HAR §16-171-603. Scope and exemptions

(a) This subchapter shall apply only 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. (b) This subchapter 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 insurer 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, when the §16-171-603 171-27 existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the commissioner or when a term conversion privilege is exercised among corporate affiliates; (4) Individual stand-alone health policies, including disability income policies; (5) Except as provided herein, contract 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 ("ERISA"); (B) A plan described by sections 401(a), 401(k), 403(b), 408(k), and 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 a plan sponsor; (E) Settlements or assumptions or liabilities associated with personal injury litigation or any dispute or claim resolution process; or (F) Prearranged funeral contracts. (8) Nothing herein shall be construed to abrogate the ability of nonprofit §16-171-603 171-28 organizations or other organizations to educate members of the United States Armed Forces in accordance with Department of Defense DoD Instruction 1344.07, Personal Commercial Solicitation on DoD Installations, or successor directive. (9) For purposes of this regulation, 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 involves life insurance or an annuity and makes no statements that preclude a clear and unequivocal understanding that life insurance or any annuity is the only subject matter of the solicitation. Provided, however, that nothing in this subsection shall be construed to relieve an insurer or insurance producer from this regulation in any in-person, face-to-face meeting established as a result of the "solicitation" exemptions identified in this subsection. [Eff 03/28/08; comp 1/22/10; comp 12/13/12; am and comp 02/02/17; comp 9/30/21] (Auth: HRS §§431:2-201, 431:2- 201.8) (Imp: HRS §431:1-201.8) §16-171-604 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 §16-171-604 171-29 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, 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 form DD 2885; or (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 a corrupt practice, improper influence, or inducement and are declared to be false, misleading, deceptive or unfair: §16-171-604 171-30 (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. (Eff 03/28/08; comp 1/22/10; comp 12/13/12; am and comp 02/02/17; comp 9/30/21] (Auth: HRS §§431:2-201; 431:2-201.8) (Imp: HRS §431:1-201.8) §16-171-605 Practices declared false, misleading, deceptive, or unfair regardless of location. (a) The following acts or practices by an insurer or insurance producer constitute a corrupt practice, improper influence, or inducement and are declared to be false, misleading, deceptive, or unfair. They include, but are not limited to: (1) 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 that purpose. This subsection does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form; (2) 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 §16-171-605 171-31 relationship. For purposes of this section, a formal banking relationship is established when the depository institution: (A) Provides the service member with a deposit agreement and periodic statements and makes the disclosures required by the Truth in Savings Act, 12 U.S.C. section 4301 et seq. and the regulations promulgated thereunder; and (B) Permits the service member to make deposits and withdrawals unrelated to the payment of processing of insurance premiums; (3) 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); (4) 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; (5) 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 member of those service members; (6) Offering or giving anything of value, directly or indirectly, to DoD personnel to procure their assistance in encouraging, assisting or facilitating the solicitation §16-171-605 171-32 or sale of life insurance to another service member; (7) Knowingly offering or giving anything of value to a service member with a pay grade of E-4 or below for his or her attendance to any event where an application for life insurance is solicited; or (8) Advising a service member with a pay grade of E-4 or below 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. (b) 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. They include, but are not limited to: (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". Nothing herein 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. These §16-171-605 171-33 designations include, but are not limited to, Chartered Life Underwriter ("CLU"), Chartered Financial Consultant ("ChFC"), Certified Financial Planner ("CFP"), Master of Science in Financial Services ("MSFS"), or Masters of Science Financial Planning ("MS"); 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. (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. They include, but are not limited to: (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". (d) The following acts or practices by an insurer or insurance producer regarding SGLI or VGLI are declared to be false, misleading, deceptive, or unfair. They include, but are not limited to: (1) Making any representation regarding the availability, suitability, amount, cost exclusions or limitations to coverage §16-171-605 171-34 provided to a service member or dependents by SGLI or VGLI, which is false, misleading, deceptive, or unfair; (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, deceptive, or unfair; 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. (e) The following acts or practices by an insurer or insurance producer regarding disclosure are declared to be false, misleading, deceptive, or unfair. They include, but are not limited to: (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 insurer or 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 individual known to be a service member, the written disclosures required by §16-171-605 171-35 section 10 of the "Military Personnel Financial Services Protection Act", Pub. L. No. 109-290, at 1323-1324; 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 to 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 chapter 431, article 10D, part IV, HRS, shall be deemed sufficient to meet this requirement for a written disclosure. (f) 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. They include, but are not limited to: (1) Excluding individually issued annuities, recommending the purchase of any life insurance product which includes a side fund to a service member in pay grades E-4 and below, unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable; (2) Offering for sale or selling a life insurance product which includes a side fund to a service member in pay grades E-4 and below, who is currently enrolled in SGLI, is presumed unsuitable, unless, after the completion of a needs assessment, the §16-171-605 171-36 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. For the purposes of this paragraph: (A) "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, survivors or dependents; and (B) "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; (3) Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund: (A) Unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty; (B) 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 §16-171-606 171-37 insurance coverage. This schedule will be provided for at least each policy year from one to ten and for every fifth policy year thereafter ending at age one hundred, policy maturity, or final expiration; and (C) Which by default diverts or transfers funds accumulated in the side fund to pay, reduce, or offset any premiums due; (4) 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; or (5) 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, for example, double indemnity, which may be excluded. (Eff 03/28/08; comp 1/22/10; comp 12/13/12; am and comp 02/02/17; comp 9/30/21] (Auth: HRS §§431:2-201; 431:2- 201.8) (Imp: HRS §431:1-201.8)