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Key: (1) language to be deleted (2) new language

CHAPTER 104--S.F.No. 1581
An act
relating to insurance; regulating continuation coverage for life insurance;
regulating life policies with accelerated benefits; 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; providing for
inflation protection in long-term care partnership policies; providing minimum
comprehensive health insurance plan benefits; modifying a definition; modifying
motor carrier insurance requirements;amending Minnesota Statutes 2006,
sections 60A.351; 61A.072; 61A.092, subdivision 6; 61A.25, subdivision
4; 62E.12; 62S.23, subdivision 1; 65B.17, by adding a subdivision; 72A.52,
subdivision 1; 72B.02, subdivision 7; 221.141, subdivision 1e; 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 60 30 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.072, is amended to read:
61A.072 POLICIES WITH ACCELERATED BENEFITS.
    Subdivision 1. Disclosure. A life insurance contract or supplemental contract that
contains a provision to permit the accelerated payment of benefits as authorized under
section 60A.06, subdivision 1, clause (4), must contain the following disclosure: "This is a
life insurance policy which pays accelerated death benefits at your option under conditions
specified in the policy. This policy is not a long-term care policy meeting the requirements
of sections 62A.46 to 62A.56 or chapter 62S."
    Subd. 4. Long-term care expenses. If the right to receive accelerated benefits
is contingent upon the insured receiving long-term care services, the contract or
supplemental contract shall include the following provisions:
    (1) the minimum accelerated benefit shall be $1,200 per month if the insured is
receiving nursing facility services and $750 per month if the insured is receiving home
services with a minimum lifetime benefit limit of $50,000;
    (2) coverage is effective immediately and benefits shall commence with the receipt
of services as defined in section 62A.46, subdivision 3, 4, or 5, or 62S.01, subdivision
25
, but may include a waiting period of not more than 90 days, provided that no more
than one waiting period may be required per benefit period as defined in section 62A.46,
subdivision 11
;
    (3) premium shall be waived during any period in which benefits are being paid to
the insured during confinement to a nursing home facility;
    (4) coverage may not be canceled or renewal refused except on the grounds of
nonpayment of premium;
    (5) coverage must include preexisting conditions during the first six months of
coverage if the insured was not diagnosed or treated for the particular condition during the
90 days immediately preceding the effective date of coverage;
    (6) coverage must include mental or nervous disorders which have a demonstrable
organic cause such as Alzheimer's and related dementias;
    (7) no prior hospitalization requirement shall be allowed unless a similar requirement
is allowed by section 62A.48, subdivision 1, or 62S.06; and
    (8) the contract shall include a cancellation provision that meets the requirements of
section 62A.50, subdivision 2, or 62S.07.
    Subd. 5. Exclusion. Subdivision 4 does not apply to contracts or supplemental
contracts granting the right to receive accelerated benefits if (1) one of the options for
payment provides for lump-sum payment; (2) no conditions or restrictions are imposed on
the use of the funds by the insured; and (3) the offeree or insured is given written notice
at the time the contract or supplemental contract is offered or sold that (i) Minnesota
law sets minimum requirements for life insurance contracts where the right to receive
accelerated benefits is contingent upon the insured receiving long-term care services,
and (ii) the contract or supplemental contract being offered or sold does not meet those
minimum requirements.
    Subd. 6. Accelerated benefits Definitions. (a) "Accelerated benefits" covered
under this section are benefits payable under the life insurance contract:
    (1) to a policyholder or certificate holder, during the lifetime of the insured, in the
anticipation of death or upon the occurrence of a specified life-threatening or catastrophic
condition as defined by the policy or rider;
    (2) that reduce the death benefit otherwise payable under the life insurance contract;
and
    (3) that are payable upon the occurrence of a single qualifying event that results in
the payment of a benefit amount fixed at the time of acceleration.
    (b) "Qualifying event" means one or more of the following:
    (1) a medical condition that would result in a drastically limited life span as specified
in the contract;
    (2) a medical condition that has required or requires extraordinary medical
intervention, such as, but not limited to, major organ transplant or continuous artificial life
support without which the insured would die;
    (3) a condition that usually requires continuous confinement in an eligible institution
as defined in the contract if the insured is expected to remain there for the rest of the
insured's life;
    (4) a long-term care illness or physical condition that results in cognitive impairment
or the inability to perform the activities of daily life or the substantial and material
duties of any occupation medical condition that would, in the absence of extensive or
extraordinary medical treatment, result in a drastically limited life span. Such conditions
may include, but are not limited to, one or more of the following:
    (i) coronary artery disease resulting in an acute infarction or requiring surgery;
    (ii) permanent neurological deficit resulting from cerebral vascular accident;
