SF 1581

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to insurance; regulating continuation coverage for life insurance;
authorizing the use of certain mortality tables to calculate reserves for certain
life policies; regulating life insurance policy illustrations and interest rate
disclosures; requiring auto insurers to notify the commissioner of decision to
withdraw from the market; regulating certain notices of cancellation and certain
policy renewals; modifying a definition; amending Minnesota Statutes 2006,
sections 60A.351; 61A.092, subdivision 6; 61A.25, subdivision 4; 65B.17, by
adding a subdivision; 72A.52, subdivision 1; 72B.02, subdivision 7; proposing
coding for new law in Minnesota Statutes, chapter 61A; repealing Minnesota
Statutes 2006, section 45.025, subdivisions 1, 2, 3, 4, 5, 6, 8, 9, 10; Minnesota
Rules, parts 2790.1750; 2790.1751.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2006, section 60A.351, is amended to read:

60A.351 RENEWAL OF INSURANCE POLICY WITH ALTERED RATES.

If an insurance company licensed to do business in this state offers or purports to
offer to renew any commercial liability and/or property insurance policy at less favorable
terms as to the dollar amount of coverage or deductibles, higher rates, and/or higher rating
plan, the new terms, the new rates and/or rating plan may take effect on the renewal date
of the policy if the insurer has sent to the policyholder notice of the new terms, new rates
and/or rating plan at least deleted text begin 60 deleted text end new text begin 30 new text end days prior to the expiration date. If the insurer has not so
notified the policyholder, the policyholder may elect to cancel the renewal policy within
the 60-day period after receipt of the notice. Earned premium for the period of coverage,
if any, shall be calculated pro rata upon the prior rate. This section does not apply to
ocean marine insurance, accident and health insurance, reinsurance, and coverage under
the federal Terrorism Risk Insurance Act.

This section does not apply if the change relates to guide "a" rates or excess rates
also known as "consent to rates" or if there has been any change in the risk insured.

Sec. 2.

Minnesota Statutes 2006, section 61A.092, subdivision 6, is amended to read:

Subd. 6.

Application.

This section applies to a policy, certificate of insurance,
or similar evidence of coverage issued to a Minnesota resident or issued to provide
coverage to a Minnesota resident. This section does not apply to: (1) a certificate of
insurance or similar evidence of coverage that meets the conditions of section 61A.093,
subdivision 2; or (2) a group life insurance policy that contains a provision permitting the
certificate holder, upon termination or layoff from employment, to retain the coverage
provided under the new text begin employer's new text end group policy new text begin or another group policy offered by the insurer
new text end by paying premiums directly to the insurer, provided that the employer shall give the
employee notice of the employee's and each related certificate holder's right to continue
the insurance by paying premiums directly to the insurer. The insurer may reserve the
right to increase premium rates after the first 18 months of continued coverage provided
for under clause (2). A related certificate holder is an insured spouse or dependent child of
the employee. Upon termination of this group policy or at the option of the insured who
has continued coverage under clause (2), each covered employee, spouse, and dependent
child is entitled to have issued to them a life conversion policy as prescribed in section
61A.09, subdivision 1, paragraph (h).

Sec. 3.

Minnesota Statutes 2006, section 61A.25, subdivision 4, is amended to read:

Subd. 4.

Reserve valuation of life insurance and endowment benefits; modified
premiums.

(a) Except as otherwise provided in paragraph (b) and subdivisions 4a and 7,
reserves according to the commissioners reserve valuation method, for the life insurance
and endowment benefits of policies providing for a uniform amount of insurance and
requiring the payment of uniform premiums shall be the excess, if any, of the present value
at the date of valuation of future guaranteed benefits provided for by the policies over
the then present value of any future modified net premiums therefor. The modified net
premiums for a policy shall be the uniform percentage of the respective contract premiums
for the benefits that the present value, at the date of issue of the policy, of all the modified
net premiums shall be equal to the sum of the then present value of the benefits provided
for by the policy and the excess of clause (1) over clause (2) as follows:

(1) a net level annual premium equal to the present value, at the date of issue, of the
benefits provided for after the first policy year, divided by the present value at the date of
issue of an annuity of one per annum payable on the first and each subsequent anniversary
of the policy on which a premium falls due; but the net level annual premium shall not
exceed the net level annual premium on the 19 year premium whole life plan for insurance
of the same amount at an age one year higher than the age at issue of the policy;

(2) a net one year term premium for the benefits provided for in the first policy year.

(b) For a life insurance policy issued on or after January 1, 1985, for which the
contract premium in the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for the excess and which
provides an endowment benefit or a cash surrender value or a combination thereof in an
amount greater than the excess premium, the reserve according to the commissioners
reserve valuation method as of a policy anniversary occurring on or before the assumed
ending date defined herein as the first policy anniversary on which the sum of any
endowment benefit and any cash surrender value then available is greater than the excess
premium shall, except as otherwise provided in subdivision 7, be the greater of the reserve
as of the policy anniversary calculated as described in paragraph (a) and the reserve as
of the policy anniversary calculated as described in that paragraph, but with the value
defined in clause (1) of that paragraph being reduced by 15 percent of the amount of the
excess first year premium; all present values of benefits and premiums being determined
without reference to premiums or benefits provided for by the policy after the assumed
ending date; the policy being assumed to mature on that date as an endowment; and the
cash surrender value provided on that date being considered as an endowment benefit.
In making the above comparison the mortality and interest bases stated in subdivisions
3 and 3b shall be used.

