28 TAC §3.803
The Texas Department of Insurance proposes an amendment to §3.803, concerning variable life insurance. The proposal is necessary to streamline the requirements of insurers authorized to issue variable life insurance contracts in this state. The proposed amendment to §3.803 eliminates the requirement of filing with the commissioner, prior to any distribution, all variable life insurance sales, advertising and descriptive material. The proposed amendment also eliminates the requirement of filing with the commissioner any revised versions of such sales, advertising and descriptive material already filed with the commissioner. This proposal will facilitate the issuance and distribution of variable life insurance sales, advertising and descriptive material by eliminating the prior filing requirement, while keeping in place all other regulatory requirements and consumer protections. The need to file variable life insurance sales, advertising and descriptive material with the commissioner prior to distribution is no longer necessary for the effective and efficient administration and regulation of variable life insurance.
Audrey Selden, Senior Associate Commissioner, Consumer Protection Program, has determined that for each of the first five years the proposed section will be in effect, there will be no measurable fiscal impact on state government. There will be no fiscal impact on local government as a result of enforcing or administering the proposal. There will be no measurable effect on local employment or local economy.
Ms. Selden also has determined that for each year of the first five years the section is in effect, the public benefit anticipated as a result of administration and enforcement of the section will be the more efficient administration of the regulation of variable life insurance advertising and the more effective utilization of public resources by streamlining the processing requirements prior to the distribution of sales, advertising and descriptive material for variable life insurance. While the requirement for prior filing of sales, advertising and descriptive material will be eliminated, variable life sales, advertising and descriptive materials will continue to be subject to other applicable requirements of Chapter 3 and Chapter 21, Texas Insurance Code and related rules. There is no anticipated economic cost to persons who are required to comply with the proposal. Instead there should be a cost savings to an insurer by the removal of the requirement of filing advertising material prior to use and ultimately the variable life insurance purchaser, while keeping in place all other regulatory requirements and consumer protections. Since there is no anticipated cost of compliance, there will be no adverse economic impact on small or micro businesses.
To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 4, 2000 to Lynda H. Nesenholtz, General Counsel and Chief Clerk, MC 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104. An additional copy of the comments must be simultaneously submitted to Jack Evins, Director of Advertising, Consumer Protection Program, MC 111-1A, P. O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of the Chief Clerk.
The amendments are proposed pursuant to the Insurance Code Articles 3.75 and 21.21 and §36.001. The Insurance Code Article 3.75, §8 provides that the commissioner may establish such rules or limitations which are fair and reasonable as may be appropriate for the augmentation and implementation of this article, including disclosure requirements. Article 21.21, §13 authorizes the commissioner to promulgate and enforce reasonable rules as necessary to accomplish the purpose of Article 21.21, the regulation of trade practices in the business of insurance. Section 36.001 authorizes the commissioner of insurance to adopt rules for the conduct and execution of the duties and functions of the department.
The proposed amendments affect regulation pursuant to the following statutes:
Insurance Code Articles 3.75 and 21.21.
§3.803. Qualifications of Insurer to Issue Variable Life Insurance. The following requirements are applicable to all insurers either seeking authority to issue variable life insurance in this state or having the authority to issue variable life insurance in this state.
(1) - (3) (No change.)
(4) Use of sales material. An insurer authorized to transact variable life insurance business in this state shall not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this state unless it complies with §§21.101 -
21.121] of this title (relating to
Insurance Advertising, Certain Trade Practices, and Solicitation [
Rules on Certain Trade Practices, Insurance Advertising, and Insurance Solicitation and Required Filing Respecting Advertising and Solicitation Material of Individual Retirement Annuity Products]).
(A) All variable life insurance sales material, advertising material, and descriptive material shall be filed with the commissioner prior to any distribution to prospective applicants. Revised versions of such materials containing changes from versions on file with the commissioner shall be filed with the commissioner. A failure to object to such material by the commissioner shall not be construed as acceptance.]
(B)] An insurer issuing flexible premium variable life contracts shall provide, to all prospective purchasers, an illustration of cash surrender values prior to or at the time of delivery of the contract. Any illustration of cash surrender values delivered to an applicant or prospective applicant pursuant to this subsection shall:
(i)] include a hypothetical gross investment return of 0.0%, and when other hypothetical gross investment returns are included, the current gross investment return must, to the extent permitted by federal law, be included;
(ii)] give equal prominence to both guaranteed and non-guaranteed aspects of the contract if guarantees are included in the contract;
(iii)] prominently display, by way of written statement, the hypothetical nature of the illustration as it relates to investment returns;
(iv)] prominently state that a contract may terminate due to insufficient premiums and/or poor investment performance; and
(v)] prominently show, by way of written statement, that excessive loans or withdrawals may cause the contract to lapse due to insufficient cash surrender value and, at the option of the insurer, prominently display the effects of loans or withdrawals on contract values.
(5) - (8) (No change.)