Section .0100 ‑ General Provisions

Link to law: http://reports.oah.state.nc.us/ncac/title 11 - insurance/chapter 04 - consumer services division/chapter 04 rules.html
Published: 2015

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CHAPTER 4 ‑ CONSUMER SERVICES DIVISION

 

SECTION .0100 ‑ GENERAL PROVISIONS

 

 

11 NCAC 04 .0101             PURPOSE OF DIVISION

11 NCAC 04 .0102             DEPUTY COMMISSIONER

11 NCAC 04 .0103             STRUCTURE OF DIVISION

11 NCAC 04 .0104             DIVISION PERSONNEL AND PROCEDURES

11 NCAC 04 .0105             COMPLAINTS AND INQUIRIES AND

INFORMATION

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated

on August 23, 1979;

Authority G.S. 57‑1; 57‑4; 57‑10; 57‑13;

57A‑18; 58‑9; 58‑9.2; 58‑10; 58‑11; 58‑15;

58‑18;

58‑25; 58‑25.1; 58‑26; 58‑27; 58‑262;

58‑262.4; 58‑296; 58‑357; 58‑7.3;

Eff. February 1, 1976;

Readopted Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

11 NCAC 04 .0106             RULE FOR LOSS

AND CLAIM PRACTICES AND PROCEDURES

 

History Note:        Authority G.S. 57‑4; 57‑10;

58‑9; 58‑9.2; 58‑15; 58‑25; 58‑25.1; 58‑26;

58‑27; 58‑40;

58‑40.1; 58‑128;

Eff. February 1, 1976;

Repealed Eff. March 8, 1978.

 

 

 

11 NCAC 04 .0107             SEX DISCRIMINATION IN INSURANCE

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated

on August 23, 1979;

Authority G.S. 58‑9; 58‑44.3; 58‑54.1;

58‑54.13;

Eff. May 5, 1977;

Readopted Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0108             MISREPRESENTATION OF POLICY

PROVISIONS

11 NCAC 04 .0109             ETHICAL STANDARDS

11 NCAC 04 .0110             STATEMENT OF ACTION

11 NCAC 04 .0111             LOSS OR CLAIM NOTICE

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated

on August 23, 1979;

Authority G.S. 57‑4; 58‑8; 58‑9; 58‑39;

58‑40; 58‑40.1; 58‑40.6; 58‑41; 58‑48; 58‑52;

58‑54.4; 58‑199; 58‑249;

Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0112             PURPOSE OF DIVISION

11 NCAC 04 .0113             DEPUTY COMMISSIONER

11 NCAC 04 .0114             STRUCTURE OF DIVISION

 

History Note:        Authority G.S. 58‑7.3; 58‑9;

Eff. December 15, 1979;

Amended Eff. July 1, 1986;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 04 .0115             DIVISION PROCEDURES

(a)  Complaint

Handling Procedure.  Complaints will be processed in the following manner:

(1)        Analyst

will request explanation from company, agent or adjuster;

(2)        If

he finds that the complaint has been improperly handled, then he will recommend

that proper action be taken;

(3)        If

the issue is not resolved, the deputy commissioner may arrange a conference

with company representatives to resolve the problem.

(b)  Hearings. 

If a conference does not resolve a disputed issue, the deputy commissioner may

recommend to the commissioner that appropriate legal action be taken to insure

compliance with the statutes, rules and regulations administered by the

department.  Such legal action may include the convening of a public hearing to

review, in light of the conduct which occasioned the complaint, the necessity

of entering an order against the party complained of.

(c)  Complaints

Represented by Counsel.  The Division will not investigate a complaint which is

also the subject matter of a pending lawsuit filed by an attorney representing

the complainant.  If a lawsuit has not been filed but the complainant has

retained an attorney, the Division will investigate the complaint according to

its normal procedures provided it has first obtained the attorney's consent.

 

History Note:        Authority G.S. 58-2-40; 58-2-50;

58-2-155; 58-2-185; 58-2-190; 58-2-195; 58-2-200; 58-3-100; 58‑33-45;

58-65-1; 58-65-40; 58-67-20; 58-67-150;

Eff. December 15, 1979;

Amended Eff. April 1, 1989.

 

11 NCAC 04 .0116             INQUIRIES AND INFORMATION

The Division maintains facilities and personnel to receive

inquiries and complaints by telephone, letter or personal visit.  The telephone

numbers for the Division are toll-free 1-800-662-7777 or 1-800-546-5664 and

1-919-807-6750. The mailing address of the Division is:  North Carolina

Department of Insurance, 1201 Mail Service Center, Raleigh, North Carolina  27699-1201;

(Attention:  Consumer Services Division).  The street address of the Division

is:  Room 3040, Dobbs Building, 430 North Salisbury Street, Raleigh, North

Carolina.

 

History Note:        Authority G.S. 58-2-25; 58-2-40;

Eff. December 15, 1979;

Amended Eff. July 1, 2012; April 1, 1989; July 1, 1986.

 

11 NCAC 04 .0117             STATEMENT OF ACTION

(a)  When an

insurer denies a claim after receiving written notice thereof from the claimant

sufficiently informative to enable the insurer to identify the specific

coverage involved, the insurer's denial shall be in writing and shall cite

specific policy provisions or legal basis relied upon in denying the claim.

(b)  When an

insurer offers to settle a claim after receiving written notice thereof from

the claimant sufficiently informative to enable the insurer to identify the

specific coverage involved, the insurer's offer of compromise settlement, when

requested by the consumer, shall confirm in writing the offer of compromise

settlement and shall cite the specific policy provision or legal basis relied

upon in support of the compromise.

 

History Note:        Authority G.S. 58-2-40; 58-3-100;

58-63-15; 58-65-40; 58-67-65; 58-67-150;

Eff. December 15, 1979;

Amended Eff. April 1, 1989; December 15, 1979.

