 743.154(2)(d) applies shall not limit exercise of the benefit to specific medical conditions.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92

836-051-0370

Minimum Benefit Standards

(1) For purposes of this rule, accelerated benefits consist of:

(a) The risk portion of the accelerated benefit, determined by deducting the cash values in the contract from the total accelerated benefit amount; and

(b) The portion of the accelerated benefit equal to the cash value in the policy at the time of acceleration. Any amount included in the accelerated benefit that is accessible through another policy provision is subject to that policy provision if more favorable to the policy holder or certificate holder. Such an amount must be separately identified.

(2) An insurer may require a premium charge or cost of insurance charge for the accelerated benefit provision. Such a charge shall be based on sound actuarial principles. In the case of group insurance, the additional cost may also be included in the experience rating.

(3) The following provisions apply to deferred financing options relating to an accelerated benefit provision:

(a) An insurer may pay a present value of the face amount or portion of the face amount being accelerated. The calculation must be based on any applicable actuarial discount appropriate to the policy design. The interest rate or interest rate methodology used in the calculation must be based on sound actuarial principles and disclosed in the contract and actuarial memorandum;

(b) An insurer may accrue an interest charge on the amount of the accelerated benefit as part of a lien against the death proceeds. The interest rate or interest rate methodology used in the calculation must be based on sound actuarial principles and disclosed in the contract and actuarial memorandum;

(c) For purposes of subsections (a) and (b) of this section, the maximum interest rate used on the risk portion must not be greater than the greater of:

(A) The current yield on 90-day treasury bills; or

(B) The current maximum statutory adjustable policy loan interest rate. If a policy, certificate or rider does not have a loan provision, the maximum rate shall not be greater than the fixed statutory policy loan interest rate.

(d) For purposes of subsections (a) and (b) of this section, the interest rate used on the portion that is equal in amount to the cash value of the contract at the time of the benefit acceleration must not be more than the policy or certificate loan interest rate stated in the policy, certificate or rider.

(4) When an accelerated benefit is payable, not more than a pro rata reduction may be made in the cash value based on the percentage of death benefits accelerated to produce the accelerated benefit payment.

(5) An insurer may consider the payment of accelerated benefits, any administrative expense charges, any future premiums and any accrued interest to be a lien against the death benefit of the policy, certificate or rider and may restrict the access to the cash value to any excess of the cash value over the sum of any other outstanding loans and the lien. Future access to additional policy loans may also be limited to any excess of the cash value over the sum of the lien any any other outstanding policy loans.

(6) When payment of an accelerated benefit results in a pro rata reduction in the cash value, the insurer may not apply the payment toward repaying an amount greater than a pro rata portion of any outstanding policy loans.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92; ID 12-1993, f. & cert. ef. 11-19-93

836-051-0380

Actuarial Disclosure and Reserves

(1) An insurer shall submit an actuarial memorandum with each filing that describes the accelerated benefit, the risks, the expected costs, the development of premiums, the bases used to calculate benefits payable and the calculation of statutory reserves.

(2) When an accelerated benefit is included as part of a policy, certificate or rider, an insurer shall determine reserves in accordance with the Standard Valuation Law. The actuary must follow both actuarial standards and certification for good and sufficient reserves. Reserves in the aggregate must be sufficient to cover:

(a) Policies upon which no claim has yet arisen; and

(b) Policies upon which an accelerated claim has arisen.

(3) Policy liens and policy loans, including accrued interest, represent assets of the insurer for statutory reporting purposes. For any policy on which the policy lien exceeds the policy's statutory reserve liability, the excess must be held as a non-admitted asset.

Stat. Auth.: ORS 731.244 & ORS 743.154
Stats. Implemented: ORS 743.154
Hist.: ID 8-1992, f. 5-26-92, cert. ef. 6-1-92

Life Insurance Illustrations

836-051-0500

Purpose; Authority

(1) The purpose of OAR 836-051-0500 to 836-051-0600 is to provide rules for life insurance policy illustrations that will protect consumers and foster consumer education. OAR 836-051-0500 to 836-051-0600 provide illustration formats, prescribe standards to be followed when illustrations are used and specify the disclosures that are required in connection with illustrations. The goals of 836-051-0500 to 836-051-0600 are to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable.