(c) Reserves according to the commissioners reserve valuation method for (1) life
insurance policies providing for a varying amount of insurance or requiring the payment
of varying premiums, (2) group annuity and pure endowment contracts purchased under
a retirement plan or plan of deferred compensation, established or maintained by an
employer, including but not limited to a partnership or sole proprietorship, or by an
employee organization, or by both, other than a plan providing individual retirement
accounts or individual retirement annuities under Section 408 of the Internal Revenue
Code, as amended, (3) disability and accidental death benefits in all policies and contracts,
and (4) all other benefits, except life insurance and endowment benefits in life insurance
policies and benefits provided by all other annuity and pure endowment contracts, shall be
calculated by a method consistent with the principles of paragraphs (a) and (b), except
that any extra premiums charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.

new text begin (d) For a universal life insurance policy that guarantees coverage to remain in
force as long as the accumulation of premiums paid satisfies a secondary guarantee
requirement, reserves according to the commissioners reserve valuation method may be
calculated using a lapse assumption only in accordance with and in the circumstances
described in the National Association of Insurance Commissioners' accounting practices
and procedures manual for policies issued on or after January 1, 2007, and on or before
December 31, 2010.
new text end

Sec. 4.

new text begin [61A.257] PREFERRED MORTALITY TABLES FOR USE IN
DETERMINING MINIMUM RESERVE LIABILITIES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section only, the following
terms have the meanings given them.
new text end

new text begin (b) "2001 CSO Mortality Table" means that mortality table, consisting of separate
rates of mortality for male and female lives, developed by the American Academy of
Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the
Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and
adopted by the NAIC in December 2002. The 2001 CSO Mortality Table is included in
the Proceedings of the NAIC (2nd Quarter 2002) and supplemented by the 2001 CSO
Preferred Class Structure Mortality Table defined in paragraph (b). Unless the context
indicates otherwise, the "2001 CSO Mortality Table" includes both the ultimate form of
that table and the select and ultimate form of that table and includes both the smoker and
nonsmoker mortality tables and the composite mortality tables. It also includes both the
age-nearest-birthday and age-last-birthday bases of the mortality tables. Mortality tables
in the 2001 CSO Mortality Table include the following:
new text end

new text begin (1) "2001 CSO Mortality Table (F)" means that mortality table consisting of the rates
of mortality for female lives from the 2001 CSO Mortality Table;
new text end

new text begin (2) "2001 CSO Mortality Table (M)" means that mortality table consisting of the
rates of mortality for male lives from the 2001 CSO Mortality Table;
new text end

new text begin (3) "composite mortality tables" means mortality tables with rates of mortality that
do not distinguish between smokers and nonsmokers; and
new text end

new text begin (4) "smoker and nonsmoker mortality tables" means mortality tables with separate
rates of mortality for smokers and nonsmokers.
new text end

new text begin (c) "2001 CSO Preferred Class Structure Mortality Table" means mortality tables
with separate rates of mortality for Super Preferred Nonsmokers, Preferred Nonsmokers,
Residual Standard Nonsmokers, Preferred Smokers, and Residual Standard Smoker splits
of the 2001 CSO Nonsmoker and Smoker Tables as adopted by the NAIC at the September
2006 national meeting and published in the NAIC Proceedings (3rd Quarter 2006). Unless
the context indicates otherwise, the "2001 CSO Preferred Class Structure Mortality Table"
includes both the ultimate form of that table and the select and ultimate form of that
table, the smoker and nonsmoker mortality tables, both the male and female mortality
tables and the gender composite mortality tables, and both the age-nearest-birthday and
age-last-birthday bases of the mortality table.
new text end

new text begin (d) "Statistical agent" means an entity with proven systems for protecting the
confidentiality of individual insured and insurer information; demonstrated resources
for and history of ongoing electronic communications and data transfer ensuring data
integrity with insurers, which are its members or subscribers; and a history of and means
for aggregation of data and accurate promulgation of the experience modifications in a
timely manner.
new text end

new text begin Subd. 2. new text end

new text begin 2001 CSO Preferred Class Structure Table. new text end

new text begin At the election of the
insurer, for each calendar year of issue, for any one or more specified plans of insurance
and subject to satisfying the conditions stated in this section, the 2001 CSO Preferred
Class Structure Mortality Table may be substituted in place of the 2001 CSO Smoker or
Nonsmoker Mortality Table as the minimum valuation standard under section 61A.25 for
policies issued on or after January 1, 2007. No such election must be made until the
insurer demonstrates at least 20 percent of the business to be valued on this table is in one
or more of the preferred classes. A table from the 2001 CSO Preferred Class Structure
Mortality Table used in place of a 2001 CSO Mortality Table, pursuant to the requirements
of this section, will be treated as part of the 2001 CSO Mortality Table only for purposes
of reserve valuation pursuant to section 61A.25 and Minnesota Rules, chapter 2748.
new text end

new text begin Subd. 3. new text end

new text begin Conditions. new text end

new text begin (a) For each plan of insurance with separate rates for preferred
and standard nonsmoker lives, an insurer may use the Super Preferred Nonsmoker,
Preferred Nonsmoker, and Residual Standard Nonsmoker Tables to substitute for the
Nonsmoker Mortality Table found in the 2001 CSO Mortality Table to determine minimum
reserves. At the time of election and annually thereafter, except for business valued under
the Residual Standard Nonsmoker Table, the qualified actuary shall certify that:
new text end

new text begin (1) the present value of death benefits over the next ten years after the valuation date,
using the anticipated mortality experience without recognition of mortality improvement
beyond the valuation date for each class, is less than the present value of death benefits
using the valuation basic table corresponding to the valuation table being used for that
class; and
new text end