 

11 NCAC 04 .0118             INSURANCE CARRIERS AS LENDERS

Any lender who

offers an insurance product to a consumer either directly or indirectly through

a subsidiary or affiliate in conjunction with an extension of credit shall

inform the consumer of the protections afforded by G.S. 58-3-135.  Nothing in

this Regulation shall limit the right of the lender, for purposes of protecting

the interest of the lender, to require insurance in connection with a loan. 

This Regulation shall not apply where the extension of credit arises out of a

life insurance contract itself or where the extension of credit is subject to

the provisions of Regulation Z (12 CFR 226), or other federal statutes or

regulations requiring comparable disclosures.

 

History Note:        Authority G.S. 58-2-40; 58-3-135;

58-3-150;

Eff. July 1, 1986;

Amended Eff. April 8, 2002; April 1, 1989.

 

11 NCAC 04 .0119             INSURER DEFINED

For the

purposes of this Chapter, "insurer" shall mean any entity governed by

the provisions of Chapter 58.

 

History Note:        Authority G.S. 58-2-40; 58-65-1;

58-67-150;

Eff. April 1, 1989;

Amended Eff. April 8, 2002.

 

11 NCAC 04 .0120             POLICY OR SERVICE FEES

An agent,

broker, or limited representative who deals directly with an applicant and who

intends to charge a policy or service fee in accordance with G.S. 58‑33‑85(b)

shall not do so unless he complies with the following:

(1)        A sign

that informs the applicant in large bold print that a policy or service fee of

[amount] will be charged, shall be displayed in a prominent place so as to be

seen and read from any part of the office lobby.

(2)        The

applicant's consent in writing is obtained on a separate form each time a

policy or service fee is charged.  The form shall be entitled, "Policy or

Service Fee Consent" and shall include the date and amount of each fee

charged.

(3)        A dated

receipt for the payment of a policy or service fee shall be issued either

separately from the policy premium receipt or stated separately on the receipt

issued for the policy premium.

 

History Note:        Authority G.S. 58-2-40; 58-2-195;

58-33-85(b);

Eff. February 1, 1993;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 04 .0121             PREMIUM PAYMENT RECEIPTS

All premium

payment receipts and copies issued by an agent, broker, or limited

representative, shall be dated and contain the printed or stamped name and

address of the agency or agent, broker, or limited representative, and the name

of the insurer.  Receipts shall be signed by the person accepting the payment.

 

History Note:        Authority G.S. 58-2-40; 58-2-185;

58-2-195;

Eff. February 1, 1993;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 04 .0122             POWER-OF-ATTORNEY

Except for

authorizations given in accordance with G.S. 58-45-35(a) or G.S. 58-46-15, no

agent, broker, or limited representative shall solicit a power-of-attorney from

a consumer that authorizes the agent, broker, or limited representative to sign

insurance-related forms.

 

History Note:        Authority G.S. 58-2-40; 58-2-195;

Eff. February 1, 1993.

 

 

 

11 NCAC 04 .0123             USE OF SPECIFIC COMPANY NAME IN

RESPONSES

When an insurer

makes a written response to an inquiry or complaint made by a consumer or the

Department, the insurer shall identify on its response its mailing address,

official corporate name, and on its response to the Department, the NAIC

company code; or its mailing address, specific corporate name, and on its

response to the Department, the NAIC company code if the insurer is part of a

group of companies.

 

History Note:        Authority G.S. 58-2-40; 58-2-190;

58-3-50; 58-63-65;

Eff. April 1, 1995;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 04 .0124             INSURANCE COMPANY CONTACT PERSONS

Every insurer

shall provide the Department=s Consumer Services Division with the name, title,

address, and telephone number, including a toll‑free number, of a

designated person to whom any person may send a complaint or inquiry.  Every

insurer shall also provide the Division with the company president=s name,

address, and telephone number for the Division=s use.  Forms will be provided

by the Division, which shall be completed and returned to the Division by every

insurer.  Every insurer shall complete, have signed by a corporate officer, and

file with the Division a new form within 15 business days after any change in

the information on the form.

 

History Note:        Authority G.S. 58-2-40; 58-2-190; 58-63-65;

Eff. April 1, 1995;

Amended Eff. February 1, 1996.

 

 

 

SECTION .0200 ‑ MARKET CONDUCT EXAMINATION SECTION

 

11 NCAC 04 .0201             FUNCTION OF SECTION

11 NCAC 04 .0202             REPORT AND COLLECTION PROCEDURES

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated on August 23, 1979;

Authority G.S. 57‑10; 57A‑18; 58‑7.3;

58‑9; 58‑9.2; 58‑18; 58‑25; 58‑16; 58‑16.2;

58‑63; 58‑25.1; 58‑26; 58‑27; 58‑296;

Eff. February 1, 1976;

Readopted Eff. March 16, 1979;

Repealed Eff. August 23, 1979;

Transferred Eff. August 14, 1986.

 

11 NCAC 04 .0203             MAINTENANCE OF RECORDS

11 NCAC 04 .0204             COMPLAINT RECORDS

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated on August 23, 1979;

Authority G.S. 57‑10; 58‑9; 58‑9.2; 58‑15;

58‑16; 58‑25; 58‑25.1; 58‑26; 58‑27;

Eff. March 16, 1979;

Repealed Eff. August 23, 1979;

Transferred to T11.11G; Eff. August 14, 1986.

 

11 NCAC 04 .0205             FUNCTION OF SECTION

 

History Note:        Authority G.S. 57‑10; 57A‑18;

58‑7.3; 58‑9; 58‑9.2; 58‑16; 58‑25; 58‑25.1;

58‑26;

58‑27; 58‑296;

Eff. December 15, 1979;

Transferred to T11.11G; Eff. August 14, 1986.

