NOTICES
Proposed Deregulation of Life and Annuity Forms
[26 Pa.B. 2753] The Insurance Commissioner proposes to deregulate certain life insurance and annuity forms, as authorized by section 354 of The Insurance Company Law of 1921 (40 P. S. § 477b). This statement announces and explains the Commissioner's proposal, and seeks comments regarding the proposal from interested parties. Comments may be submitted as noted below.
Statutory Authority
Section 354 of The Insurance Company Law of 1921 (40 P. S. § 477b) requires that all policy forms for life insurance and annuities, and other lines of business, be submitted to the Insurance Commissioner for prior approval before issuance to any consumer in the Commonwealth. However, that law gives the Commissioner express authority to exempt forms from the prior approval requirement.
Section 354 provides:
It shall be unlawful for any insurance company . . . doing business in this Commonwealth, to issue, sell or dispose of any policy, contract or certificate . . . or use applications, riders or endorsements, in connection therewith, until the forms of the same have been submitted to and formally approved by the Insurance Commissioner . . . except any forms which, in the opinion of the Insurance Commissioner, do not require [her] approval [Emphasis added.]
The regulations implementing section 354 merely repeat, and do not elaborate on, the provision authorizing the exemption of forms from filing and approval. See 31 Pa. Code § 89.3(a).
Insurers Subject to the Filing Requirement
Section 354 applies only to insurance companies, associations and exchanges, which terms are defined at section 101 of The Insurance Company Law (40 P. S. § 361).
Lines of Business to Which Exemption May be Applied
By its terms, section 354 regulates life insurance and annuity1 business, including:1
Group and Individual Life Insurance
Group and Individual AnnuitiesForms Which Are Deregulated
The Commissioner's proposal extends to certain group and individual lines of business offered by life insurers only.
Group Forms Which Are Not Deregulated
The Commissioner's proposal to deregulate certain group forms does not extend to the following:
Group universal and group variable life policies and certificates and all riders, amendments, endorsements and applications used with them;
Individual retirement annuity (IRA) group annuity policies and certificates and all riders, amendments, endorsements and applications used with them;
Synthetic guaranteed investment contracts and certificates and all riders, amendments, endorsements and applications used with them; and
Group annuity policies issued to policyholders other than employers, trustees of employer funds, labor unions, police fraternities, firemen's fraternities, teachers' associations or federations, multiple employer trusts, labor union trusts, association trusts, associations, or trustees of collective trusts. All certificates, riders, amendments, endorsements and applications used with the aforementioned group annuity policies.
Continuing Authority of the Commissioner
Notwithstanding the implementation of this proposal, the Commissioner will retain complete authority to request and be provided a copy of any form being issued in this Commonwealth, as provided by section 903 of The Insurance Department Act of 1921 (40 P. S. § 323.3).
The Commissioner also will retain complete authority to reassume regulatory authority over the types of forms deregulated hereunder at her discretion.
Notwithstanding the deregulation of the forms specified herein, all such forms must continue to comply with applicable Pennsylvania law including, but not limited to:
Uniform Policy Provisions (40 P. S. § 510)
Standard Nonforfeiture Law for Life Insurance (40 P. S. § 510.1)
Group Life Insurance Act (40 P. S. § 532.1 et seq.)Continuing Policy of the Department
Section 354 of The Insurance Company Law of 1921 (40 P. S. § 477b) does not regulate guaranteed investment contracts without annuity provisions and funding agreement contracts without annuity provisions. However, section 202 of The Insurance Company Law of 1921 (40 P. S. § 382) does not authorize life insurance companies to issue such contracts in the Commonwealth.
Deregulated Commercial Lines Life Insurance and Annuity Forms
The following insurance forms may be used without prior approval consistent with compliance with appropriate statutory and regulatory requirements:
1) Individual Traditional Term Life policies (not including indeterminate premium, limited benefit1, modified premium2 or single premium term life policies)2 3 .
2) Individual Traditional Whole Life policies, (not including interest sensitive, indeterminate premium, limited benefit1 or modified premium2 whole life policies).
3) Individual Traditional Endowment policies (not including interest sensitive, indeterminate premium or modified premium2 endowment policies).
4) Individual Traditional Term Life riders (not including indeterminate premium, limited benefit1 or modified premium2 term life riders).
5) Individual Traditional Cost of Living, Guaranteed Purchase Option, Spouse Term, Child Term, Family Term, Other Insured, Dividend Additions, Business Exchange and Substitute Insured riders.