new text begin (2) the present value of death benefits over the future life of the contracts, using
anticipated mortality experience without recognition of mortality improvement beyond
the valuation date for each class, is less than the present value of death benefits using the
valuation basic table corresponding to the valuation table being used for that class.
new text end

new text begin (b) For each plan of insurance with separate rates for preferred and standard smoker
lives, an insurer may use the Preferred Smoker and Residual Standard Smoker Tables to
substitute for the Smoker Mortality Table found in the 2001 CSO Mortality Table to
determine minimum reserves. At the time of election and annually thereafter, for business
valued under the Preferred Smoker Table, the qualified actuary shall certify that:
new text end

new text begin (1) the present value of death benefits over the next ten years after the valuation date,
using the anticipated mortality experience without recognition of mortality improvement
beyond the valuation date for each class, is less than the present value of death benefits
using the Preferred Smoker Valuation Basic Table corresponding to the valuation table
being used for that class; and
new text end

new text begin (2) the present value of death benefits over the future life of the contracts, using
anticipated mortality experience without recognition of mortality improvement beyond
the valuation date for each class, is less than the present value of death benefits using the
Preferred Smoker Valuation Basic Table.
new text end

new text begin (c) Unless exempted by the commissioner, every authorized insurer using the 2001
CSO Preferred Class Structure Table shall annually file with the commissioner, the
NAIC, or a statistical agent designated by the NAIC and acceptable to the commissioner,
statistical reports showing mortality and such other information as the commissioner may
deem necessary or expedient for the administration of the provisions of this section. The
form of the reports shall be established by the commissioner or the commissioner may
require the use of a form established by the NAIC or by a statistical agent designated by
the NAIC and acceptable to the commissioner.
new text end

Sec. 5.

new text begin [61A.70] APPLICABILITY AND SCOPE.
new text end

new text begin Sections 61A.70 to 61A.745 apply to all group and individual life insurance policies
and certificates except:
new text end

new text begin (1) variable life insurance;
new text end

new text begin (2) individual and group annuity contracts;
new text end

new text begin (3) credit life insurance; or
new text end

new text begin (4) life insurance policies with no illustrated death benefits on any individual
exceeding $10,000.
new text end

Sec. 6.

new text begin [61A.705] DEFINITIONS.
new text end

new text begin For the purposes of sections 61A.70 to 61A.745:
new text end

new text begin (a) "Actuarial Standards Board" means the board established by the American
Academy of Actuaries to develop and promulgate standards of actuarial practice.
new text end

new text begin (b) "Contract premium" means the gross premium that is required to be paid under
a fixed premium policy, including the premium for a rider for which benefits are shown
in the illustration.
new text end

new text begin (c) "Currently payable scale" means a scale of nonguaranteed elements in effect for
a policy form as of the preparation date of the illustration or declared to become effective
within the next 95 days.
new text end

new text begin (d) "Disciplined current scale" means a scale of nonguaranteed elements constituting
a limit on illustrations currently being illustrated by an insurer that is reasonably based
on actual recent historical experience, as certified annually by an illustration actuary
designated by the insurer. Further guidance in determining the disciplined current scale
as contained in standards established by the Actuarial Standards Board may be relied
upon if the standards:
new text end

new text begin (1) are consistent with all provisions of sections 61A.70 to 61A.745;
new text end

new text begin (2) limit a disciplined current scale to reflect only actions that have already been
taken or events that have already occurred;
new text end

new text begin (3) do not permit a disciplined current scale to include any projected trends of
improvements in experience or any assumed improvements in experience beyond the
illustration date; and
new text end

new text begin (4) do not permit assumed expenses to be less than minimum assumed expenses.
new text end

new text begin (e) "Generic name" means a short title descriptive of the policy being illustrated such
as "whole life," "term life," or "flexible premium adjustable life."
new text end

new text begin (f) "Guaranteed elements" and "nonguaranteed elements" are defined as follows:
new text end

new text begin (1) "guaranteed elements" means the premiums, benefits, values, credits, or charges
under a policy of life insurance that are guaranteed and determined at issue; and
new text end

new text begin (2) "nonguaranteed elements" means the premiums, benefits, values, credits, or
charges under a policy of life insurance that are not guaranteed or not determined at issue.
new text end

new text begin (g) "Illustrated scale" means a scale of nonguaranteed elements currently being
illustrated that is not more favorable to the policy owner than the lesser of:
new text end

new text begin (1) the disciplined current scale; or
new text end

new text begin (2) the currently payable scale.
new text end

new text begin (h) "Illustration" means a presentation or depiction that includes nonguaranteed
elements of a policy of life insurance over a period of years and that is one of the three
types defined in clauses (1) to (3):
new text end

new text begin (1) "basic illustration" means a ledger or proposal used in the sale of a life insurance
policy that shows both guaranteed and nonguaranteed elements;
new text end

new text begin (2) "supplemental illustration" means an illustration furnished in addition to a basic
illustration that meets the applicable requirements of sections 61A.70 to 61A.745, and that
may be presented in a format differing from the basic illustration, but may only depict a
scale of nonguaranteed elements that is permitted in a basic function; and
new text end

new text begin (3) "in-force illustration" means an illustration furnished at any time after the policy
that it depicts has been in force for one year or more.
new text end

new text begin (i) "Illustration actuary" means an actuary meeting the requirements of section 11
who certifies to illustrations based on the standard of practice adopted by the Actuarial
Standards Board.
new text end