 

 

 

11 NCAC 04 .0206             REPORT AND COLLECTION PROCEDURES

 

History Note:        Authority G.S. 57‑10; 58‑16;

58‑16.2; 58‑18; 58‑63;

Eff. December 15, 1979;

Transferred to T11.11G; Eff. August 14, 1986.

 

 

 

11 NCAC 04 .0207             MAINTENANCE OF RECORDS

 

History Note:        Authority G.S. 57‑10; 58‑9;

58‑9.2; 58‑15; 58‑25; 58‑25.1; 58‑26; 58‑27;

Eff. December 15, 1979;

Transferred to T11.11G; Eff. August 14, 1986.

 

 

 

11 NCAC 04 .0208             COMPLAINT RECORDS

 

History Note:        Authority G.S. 57‑10; 58‑9;

58‑16; 58‑25.1; 58‑26; 58‑27; 58‑54.5; 58‑54.6;

Eff. December 15, 1979;

Transferred to T11.11G; Eff. August 14, 1986.

 

 

 

 

 

SECTION .0300 ‑ LIFE: ACCIDENT AND HEALTH

 

11 NCAC 04 .0301             FUNCTION OF SECTION

11 NCAC 04 .0302             RECEIPT AND DISTRIBUTION OF MEDICAL

INFORMATION

11 NCAC 04 .0303             PROVISIONS OF ACCIDENT: HEALTH AND

DISABILITY CONTRACTS

11 NCAC 04 .0304             PREMIUM NOTICES: PAYMENTS: AND

REFUNDS

11 NCAC 04 .0305             ISSUANCE OF ACCIDENT: HEALTH AND

DISABILITY CONTRACTS

11 NCAC 04 .0306             CONTESTABILITY CLAUSE AND RESCISSION

11 NCAC 04 .0307             ISSUE AND PREMIUM PAYMENTS OF LIFE

INSURANCE CONTRACTS

11 NCAC 04 .0308             CREDIT ACCIDENT: HEALTH AND LIFE

INSURANCE

11 NCAC 04 .0309             LIFE INSURANCE SALES: FINANCING

FIRST YEAR PREMIUM

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated on August 23, 1979;

Authority G.S. 57‑1; 57‑4; 57‑10; 58‑9;

58‑25.1; 58‑26; 58‑27; 58‑42.1; 58‑207; 58‑251.1;

58‑251.4; 58‑260.1;

Eff. February 1, 1976;

Readopted Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0310             CLAIM PRACTICES: PROCEDURES: LIFE:

ACCIDENT: HEALTH

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated on August 23, 1979;

Authority G.S. 57‑1; 57‑4; 58‑9; 58‑54.3;

Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0311             FUNCTION OF SECTION

 

History Note:        Authority G.S. 57‑1, ‑4; 58‑9,

‑262.4;

Eff. December 15, 1979;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 04 .0312             INFORMATION USED IN CLAIM

SETTLEMENTS

(a)  Any information (including medical information) used in

whole or in part as the basis of settling a life, accident health or disability

claim shall be furnished to the Department as necessary in connection with

specific complaints and inquiries.  As used in this Section,

"furnished" shall include either mailing claim settlement information

to the Department or exhibiting such information to the appropriate division

personnel at a time and place set by the Division personnel.

(b)  To the extent permitted by law, the Department shall

treat medical information as confidential.

 

History Note:        Authority G.S. 58-2-40; 58-2-100;

58-2-130; 58-2-190; 58-2-195; 58-2-200; 58-63-20; 58-65-40; 58-65-105; 58-67-65;

58-67-150;

Eff. December 15, 1979;

Amended Eff. April 1, 1989.

 

11 NCAC 04 .0313             PROVISIONS OF CONTRACTS

In order to prevent unfair discrimination among insureds,

the following phrases and provisions commonly found in life, accident, health

and disability contracts, if not expressly defined in such contracts, shall be

construed by the Department in the following manner:

(1)           Regular Care and Attendance of a Physician.  As

used in life, accident and health and disability policies, "regular care

and attendance of a physician" shall not be construed to require insureds

to see or be under the care of a physician on a regular basis if it can be

shown that the insured has reached his maximum point of recovery yet is still

disabled under the terms of the insurance contract.  This requirement shall

not, however, restrict the right of the insurer at its own expense, to

periodically examine or cause to have examined the insured according to the

terms of the contract of insurance.

(2)           Premature Baby.  A premature baby shall not be

considered a well baby.  The protection afforded newborn infants under G.S.

58-51-30 shall be provided to premature babies.

(3)           Medical Necessity.  "Medical necessity"

shall be construed as including treatment which restores not only the insured's

physical but also his mental well-being.  As used in this Section,

"restoration of mental well-being" does not require coverage of

psychiatric disorders when such disorders are excluded under the express terms

of the contract.

(4)           Sound Health.  The question, "Are you in sound

health?" shall be considered ambiguous, and therefore answers to that

question on an insurance application shall not be used as the basis for

rescission of a policy or denial of a claim.

 

History Note:        Authority G.S. 58-2-40; 58-3-150;

58-51-1; 58-63-15; 58-63-65; 58-65-1; 58-65-40; 58-65-95; 58-67-65; 58-67-150;

Eff. December 15, 1979;

Amended Eff. July 1, 2012; April 8, 2002; April 1, 1989.

 

11 NCAC 04 .0314             PREMIUM NOTICES: PAYMENTS AND

REFUNDS

The Commissioner shall consider an unfair trade practice the

failure by an insurer to adhere to any of the following procedures concerning

premium notices, payments and refunds on life, accident, health, or disability

policies when such failure is so frequent as to indicate a general business

practice:

(1)           Premium Notices.  Any insurer which makes a

practice of sending premium notices shall maintain records sufficient to show

that it mailed or otherwise delivered such notice to an individual insured or

policy owner.

