TITLE 13 INSURANCE
CHAPTER 9 LIFE INSURANCE AND ANNUITIES
PART 17 MILITARY SALES PRACTICES
13.9.17.1 ISSUING AGENCY: New
Mexico Public Regulation Commission Insurance Division.
[13.9.17.1 NMAC - N,
1/1/08]
13.9.17.2 SCOPE: This rule shall apply to the solicitation
or sale of any life insurance or annuity product by an insurer or insurance
producer to an active duty service member of the United States armed forces.
[13.9.17.2 NMAC - N,
1/1/08]
13.9.17.3 STATUTORY AUTHORITY: Sections 59A-2-9, 59A-16-3, 59A-16-4, 59A-16-5 and 59A-16-15 NMSA 1978.
[13.9.17.3 NMAC - N,
1/1/08]
13.9.17.4 DURATION: Permanent.
[13.9.17.4 NMAC - N,
1/1/08]
13.9.17.5 EFFECTIVE DATE: January
1, 2008 unless a later date is cited at the end of a section.
[13.9.17.5 NMAC - N,
1/1/08]
13.9.17.6 OBJECTIVE: The objective of this rule is to set forth
standards to protect active duty service members of the United States armed
forces from dishonest and predatory insurance sales practices by declaring
certain identified practices to be false, misleading, deceptive or unfair.
[13.9.17.6 NMAC - N,
1/1/08]
13.9.17.7 DEFINITIONS:
A. Active Duty means full-time
duty in the active military service of the United States and includes members
of the reserve component, national guard and reserve, while serving under
published orders for active duty or full-time training. The term does not include members of the
reserve component who are performing active duty or active duty for training
under military calls or orders specifying periods of less than 31 calendar
days.
B. DoD
means department of defense.
C. DoD personnel means all
active duty service members and all civilian employees, including
nonappropriated fund employees and special government employees, of the
department of defense.
D. Door to door means a
solicitation or sales method whereby an insurance producer proceeds randomly or
selectively from household to household without prior specific appointment.
E. General advertisement means
an advertisement having as its sole purpose the promotion of the reader's or
viewer's interest in the concept of insurance, or the promotion of the insurer
or the insurance producer.
F. Insurer means an insurance
company required to be licensed under the laws of this state to provide life
insurance products, including annuities.
G. Insurance producer means a
person required to be licensed under the laws of this state to sell, solicit or
negotiate life insurance, including annuities.
H. IRC
means the Internal Revenue Code.
I. Known or knowingly means,
depending on its use herein, the insurance producer or insurer had actual
awareness, or in the exercise of ordinary care should have known, at the time
of the act or practice complained of, that the person solicited is a service
member.
J. Life insurance, as used in 13.9.17 NMAC, means
insurance coverage on human lives including benefits of endowment and
annuities, and may include benefits in the event of death or dismemberment by
accident and benefits for disability income and unless otherwise specifically
excluded, includes individually issued annuities.
K. Military installation means
any federally owned, leased, or operated base, reservation, post, camp,
building, or other facility to which service members are assigned for duty,
including barracks, transient housing, and family quarters.
L. MyPay means the defense
finance and accounting service web-based system that enables service members to
process certain discretionary pay transactions or provide updates to personal
information data elements without using paper forms.
M. Service member means any
active duty officer, commissioned and warrant, or enlisted member of the United
States armed forces.
N. SGLI
means servicemembers’ group life insurance.
O. Side fund means a fund or
reserve that is part of or otherwise attached to a life insurance policy, excluding
individually issued annuities, by rider, endorsement or other mechanism which
accumulates premium or deposits with interest or by other means. The term does not include:
(1) accumulated value or cash value or secondary
guarantees provided by a universal life policy;
(2) cash values provided by a whole life
policy which are subject to standard nonforfeiture law for life insurance; or
(3)
a premium deposit fund which:
(a) contains only premiums
paid in advance which accumulate at interest;
(b) imposes no penalty for
withdrawal;
(c) does not permit funding beyond future
required premiums;
(d) is not marketed or
intended as an investment; and
(e) does not carry a
commission, either paid or calculated.
P. Specific appointment means a
prearranged appointment agreed upon by both parties and definite as to place
and time.
Q. United States armed forces
means all components of the army, navy, air force, marine corps, and coast
guard.
R. VGLI
means veterans’ group life insurance.