new text begin (j) "Lapse-supported illustration" means an illustration of a policy form failing
the test of self-supporting as defined in sections 61A.70 to 61A.745, under a modified
persistency rate assumption using persistency rates underlying the disciplined current
scale for the first five years and 100 percent policy persistency thereafter.
new text end

new text begin (k)(1) "Minimum assumed expenses" means the minimum expenses that may be
used in the calculation of the disciplined current scale for a policy form. The insurer
may choose to designate each year the method of determining assumed expenses for all
policy forms from the following:
new text end

new text begin (i) fully allocated expenses;
new text end

new text begin (ii) marginal expenses; and
new text end

new text begin (iii) a generally recognized expense table based on fully allocated expenses
representing a significant portion of insurance companies and approved by the National
Association of Insurance Commissioners or by the commissioner.
new text end

new text begin (2) Marginal expenses may be used only if greater than a generally recognized
expense table. If no generally recognized expense table is approved, fully allocated
expenses must be used.
new text end

new text begin (l) "Nonterm group life" means a group policy or individual policies of life insurance
issued to members of an employer group or other permitted group where:
new text end

new text begin (1) every plan of coverage was selected by the employer or other group
representative;
new text end

new text begin (2) some portion of the premium is paid by the group or through payroll deduction;
and
new text end

new text begin (3) group underwriting or simplified underwriting is used.
new text end

new text begin (m) "Policy owner" means the owner named in the policy or the certificate holder in
the case of a group policy.
new text end

new text begin (n) "Premium outlay" means the amount of premium assumed to be paid by the
policy owner or other premium payer out-of-pocket.
new text end

new text begin (o) "Self-supporting illustration" means an illustration of a policy form for which it
can be demonstrated that, when using experience assumptions underlying the disciplined
current scale, for all illustrated points in time on or after the 15th policy anniversary or the
20th policy anniversary for second-or-later-to-die policies (or upon policy expiration if
sooner), the accumulated value of all policy cash flows equals or exceeds the total policy
owner value available. For this purpose, policy owner value will include cash surrender
values and any other illustrated benefit amounts available at the policy owner's election.
new text end

Sec. 7.

new text begin [61A.71] POLICIES TO BE ILLUSTRATED.
new text end

new text begin (a) Each insurer marketing policies to which sections 61A.70 to 61A.745 are
applicable shall notify the commissioner whether a policy form is to be marketed with
or without an illustration. For all policy forms being actively marketed on the effective
date of sections 61A.70 to 61A.745, the insurer shall identify in writing those forms and
whether or not an illustration will be used with them. For policy forms filed after the
effective date of sections 61A.70 to 61A.745, the identification must be made at the time
of filing. Any previous identification may be changed by notice to the commissioner.
new text end

new text begin (b) If the insurer identifies a policy form as one to be marketed without an
illustration, any use of an illustration for any policy using that form prior to the first
policy anniversary is prohibited.
new text end

new text begin (c) If a policy form is identified by the insurer as one to be marketed with an
illustration, a basic illustration prepared and delivered in accordance with sections
61A.70 to 61A.745 is required, except that a basic illustration need not be provided to
individual members of a group or to individuals insured under multiple lives coverage
issued to a single applicant unless the coverage is marketed to these individuals. The
illustration furnished an applicant for a group life insurance policy or policies issued to a
single applicant on multiple lives may be either an individual or composite illustration
representative of the coverage on the lives of member of the group or the multiple lives
covered.
new text end

new text begin (d) Potential enrollees of nonterm group life subject to this regulation shall be
furnished a quotation with the enrollment materials. The quotation must show potential
policy values for sample ages and policy years on a guaranteed and nonguaranteed basis
appropriate to the group and the coverage. This quotation must not be considered an
illustration for purposes of sections 61A.70 to 61A.745, but all information provided shall
be consistent with the illustrated scale. A basic illustration must be provided at delivery of
the certificate to enrollees for nonterm group life who enroll for more than the minimum
premium necessary to provide pure death benefit protection. In addition, the insurer shall
make a basic illustration available to any nonterm group life enrollee who requests it.
new text end

Sec. 8.

new text begin [61A.715] GENERAL RULES AND PROHIBITIONS.
new text end

new text begin (a) An illustration used in the sale of a life insurance policy must satisfy the
applicable requirements of sections 61A.70 to 61A.745, be clearly labeled "life insurance
illustration," and contain the following basic information:
new text end

new text begin (1) name of insurer;
new text end

new text begin (2) name and business address of producer or insurer's authorized representative, if
any;
new text end

new text begin (3) name, age, and sex of proposed insured, except where a composite illustration is
permitted under sections 61A.70 to 61A.745;
new text end

new text begin (4) underwriting or rating classification upon which the illustration is based;
new text end

new text begin (5) generic name of policy, the company product name, if different, and form
number;
new text end

new text begin (6) initial death benefit; and
new text end

new text begin (7) dividend option election or application of nonguaranteed elements, if applicable.
new text end

new text begin (b) When using an illustration in the sale of a life insurance policy, an insurer or
its producers or other authorized representatives shall not:
new text end

new text begin (1) represent the policy as anything other than a life insurance policy;
new text end

new text begin (2) use or describe nonguaranteed elements in a manner that is misleading or has the
capacity or tendency to mislead;
new text end

new text begin (3) state or imply that the payment or amount of nonguaranteed elements is
guaranteed;
new text end

new text begin (4) use an illustration that does not comply with the requirements of sections 61A.70
to 61A.745;
new text end

new text begin (5) use an illustration that at any policy duration depicts policy performance more
favorable to the policy owner than that produced by the illustrated scale of the insurer
whose policy is being illustrated;
new text end