(2)           Timely Remittance.  Insurance companies shall use

date of mailing, rather than date of receipt, to determine whether the insured

has made timely remittance of premium, provided the premium payment is received

within seven days after either the termination date of the policy or the last

day of its grace period, whichever is later.

(3)           Right to Return Policy.  When such right is given

by contract or statute, no insurer shall abridge or frustrate the right of the

insured to return a policy within ten days after he receives it for a full

refund of premiums paid.  Evidence of such delivery shall be signed statements

from the policyowner of the date of delivery, copies of signed certified mail

receipt, certification of mailing, or firm mailing book entry.

(4)           Unearned Premium Refund.  When such right is given

by contract or statute, no insurer shall abridge or frustrate the right of the

insured to receive a refund of unearned premium.

(5)           Unearned Premium on Health Policies.  When an

insured covered by an accident, health or disability policy dies during the

term of the policy, his insurer shall refund the unearned premium.

(6)           Commingling.  No licensed person may commingle

premiums, insurance deposits or other such funds.  Such funds are considered to

have been received in a fiduciary capacity on behalf of policyowner and must be

immediately forwarded to the proper insurers or be deposited into an authorized

account which is separate and distinct from the person's operating and/or

personal accounts.  The account shall be used to receive and disburse premiums

paid for insurers, return premiums to policyowner, bank charges for the account

and transfer of earned commissions or fees.

 

History Note:        Authority G.S. 58-2-40; 58-2-195;

58-51-10; 58-51-15; 58-63-65; 58-65-40; 58-67-50; 58-67-65; 58-67-150;

Eff. December 15, 1979;

Amended Eff. April 1, 1989.

 

11 NCAC 04 .0315             ISSUANCE OF CONTRACTS

The Commissioner shall consider an unfair trade practice the

failure by an insurer to adhere to any of the following procedures with respect

to the issuance of life, accident, health, or disability policies when such

failure is so frequent as to indicate a general business practice:

(1)           Policies to Cover Newborn Infants.  No health

application or requirements of insurability shall be used to circumvent the

requirements of North Carolina General Statute 58-51-30.

(2)           Rating of Guaranteed Issue Coverages.  There shall

be no rating of policies where guaranteed issue at a specified rate is

represented.  When only guaranteed issue is represented, the insurer shall

disclose in writing to any applicant subjected to individual rating the fact

that his rate deviates from the standard rates for such coverage.  This Section

shall not apply to individual policies issued to employees under a contract

between their employer and his insurer.

(3)           Replacement of Existing Coverage.  With respect to

individual accident, health and disability coverages, when an insurer's agent,

by misrepresenting the new policy as a supplement or addition to the existing

policy, induces an insured to assent to the replacement of his existing policy

with a new policy new waiting periods shall be decreased by the amount of time

coverage was afforded under the existing policy.

(4)           Continuous Coverage Under Credit Life, Accident and

Health Policies. In a series of credit life or credit accident and health

insurance transactions where the insured, the lender, and the insurer are the

same and there is no appreciable lapse in coverage between transactions, the

waiting periods of the insurance agreements shall run from the date of the

first insurance contract, at least to the extent of the amount and term of the

indebtedness outstanding at the time of renewal or refinancing.

 

History Note:        Authority G.S. 58-2-40; 58-3-125;

58-3-150; 58-33-75; 58-51-30; 58-63-40; 58-65-40; 58-67-50; 58-67-65;

58-67-150;

Eff. December 15, 1979;

Amended Eff. April 8, 2002; April 1, 1989; December 15,

1979.

 

11 NCAC 04 .0316             CONTESTABILITY CLAUSE AND RESCISSION

If an insurer does not promptly attempt to rescind an

accident, health or disability policy upon becoming aware that the insured's

application contained false statements, the insurer may not subsequently use

such false statements as a basis for attempted rescission or alteration of the

policy.  The Commissioner shall consider failure to adhere to this principle an

unfair trade practice when such failure is so frequent as to indicate a general

business practice.

 

History Note:        Authority G.S. 58-2-40; 58-63-40;

58-65-1; 58-65-40;

Eff. December 15, 1979.

 

11 NCAC 04 .0317             SEX DISCRIMINATION: LIFE: ACCIDENT

AND HEALTH INSURANCE

(a)  Prohibited Practices.  The Commissioner shall consider

unfair discrimination the denial of life, accident, health or disability

insurance on the basis of the insured's or prospective insured's sex or marital

status.  The amount of benefits payable on any term, condition or type of

coverage shall not be restricted, modified, excluded or reduced on the basis of

the sex or marital status of the insured or prospective insured.  All

underwriting criteria shall be applied in all instances of similar

circumstances without regard to the sex or marital status of the insured or

prospective insured, except to the extent that the amount of the benefits,

terms, conditions or type of coverage vary as a result of the application of

rate or premium differentials not prohibited under this Chapter, such as

differentials for life insurance or annuities derived from sex‑based life

expectancy tables.  Nothing in this Section shall prohibit an insurer from

taking marital status into account for the purpose of determining persons

eligible for dependent benefits.  Examples of the practices prohibited by this

Section include, but are not limited to:

(1)           denying coverage to females gainfully

employed at home, employed part‑time or employed by relatives when

coverage is offered to males similarly employed;

(2)           denying policy riders to females when the

riders are available to males;

(3)           denying maternity coverage to unmarried

females covered under a policy or contract if maternity coverage is available

to married females covered under such a policy or contract;

(4)           denying, under group contracts, dependent

coverage to husbands of female employees, when dependent coverage is available

to wives of male employees;

(5)           denying disability income contracts to

employed women when coverage is offered to men similarly employed;

(6)           treating complications of pregnancy

differently from any other illness or sickness under the contract;

(7)           restricting, reducing, modifying, or

excluding benefits payable for disorders of the genital organs of only one sex;

(8)           offering lower maximum monthly benefits to

women than to men who are in the same classification under a disability income

contract;

(9)           offering more restrictive benefit periods

and more restrictive definitions of disability to women than to men in the same

classifications under a disability income contract;

(10)         establishing different conditions by sex

under which the policyholder may exercise benefit options contained in the

contract;

(11)         limiting the amount of coverage an insured

or prospective insured may purchase based upon the insured's or prospective

insured's marital status unless such limitation is for the purpose of defining

persons eligible for dependent benefits.