(2) Insurers shall, as far as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

(3) OAR 836-051-0500 to 836-051-0600 are adopted pursuant to ORS 731.244 and 746.240 for the purpose of implementing 746.075, 746.085, 746.100, 746.110, and 746.240.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0510

Applicability and Scope

(1) OAR 836-051-0500 to 836-051-0600 apply to all group life insurance policies and certificates and all individual life insurance policies except:

(a) Variable life insurance;

(b) Individual and group annuity contracts;

(c) Credit life insurance;

(d) Life insurance policies with an illustrated death benefit that does not exceed $10,000 on any individual; and

(e) Group term life insurance policies.

(2) OAR 836-051-0500 to 836-051-0600 apply to life insurance policies described in section (1) of this section that are sold on or after July 1, 1997. An insurer may conform its policies to the provisions of OAR 836-051-0500 to 836-051-0600 prior to that date.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0520

Definitions

For the purposes of OAR 836-051-0500 to 836-051-0600:

(1) "Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

(2) "Contract premium" means the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

(3) "Currently payable scale" means a scale of non-guaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next 95 days.

(4) "Disciplined current scale" means a scale of non-guaranteed elements constituting a limit on illustrations currently being illustrated by an insurer, that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Further guidance in determining the disciplined current scale as contained in standards established by the Actuarial Standards Board may be relied upon if the standards:

(a) Are consistent with all provisions of OAR 836-051-0500 to 836-051-0600;

(b) Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred;

(c) Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and

(d) Do not permit assumed expenses to be less than minimum assumed expenses.

(5) "Generic name" means a short title descriptive of the policy being illustrated, such as "whole life," "term life" or "flexible premium adjustable life."

(6) "Guaranteed elements" and "non-guaranteed elements" have the following meanings:

(a) "Guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue;

(b) "Non-guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

(7) "Illustrated scale" means a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

(a) The disciplined current scale; or

(b) The currently payable scale.

(8) "Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and that is one of the following three types:

(a) "Basic illustration" means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements;

(b) "Supplemental illustration" means an illustration furnished in addition to a basic illustration that meets the applicable requirements of OAR 836-051-0500 to 836-051-0600, and that may be presented in a format differing from the basic illustration, but may depict only a scale of non-guaranteed elements that is permitted in a basic illustration;

(c) "In force illustration" means an illustration furnished at any time after the policy that the illustration depicts has been in force for one year or more.

(9) "Illustration actuary" means an actuary meeting the requirements of OAR 836-051-0580 who certifies to illustrations based on the standard of practice promulgated by the Actuarial Standards Board.

(10) "Lapse-supported illustration" means an illustration of a policy form failing the test of self-supporting as described in OAR 836-051-0500 to 836-051-0600, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five years and 100 percent policy persistency thereafter.

(11) "Minimum assumed expenses" means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. An insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

(a) Fully allocated expenses;

(b) Marginal expenses, except that marginal expenses may be used only if greater than a generally recognized expense table, and if no generally recognized expense table is approved, fully allocated expenses must be used; and

(c) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the Director.

(12) "Non-term group life" means a group policy or individual policies of life insurance issued to members of an employer group or other permitted group when:

(a) Every plan of coverage was selected by the employer or other group representative;

(b) Some portion of the premium is paid by the group or through payroll deduction; and

(c) Group underwriting or simplified underwriting is used.

(13) "Policy owner" means the owner named in the policy or the certificate holder in the case of a group policy.

(14) "Premium outlay" means the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket.

(15) "Self-supporting illustration" means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies (or upon policy expiration if sooner), the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value must include cash surrender values and any other illustrated benefit amounts available at the policy owner's election.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0530

Policies to Be Illustrated

(1) An insurer shall identify each life insurance policy form filed with the Director on or after July 1, 1997, that will be marketed with an illustration. For informational purposes, the insurer shall file with the policy form filing a sample illustration in John Doe format to match a John Doe policy. Approval of a policy form filing will not be given until the Director has received the informational sample illustration. The insurer shall also identify in writing each policy form being actively marketed on July 1, 1997, with which an illustration is being or will be used. Any decision to market with an illustration or not may be changed by notice to the Director.

(2) If an insurer does not identify a policy form as one to be marketed with an illustration, any use of an illustration for any policy using that form prior to the first policy anniversary is prohibited.