new text begin (6) provide an applicant with an incomplete illustration;
new text end

new text begin (7) represent in any way that premium payments will not be required for each year
of the policy in order to maintain the illustrated death benefits, unless that is the fact;
new text end

new text begin (8) use the term "vanish" or "vanishing premium," or a similar term that implies the
policy becomes paid up, to describe a plan for using nonguaranteed elements to pay a
portion of future premiums;
new text end

new text begin (9) except for policies that can never develop nonforfeiture values, use an illustration
that is "lapse-supported"; or
new text end

new text begin (10) use an illustration that is not "self-supporting."
new text end

new text begin (c) If an interest rate used to determine the illustrated nonguaranteed elements is
shown, it must not be greater than the earned interest rate underlying the disciplined
current scale.
new text end

Sec. 9.

new text begin [61A.72] STANDARDS FOR BASIC ILLUSTRATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Format. new text end

new text begin A basic illustration must conform with the following
requirements:
new text end

new text begin (1) the illustration must be labeled with the date on which it was prepared;
new text end

new text begin (2) each page, including any explanatory notes or pages, must be numbered and
show its relationship to the total number of pages in the illustration (e.g., the fourth page
of a seven-page illustration must be labeled "page 4 of 7 pages");
new text end

new text begin (3) the assumed dates of payment receipt and benefit payout within a policy year
must be clearly identified;
new text end

new text begin (4) if the age of the proposed insured is shown as a component of the tabular detail,
it must be issue age plus the number of years the policy is assumed to have been in force;
new text end

new text begin (5) the assumed payments on which the illustrated benefits and values are based
must be identified as premium outlay or contract premium, as applicable. For policies that
do not require a specific contract premium, the illustrated payments must be identified
as premium outlay;
new text end

new text begin (6) guaranteed death benefits and values available upon surrender, if any, for the
illustrated premium outlay or contract premium must be shown and clearly labeled
guaranteed;
new text end

new text begin (7) if the illustration shows any nonguaranteed elements, they cannot be based on a
scale more favorable to the policy owner than the insurer's illustrated scale at any duration.
These elements must be clearly labeled nonguaranteed;
new text end

new text begin (8) the guaranteed elements, if any, must be shown before corresponding
nonguaranteed elements and must be specifically referred to on any page of an illustration
that shows or describes only the nonguaranteed elements (e.g., "see page one for
guaranteed elements");
new text end

new text begin (9) the account or accumulation value of a policy, if shown, must be identified by the
name this value is given in the policy being illustrated and shown in close proximity to the
corresponding value available upon surrender;
new text end

new text begin (10) the value available upon surrender must be identified by the name this value
is given in the policy being illustrated and must be the amount available to the policy
owner in a lump sum after deduction of surrender charges, policy loans, and policy loan
interest, as applicable;
new text end

new text begin (11) illustrations may show policy benefits and values in graphic or chart form
in addition to the tabular form;
new text end

new text begin (12) any illustration of nonguaranteed elements shall be accompanied by a statement
indicating that:
new text end

new text begin (i) the benefits and values are not guaranteed;
new text end

new text begin (ii) the assumptions on which they are based are subject to change by the insurer; and
new text end

new text begin (iii) actual results may be more or less favorable;
new text end

new text begin (13) if the illustration shows that the premium payer may have the option to allow
policy charges to be paid using nonguaranteed values, the illustration must clearly disclose
that a charge continues to be required and that, depending on actual results, the premium
payer may need to continue or resume premium outlays. Similar disclosure must be made
for premium outlay of lesser amounts or shorter durations than the contract premium. If a
contract premium is due, the premium outlay display must not be left blank or show zero
unless accompanied by an asterisk or similar mark to draw attention to the fact that the
policy is not paid up; and
new text end

new text begin (14) if the applicant plans to use dividends or policy values, guaranteed or
nonguaranteed, to pay all or a portion of the contract premium or policy charges, or for
any other purpose, the illustration may reflect those plans and the impact on future policy
benefits and values.
new text end

new text begin Subd. 2. new text end

new text begin Narrative summary. new text end

new text begin A basic illustration must include the following:
new text end

new text begin (1) a brief description of the policy being illustrated, including a statement that it
is a life insurance policy;
new text end

new text begin (2) a brief description of the premium outlay or contract premium, as applicable,
for the policy. For a policy that does not require payment of a specific contract premium,
the illustration shall show the premium outlay that must be paid to guarantee coverage
for the term of the contract, subject to maximum premiums allowable to qualify as a life
insurance policy under the applicable provisions of the Internal Revenue Code;
new text end

new text begin (3) a brief description of any policy features, riders, or options, guaranteed or
nonguaranteed, shown in the basic illustration and the impact they may have on the
benefits and values of the policy;
new text end

new text begin (4) identification and a brief definition of column headings and key terms used in
the illustration; and
new text end

new text begin (5) a statement containing in substance the following: "This illustration assumes
that the currently illustrated nonguaranteed elements will continue unchanged for all
years shown. This is not likely to occur, and actual results may be more or less favorable
than those shown."
new text end

new text begin Subd. 3. new text end

new text begin Numeric summary. new text end

new text begin (a) Following the narrative summary, a basic
illustration must include a numeric summary of the death benefits and values and the
premium outlay and contract premium, as applicable. For a policy that provides for a
contract premium, the guaranteed death benefits and values must be based on the contract
premium. This summary must be shown for at least policy years five, ten, and 20 and at
age 70, if applicable, on the three bases shown in clauses (1) to (3). For multiple life
policies the summary must show policy years five, ten, 20, and 30:
new text end