    (iii) end stage renal failure;
    (iv) Acquired Immune Deficiency Syndrome; or
    (v) other medical conditions that the commissioner shall approve for any particular
filing; or
    (5) other qualifying events that the commissioner approves for a particular filing.
    Subd. 2. Type of product. Accelerated benefit riders and life insurance policies
with accelerated benefit provisions are primarily mortality risks rather than morbidity
risks. They are life insurance benefits subject to this chapter.
    Subd. 3. Assignee or beneficiary. Before paying the accelerated benefit, the insurer
is required to obtain from an assignee or irrevocable beneficiary a signed acknowledgment
of concurrence for payout. If the insurer making the accelerated benefit is itself the
assignee under the policy, no acknowledgment is required.
    Subd. 4. Criteria for payment. (a) Contract payment options shall include the
option to take the benefit as a lump sum. The benefit shall not be made available as an
annuity contingent upon the life of the insured.
    (b) No restrictions are permitted on the use of the proceeds.
    (c) If any death benefit remains after payment of an accelerated benefit, the
accidental death benefit provision, if any, in the policy or rider shall not be affected by the
payment of the accelerated benefit.
    Subd. 5. Disclosures. (a) The terminology "accelerated benefit" shall be included
in the descriptive title. Products regulated under this section shall not be described or
marketed as long-term care insurance or as providing long-term care benefits.
    (b) A disclosure statement is required at the time of application for the policy or
rider and at the time the accelerated benefit payment request is submitted that receipt of
these accelerated benefits may be taxable and that assistance should be sought from a
personal tax advisor. The disclosure statement shall be prominently displayed on the first
page of the policy or rider and any other related documents.
    (c)(1) A written disclosure including, but not necessarily limited to, a brief
description of the accelerated benefit and definitions of the conditions or occurrences
triggering payment of the benefits shall be given to the applicant. The description shall
include an explanation of any effect of the payment of a benefit on the policy's cash value,
accumulation account, death benefit, premium, policy loans, and policy liens.
    (i) In the case of agent solicited insurance, the agent shall provide the disclosure
form to the applicant prior to or concurrently with the application. Acknowledgment of
the disclosure shall be signed by the applicant and writing agent.
    (ii) In the case of a solicitation by direct response methods, the insurer shall provide
the disclosure form to the applicant at the time the policy is delivered, with a notice that
a full premium refund shall be received if the policy is returned to the company within
the free look period.
    (iii) In the case of group insurance policies, the disclosure form shall be contained
as part of the certificate of coverage or any related document furnished by the insurer
for the certificate holder.
    (2) If there is a premium or cost of insurance charge, the insurer shall give the
applicant a generic illustration numerically demonstrating any effect of the payment of a
benefit on the policy's cash value, accumulation account, death benefit, premium, policy
loans, and policy liens.
    (i) In the case of agent-solicited insurance, the agent shall provide the illustration to
the applicant prior to or concurrently with the application.
    (ii) In the case of a solicitation by direct response methods, the insurer shall provide
the illustration to the applicant at the time the policy is delivered.
    (iii) In the case of group insurance policies, the disclosure form shall be contained
as part of the certificate of coverage or any related document furnished by the insurer
for the certificate holder.
    (3) Disclosure of premium charge.
    (i) An insurer with financing options other than as described in subdivision 9,
paragraph (a), clauses (2) and (3), shall disclose to the policy owner any premium or cost
of insurance charge for the accelerated benefit. The insurer shall make a reasonable effort
to assure that the certificate holder is aware of any additional premium or cost of insurance
charge if the certificate holder is required to pay a charge.
    (ii) An insurer shall furnish an actuarial demonstration to the state insurance
department when filing the product disclosing the method of arriving at its cost for the
accelerated benefit.
    (4) The insurer shall disclose to the policy owner any administrative expense charge.
The insurer shall make a reasonable effort to assure that the certificate holder is aware of
any administrative expense charge if the certificate holder is required to pay the charge.
    (d) When a policy owner or certificate holder requests an acceleration, the insurer
shall send a statement to the policy owner or certificate holder and irrevocable beneficiary
showing any effect that the payment of the accelerated benefit will have on the policy's
cash value, accumulation account, death benefit, premium, policy loans, and policy liens.
The statement shall disclose that receipt of accelerated benefit payments may adversely
affect the recipient's eligibility for Medicaid or other government benefits or entitlements.
In addition, receipt of an accelerated benefit payment may be taxable and assistance
should be sought from a personal tax advisor. When a previous disclosure statement
becomes invalid as a result of an acceleration of the death benefit, the insurer shall send