(b)  Applicability and Scope.  This Rule shall apply to all

contracts delivered or issued for delivery in this state by an insurer on or

after the effective date of this Rule and to all existing group contracts which

are amended or renewed on or after the effective date of this Rule.

 

History Note:        Authority G.S. 58-2-40; 58-3-120;

58-63-1; 58-63-65;

Eff. December 15, 1979.

 

11 NCAC 04 .0318             LIFE INSURANCE SALES: FINANCING

FIRST YEAR PREMIUM

Subject to the exception set forth in Subsection (16) of

this Rule, the Commissioner shall consider an unfair trade practice the failure

by an insurance company to adhere to the following procedures concerning the

sale of life insurance contracts for which the first year's premium or any

portion thereof is financed through a device suggested by the insurer or its

agent with the insurance policy itself being assigned as security:

(1)           Minimum Down‑Payment Required.  A minimum

down‑payment of twenty five dollars ($25.00) in cash or by valid and

currently collectible check of the applicant is required for such insurance. 

Under no circumstances will a company or an agent directly or indirectly either

furnish this down‑payment or waive this requirement.

(2)           Financing Device to be Explained in Policy

Application.  The furnishing of a promissory note in connection with financing

part of the first year's premium must be explained in the policy application. 

Such explanation must be clear and complete and must specify the principal sum

of the note or notes, the interest payable, the due date, the amount payable on

that due date, the interest rate and the annual percentage rate.

(3)           Execution of Promissory Note.  All blank spaces in

a promissory note form or an assignment of an insurance policy form

subsequently executed by the insured must be filled in by the handwriting of

the insured except blank spaces relating to the policy number to be issued, and

the signatures of witnesses and co‑makers.  No agent or anyone acting

under his direction or control other than the insured shall write in such

spaces.

(4)           Promissory Note May be Sold Only With Recourse.  If

a promissory note is taken to finance part of the first year's premium said

note may be sold or otherwise transferred by the payee with recourse only, and

this fact must appear in bold print on the face of the note.

(5)           Note to be Retained Until Policy Acceptance is

Executed.  Any promissory note given by the applicant in connection with an

application for a policy shall not be sold or otherwise transferred by the

agent or company, nor any commissions on the sale paid to the agent until 15

days after a properly executed policy acceptance form has been received in the

home office of the insurance company issuing the policy.

(6)           Copy of Note to be Furnished Applicant.  A copy of

the note executed by the applicant must be attached to the policy when

delivered.

(7)           Policy Acceptance to be Executed on Delivery of the

Policy; Contract Rescission.  Upon delivery of the policy, a policy acceptance

form must be executed which recites the following:

(a)           The policy has been issued as represented;

(b)           The applicant acknowledges and understands

the provisions and obligations of the debt he has incurred in connection with

applying for the policy and the terms are set forth in the record;

(c)           The applicant understands that he may cancel

the policy and his promissory note and his down‑payment will be returned

to him if he refuses to accept delivery of the policy and sign the acceptance

form, and the applicant understands that if at any time within 10 days after

the execution of the policy acceptance form he shall be allowed to rescind the

agreement, and the promissory note, together with the total amount of his down‑payment,

shall be returned to him;

(d)           The applicant further understands that the

rescission or rejection must be communicated to the company by mail and return

of the policy within the 10 day period; and

(e)           The applicant acknowledges that the

obligations of the debt cannot be altered by a cancellation of the policy at

his request unless properly cancelled within 10 days, in writing, mailed to the

company at the address specified.  The policy acceptance form shall contain a

number designation corresponding to the policy issued and shall not be made

available to the agent until the application is received in the home office. 

The provisions of Subsections (7)(c) and (d) of this Rule shall be printed in

bold type upon the face of the policy.

(8)           Insured to be Notified of Assignment.  The insurer,

the note purchaser, assignee or company shall notify the note maker (insured)

and all co‑makers regarding the purchase, transfer or assignment of the

note, after such transfer, inviting any questions relative to the note or the

policy which is used as collateral security for the note.

(9)           Requests for Cancellation to be Handled Promptly. 

The company and its agents shall give prompt and complete cooperation to the

insured and the Department of Insurance when requests to cancel the policy and

premium financing arrangements are received.

(10)         Special Rule in Event Applicant is Under Eighteen

Years of Age.  If the applicant is a minor and executes a promissory note for

the payment of part or all of the first year's premium, such note must be

witnessed by at least one of the applicant's parents or his guardian.

(11)         Disclosure of Extended Obligations.  The agent shall

clearly disclose to the insured that the cancellation of the note may reduce

the cash surrender value of the policy in direct proportion to the amount of

the promissory note.  The agent shall not use terms such as "bonus

payment", "free insurance", or any other term which induces the

applicant to believe that the promissory note will be paid by monies other than

his policy cash values.  Terms leading the applicant to believe that he is

receiving free insurance by deferring the premium payment for the first year

shall not be employed.

(12)         Cash Values.  Cash values shown at the presentation

shall be based on the policy offered.  The cash values shown at the time of

presentation shall be a specimen of the policy being offered and not for a

larger policy.