new text begin (1) policy guarantees;
new text end

new text begin (2) insurer's illustrated scale; and
new text end

new text begin (3) insurer's illustrated scale used but with the nonguaranteed elements reduced
as follows:
new text end

new text begin (i) dividends at 50 percent of the dividends contained in the illustrated scale used;
new text end

new text begin (ii) nonguaranteed credited interest at rates that are the average of the guaranteed
rates and the rates contained in the illustrated scale used; and
new text end

new text begin (iii) all nonguaranteed charges, including but not limited to term insurance charges,
mortality, and expense charges at rates that are the average of the guaranteed rates and the
rates contained in the illustrated scale used.
new text end

new text begin (b) In addition, if coverage would cease prior to policy maturity or age 100, the year
in which coverage ceases must be identified for each of the three bases.
new text end

new text begin Subd. 4. new text end

new text begin Statements. new text end

new text begin (a) Statements substantially similar to paragraphs (b) and (c)
must be included on the same page as the numeric summary and signed by the applicant or
the policy owner in the case of an illustration provided at time of delivery, as required
in sections 61A.70 to 61A.745.
new text end

new text begin (b) A statement to be signed and dated by the applicant or policy owner reading as
follows: "I have received a copy of this illustration and understand that any nonguaranteed
elements illustrated are subject to change and could be either higher or lower. The agent
has told me they are not guaranteed."
new text end

new text begin (c) A statement to be signed and dated by the insurance producer or other authorized
representative of the insurer reading as follows: "I certify that this illustration has been
presented to the applicant and that I have explained that any nonguaranteed elements
illustrated are subject to change. I have made no statements that are inconsistent with
the illustration."
new text end

new text begin Subd. 5. new text end

new text begin Tabular detail. new text end

new text begin (a) A basic illustration must include the following for at
least each policy year from one to ten and for every fifth policy year thereafter ending at
age 100, policy maturity or final expiration; and except for term insurance beyond the 20th
year, for any year in which the premium outlay and contract premium, if applicable, is
subject to change:
new text end

new text begin (1) the premium outlay and mode the applicant plans to pay and the contract
premium, as applicable;
new text end

new text begin (2) the corresponding guaranteed death benefit, as provided in the policy; and
new text end

new text begin (3) the corresponding guaranteed value available upon surrender, as provided
in the policy.
new text end

new text begin (b) For a policy that provides for a contract premium, the guaranteed death benefit
and value available upon surrender must correspond to the contract premium.
new text end

new text begin (c) Nonguaranteed elements may be shown if described in the contract. In the case
of an illustration for a policy on which the insurer intends to credit terminal dividends,
they may be shown if the insurer's current practice is to pay terminal dividends. If any
nonguaranteed elements are shown they must be down at the same durations as the
corresponding guaranteed elements, if any. If no guaranteed benefit or value is available
at any duration for which a nonguaranteed benefit or value is shown, a zero must be
displayed in the guaranteed column.
new text end

Sec. 10.

new text begin [61A.725] STANDARDS FOR SUPPLEMENTAL ILLUSTRATIONS.
new text end

new text begin (a) A supplemental illustration may be provided so long as:
new text end

new text begin (1) it is appended to, accompanied by, or preceded by a basic illustration that
complies with sections 61A.70 to 61A.745;
new text end

new text begin (2) the nonguaranteed elements shown are not more favorable to the policy owner
than the corresponding elements based on the scale used in the basic illustration.
new text end

new text begin (3) it contains the same statement required of a basic illustration that nonguaranteed
elements are not guaranteed; and
new text end

new text begin (4) for a policy that has a contract premium, the contract premium underlying the
supplemental illustration is equal to the contract premium shown in the basic illustration.
For policies that do not require a contract premium, the premium outlay underlying
the supplemental illustration must be equal to the premium outlay shown in the basic
illustration.
new text end

new text begin (b) The supplemental illustration must include a notice referring to the basic
illustration for guaranteed elements and other important information.
new text end

Sec. 11.

new text begin [61A.73] DELIVERY OF ILLUSTRATION AND RECORD
RETENTION.
new text end

new text begin (a)(1) If a basic illustration is used by an insurance producer or other authorized
representative of the insurer in the sale of a life insurance policy and the policy is applied
for as illustrated, a copy of that illustration, signed in accordance with sections 61A.70 to
61A.745, must be submitted to the insurer at the time of policy application. A copy also
must be provided to the applicant.
new text end

new text begin (2) If the policy is issued other than as applied for, a revised basic illustration
conforming to the policy as issued must be sent with the policy. The revised illustration
must conform to the requirements of sections 61A.70 to 61A.745, must be labeled
"Revised Illustration," and must be signed and dated by the applicant or policy owner and
producer or other authorized representative of the insurer no later than the time the policy
is delivered. A copy must be provided to the insurer and the policy owner.
new text end

new text begin (b)(1) If no illustration is used by an insurance producer or other authorized
representative in the sale of a life insurance policy or if the policy is applied for other
than as illustrated, the producer or representative shall certify to that effect in writing
on a form provided by the insurer. On the same form the applicant shall acknowledge
that no illustration conforming to the policy applied for was provided and shall further
acknowledge an understanding that an illustration conforming to the policy as issued will
be provided no later than at the time of policy delivery. This form shall be submitted to the
insurer at the time of policy application.
new text end

new text begin (2) If the policy is issued, a basic illustration conforming to the policy as issued must
be sent with the policy and signed no later than the time the policy is delivered. A copy
must be provided to the insurer and the policy owner.
new text end