a revised disclosure statement to the policy owner or certificate holder and irrevocable
beneficiary. When the insurer agrees to accelerate death benefits, the insurer shall issue an
amended schedule page to the policy holder or notify the certificate holder under a group
policy to reflect any new reduced in-force face amount of the contract.
    Subd. 6. Effective date of accelerated benefits. The accelerated benefit provision
shall be effective for accidents on the effective date of the policy or rider. The accelerated
benefit provision shall be effective for illness no more than 30 days following the effective
date of the policy or rider.
    Subd. 7. Waiver of premiums. The insurer may offer a waiver of premium for the
accelerated benefit provision in the absence of a regular waiver of premium provision
being in effect. At the time the benefit is claimed, the insurer shall explain any continuing
premium requirement to keep the policy in force.
    Subd. 8. Discrimination. An insurer shall not unfairly discriminate among insureds
with differing qualifying events covered under the policy or among insureds with similar
qualifying events covered under the policy. An insurer shall not apply further conditions
on the payment of the accelerated benefits other than those conditions specified in the
policy or rider.
    Subd. 9. Actuarial standards. (a) The issuer may use the following financing
options:
    (1) requiring a premium charge or cost of insurance charge for the accelerated
benefit. This charge shall be based on sound actuarial principles. In the case of group
insurance, the additional cost may also be reflected in the experience rating.
    (2) paying a present value of the face amount. The calculation shall be based on any
applicable actuarial discount appropriate to the policy design. The interest rate or interest
rate methodology used in the calculation shall be based on sound actuarial principles and
disclosed in the contract or actuarial memorandum. The maximum interest rate used shall
be no greater than the greater of:
    (i) current yield on 90-day treasury bills; or
    (ii) current maximum statutory adjustable policy loan interest rate.
    (3) accruing an interest charge on the amount of the accelerated benefits. The interest
rate or interest rate methodology used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum. The maximum interest
rate shall be no greater than the greater of:
    (i) current yield on 90-day treasury bills; or
    (ii) current maximum statutory adjustable policy loan interest rate.
    The interest rate accrued on the portion of the lien that is equal in amount to the cash
value of the contract at the time of the benefit acceleration shall be no more than the
policy loan interest rate stated in the contract.
    (b)(1) Except as provided in clause (2), when an accelerated benefit is payable, there
shall be no more than a pro rata reduction in the cash value based on the percentage of
death benefits accelerated to produce the accelerated benefit payment.
    (2) Alternatively, the payment of accelerated benefits, any administrative expense
charges, any future premiums, and any accrued interest can be considered a lien against
the death benefit of the policy or rider and the access to the cash value may be restricted to
any excess of the cash value over the sum of any other outstanding loans and the lien.
Future access to additional policy loans could also be limited to any excess of the cash
value over the sum of the lien and any other outstanding policy loans.
    (c) When payment of an accelerated benefit results in a pro rata reduction in the cash
value, the payment may not be applied toward repaying an amount greater than a pro rata
portion of any outstanding policy loans.
    Subd. 10. Actuarial disclosure and reserves. (a) A qualified actuary should
describe the accelerated benefits, the risks, the expected costs, and the calculation of
statutory reserved in an actuarial memorandum accompanying each state filing. The
insurer shall maintain in its files descriptions of the bases and procedures used to calculate
benefits payable under these provisions. These descriptions shall be made available for
examination by the commissioner upon request.
    (b)(1) When benefits are provided through the acceleration of benefits under group
or individual life policies or riders to such policies, policy reserves shall be determined
in accordance with the Standard Valuation Law. All valuation assumptions used in
constructing the reserves shall be determined as appropriate for statutory valuation
purposes by a member in good standing of the American Academy of Actuaries. Mortality
tables and interest currently recognized for life insurance reserves by the National
Association of Insurance Commissioners (NAIC) may be used as well as appropriate
assumptions for the other provisions incorporated in the policy form. The actuary shall
follow both actuarial standards and certification for good and sufficient reserves. Reserves
in the aggregate should be sufficient to cover:
    (i) policies upon which no claim has yet arisen; and
    (ii) policies upon which an accelerated claim has arisen.
    (2) For policies and certificates that provide actuarially equivalent benefits, no
additional reserves need to be established.
    (3) Policy liens and policy loans, including accrued interest, represent assets of the
company for statutory reporting purposes. For a policy on which the policy lien exceeds
the policy's statutory reserve liability, the excess shall be held as a nonadmitted asset.
    Subd. 11. Filing requirement. The filing and prior approval of forms containing an
accelerated benefit is required.

