TN Insurance Bulletin (2010-06-07): 2009 Tennessee Public Acts, Chapter 178 and 2010 Tennessee Acts, Chapter 713

[LOGO] STATE OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE 500 JAMES ROBERTSON PARKWAY NASHVILLE, TENNESSEE 37243-5065 615-741-6007 PHIL BREDESEN GOVERNOR LESLIE A. NEWMAN COMMISSIONER ## BULLETIN TO: All Life and Health Insurers Doing Business in Tennessee FR: Leslie A. Newman, Commissioner Department of Commerce and Insurance RE: 2009 Tennessee Public Acts, Chapter 178 and 2010 Tennessee Public Acts, Chapter 713 DT: June 7, 2010 The purpose of this Bulletin is to notify all life and health insurers doing business in Tennessee that the attached: Notice Concerning Coverage Under The Tennessee Life and Health Insurance Guaranty Association Act, drafted pursuant to TENN. CODE ANN. § 56-12-218(b) and separate Notice drafted pursuant to TENN. CODE ANN. § 56-12-218(d), are approved for use in Tennessee. Laws were passed during both sessions of the 106 General Assembly affecting the content of the statutorily required notices, and necessitating these new notices to be filed with and approved by the commissioner. TENN. CODE ANN. § 56-12-218 provides that no person, including an insurer, agent or affiliate of an insurer, shall publish in any media the existence of the guaranty association in an effort to induce the purchase of an insurance product covered under the association. Section 218(b) of the Tennessee Life and Health Insurance Guaranty Association Act ("Act") tasks the association with preparing a summary document describing the general purposes and limitations of the association. Section 218(d) requires approval by the commissioner of a notice document to be given to any insured whose policy is specifically excluded from coverage by TENN. CODE ANN. § 56-12-204(b)(2)(A). The attached documents must be in use sixty (60) days from the date of issuance of this bulletin and must be drafted in type not smaller than ten-point. LAN/lnw NOTICE CONCERNING COVERAGE UNDER THE TENNESSEE LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION ACT Residents of Tennessee who purchase life insurance, annuities or health insurance should know that the insurance companies licensed in this state to write these types of insurance are members of the Tennessee Life and Health Insurance Guaranty Association. The purpose of this association is to assure that policyholders will be protected, within limits, in the unlikely event that a member insurer becomes financially unable to meet its obligations. If this should happen, the Guaranty Association will assess its other member insurance companies for the money to pay the claims of insured persons who live in the state and, in some cases, to keep coverage in force. The valuable extra protection provided by these insurers through the Guaranty Association is not unlimited, however. And, as noted below, this protection is not a substitute for consumers' care in selecting companies that are well-managed and financially stable. The state law that provides for this safety-net coverage is called the Tennessee Life and Health Insurance Guaranty Association Act. The following is a brief summary of this law's coverages, exclusions and limits. This summary does not cover all provisions of the law or describe all of the conditions and limitations relating to coverage. This summary does not in any way change anyone's rights or obligations under the act or the rights or obligations of the Guaranty Association. # COVERAGE Generally, individuals will be protected by the Life and Health Insurance Guaranty Association if they live in this state and hold a life or health insurance contract, an annuity, or if they are insured under a group insurance contract issued by an insurer authorized to conduct business in Tennessee. Health insurance includes disability and long term care policies. The beneficiaries, payees or assignees of insured persons are protected as well, even if they live in another state. # EXCLUSIONS FROM COVERAGE However, persons holding such policies are not protected by this Guaranty Association if: (1) they are eligible for protection under the laws of another state (this may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insured who live outside that state); (2) the insurer was not authorized to do business in this state; (3) their policy was issued by an HMO, a fraternal benefit society, a mandatory state pooling plan, a mutual assessment company or similar plan in which the policyholder is subject to future assessments, or by an insurance exchange. The Guaranty Association also does not provide coverage for: (1) any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has assumed the risk, such as a variable contract sold by prospectus; (2) any policy of reinsurance (unless an assumption certificate was issued); (3) interest rate yields that exceed an average rate; (4) dividends; 1 (5) credits given in connection with the administration of a policy by a group contractholder; (6) employers' plans to the extent they are self-funded (that is, not insured by an insurance company, even if an insurance company administers them); (7) unallocated annuity contracts (which give rights to group contractholders, not individuals). ## LIMITS ON AMOUNT OF COVERAGE The act also limits the amount the Guaranty Association is obligated to pay out. The Guaranty Association cannot pay more than what the insurance company would owe under a policy or contract. For any one insured life, the Guaranty Association guarantees payments up to a stated maximum no matter how many policies and contracts there were with the same company, even if they provided different types of coverage. These aggregate limits per life are as follows: - $300,000 for policies and contracts of all types, except as described in the next point - $500,000 for basic hospital, medical and surgical insurance and major medical insurance issued by companies that become insolvent after January 1, 2010 Within these overall limits, the Guaranty Association cannot guarantee payment of benefit greater than the following: - life insurance death benefits - $300,000 - life insurance cash surrender value - $100,000 - present value of annuity benefits for companies insolvent before July 1, 2009 - $100,000 - present value of annuity benefits for companies insolvent after June 30, 2009 - $250,000 - health insurance benefits for companies declared insolvent before January 1, 2010 - $100,000 - health insurance benefits for companies declared insolvent on or after January 1, 2010: - $100,000 for limited benefits and supplemental health coverages - $300,000 for disability and long term care insurance - $500,000 for basic hospital, medical and surgical insurance or major medical insurance 2 The Tennessee Life and Health Insurance Guaranty Association may not provide coverage for this policy. If coverage is provided, it may be subject to substantial limitations or exclusions, and require continued residency in Tennessee. You should not rely on coverage by the Tennessee Life and Health Insurance Guaranty Association in selecting an insurance company or in selecting an insurance policy. Coverage is NOT provided for your policy or any portion of it that is not guaranteed by the insurer for which you have assumed the risk, such as a variable contract sold by prospectus. Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the Guaranty Association to induce you to purchase any kind of insurance policy. Tennessee Life and Health Guaranty Association 1200 One Nashville Place 150 4th Avenue North Nashville, TN 37219 Tennessee Department of Commerce and Insurance 500 James Robertson Parkway Nashville, TN 37243 3 # NOTICE Residents of this state who purchase life insurance, annuities or health insurance should know that the insurance companies licensed in this state to write these types of insurance are members of the Tennessee Life and Health Insurance Guaranty Association. The purpose of this association is to assure that policyholders will be protected, within limits, in the unlikely event that a member insurer becomes financially unable to meet its obligations. If this should happen, the Guaranty Association will assess its other member insurance companies for the money to pay the claims of insured persons who live in this state and, in some cases, to keep coverage in force. The valuable extra protection provided by these insurers through the Guaranty Association is not unlimited, however, and is not available at all for some policies. COVERAGE IS NOT PROVIDED FOR YOUR POLICY OR ANY PORTION OF IT THAT IS NOT GUARANTEED BY THE INSURER OR FOR WHICH YOU HAVE ASSUMED THE RISK, SUCH AS A VARIABLE CONTRACT SOLD BY PROSPECTUS. Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the Guaranty Association to induce you to purchase any kind of insurance policy. Tennessee Life and Health Guaranty Association 1200 One Nashville Place 150 4th Avenue North Nashville, TN 37219 Tennessee Department of Commerce and Insurance 500 James Robertson Parkway Nashville, TN 37243