[13.9.17.7 NMAC - N,
1/1/08]
13.9.17.8 EXEMPTIONS:
A. This rule shall not apply to
solicitations or sales involving:
(1) credit insurance;
(2) group life insurance or group annuities
where there is no in-person, face-to-face solicitation of individuals by an
insurance producer or where the contract or certificate does not include a side
fund;
(3) an application to the existing insurer
that issued the existing policy or contract when a contractual change or a
conversion privilege is being exercised; or, when the existing policy or
contract is being replaced by the same insurer pursuant to a program filed with
and approved by the superintendent of insurance; or, when a term conversion
privilege is exercised among corporate affiliates;
(4) individual stand-alone health policies,
including disability income policies;
(5) contracts offered by SGLI or VGLI as
authorized by 38 U.S.C. Section 1965 et seq;
(6) life insurance contracts offered through
or by a non-profit military association, qualifying under Section 501 (c) (23)
of the IRC, and which are not underwritten by an insurer; or
(7) contracts
used to fund:
(a) an employee pension or welfare benefit
plan that is covered by the Employee Retirement and Income Security Act;
(b) a plan described by Sections 401(a),
401(k), 403(b), 408(k) or 408(p) of the IRC, as amended, if established or
maintained by an employer;
(c) a government or church plan defined in
Section 414 of the IRC, a government or church welfare benefit plan, or a
deferred compensation plan of a state or local government or tax exempt
organization under Section 457 of the IRC;
(d) a nonqualified deferred compensation
arrangement established or maintained by an employer or plan sponsor;
(e) settlements of or assumptions of
liabilities associated with personal injury litigation or any dispute or claim
resolution process; or
(f) prearranged funeral contracts.
B. Nothing herein shall be construed to
abrogate the ability of nonprofit organizations or other organizations to
educate members of the United States Armed forces in accordance with DoD instruction
1344.07 - personal commercial solicitation on DoD installations or successor
directive.
C. For purposes of this rule, general
advertisements, direct mail and internet marketing shall not constitute
"solicitation." Telephone
marketing shall not constitute "solicitation" provided the caller
explicitly and conspicuously discloses that the product concerned is life
insurance and makes no statements that avoid a clear and unequivocal statement
that life insurance is the subject matter of the solicitation. Provided however, nothing in Subsection C of
13.9.17.8 NMAC shall be construed to exempt an insurer or insurance producer
from 13.9.17 NMAC in any in-person, face-to-face meeting established as a
result of the "solicitation" exemptions identified in Subsection C of
13.9.17.8 NMAC.
[13.9.17.8 NMAC - N,
1/1/08]
13.9.17.9 PRACTICES DECLARED FALSE,
MISLEADING, DECEPTIVE OR UNFAIR ON A MILITARY INSTALLATION:
A. The following acts or practices when
committed on a military installation by an insurer or insurance producer with
respect to the in-person, face-to-face solicitation of life insurance are
declared to be false, misleading, deceptive or unfair:
(1) knowingly soliciting the purchase of any
life insurance product "door to door" or without first establishing a
specific appointment for each meeting with the prospective purchaser.
(2) soliciting service members in a group or
"mass" audience or in a "captive" audience where attendance
is not voluntary.
(3) knowingly making appointments with or
soliciting service members during their normally scheduled duty hours.
(4) making appointments with or soliciting
service members in barracks, day rooms, unit areas, or transient personnel
housing or other areas where the installation commander has prohibited
solicitation.
(5) soliciting the sale of life insurance
without first obtaining permission from the installation commander or the
commander's designee.
(6) posting unauthorized bulletins, notices or
advertisements.
(7) failing to present DD form 2885, personal
commercial solicitation evaluation, to service members solicited or encouraging
service members solicited not to complete or submit a DD form 2885.
(8) knowingly
accepting an application for life insurance or issuing a policy of life
insurance on the life of an enlisted member of the United States armed forces
without first obtaining for the insurer's files a completed copy of any
required form which confirms that the applicant has received counseling or
fulfilled any other similar requirement for the sale of life insurance
established by regulations, directives or rules of the DoD or any branch of the
armed forces.
B. The following acts or practices when
committed on a military installation by an insurer or insurance producer
constitute corrupt practices, improper influences or inducements and are
declared to be false, misleading, deceptive or unfair:
(1) using DoD personnel, directly or
indirectly, as a representative or agent in any official or business capacity
with or without compensation with respect to the solicitation or sale of life
insurance to service members; or
(2) using an insurance producer to participate
in any United States armed forces sponsored education or orientation program.