    Sec. 3. 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 employer's group policy or another group policy offered by the insurer
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. 4. 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.
(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.

    Sec. 5. [61A.257] PREFERRED MORTALITY TABLES FOR USE IN
DETERMINING MINIMUM RESERVE LIABILITIES.
    Subdivision 1. Definitions. (a) For the purposes of this section only, the following
terms have the meanings given them.
(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 (c). 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:
(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;
(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;
(3) "composite mortality tables" means mortality tables with rates of mortality that
do not distinguish between smokers and nonsmokers; and
(4) "smoker and nonsmoker mortality tables" means mortality tables with separate
rates of mortality for smokers and nonsmokers.
(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.
(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.
    Subd. 2. 2001 CSO Preferred Class Structure Table. 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.
    Subd. 3. Conditions. (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 appointed actuary shall certify that:
(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
(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.
(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 appointed actuary shall certify that:
(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
(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 corresponding to the valuation table being
used for that class.
(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.

    Sec. 6. [61A.70] APPLICABILITY AND SCOPE.
Sections 61A.70 to 61A.745 apply to all group and individual life insurance policies
and certificates except:
(1) variable life insurance;
(2) individual and group annuity contracts;
(3) credit life insurance; or
(4) life insurance policies with no illustrated death benefits on any individual
exceeding $10,000.

    Sec. 7. [61A.705] DEFINITIONS.
For the purposes of sections 61A.70 to 61A.745:
(a) "Actuarial Standards Board" means the board established by the American
Academy of Actuaries to develop and promulgate standards of actuarial practice.
(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.
(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.
(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:
(1) are consistent with all provisions of sections 61A.70 to 61A.745;
(2) limit a disciplined current scale to reflect only actions that have already been
taken or events that have already occurred;
(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
(4) do not permit assumed expenses to be less than minimum assumed expenses.
(e) "Generic name" means a short title descriptive of the policy being illustrated such
as "whole life," "term life," or "flexible premium adjustable life."
(f) "Guaranteed elements" and "nonguaranteed elements" are defined as follows:
(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
(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.
(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:
(1) the disciplined current scale; or
(2) the currently payable scale.
(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):
(1) "basic illustration" means a ledger or proposal used in the sale of a life insurance
policy that shows both guaranteed and nonguaranteed elements;
(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 illustration; and
(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.
(i) "Illustration actuary" means an actuary meeting the requirements of section
61A.74 who certifies to illustrations based on the standard of practice adopted by the
Actuarial Standards Board.
(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.
(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:
(i) fully allocated expenses;
(ii) marginal expenses; and
(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.
(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.
(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:
(1) every plan of coverage was selected by the employer or other group
representative;
(2) some portion of the premium is paid by the group or through payroll deduction;
and
(3) group underwriting or simplified underwriting is used.
(m) "Policy owner" means the owner named in the policy or the certificate holder in
the case of a group policy.
(n) "Premium outlay" means the amount of premium assumed to be paid by the
policy owner or other premium payer out-of-pocket.
(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.