(3) If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with OAR 836-051-0500 to 836-051-0600 is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

(4) Potential enrollees of non-term group life insurance subject to OAR 836-051-0500 to 836-051-0600 shall be furnished a quotation as described in this section with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation shall not be considered an illustration for purposes of 836-051-0500 to 836-051-0600, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0540

General Rules and Prohibitions

(1) An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of OAR 836-051-0500 to 836-051-0600, be clearly labeled "life insurance illustration" and contain the following basic information:

(a) Name of insurer;

(b) Name and business address of the insurance producer, if any;

(c) Name, age and sex of proposed insured, except when a composite illustration is permitted under OAR 836-051-0500 to 836-051-0600;

(d) Underwriting or rating classification upon which the illustration is based;

(e) Generic name of policy, the insurer product name, if different, and form number;

(f) Initial death benefit; and

(g) Dividend option election or application of non-guaranteed elements, if applicable.

(2) When using an illustration in the sale of a life insurance policy, neither an insurer nor its insurance producer shall:

(a) Represent the policy as anything other than a life insurance policy;

(b) Use or describe non-guaranteed elements in a manner that is misleading or has the capacity or tendency to mislead;

(c) State or imply that the payment or amount of non-guaranteed elements is guaranteed;

(d) Use an illustration that does not comply with the requirements of OAR 836-051-0500 to 836-051-0600;

(e) Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated;

(f) Provide an applicant with an incomplete illustration;

(g) Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact;

(h) Use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums;

(i) Except for policies that can never develop nonforfeiture values, use an illustration that is "lapse-supported;" or

(j) Use an illustration that is not "self-supporting."

(3) If an interest rate used to determine the illustrated non-guaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05

836-051-0550

Standards for Basic Illustrations

(1) The format of a basic illustration shall conform to the following requirements:

(a) The illustration shall be labeled with the date on which it was prepared;

(b) Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages");

(c) The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified.

(d) If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force.

(e) The assumed payments on which the illustrated benefits and values are based shall be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments shall be identified as premium outlay;

(f) Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium shall be shown and clearly labeled guaranteed.

(g) If the illustration shows any non-guaranteed elements, they cannot be based on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration. These elements shall be clearly labeled non-guaranteed;

(h) The guaranteed elements, if any, shall be shown before corresponding non-guaranteed elements and shall be specifically referred to on any page of an illustration that shows or describes only the non-guaranteed elements (e.g., "see page one for guaranteed elements");

(i) The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender;

(j) The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable;

(k) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form;

(l) Any illustration of non-guaranteed elements shall be accompanied by a statement indicating that:

(A) The benefits and values are not guaranteed;

(B) The assumptions on which they are based are subject to change by the insurer; and

(C) Actual results may be more or less favorable.

(m) If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up;

(n) If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may show such use of dividends or policy values and the effect on future policy benefits and values.

(2) A basic illustration shall have a narrative summary, which shall include the following:

(a) A brief description of the policy being illustrated, including a statement that it is a life insurance policy;

(b) A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the policy, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code;

(c) A brief description of any policy features, riders or options, guaranteed or non-guaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy;

(d) Identification and a brief definition of column headings and key terms used in the illustration; and

(e) A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."

(3) Following the narrative summary, a basic illustration shall include a numeric summary of the death benefits and values and the premium outlay and contract premium, as applicable. The following provisions apply to the numeric summary:

(a) For a policy that provides for a contract premium, the guaranteed death benefits and values shall be based on the contract premium. This summary shall be shown for at least policy years five, ten and twenty and at age 70, if applicable, on the three bases shown in this subsection. For multiple life policies, the summary shall show policy years five, ten, twenty and thirty. The three bases are as follows:

(A) Policy guarantees;

(B) Insurer's illustrated scale;

(C) Insurer's illustrated scale used but with the non-guaranteed elements reduced as follows:

(i) Dividends at 50 percent of the dividends contained in the illustrated scale used;

(ii) Non-guaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used; and

(iii) All non-guaranteed charges, including but not limited to, term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used; and

(b) In addition, if coverage would cease prior to policy maturity or age 100, the year in which coverage ceases shall be identified for each of the three bases.