new text begin (c) If the basic illustration or revised illustration is sent to the applicant or policy
owner by mail from the insurer, it must include instructions for the applicant or policy
owner to sign the duplicate copy of the numeric summary page of the illustration for the
policy issued and return the signed copy to the insurer. The insurer's obligation under this
paragraph must be satisfied if it can demonstrate that it has made a diligent effort to secure
a signed copy of the numeric summary page. The requirement to make a diligent effort
must be deemed satisfied if the insurer includes in the mailing a self-addressed postage
prepaid envelope with instructions for the return of the signed numeric summary page.
new text end

new text begin (d) A copy of the basic illustration and a revised basic illustration, if any, signed as
applicable, along with any certification that either no illustration was used or that the policy
was applied for other than as illustrated, must be retained by the insurer until three years
after the policy is no longer in force. A copy need not be retained if no policy is issued.
new text end

Sec. 12.

new text begin [61A.735] ANNUAL REPORT; NOTICE TO POLICY OWNERS.
new text end

new text begin (a) In the case of a policy designated as one for which illustrations will be used, the
insurer shall provide each policy owner with an annual report on the status of the policy
that must contain at least the information in this section.
new text end

new text begin (b) For universal life policies, the report must include the following:
new text end

new text begin (1) the beginning and end date of the current report period;
new text end

new text begin (2) the policy value at the end of the previous report period and at the end of the
current report period;
new text end

new text begin (3) the total amounts that have been credited or debited to the policy value during
the current report period, identifying each by type (e.g., interest, mortality, expense, and
riders);
new text end

new text begin (4) the current death benefit at the end of the current report period on each life
covered by the policy;
new text end

new text begin (5) the net cash surrender value of the policy as of the end of the current report period;
new text end

new text begin (6) the amount of outstanding loans, if any, as of the end of the current report period;
new text end

new text begin (7) for fixed premium policies, assuming guaranteed interest, mortality, and expense
loads and continued scheduled premium payments, the policy's net cash surrender value
is such that it would not maintain insurance in force until the end of the next reporting
period, a notice to this effect must be included in the report; or
new text end

new text begin (8) for flexible premium policies, assuming guaranteed interest, mortality, and
expense loads, the policy's net cash surrender value will not maintain insurance in force
until the end of the next reporting period unless further premium payments are made, a
notice to this effect must be included in the report.
new text end

new text begin (b) For all other policies, the report must include where applicable:
new text end

new text begin (1) current death benefit;
new text end

new text begin (2) annual contract premium;
new text end

new text begin (3) current cash surrender value;
new text end

new text begin (4) current dividend;
new text end

new text begin (5) application of current dividend; and
new text end

new text begin (6) amount of outstanding loan.
new text end

new text begin (c) Insurers writing life insurance policies that do not build nonforfeiture values shall
only be required to provide an annual report with respect to these policies for those years
when a change has been made to nonguaranteed policy elements by the insurer.
new text end

new text begin (d) If the annual report does not include an in-force illustration, it must contain the
following notice displayed prominently: "IMPORTANT POLICY OWNER NOTICE:
You should consider requesting more detailed information about your policy to understand
how it may perform in the future. You should not consider replacement of your policy
or make changes in your coverage without requesting a current illustration. You may
annually request, without charge, such an illustration by calling [insurer's phone number],
writing to [insurer's name] at [insurer's address] or contacting your agent. If you do not
receive a current illustration of your policy within 30 days from your request, you should
contact your state insurance department." The insurer may vary the sequential order of the
methods for obtaining an in-force illustration.
new text end

new text begin (e) Upon request of the policy owner, the insurer shall furnish an in-force illustration
of current and future benefits and values based on the insurer's present illustrated scale.
This illustration must comply with the requirements of sections 61A.715, paragraphs (a)
and (b), and 61A.72, subdivisions 1 and 5. No signature or other acknowledgment of
receipt of this illustration must be required.
new text end

new text begin (f) If an adverse change in nonguaranteed elements that could affect the policy has
been made by the insurer since the last annual report, the annual report must contain a
notice of that fact and the nature of the change prominently displayed.
new text end

Sec. 13.

new text begin [61A.74] ANNUAL CERTIFICATIONS.
new text end

new text begin (a) The board of directors of each insurer shall appoint one or more illustration
actuaries.
new text end

new text begin (b) The illustration actuary shall certify that the disciplined current scale used in
illustrations is in conformity with the Actuarial Standard of Practice for Compliance with
the NAIC Model Regulation on Life Insurance Illustrations promulgated by the Actuarial
Standards Board, and that the illustrated scales used in insurer-authorized illustrations
meet the requirements of sections 61A.70 to 61A.745.
new text end

new text begin (c) The illustration actuary shall:
new text end

new text begin (1) be a member in good standing of the American Academy of Actuaries;
new text end

new text begin (2) be familiar with the standard of practice regarding life insurance policy
illustrations;
new text end

new text begin (3) not have been found by the commissioner, following appropriate notice and
hearing to have:
new text end

new text begin (i) violated any provision of, or any obligation imposed by, the insurance law or
other law in the course of the actuary's dealings as an illustration actuary;
new text end

new text begin (ii) been found guilty of fraudulent or dishonest practices;
new text end

new text begin (iii) demonstrated the actuary's incompetence, lack of cooperation, or
untrustworthiness to act as an illustration actuary; or
new text end

new text begin (iv) resigned or been removed as an illustration actuary within the past five years as
a result of acts or omissions indicated in any adverse report on examination or as a result
of a failure to adhere to generally acceptable actuarial standards;
new text end