(13)         Cancellation of Existing Insurance.  The disturbing

of any permanent insurance, including the partial or total replacement of any

provisions of an existing policy for the purpose of placing additional

insurance, or "twisting" as defined in G.S. 58-3-115, will be cause

for investigation and review by the Department of Insurance.

(14)         Licensed Agents.  Only licensed agents are eligible

to sell life insurance.  No person other than a licensed agent shall

participate or receive commission or any other valuable consideration in

connection with the solicitation, negotiation, procurement, or making of life

insurance contracts in this state.

(15)         Agent Identification.  An agent or field

representative who is licensed by this state as a life insurance agent shall

not represent, refer to, or hold himself out to the public under any special

title which would obscure the fact that he is a licensed agent of the company. 

Identification as an agent or representative of a special division may be

permitted providing such a division actually exists and the agency relationship

is disclosed.

(16)         Scope of Regulation.  This Regulation shall not

apply to life insurance policies financed in conformity with G.S. 58, Article

35.

 

History Note:        Authority G.S. 58-2-40; 58-3-115;

58-63-40;

Eff. December 15, 1979

Amended Eff. April 8, 2002.

 

11 NCAC 04 .0319             CLAIMS PRACTICES: LIFE: ACCIDENT AND

HEALTH INSURANCE

The Commissioner shall consider as prima facie violative of

G.S. 58-63-15(11) the failure by an insurer to adhere to the following

procedures concerning settlement of life, accident, health and disability

claims when such failure is so frequent as to indicate a general business

practice:

(1)           Examining Physician's Opinion.  When the patient's

health is in question, an insurer shall give greater weight to the opinion of a

physician who has examined the patient than to the opinion of a physician who

has not examined the patient and whose opinion is based solely on a review of

the examining physician's notes or reports.  As used in this Section,

"examination of the patient" shall include the interpretation by a

specialist of the results of diagnostic tests performed on the patient by

others.

(2)           Settlement Offers.  Initial offers of settlement or

compromise made by an insurer or its representative shall remain open for a

period of time of not less than 30 calendar days.

(3)           Multiple Health Impairments.  When an insured is

confined to the hospital with multiple health impairments some of which may be

excluded from coverage, the insurer or its representative shall make pro rata

payments where treatment for excluded conditions can be separated.

(4)           Assignment of Benefits.  If an accident, health or

disability contract does not prohibit assignment of benefits and a proper

assignment (including notice to the insurer prior to the payment of the claim)

is made, the insurer shall honor the assignment even though it may have

erroneously paid the insured.  Submission of a completed claims form G33H and

its successor(s) indicating that an assignment is on file shall be treated as

though it were submission of the actual assignment.

(5)           Claim Status Reports.  Health insurance claims

subject to 58-3-225 shall be processed in accordance with the provisions of the

statute.  Otherwise, if benefits claimed under an accident, health, or

disability contract have not been paid within 45 days after receipt of the

initial claim by the insurer, the insurer shall at that time mail a claim

status report to the insured.

 

History Note:        Authority G.S. 58-2-40; 58-3-225; 58-63-15;

58-63-65; 58-65-1; 58-65-40; 58-65-125; 58-67-65; 58-67-150;

Eff. December 15, 1979;

Amended Eff. July 1, 2012; April 8, 2002; April 1, 1989.

 

11 NCAC 04 .0320             STUDENT LOANS

Whenever a life insurer offers an insurance product that has

associated with it the possibility of that company making a federal guaranteed

student loan through the Federal Higher Education Act in connection with the solicitation

or sale of the life insurance product, said agent of company and applicant

shall execute a form to be approved by the Department.  Said form shall set out

the rights of the applicant under G.S. 58-3-135, and, among other things, also

shall state that the purchase of life insurance is not necessary to obtain a

federal guaranteed student loan and that information on alternative sources of

such loans can be had by contacting student finance officers at institutions of

higher learning.  Once this form is executed, one copy of the same shall be

left with the applicant and the insurance carrier, issuing the insurance

product, shall keep a copy of the form in its records for a period of at least

three years.

 

History Note:        Authority G.S. 58-2-40; 58-3-135;

58-3-150;

Eff. July 1, 1986;

Amended Eff. April 8, 2002; April 1, 1989.

 

SECTION .0400 ‑ PROPERTY AND LIABILITY

 

11 NCAC 04 .0401             FUNCTION OF SECTION

11 NCAC 04 .0402             RATING OF AUTOMOBILE INSURANCE

11 NCAC 04 .0403             BILLING PROCEDURES FOR AUTOMOBILE

LIABILITY INSURANCE

11 NCAC 04 .0404             CANCELLATION: TERMINATION: RENEWAL

OR NONRENEWAL

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated

on August 23, 1979;

Authority G.S. 58‑9; 58‑30.3; 58‑30.4;

58‑32; 58‑72(4) through ‑72(22); 58‑131.56;

58‑131.57; 58‑248.26; 58‑248.31; 58‑248.32;

58‑248.36; 20‑310;

Eff. February 1, 1976;

Readopted Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0405             DRIVE‑IN CLAIM SERVICE

FACILITIES

11 NCAC 04 .0406             TOTAL LOSSES ON MOTOR VEHICLES

11 NCAC 04 .0407             REPAIR ESTIMATES

11 NCAC 04 .0408             DETERMINATION OF REPAIR COSTS

11 NCAC 04 .0409             NOTICE OF CESSION

11 NCAC 04 .0410             PROMPT DETERMINATION OF DAMAGE

11 NCAC 04 .0411             SEX DISCRIMINATION IN AUTOMOBILE

INSURANCE

11 NCAC 04 .0412             HANDLING OF LOSS AND CLAIM PAYMENTS

11 NCAC 04 .0413             WRITTEN CONFIRMATION OF ORAL

AGREEMENTS

 

History Note:        Filed as an Emergency Repeal Eff. April

25, 1979, for a Period of 120 Days to be Reinstated

on August 23, 1979;

Authority G.S. 58‑9; 58‑30.3; 58‑30.4;

58‑39; 58‑44.3; 58‑54; 58‑54.4; 58‑131.37;

Eff. March 16, 1979;

Repealed Eff. August 23, 1979.