    Sec. 8. [61A.71] POLICIES TO BE ILLUSTRATED.
(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.
(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.
(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 members of the group or the multiple lives
covered.
(d) Potential enrollees of nonterm group life subject to sections 61A.70 to 61A.745
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.

    Sec. 9. [61A.715] GENERAL RULES AND PROHIBITIONS.
(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:
(1) name of insurer;
(2) name and business address of producer or insurer's authorized representative, if
any;
(3) name, age, and sex of proposed insured, except where a composite illustration is
permitted under sections 61A.70 to 61A.745;
(4) underwriting or rating classification upon which the illustration is based;
(5) generic name of policy, the company product name, if different, and form
number;
(6) initial death benefit; and
(7) dividend option election or application of nonguaranteed elements, if applicable.
(b) When using an illustration in the sale of a life insurance policy, an insurer or
its producers or other authorized representatives shall not:
(1) represent the policy as anything other than a life insurance policy;
(2) use or describe nonguaranteed elements in a manner that is misleading or has the
capacity or tendency to mislead;
(3) state or imply that the payment or amount of nonguaranteed elements is
guaranteed;
(4) use an illustration that does not comply with the requirements of sections 61A.70
to 61A.745;
(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;
(6) provide an applicant with an incomplete illustration;
(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;
(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;
(9) except for policies that can never develop nonforfeiture values, use an illustration
that is "lapse-supported"; or
(10) use an illustration that is not "self-supporting."
(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.

    Sec. 10. [61A.72] STANDARDS FOR BASIC ILLUSTRATIONS.
    Subdivision 1. Format. A basic illustration must conform with the following
requirements:
(1) the illustration must be labeled with the date on which it was prepared;
(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");
(3) the assumed dates of payment receipt and benefit payout within a policy year
must be clearly identified;
(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;
(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;
(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;
(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;
(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");
(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;
(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;
(11) illustrations may show policy benefits and values in graphic or chart form
in addition to the tabular form;
(12) any illustration of nonguaranteed elements shall be accompanied by a statement
indicating that:
(i) the benefits and values are not guaranteed;
(ii) the assumptions on which they are based are subject to change by the insurer; and
(iii) actual results may be more or less favorable;
(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
(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.
    Subd. 2. Narrative summary. A basic illustration must include the following:
(1) a brief description of the policy being illustrated, including a statement that it
is a life insurance policy;
(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;
(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;
(4) identification and a brief definition of column headings and key terms used in
the illustration; and
(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."
    Subd. 3. Numeric summary. (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:
(1) policy guarantees;
(2) insurer's illustrated scale; and
(3) insurer's illustrated scale used but with the nonguaranteed elements reduced
as follows:
(i) dividends at 50 percent of the dividends contained in the illustrated scale used;
(ii) nonguaranteed credited interest at rates that are the average of the guaranteed
rates and the rates contained in the illustrated scale used; and
(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.
(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.
    Subd. 4. Statements. (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.
(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."
(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."
    Subd. 5. Tabular detail. (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:
(1) the premium outlay and mode the applicant plans to pay and the contract
premium, as applicable;
(2) the corresponding guaranteed death benefit, as provided in the policy; and
(3) the corresponding guaranteed value available upon surrender, as provided
in the policy.
(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.
(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 shown 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.

    Sec. 11. [61A.725] STANDARDS FOR SUPPLEMENTAL ILLUSTRATIONS.
(a) A supplemental illustration may be provided so long as:
(1) it is appended to, accompanied by, or preceded by a basic illustration that
complies with sections 61A.70 to 61A.745;
(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.
(3) it contains the same statement required of a basic illustration that nonguaranteed
elements are not guaranteed; and
(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.
(b) The supplemental illustration must include a notice referring to the basic
illustration for guaranteed elements and other important information.

    Sec. 12. [61A.73] DELIVERY OF ILLUSTRATION AND RECORD
RETENTION.
(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.
(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.
(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.
(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.
(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.
(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.