new text begin (4) not fail to notify the commissioner of any action taken by a commissioner of
another state similar to that under clause (3);
new text end

new text begin (5) disclose in the annual certification whether, since the last certification, a currently
payable scale applicable for business issued within the previous five years and within
the scope of the certification has been reduced for reasons other than changes in the
experience factors underlying the disciplined current scale. If nonguaranteed elements
illustrated for new policies are not consistent with those illustrated for similar in-force
policies, this must be disclosed in the annual certification. If nonguaranteed elements
illustrated for both new and in-force policies are not consistent with the nonguaranteed
elements actually being paid, charged, or credited to the same or similar forms, this must
be disclosed in the annual certification; and
new text end

new text begin (6) disclose in the annual certification the method used to allocate overhead expenses
for all illustrations:
new text end

new text begin (i) fully allocated expenses;
new text end

new text begin (ii) marginal expenses; or
new text end

new text begin (iii) a generally recognized expense table based on fully allocated expenses
representing a significant portion of insurance companies and approved by the National
Association of Insurance Commissioners or by the commissioner.
new text end

new text begin (d)(1) The illustration actuary shall file a certification with the board and with the
commissioner:
new text end

new text begin (i) annually for all policy forms for which illustrations are used; and
new text end

new text begin (ii) before a new policy form is illustrated.
new text end

new text begin (2) If an error in a previous certification is discovered, the illustration actuary shall
notify the board of directors of the insurer and the commissioner promptly.
new text end

new text begin (e) If an illustration actuary is unable to certify the scale for any policy form
illustration the insurer intends to use, the actuary shall notify the board of directors of the
insurer and the commissioner promptly of the actuary's inability to certify.
new text end

new text begin (f) A responsible officer of the insurer, other than the illustration actuary, shall
certify annually:
new text end

new text begin (1) that the illustration formats meet the requirements of sections 61A.70 to 61A.745
and that the scales used in insurer-authorized illustrations are those scales certified by the
illustration actuary; and
new text end

new text begin (2) that the company has provided its agents with information about the expense
allocation method used by the company in its illustrations and disclosed as required in
paragraph (c), clause (6).
new text end

new text begin (g) The annual certifications must be provided to the commissioner each year by a
date determined by the insurer.
new text end

new text begin (h) If an insurer changes the illustration actuary responsible for all or a portion of the
company's policy forms, the insurer shall notify the commissioner of that fact promptly
and disclose the reason for the change.
new text end

Sec. 14.

new text begin [61A.745] PENALTIES.
new text end

new text begin In addition to any other penalties provided by the laws of this state, an insurer or
producer that violates a requirement of sections 61A.70 to 61A.745 is guilty of a violation
of section 72A.20.
new text end

Sec. 15.

Minnesota Statutes 2006, section 65B.17, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Authorization to nonrenew. new text end

new text begin An insurer withdrawing from the market by
nonrenewing a line of business must notify the commissioner in writing at least 90 days
before termination of any policy is effective. The notice must contain the effective date of
the withdrawal plan, the number of policies affected, the reason for the withdrawal, and
the availability of coverage in the market.
new text end

Sec. 16.

Minnesota Statutes 2006, section 72A.52, subdivision 1, is amended to read:

Subdivision 1.

Contents.

In addition to all other legal requirements a policy or
contract of insurance described in section 72A.51 shall show the name and address of the
insurer and the seller of the policy or contract and shall state, clearly and conspicuously
in boldface type of a minimum size of ten points, a new text begin right to cancel new text end notice deleted text begin in deleted text end new text begin which shall
include new text end the following deleted text begin form or its equivalent deleted text end : deleted text begin "RIGHT TO CANCEL. You may cancel this
policy by delivering or mailing a written notice or sending a telegram to (insert name and
mailing address of the insurer or the seller of the policy or contract) and by returning
the policy or contract before midnight of the tenth day after the date you receive the
policy. Notice given by mail and return of the policy or contract by mail are effective on
being postmarked, properly addressed and postage prepaid. The insurer must return all
payments made for this policy within ten days after it receives notice of cancellation
and the returned policy."
deleted text end

new text begin (1) a minimum of ten days beginning on the date the policy is received by the owner;
new text end

new text begin (2) a minimum of 30 days beginning on the date the policy is received by the owner
if the policy is a replacement policy;
new text end

new text begin (3) a requirement for the return of the policy to the company or an agent of the
company;
new text end

new text begin (4) a statement that the policy is considered void from the beginning and the parties
shall be in the same position as if no policy had been issued; and
new text end

new text begin (5) a refund of all premiums paid, including any fees or charges, if the policy is
returned.
new text end

For variable annuity contracts issued pursuant to sections 61A.13 to 61A.21, this
notice shall be suitably modified so as to notify the purchaser that the purchaser is entitled
to a refund of the amount calculated in accordance with the provisions of section 72A.51,
subdivision 3.

Sec. 17.

Minnesota Statutes 2006, section 72B.02, subdivision 7, is amended to read:

Subd. 7.

Staff adjuster.

"Staff adjuster" means an adjuster who is a salaried
employee of an insurance company new text begin or an affiliate of an insurance company new text end and who is
engaged in adjusting insured losses solely for that company or other companies under
common control or ownership.

Sec. 18. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2006, section 45.025, subdivisions 1, 2, 3, 4, 5, 6, 8, 9, and
10, new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Rules, parts 2790.1750; and 2790.1751, new text end new text begin are repealed.
new text end