 

 

 

11 NCAC 04 .0414             FUNCTION OF SECTION

 

History Note:        Authority G.S. 58‑7.3, ‑9, ‑72;

Eff. December 15, 1979;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 04 .0415             SAFE DRIVER INCENTIVE PLAN

The following

are Department of Insurance rules regarding the Safe Driver Incentive Plan

("SDIP"):

(1)        License

revocation for refusal to submit to chemical tests shall not be considered

conviction of a moving traffic violation.

(2)        A

conviction for driving the wrong way on a one‑way street is not a

conviction for driving on the wrong side of the road.

(3)        The

revocation or suspension of a driver's license solely because of the

accumulation of motor vehicle points shall not be considered a conviction.

(4)        When new

operators are added to an automobile policy, their SDIP points may be added to

the policy at the same time coverage is extended to them.

(5)        SDIP

points for an operator whose license has been suspended or revoked may be added

only at the date the operator again becomes eligible for license with the

following exception:  SDIP points may be charged at the inception date of the

current policy if the operator has previously been convicted of a moving traffic

violation while his license was suspended or revoked or if there is reliable

evidence that the operator does, in fact, operate a motor vehicle.

(6)        If an

operator dies or permanently leaves an insured's household during the policy

period, his SDIP points shall be removed at the time of his death or departure.

 

History Note:        Authority G.S. 58-2-40; 58-36-65;

58-36-75;

Eff. December 15, 1979;

Amended Eff. February 1, 1993.

 

 

 

11 NCAC 04 .0416             BILLING PROCEDURES FOR AUTOMOBILE

INSURANCE

(a)  With

respect to new business, an insurer shall take no more than 90 days from the

effective date of the policy to make any investigation other than review of the

initial application and to bill the insured for proper classification or sub‑classification.

(b)  With

respect to renewal business, an insurer shall not bill for any additional

premium after the renewal quotation is made (for any condition which existed at

the time of renewal and which is on the driver's motor vehicle record).

(c)  With

respect to renewal business, if the insured does not provide complete rating

information necessary to underwrite the policy or makes an effort to withhold

rating information, the insurer shall take no more than 90 days from the

effective date of the renewal to make inquiry of the insured, to make any other

investigation and to bill the insured for proper classification and sub‑classification.

(d)  When an

insurer obtains information from sources other than the Department of Motor

Vehicles for use in underwriting an automobile policy and the insured alleges

that such information is incorrect, the insurer shall verify the accuracy of

such information.

(e)  Unearned

premium refunds shall be determined from the later of either the date the

consumer gives direct notice to a company or an agent of the company of such

cancellation or the effective date of cancellation requested by the insured. 

In the case of physical damage insurance where there is a loss payee, the

effective date of cancellation for the purposes of determining unearned premium

refund shall be ten days from the date cancellation notice was given directly

to a company or a company's agent.  However, if the consumer can show proof

that within the ten day period in this Rule where cancellation involves a loss

payee, that the consumer had obtained replacement physical damage coverage

which included the loss payee, then determination of the cancellation date for

purposes of determining unearned premium refund shall be had, from the last

date of any lapse in coverage for the loss payee during the ten day time set

out in this Rule, or; in the case of no lapse, shall be determined as if no

loss payee was involved.

 

History Note:        Authority G.S. 58‑9; 58‑248.34;

Eff. December 15, 1979;

Amended Eff. April 1, 1989; July 1, 1986.

 

 

 

11 NCAC 04 .0417             DRIVE-IN CLAIM SERVICE FACILITIES

No insurer shall require any claimant to use a drive-in

claim service operated by the insurer. The claimant's voluntary utilization of

a drive-in claim service or preferred repair shop shall not prejudice the right

of either party to obtain independent appraisals and negotiate settlement on

the basis of such appraisals.

 

History Note:        Authority G.S. 58-2-40; 58-63-65;

Eff. December 15, 1979;

Amended Eff. July 1, 2012.

 

11 NCAC 04 .0418             TOTAL LOSSES ON MOTOR VEHICLES

The

commissioner shall consider as prima facie violative of G.S. 58‑63‑15(11)

the failure by an insurer to adhere to the following procedures concerning

settlement of covered "total loss" motor vehicle claims when such

failure is so frequent as to indicate a general business practice:

(1)        If the

insurer and the claimant are initially unable to reach an agreement as to the

value of the vehicle, the insurer shall base any further settlement offer not

only on published regional average values of similar vehicles, but also on the

value of the vehicle in the local market.  Local market value shall be

determined by using either the local market price of a comparable vehicle or,

if no comparable vehicle can be found, quotations from at least two qualified

dealers within the local market area.  Additionally, if the claimant represents

that the vehicle actually owned by him was in better than average condition,

the insurer shall give due consideration to the condition of the claimant's

vehicle prior to the accident.

(2)        Where

the insurer has the right to elect to replace the vehicle and does so elect,

the replacement vehicle shall be available without delay, similar to the lost

vehicle, and paid for by the insurer, subject only to the deductible and to the

value of any enhancements acceptable to the insured.

(3)        If the

insurer makes a deduction for the salvage value of a "total loss"

vehicle retained by the claimant, the insurer, if so requested by the claimant,

shall furnish the claimant with the name and address of a salvage dealer who

will purchase the salvage for the amount deducted.

(4)        If a

written statement is requested by the claimant, a total loss payment by an

insurer shall be accompanied by a written statement listing the estimates,

evaluations and deductions used in calculating the payment, if any, and the

source of these values.