    Sec. 13. [61A.735] ANNUAL REPORT; NOTICE TO POLICY OWNERS.
(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.
(b) For universal life policies, the report must include the following:
(1) the beginning and end date of the current report period;
(2) the policy value at the end of the previous report period and at the end of the
current report period;
(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);
(4) the current death benefit at the end of the current report period on each life
covered by the policy;
(5) the net cash surrender value of the policy as of the end of the current report period;
(6) the amount of outstanding loans, if any, as of the end of the current report
period; and
(7) for fixed premium policies, assuming guaranteed interest, mortality, and expense
loads and continued scheduled premium payments, if 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
(8) for flexible premium policies, assuming guaranteed interest, mortality, and
expense loads, if 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.
(c) For all other policies, the report must include where applicable:
(1) current death benefit;
(2) annual contract premium;
(3) current cash surrender value;
(4) current dividend;
(5) application of current dividend; and
(6) amount of outstanding loan.
(d) 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.
(e) 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.
(f) 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.
(g) 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.

    Sec. 14. [61A.74] ANNUAL CERTIFICATIONS.
(a) The board of directors of each insurer shall appoint one or more illustration
actuaries.
(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.
(c) The illustration actuary shall:
(1) be a member in good standing of the American Academy of Actuaries;
(2) be familiar with the standard of practice regarding life insurance policy
illustrations;
(3) not have been found by the commissioner, following appropriate notice and
hearing to have:
(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;
(ii) been found guilty of fraudulent or dishonest practices;
(iii) demonstrated the actuary's incompetence, lack of cooperation, or
untrustworthiness to act as an illustration actuary; or
(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;
(4) not fail to notify the commissioner of any action taken by a commissioner of
another state similar to that under clause (3);
(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
(6) disclose in the annual certification the method used to allocate overhead expenses
for all illustrations:
(i) fully allocated expenses;
(ii) marginal expenses; or
(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.
(d)(1) The illustration actuary shall file a certification with the board and with the
commissioner:
(i) annually for all policy forms for which illustrations are used; and
(ii) before a new policy form is illustrated.
(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.
(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.
(f) A responsible officer of the insurer, other than the illustration actuary, shall
certify annually:
(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
(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).
(g) The annual certifications must be provided to the commissioner each year by a
date determined by the insurer.
(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.

    Sec. 15. [61A.745] PENALTIES.
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.

    Sec. 16. Minnesota Statutes 2006, section 62E.12, is amended to read:
62E.12 MINIMUM BENEFITS OF COMPREHENSIVE HEALTH
INSURANCE PLAN.
    (a) The association through its comprehensive health insurance plan shall offer
policies which provide the benefits of a number one qualified plan and a number two
qualified plan, except that the maximum lifetime benefit on these plans shall be $2,800,000
$5,000,000; and an extended basic Medicare supplement plan and a basic Medicare
supplement plan as described in sections 62A.3099 to 62A.44. The association may
also offer a plan that is identical to a number one and number two qualified plan except
that it has a $2,000 annual deductible and a $2,800,000 $5,000,000 maximum lifetime
benefit. The association, subject to the approval of the commissioner, may also offer
plans that are identical to the number one or number two qualified plan, except that they
have annual deductibles of $5,000 and $10,000, respectively; have limitations on total
annual out-of-pocket expenses equal to those annual deductibles and therefore cover 100
percent of the allowable cost of covered services in excess of those annual deductibles;
and have a $2,800,000 $5,000,000 maximum lifetime benefit. The association, subject to
approval of the commissioner, may also offer plans that meet all other requirements of
state law except those that are inconsistent with high deductible health plans as defined
in sections 220 and 223 of the Internal Revenue Code and supporting regulations. As of
January 1, 2006, the association shall no longer be required to offer an extended basic
Medicare supplement plan.
    (b) The requirement that a policy issued by the association must be a qualified plan
is satisfied if the association contracts with a preferred provider network and the level of
benefits for services provided within the network satisfies the requirements of a qualified
plan. If the association uses a preferred provider network, payments to nonparticipating
providers must meet the minimum requirements of section 72A.20, subdivision 15.
    (c) The association shall offer health maintenance organization contracts in those
areas of the state where a health maintenance organization has agreed to make the
coverage available and has been selected as a writing carrier.
    (d) Notwithstanding the provisions of section 62E.06 and unless those charges are
billed by a provider that is part of the association's preferred provider network, the state
plan shall exclude coverage of services of a private duty nurse other than on an inpatient
basis and any charges for treatment in a hospital located outside of the state of Minnesota
in which the covered person is receiving treatment for a mental or nervous disorder, unless
similar treatment for the mental or nervous disorder is medically necessary, unavailable in
Minnesota and provided upon referral by a licensed Minnesota medical practitioner.
EFFECTIVE DATE.This section is effective the day following final enactment
and applies to policies existing, issued, or renewed, on or after that date.