6) Individual Fixed Immediate Annuity policies, not including policies with market value adjustment or providing payments of interest only, and all riders, amendments and endorsements used with them.
7) Individual Annuity applications, except individual variable annuity applications.
8) Group Term Life policies and certificates. All riders, amendments, endorsements and applications used with them.
9) Group Whole Life policies and certificates. All riders, amendments, endorsements and applications used with them.
10) Group Annuity policies issued to employers, trustees of employer funds, labor unions, police fraternities, firemen's fraternities, teachers' associations or federations, multiple employer trusts, labor union trusts, association trusts, associations, or trustees of collective trusts. All certificates, riders, amendments, endorsements and applications used with them.
Effective Date
This proposal will not become effective until final action by the Commissioner following receipt and consideration of comments from interested persons. Filings made prior to the effective date cannot be used absent the prior approval of the Commissioner.
Duration of Deregulation
The Commissioner intends that the deregulation will remain in effect until a subsequent notice is issued by the Commissioner. The Commissioner intends that any such subsequent notice will be effective upon 90 days notice to the industry. The Commissioner further intends to review the implementation of this proposal at its 12 month anniversary, and annually thereafter, to ascertain whether additional forms should be deregulated, or whether she should reassume regulatory jurisdiction over forms previously deregulated.
Records Maintenance
Insurers will be required to maintain complete and accurate specimen copies of all deregulated forms which are issued to Pennsylvania residents. Such records shall include the date the form was first issued in the Commonwealth and specimen copies of all applications, certificates, riders, amendments and endorsements used with the deregulated policies. The records specified herein should be maintained until at least 2 years after a claim can no longer be reported under the form. (See Insurance Department Notice 1994-01.)
Pennsylvania's Current Stature in the Marketplace
At the present time approximately 23 states provide for some alternative other than requiring that life insurance and annuity forms issued in the market place be filed on a prior approval basis.
Four of our neighboring states provide for some deregulation of life and annuity forms: New Jersey, Ohio, Delaware, and the District of Columbia. Maryland, West Virginia, and New York continue to have regulatory schemes similar to Pennsylvania's prior approval system.
Anticipated Savings to the Commonwealth
The Insurance Department receives approximately 3,500 filings in the proposed deregulated categories each year. Implementation of this deregulation proposal will save the Department approximately 1,700 man hours per year. The Commissioner intends to redeploy these man hours within the Insurance Department to ensure the timely review and approval of form filings in other product lines.
Anticipated Costs to the Commonwealth
Implementation of this proposal is anticipated to cost the Commonwealth approximately $12,000 per year in retaliatory fees that would otherwise be collected.
Anticipated Savings to the Insurance Industry
It is anticipated that this proposal will save the insurance industry approximately $1.2 million per year, assuming that each form filing requires 10 man hours at an average salary of $70,000 to:
* prepare submission to the Insurance Department;
* review, discuss and respond to Insurance Department inquiries regarding the filing; and
* distribute, file and store copies of the approval received from the Department.
It is anticipated that the expense savings realized by insurers from this proposal will be passed along to Pennsylvania consumers in the form of lower rates.
Additionally, implementation of this proposal will permit insurers to bring their products to market quicker, allowing the industry to better respond to market conditions. Consumers will also benefit by having new products available more expeditiously.
Submission of Comments
Comments on this proposal must be filed with the Insurance Department no later than July 8, 1996. Thereafter, the Insurance Department will analyze the comments on the proposal, ascertain whether a public hearing or meeting is warranted, and make a final determination in this matter.
Comments should be directed to Gregory S. Martino, Deputy Insurance Commissioner, 1311 Strawberry Square, Harrisburg, PA 17120.
LINDA S. KAISER,
Insurance Commissioner
[Pa.B. Doc. No. 96-937. Filed for public inspection June 7, 1996, 9:00 a.m.] _______
1 Section 354 does not regulate the approval of Credit Insurance forms or Fraternal Benefit Society forms, and, therefore, these are not affected by the deregulation proposed herein.
2 Limited benefit life insurance policies are defined at 31 Pa. Code § 87.12.
3 Modified premium life insurance policies are defined at 31 Pa. Code § 87.13.
No part of the information on this site may be reproduced for profit or sold for profit.This material has been drawn directly from the official Pennsylvania Bulletin full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
