Replacement of Life Insurance Policies or Annuity Contracts; Compliance with Department Rule 97

Arkansas Insurance Department Mike Beebe Jay Bradford Governor Commissioner 1200 West Third Street, Little Rock, AR 72201-1904 · (501) 371-2600 · (501) 371-2618 fax · www.insurance.arkansas.gov Information (800) 282-9134 · Consumer Services (800) 852-5494 · Seniors (800) 224-6330 · Criminal Inv. (866) 660-0888 March 8, 2010 BULLETIN NO. 1-2010 TO: ALL LIFE INSURERS AND PRODUCERS, THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, TRADE ASSOCIATIONS, AND OTHER INTERESTED PARTIES FROM: ARKANSAS INSURANCE DEPARTMENT RE: REPLACEMENT OF LIFE INSURANCE POLICIES OR ANNUITY CONTRACTS; COMPLIANCE WITH DEPARTMENT RULE 97 On July 23, 2009, the Arkansas Insurance Department (“Department”) issued Bulletin 8-2009 informing the industry and other interested parties of the adoption of Department Rule 97, “Life Insurance and Annuities Replacement.” It has come to the Department’s attention that some companies have interpreted §§4(A) and (B) of Rule 97 to require a Life Insurance and Annuities Replacement Memorandum (“Replacement Memorandum”) not only when coverage is being replaced, but also in all cases in which the potential insured has any existing coverage. This was not the Department’s intent and is contrary to our interpretation. Although §§4(A) and (B) may appear to include existing policies regardless of whether a replacement is contemplated, §§1(A)(1) and (2) clearly state that the purpose of Rule 97 is to regulate the activities of insurers and producers with respect to the replacement of existing life insurance and annuities, and to protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions. Therefore, Rule 97 does not apply in situations where a consumer with an existing policy purchases a new policy while maintaining the existing policy in force. In such cases, the Department will not require a Replacement Memorandum. Questions concerning this Bulletin should be directed to the Arkansas Insurance Department’s Legal Division at (501) 371-2820 or via e-mail to insurance.legal@arkansas.gov. _________________________________ JAY BRADFORD INSURANCE COMMISSIONER STATE OF ARKANSAS March 8, 2010_____________