    Sec. 17. Minnesota Statutes 2006, section 62S.23, subdivision 1, is amended to read:
    Subdivision 1. Inflation protection feature. (a) No insurer may offer a long-term
care insurance policy unless the insurer also offers to the policyholder, in addition to any
other inflation protection, the option to purchase a policy that provides for benefit levels to
increase with benefit maximums or reasonable durations which are meaningful to account
for reasonably anticipated increases in the costs of long-term care services covered by
the policy. In addition to other options that may be offered, insurers must offer to each
policyholder, at the time of purchase, the option to purchase a policy with an inflation
protection feature no less favorable than one of the following:
    (1) increases benefit levels annually in a manner so that the increases are
compounded annually at a rate not less than five percent;
    (2) guarantees the insured individual the right to periodically increase benefit levels
without providing evidence of insurability or health status so long as the option for the
previous period has not been declined. The amount of the additional benefit shall be no
less than the difference between the existing policy benefit and that benefit compounded
annually at a rate of at least five percent for the period beginning with the purchase of the
existing benefit and extending until the year in which the offer is made; or
    (3) covers a specified percentage of actual or reasonable charges and does not
include a maximum specified indemnity amount or limit.
    (b) A long-term care partnership policy must provide the inflation protection
described in this subdivision. If the policy is sold to an individual who:
    (1) has not attained age 61 as of the date of purchase, the policy must provide
compound annual inflation protection;
    (2) has attained age 61, but has not attained age 76 as of such date, the policy must
provide some level of inflation protection; and
    (3) has attained the age of 76 as of such date, the policy may, but is not required to,
provide some level of inflation protection.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 18. Minnesota Statutes 2006, section 65B.17, is amended by adding a subdivision
to read:
    Subd. 2a. Authorization to nonrenew. 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.

    Sec. 19. 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 right to cancel notice in which shall
include the following form or its equivalent: "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."
(1) a minimum of ten days beginning on the date the policy is received by the owner;
(2) a minimum of 30 days beginning on the date the policy is received by the owner
if the policy is a replacement policy;
(3) a requirement for the return of the policy to the company or an agent of the
company;
(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;
(5) a refund of all premiums paid, including any fees or charges, if the policy is
returned; and
    (6) a statement that notice given by mail and return of the policy or contract by mail
are effective on being postmarked, properly addressed, and postage prepaid.
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. 20. 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 or an affiliate of an insurance company and who is
engaged in adjusting insured losses solely for that company or other companies under
common control or ownership.

    Sec. 21. Minnesota Statutes 2006, section 221.141, subdivision 1e, is amended to read:
    Subd. 1e. Insurer must be authorized. A policy of insurance, bond, or other
evidence of financial responsibility does not satisfy the requirements of this section unless:
    (1) the insurer or surety furnishing the evidence of financial responsibility is
authorized or registered by the Department of Commerce to issue the policies, bonds, or
certificates in this state.; or
    (2) the insurer is a risk retention group registered under chapter 60E and the insured
is a nonprofit organization that is exempt from taxation under section 501(c)(3) of the
Internal Revenue Code of 1986.

    Sec. 22. REPEALER.
(a) Minnesota Statutes 2006, section 45.025, subdivisions 1, 2, 3, 4, 5, 6, 8, 9, and
10, are repealed.
(b) Minnesota Rules, parts 2790.1750; and 2790.1751, are repealed.

    Sec. 23. EFFECTIVE DATE; APPLICATION.
    Sections 6 to 15 and section 22 are effective January 1, 2008, and apply to policies
issued on or after that date.
Presented to the governor May 18, 2007
Signed by the governor May 21, 2007, 2:52 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569