[13.9.17.9 NMAC - N,
1/1/08]
13.9.17.10 CORRUPT PRACTICES, IMPROPER INFLUENCES OR INDUCEMENTS REGARDLESS OF
LOCATION: The following acts or
practices by an insurer or insurance producer constitute corrupt practices,
improper influences or inducements and are declared to be false, misleading,
deceptive or unfair:
A. submitting, processing or assisting
in the submission or processing of any allotment form or similar device used by
the United States armed forces to direct a service member's pay to a third
party for the purchase of life insurance; the foregoing includes, but is not
limited to, using or assisting in using a service member's MyPay account or
other similar internet or electronic medium for such purposes; Subsection A of
13.9.17.10 NMAC does not prohibit assisting a service member by providing
insurer or premium information necessary to complete any allotment form;
B. knowingly receiving funds from a
service member for the payment of premium from a depository institution with
which the service member has no formal banking relationship; for purposes of
13.9.17.10 NMAC, a formal banking relationship is established when the
depository institution:
(1)
provides the service member a deposit agreement and periodic statements
and makes the disclosures required by the Truth in Savings Act, 12 U.S.C. §
4301 et seq. and the regulations promulgated thereunder; and
(2) permits the service member to make
deposits and withdrawals unrelated to the payment or processing of insurance
premiums;
C. employing any device or method or
entering into any agreement whereby funds received from a service member by
allotment for the payment of insurance premiums are identified on the service
member's leave and earnings statement or equivalent or successor form as
"savings" or "checking" and where the service member has no
formal banking relationship as defined in Paragraph (2) of Subsection A of
13.9.17.7 NMAC;
D. entering into any agreement with a
depository institution for the purpose of receiving funds from a service member
whereby the depository institution, with or without compensation, agrees to
accept direct deposits from a service member with whom it has no formal banking
relationship;
E. using DoD personnel, directly or
indirectly, as a representative or agent in any official or unofficial capacity
with or without compensation with respect to the solicitation or sale of life
insurance to service members who are junior in rank or grade, or to the family
members of such personnel;
F. offering or giving anything of
value, directly or indirectly, to DoD personnel to procure their assistance in
encouraging, assisting or facilitating the solicitation or sale of life
insurance to another service member;
G. knowingly offering or giving
anything of value to a service member for his or her attendance to any event
where an application for life insurance is solicited; or
H. advising a service member to change
his or her income tax withholding or state of legal residence for the sole
purpose of increasing disposable income to purchase life insurance.
[13.9.17.10 NMAC - N, 1/1/08]
13.9.17.11 ACTS
OR PRACTICES THAT LEAD TO CONFUSION REGARDLESS OF LOCATION:
A. The following acts or practices by
an insurer or insurance producer lead to confusion regarding source,
sponsorship, approval or affiliation and are declared to be false, misleading,
deceptive or unfair:
(1)
making any representation, or using any device, title, descriptive name
or identifier that has the tendency or capacity to confuse or mislead a service
member into believing that the insurer, insurance producer or product offered
is affiliated, connected or associated with, endorsed, sponsored, sanctioned or
recommended by the United States government, the United States armed forces, or
any state or federal agency or government entity; examples of prohibited
insurance producer titles include, but are not limited to, "battalion
insurance counselor," "unit insurance advisor,"
"servicemen's group life insurance conversion consultant" or "veteran's
benefits counselor;" or
(2) soliciting the purchase of any life
insurance product through the use of or in conjunction with any third party
organization that promotes the welfare of or assists members of the United
States Armed forces in a manner that has the tendency or capacity to confuse or
mislead a service member into believing that either the insurer, insurance
producer or insurance product is affiliated, connected or associated with,
endorsed, sponsored, sanctioned or recommended by the United States government,
or the United States armed forces.
B. Nothing in 13.9.17.11 NMAC shall be
construed to prohibit a person from using a professional designation awarded
after the successful completion of a course of instruction in the business of
insurance by an accredited institution of higher learning. Such designations include, but are not
limited to, chartered life underwriter, chartered financial consultant, certified
financial planner, master of science in financial services, or masters of
science financial planning.
C. The following acts or practices by
an insurer or insurance producer lead to confusion regarding premiums, costs or
investment returns and are declared to be false, misleading, deceptive or
unfair:
(1) using or describing the credited interest
rate on a life insurance policy in a manner that implies that the credited
interest rate is a net return on premium paid; or
(2) excluding individually issued annuities,
misrepresenting the mortality costs of a life insurance product, including
stating or implying that the product "costs nothing" or is
"free."
[13.9.17.11 NMAC - N, 1/1/08]
13.9.17.12 OTHER
ACTS OR PRACTICES REGARDLESS OF LOCATION:
A. The following acts or practices by
an insurer or insurance producer regarding SGLI or VGLI are declared to be
false, misleading, deceptive or unfair:
(1) making any representation regarding the
availability, suitability, amount, cost, exclusions or limitations to coverage
provided to a service member or dependents by SGLI or VGLI, which is false,
misleading or deceptive;
(2) making any representation regarding
conversion requirements, including the costs of coverage, or exclusions or
limitations to coverage of SGLI or VGLI to private insurers which is false,
misleading or deceptive; or
(3) suggesting, recommending or encouraging a
service member to cancel or terminate his or her SGLI policy or issuing a life
insurance policy which replaces an existing SGLI policy unless the replacement
shall take effect upon or after the service member's separation from the United
States armed forces.