(4) A basic illustration shall include the following tabular detail:

(a) A basic illustration shall include the following for at least each policy year from one to ten and for every fifth policy year thereafter ending at age 100, policy maturity or final expiration; and except for term insurance beyond the 20th year, for any year in which the premium outlay and contract premium, if applicable, is to change:

(A) The premium outlay and mode the applicant plans to pay and the contract premium, as applicable;

(B) The corresponding guaranteed death benefit, as provided in the policy; and

(C) The corresponding guaranteed value available upon surrender, as provided in the policy.

(b) For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender shall correspond to the contract premium; and

(c) Non-guaranteed elements may be shown if described in the narrative. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer's current practice is to pay terminal dividends. If any non-guaranteed elements are shown they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a non-guaranteed benefit or value is shown, a zero shall be displayed in the guaranteed column.

(5) Statements substantially similar to the following shall be included on the same page as the numeric summary and signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in OAR 836-051-0500 to 836-051-0600.

(a) A statement to be signed and dated by the applicant or policy owner reading as follows: "I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."

(b) A statement to be signed and dated by the insurance producer that reads as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05

836-051-0560

Standards for Supplemental Illustrations

(1) A supplemental illustration may be provided so long as:

(a) It is appended to, accompanied by or preceded by a basic illustration that complies with OAR 836-051-0500 to 836-051-0600;

(b) The non-guaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration;

(c) It contains the same statement required of a basic illustration that non-guaranteed elements are not guaranteed; and

(d) For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration. For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration shall be equal to the premium outlay shown in the basic illustration.

(2) The supplemental illustration shall include a notice referring to the basic illustration for guaranteed elements and other important information.

Stat. Auth.: ORS 731.244 & ORS 746.240
Stats. Implemented: ORS 746.075, ORS 746.085, ORS 746.100, ORS 746.110 & ORS 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0570

Delivery of Illustration and Record Retention

(1) If a basic illustration is used by an insurance producer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with OAR 836-051-0500 to 836-051-0600, shall be submitted to the insurer at the time of policy application. A copy also shall be provided to the applicant. If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy. The revised illustration shall conform to the requirements of 836-051-0500 to 836-051-0600, shall be labeled "Revised Illustration" and shall be signed and dated by the applicant or policy owner and insurance producer no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

(2) If no illustration is used by an insurance producer in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the insurance producer shall certify to that effect in writing on a form provided by the insurer. On the same form the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form shall be submitted to the insurer at the time of policy application. If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

(3) If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it shall include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer's obligation under this section shall be satisfied if the insurer can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort shall be satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

(4) A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, shall be retained by the insurer until three years after the policy is no longer in force. A copy need not be retained if no policy is issued.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05

836-051-0580

Annual Report; Notice to Policy Owners

(1) In the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policy owner with an annual report on the status of the policy that shall contain at least the following information:

(a) For universal life policies, the report shall include the following:

(A) The beginning and end date of the current report period;

(B) The policy value at the end of the previous report period and at the end of the current report period;

(C) 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);

(D) The current death benefit at the end of the current report period on each life covered by the policy;

(E) The net cash surrender value of the policy as of the end of the current report period;

(F) The amount of outstanding loans, if any, as of the end of the current report period; and

(G) For fixed premium policies: If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy's net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect shall be included in the report; or

(H) For flexible premium policies: If, assuming guaranteed interest, mortality and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

(b) For all other policies, when applicable:

(A) Current death benefit;

(B) Annual contract premium;

(C) Current cash surrender value;

(D) Current dividend;

(E) Application of current dividend; and

(F) Amount of outstanding loan.

(c) Insurers writing life insurance policies that do not build nonforfeiture values shall be required to provide only an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer.

(2) If the annual report does not include an in force illustration, it shall contain the following notice displayed prominently:

"IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department."

The insurer may vary the sequential order of the methods for obtaining an in force illustration.

(3) Upon the request of the policy owner, the insurer shall furnish an in force illustration of current and future benefits and values based on the insurer's present illustrated scale. This illustration shall comply with the requirements of OAR 836-051-0540(1) and (2), and OAR 836-051-0550(1) and (5). No signature or other acknowledgment of receipt of this illustration shall be required.

(4) If an adverse change in non-guaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report shall contain a notice of that fact and the nature of that change shall be prominently displayed.

Stat. Auth.: ORS 731.244 & ORS 746.240
Stats. Implemented: ORS 746.075, ORS 746.085, ORS 746.100, ORS 746.110 & ORS 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

836-051-0590

Annual Certifications

(1) The board of directors of each insurer shall appoint one or more illustration actuaries.

(2) The illustration actuary shall certify that the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of Practice for Compliance with the NAIC Model Regulation on Life Insurance Illustrations promulgated by the Actuarial Standards Board, and that the illustrated scales used in insurer-authorized illustrations meet the requirements of OAR 836-051-0500 to 836-051-0600.

(3) The illustration actuary shall:

(a) Be a member in good standing of the American Academy of Actuaries;

(b) Be familiar with the standard of practice regarding life insurance policy illustrations;

(c) Not have been found by the Director, following appropriate notice and hearing to have:

(A) Violated any provision of, or any obligation imposed by, the Insurance Law or other law in the course of the actuary's dealings as an illustration actuary;

(B) Been found guilty of fraudulent or dishonest practices;

(C) Demonstrated the actuary's incompetence, lack of cooperation or untrustworthiness to act as an illustration actuary; or

(D) Resigned or been removed as an illustration actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards.

(d) Not fail to notify the Director of any action taken by a commissioner of another state similar to that under subsection (c) of this section (3);

(e) Disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in force policies are not consistent with the nonguaranteed elements actually being paid, charged or credited to the same or similar forms, this must be disclosed in the annual certification; and

(f) Disclose in the annual certification the method used to allocate overhead expenses for all illustrations:

(A) Fully allocated expenses;

(B) Marginal expenses; or

(C) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the Director.

(4)(a) The illustration actuary shall file a certification with the board and with the Director:

(A) Annually for all policy forms for which illustrations are used; and

(B) Before a new policy form is illustrated.

(b) If an error in a previous certification is discovered, the illustration actuary shall notify the board of directors of the insurer and the director promptly.

(5) If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the Director promptly of the actuary's inability to certify.

(6) A responsible officer of the insurer, other than the illustration actuary, shall certify annually:

(a) That the illustration formats meet the requirements of OAR 836-051-0500 to 836-051-0600 and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary; and

(b) That the insurer has provided its insurance producers with information about the expense allocation method used by the insurer in its illustrations and disclosed as required in section (3)(f) of this rule.

(7) The annual certification shall be provided to the Director each year by a date determined by the insurer. If the insurer decides to change the date for a subsequent year, the insurer must so notify the Director prior to the insurer's current elected date and include with the notification an explanation for the change. The first annual certification by an insurer is due on the date elected by the insurer during the calendar year beginning January 1, 1998.

(8) If an insurer changes the illustration actuary responsible for all or a portion of the insurer's policy forms, the insurer shall notify the Director of that fact promptly and disclose the reason for the change.

Stat. Auth.: ORS 731.244 & 746.240
Stats. Implemented: ORS 746.075, 746.085, 746.100, 746.110 & 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97; ID 8-2005, f. 5-18-05, cert. ef. 8-1-05

836-051-0600

Trade Practice Regulation

Violation of any provision of OAR 836-051-0500 to 836-051-0600 is an unfair trade practice under ORS 746.240.

Stat. Auth.: ORS 731.244 & ORS 746.240
Stats. Implemented: ORS 746.075, ORS 746.085, ORS 746.100, ORS 746.110 & ORS 746.240
Hist.: ID 5-1997, f. 5-27-97, cert. ef. 7-1-97

Authorization, Genetic Testing

836-051-0700

Authorization, Genetic Testing

(1) A person who asks an applicant for insurance to take a genetic test in connection with an application for insurance shall obtain the specific authorization of the applicant by use of the form in Exhibit 1 to this rule, or a form that is substantively similar.

(2) This rule implements ORS 746.135.

Stat. Auth.: ORS 746.135
Stats. Implemented: ORS 746.135
Hist.: ID 5-2004, f. & cert. ef. 6-14-04

Preneed Life Insurance Minimum Standards for
Determining Reserve Liability and Nonforfeiture Value

836-051-0750

Purpose; Authority; Applicability; and Effective Date

(1) OAR 836-051-0750 to 836-051-0775 are adopted pursuant to the general rulemaking authority of the Director in ORS 731.244, and specific authority of ORS 733.306 and 743.215 for approving mortality tables adopted by the National Association of Insurance Commissioners for use in determining minimum valuation and nonforfeiture standards.