B. The following acts or practices by
an insurer and or insurance producer regarding disclosure are declared to be
false, misleading, deceptive or unfair:
(1) deploying, using or contracting for any
lead generating materials designed exclusively for use with service members
that do not clearly and conspicuously disclose that the recipient will be
contacted by an insurance producer, if that is the case, for the purpose of
soliciting the purchase of life insurance;
(2) failing to disclose that a solicitation
for the sale of life insurance will be made when establishing a specific
appointment for an in-person, face-to-face meeting with a prospective
purchaser;
(3) excluding individually issued annuities,
failing to clearly and conspicuously disclose the fact that the product being
sold is life insurance;
(4) failing to make, at the time of sale or
offer to an individual known to be a service member, the written disclosures
required by Section 10 of the Military Personnel Financial Services Protection
Act, Pub. L. No. 109-290; or
(5) excluding individually issued annuities,
when the sale is conducted in-person face-to-face with an individual known to
be a service member, failing to provide the applicant at the time the
application is taken:
(a) an explanation of any free
look period with instructions on how to cancel if a policy is issued; and
(b) either a copy of the
application or a written disclosure; the copy of the application or the written
disclosure shall clearly and concisely set out the type of life insurance, the
death benefit applied for and its expected first year cost; a basic
illustration that meets the requirements of 13.9.5 NMAC, Life Insurance
Disclosure and 13.9.14 NMAC, Life Insurance Illustrations shall be deemed
sufficient to meet this requirement for a written disclosure.
[13.9.17.12 NMAC - N, 1/1/08]
13.9.17.13 ACTS
OR PRACTICES REGARDING DISCLOSURE REGARDLESS OF LOCATION: The
following acts or practices by an insurer or insurance producer with respect to
the sale of certain life insurance products are declared to be false,
misleading, deceptive or unfair:
A. excluding individually issued
annuities, recommending the purchase of any life insurance product which
includes a side fund to a service member unless the insurer has reasonable
grounds for believing that the life insurance death benefit, standing alone, is
suitable;
B. offering for sale or selling a life
insurance product which includes a side fund to a service member who is
currently enrolled in SGLI, is presumed unsuitable unless, after the completion
of a needs assessment, the insurer demonstrates that the applicant's SGLI death
benefit, together with any other military survivor benefits, savings and
investments, survivor income, and other life insurance are insufficient to meet
the applicant's insurable needs for life insurance:
(1) "insurable needs" are the risks
associated with premature death taking into consideration the financial
obligations and immediate and future cash needs of the applicant's estate
and/or survivors or dependents;
(2) "other military survivor
benefits" include, but are not limited to: the death gratuity, funeral
reimbursement, transition assistance, survivor and dependents' educational
assistance, dependency and indemnity compensation, “TRICARE” healthcare
benefits, survivor housing benefits and allowances, federal income tax
forgiveness, and social security survivor benefits;
C. excluding individually issued
annuities, offering for sale or selling any life insurance contract which
includes a side fund:
(1) unless interest credited accrues from the
date of deposit to the date of withdrawal and permits withdrawals without limit
or penalty;
(2) unless the applicant has been provided with
a schedule of effective rates of return based upon cash flows of the combined
product; for this disclosure, the effective rate of return will consider all
premiums and cash contributions made by the policyholder and all cash
accumulations and cash surrender values available to the policyholder in
addition to life insurance coverage; this schedule will be provided for at
least each policy year from one (1) to ten (10) and for every fifth policy year
thereafter ending at age 100, policy maturity or final expiration; and
(3) which by default diverts or transfers
funds accumulated in the side fund to pay, reduce or offset any premiums due;
D. excluding individually issued
annuities, offering for sale or selling any life insurance contract which after
considering all policy benefits, including but not limited to endowment, return
of premium or persistency, does not comply with standard nonforfeiture law for
life insurance, Section 59A-20-31 NMSA 1978; or
E. selling any life insurance product
to an individual known to be a service member that excludes coverage if the
insured's death is related to war, declared or undeclared, or any act related
to military service except for an accidental death coverage, e.g., double
indemnity, which may be excluded.
[13.9.17.13 NMAC - N, 1/1/08]
HISTORY OF 13.9.17 NMAC:
[RESERVED]