(2) OAR 836-051-0750 to 836-051-0775 apply to preneed insurance and to similar policies and certificates used to fund funeral services and expenses as determined by the Director, issued on or after January 1, 2009.

(3) The purpose of OAR 836-051-0750 to 836-051-0775 is to establish for preneed insurance products minimum mortality standards for reserves and nonforfeiture values, and to require the use of the 1980 Commissioners Standard Ordinary (CSO) Life Valuation Mortality Table for use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values for preneed insurance products.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0755

Definitions

As used in OAR 836-051-0750 to 836-051-0775:

(1) “Preneed insurance” is any life insurance policy that is issued in combination with, in support of, with an assignment to, or as a guarantee for a prearrangement agreement for goods and services to be provided at the time of and immediately following the death of the insured. Goods and services may include, but are not limited to embalming, cremation, body preparation, viewing or visitation, coffin or urn, memorial stone, and transportation of the deceased. The status of the policy as preneed insurance is determined at the time of issue in accordance with the policy form filing.

(2) “Ultimate 1980 CSO” means the 1980 Commissioners’ Standard Ordinary Life Valuation Mortality Tables (1980 CSO) without ten-year (10-year) selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law approved in December 1983.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0760

Minimum Valuation Mortality Standards

For preneed insurance and to similar policies and certificates used to fund funeral services and expenses, the minimum mortality standard for determining reserve liabilities and nonforfeiture values for both male and female insureds shall be the Ultimate 1980 CSO.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0765

Minimum Valuation Interest Rate Standards

(1) The interest rates used in determining the minimum standard for valuation of preneed insurance shall be the calendar year statutory valuation interest rates as defined in ORS 733.306 and 733.310.

(2) The interest rates used in determining the minimum standard for nonforfeiture values for preneed insurance shall be the calendar year statutory nonforfeiture interest rates as defined in ORS 743.215, 743.216 and 743.221.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0770

Minimum Valuation Method Standards

(1) The method used in determining the standard for the minimum valuation of reserves of preneed insurance shall be the method defined in ORS 733.306 and 733.310.

(2) The method used in determining the standard for the minimum nonforfeiture values for preneed insurance shall be the method defined in ORS 743.215, 743.216 and 743.221.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0775

Transition Rules

(1) For preneed insurance policies issued on or after the effective date of this rule and before January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for nonforfeiture benefits for both male and female insureds.

(2) If an insurer elects to use the 2001 CSO as a minimum standard for any preneed insurance policy issued on or after the effective date of this rule and before January 1, 2012, the insurer shall provide, as a part of the actuarial opinion memorandum submitted in support of the company’s asset adequacy testing, an annual written notification to the Director. The notification shall include:

(a) A complete list of all preneed insurance policy forms that use the 2001 CSO as a minimum standard;

(b) A certification signed by the appointed actuary stating that the reserve methodology employed by the company in determining reserves for the preneed insurance policies issued after the effective date and using the 2001 CSO as a minimum standard, develops adequate reserves (For the purposes of this certification, the preneed insurance policies using the 2001 CSO as a minimum standard cannot be aggregated with any other policies.); and

(3) Supporting information regarding the adequacy of reserves for preneed insurance policies issued after the January 1, 2009, and using the 2001 CSO as a minimum standard for reserves.

(4) Preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves.

Stat. Authority: ORS 731.244, 733.306, 743.205
Stats. Implemented: ORS 733.306, 733.310, 743.215, 743.216, 743.221
Hist.: ID 17-2008, f. & cert. ef. 12-9-08

836-051-0900

Purpose; Authority

(1) OAR 836-051-0900 to 836-051-0925 establish standards for disclosure of minimum information relating to annuity contracts, to protect consumers and foster consumer education. OAR 836-051-0900 to 836-051-0925 prescribe the minimum information that must be disclosed and the method for disclosing it in connection with the sale of annuity contracts. The goal of 836-051-0900 to 836-051-0925 is to ensure that purchasers of annuity contracts understand certain basic features of annuity contracts.

(2) OAR 836-051-0900 to 836-051-0925 are adopted pursuant to ORS 731.244 for the purpose of implementing 746.075, 746.085, 746.110 & 746.240.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110, & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

836-051-0905

Applicability and Scope

(1) OAR 836-051-0900 to 836-051-0925 apply to all group and individual annuity contracts and certificates except:

(a) Registered or non-registered variable annuities or other registered products;

(b) Immediate and deferred annuities that contain no nonguaranteed elements except as provided in OAR 836-051-0920(2);

(c) Annuities used to fund:

(A) An employee pension plan that is covered by the Employee Retirement Income Security Act (ERISA);

(B) A plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, when the plan, for purposes of ERISA, is established or maintained by an employer;

(C) A governmental or church plan defined in Section 414 or a deferred compensation plan of a state or local government or a tax exempt organization under Section 457 of the Internal Revenue Code; or

(D) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.

(d) Structured settlement annuities; and

(e) Funding agreements.

(2) OAR 836-051-0900 to 836-051-0925 also apply to annuities used to fund a plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after-tax basis, and when the insurer has been notified that plan participants may choose from among two or more fixed annuity providers and there is a direct solicitation of an individual employee by a producer for the purchase of an annuity contract. A direct solicitation under this section does not include any meeting held by a producer solely for the purpose of educating or enrolling employees in the plan or arrangement.

(3) OAR 836-051-0900 to 836-051-0925 apply to annuity contracts that are sold on or after October 1, 2008. An insurer may conform its contracts to the provisions of 836-051-0900 to 836-051-0925 prior to that date.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110 & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

836-051-0910

Definitions

As used in OAR 836-051-0900 to 836-051-0925:

(1) “Contract owner” means the owner named in the annuity contract or a certificate holder in the case of a group annuity contract.

(2) “Determinable elements” means elements that are derived from processes or methods that are guaranteed at issue and not subject to insurer discretion, but in which the values or amounts cannot be determined until some point after issue. These elements include the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these. These elements may be described as guaranteed but not determined at issue. An element is considered determinable if it was calculated from underlying determinable elements only, or from both determinable and guaranteed elements.

(3) “Free look” means the number of days immediately after delivery of the contract in which the contract owner has to examine the contract and decide to return it to get the purchase payment returned penalty free. May also be referred to as “Right to Examine.”

(4) “Funding agreement” means an agreement for an insurer to accept and accumulate funds and to make one or more payments at future dates in amounts that are not based on mortality or morbidity contingencies.

(5) “Generic name” means a short title descriptive of the annuity contract being applied for or illustrated, such as “single premium deferred annuity.”

(6) “Guaranteed elements” means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are guaranteed and determined at issue. An element is considered guaranteed if all of the underlying elements that go into its calculation are guaranteed.

(7) “Non-guaranteed elements” means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

(8) “Structured settlement annuity” means a “qualified funding asset” as defined in section 130(d) of the Internal Revenue Code or an annuity that, by its issue, would be a qualified funding asset under section 130(d) but for the fact that it is not owned by an assignee under a qualified assignment.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110 & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

836-051-0915

Standards for the Disclosure Document and Buyer’s Guide

(1) When the application for an annuity contract is taken in a face-to-face meeting, the applicant shall be given, at or before the time of application, both the disclosure document described in section (6) of this rule and the Buyer’s Guide contained in Exhibit 1 to this rule.

(2) When the application for an annuity contract is taken by means other than in a face-to-face meeting, the applicant shall be sent both the disclosure document and the Buyer’s Guide no later than five business days after the completed application is received by the insurer. The following provisions apply to the requirement in this section:

(a) With respect to an application received as a result of a direct solicitation through the mail:

(A) Providing a Buyer’s Guide in a mailing inviting prospective applicants to apply for an annuity contract satisfies the requirement that the Buyer’s Guide be provided no later than five business days after receipt of the application.

(B) Providing a disclosure document in a mailing inviting a prospective applicant to apply for an annuity contract satisfies the requirement that the disclosure document be provided no later than five business days after receipt of the application.

(b) With respect to an application received through the Internet:

(A) Taking reasonable steps to make the Buyer’s Guide available for viewing and printing on the insurer’s website satisfies the requirement that the Buyer’s Guide be provided no later than five business days of receipt of the application.

(B) Taking reasonable steps to make the disclosure document available for viewing and printing on the insurer’s website satisfies the requirement that the disclosure document be provided no later than five business days after receipt of the application.

(c) A solicitation for an annuity contract provided in other than a face-to-face meeting must include a statement that the proposed applicant may contact the insurance department of the state for a free annuity Buyer’s Guide, except that alternatively, an insurer may include a statement that the prospective applicant may contact the insurer for a free annuity Buyer’s Guide.

(3) When the Buyer’s Guide and disclosure document are provided at delivery of the contract and are not provided at or before the time of application, a free look period of no less than 15 days must be provided for the applicant to return the annuity contract without penalty. This free look runs concurrently with the free look provided under the contract.

(4) When the Buyer’s Guide and disclosure document are provided at the time of application, a free look period of no less than ten days must be provided to enable the contract owner to examine the contract with the disclosure document and return the annuity contract without penalty if not satisfied.

(5) For the purpose of this rule, a “Buyer’s Guide” is the document in Exhibit 1 to this rule or the most current version adopted by the NAIC, or other published descriptions that are similar in nature approved by the Director. Companies may purchase personalized brochures from the NAIC or reproduce the Buyer’s Guide in their own type, style and format. Any description of an annuity feature in the Buyer’s Guide is for general education and does not imply that all features are acceptable for filing under Oregon standards.

(6) At a minimum, the following information shall be included in the disclosure document required to be provided under OAR 836-051-0900 to 836-051-0925:

(a) The generic name of the contract, the insurer product name, if different, and form number, and the fact that it is an annuity;

(b) The insurer’s name and address;

(c) A description of the contract and its benefits, emphasizing its long-term nature, including examples when appropriate, as follows:

(A) The guaranteed, non-guaranteed and determinable elements of the contract, and their limitations, if any, and an explanation of how they operate;

(B) An explanation of the initial crediting rate, specifying any bonus or introductory portion, the duration of the rate and the fact that rates may change from time to time and are not guaranteed;

(C) Periodic income options both on a guaranteed and non-guaranteed basis;

(D) Any value reductions caused by withdrawals from or surrender of the contract, and also a dollar-figure statement, which may be specific to the contract or given as an example using round numbers, of the maximum effect of penalties, surrender charges, market value adjustments and any other adjustments owing to a withdrawal or surrender;

(E) How values in the contract can be accessed;

(F) The death benefit, if available and how it will be calculated;

(G) A summary of the federal tax status of the contract and any penalties applicable on withdrawal of values from the contract; and

(H) The impact of any rider, such as a long-term care rider.

(d) The specific dollar amount or percentage charges and fees, which shall be listed with an explanation of how they apply.

(e) Information about the current guaranteed rate for new contracts, with a clear notice that the rate is subject to change.

(7) An insurer must define terms used in the disclosure statement in language that facilitates the understanding by a typical person within the segment of the public to which the disclosure statement is directed.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110 & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

836-051-0920

Report to Contract Owners

(1) For an annuity in the payout period with changes in non-guaranteed elements and for the accumulation period of a deferred annuity, the insurer shall provide each contract owner with a report, at least annually, on the status of the contract that contains at least the following information:

(a) The beginning and end date of the current report period.

(b) The accumulation and cash surrender value, if any, at the end of the previous report period and at the end of the current report period.

(c) The total amounts, if any, that have been credited, charged to the contract value or paid during the current report period; and

(d) The amount of outstanding loans, if any, as of the end of the current report period.

(2) For a deferred annuity with only guaranteed elements and no cash surrender value during the accumulation period, the insurer shall provide each contract owner with a report, at least annually, on the status of the contract that contains at least the following information:

(a) The beginning and end date of the current report period.

(b) The selected annuitization date, including any time restraints for changing the annuitization date.

(c) The selected annuitization option, including any time restraints for changing to another option.

(d) Any additional benefit values, such as the death benefit and any optional access to cash values.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110 & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

836-051-0925

Trade Practice Regulation

Violation of any provision of OAR 836-051-0900 to 836-051-0925 is an unfair trade practice under ORS 746.240.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 742.009, 746.075, 746.085, 746.110 & 746.240
Hist.: ID 14-2008, f. & cert. ef. 8-15-08

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