(5)        When a

motor vehicle is damaged in an amount which, inclusive of original and

supplemental claims, equals or exceeds 75 percent of the preaccident actual

cash value, as such value is determined in accordance with this Rule, an

insurance carrier shall "total loss" the automobile by paying the

claimant the preaccident value, and in return, receiving possession of the legal

title of the salvage of said automobile.  At the election of the claimant, or

in those circumstances where the insurance carrier will be unable to obtain an

unencumbered title to the damaged vehicle then the insurance carrier shall have

the right to deduct the value of the salvage of the total loss from the actual

value of the vehicle and leave such salvage with the claimant subject to the

insurance carrier abiding by Subparagraphs (3) and (6) of this Rule.  No

insurer, adjuster, appraiser, agent, or any other person shall enter into any

oral or written agreement(s), by and between themselves, to limit any original

or supplemental claim(s) so as to artificially keep the repair cost of a

damaged vehicle below 75% of its preaccident value, if in fact such original and

any supplemental claim(s) exceed or would exceed 75% of the vehicle's

preaccident value.

(6)        The

insurer shall be responsible for all reasonable towing and storage charges

until three days after the owner and storage facility are notified in writing

that the insurer will no longer reimburse the owner or storage facility for

storage charges.  Notification to the owner shall include the name, address,

and telephone number of the facility where the vehicle is being stored. 

Notification to the storage facility shall include the name, address, and, if

available, telephone number of the owner.  No insurer shall abandon the salvage

of a motor vehicle to a towing or storage service without the consent of the

service involved.  In instances where the towing and storage charges are paid

to the owner, the check or draft for the amount of such service shall be

payable jointly to the owner and the towing or storage service.

 

History Note:        Authority G.S. 58‑2‑40; 58‑63‑65;

Eff. December 15, 1979;

Amended Eff. April 1, 1993; April 1, 1989; July 1, 1986.

 

 

 

11 NCAC 04 .0419             MOTOR VEHICLE REPAIR ESTIMATES

The

commissioner shall consider as prima facie violative of G.S. 58‑63‑15(11)

the failure by an insurer to adhere to the following procedures concerning

repair estimates on covered motor vehicle damage claims submitted when such

failure is so frequent as to indicate a general business practice:

(1)        If the

insurer requires the claimant to obtain more than two estimates of property

damage, the cost, if any, of such additional estimates shall be borne by the

insurer.

(2)        No

insurer shall refuse to inspect the damaged vehicle if a personal inspection is

requested by the claimant.  However, if the damaged vehicle is situated other

than where it is normally used or cannot easily be moved, the insurer may

satisfy the requirements of this Section by having a competent local appraiser

inspect the damaged vehicle.

(3)        When the

insurer elects to have the claimant's property repaired, the insurer shall, if

so requested by the claimant, furnish the claimant with a legible front and

back copy of its estimate.  This estimate shall contain the name and address of

the insurer and, if the estimate was prepared by a repair service, the name and

address of that service.  If there is a dispute concerning pre‑existing

damage to the vehicle which the insurer does not intend to have repaired, the

extent of such damage shall be clearly stated in the estimate.

(4)        If

requested by a claimant, an insurer shall provide to the claimant copies of the

estimate and all supplements thereto that it uses to offer a settlement.

 

History Note:        Authority G.S. 58‑2‑40; 58‑63‑65;

Eff. December 15, 1979;

Amended Eff. April 1, 1993; April 1, 1989.

 

 

 

11 NCAC 04 .0420             WRITTEN CONFIRMATION OF ORAL

AGREEMENTS

(a)  If an

insurer, by telephone or otherwise, accepts liability or advises a claimant to

have damaged property repaired with the understanding that the insurer will pay

or reimburse the claimant, the insurer shall, if requested by the claimant,

promptly confirm the understanding in writing.  Such writing shall clearly

state the responsibility assumed by the insurer for payment of incurred costs.

(b)  If so

requested by the claimant, the insurer or its representative shall confirm in

writing all other oral agreements between itself or its representative and the

claimant.

 

History Note:        Authority G.S. 58-2-40; 58-3-100;

58-63-15;

Eff. December 15, 1979.

 

11 NCAC 04 .0421             HANDLING OF LOSS AND CLAIM PAYMENTS

The

commissioner shall consider as prima facie violative of G.S. 58‑3‑100

and 58‑63‑15(11) failure by an insurer to adhere to the following

procedures concerning loss and claim payments when such failure is so frequent

as to indicate a general business practice:

(1)        Loss and

claim payments shall be mailed or otherwise delivered within 10 business days

after the claim is settled.

(2)        Unless

the insured consents, no insurer shall deduct from a loss or claim payment made

under one policy premiums owed by the insured on another policy.

(3)        No

insurer shall withhold the entire amount of a loss or claim payment because the

insured owes premium or other monies in an amount less than the loss or claim

payment.

(4)        If a

release or full payment of claim is executed by a claimant, involving a repair

to a motor vehicle, it shall not bar the right of the claimant to promptly

assert a claim for property damages unknown to either the claimant or to the

insurance carrier prior to the repair of the vehicle, which damages were

directly caused by the accident and which damages could not be determined or

known until after the repair or attempted repair of the motor vehicle.  Claims

asserted within 30 days after repair shall be considered promptly asserted.

(5)        If a

release or full payment of claim is executed by a third party claimant,

involving a repair to a motor vehicle, it shall not bar the right of the third

party claimant to promptly assert a claim for diminished value, which

diminished value was directly caused by the accident and which diminished value

could not be determined or known until after the repair or attempted repair of

the motor vehicle.  Claims asserted within 30 days after repair for diminished

value shall be considered promptly asserted.

 

History Note:        Authority G.S. 58‑2‑40; 58‑3‑100;

58‑63‑65;

Eff. December 15, 1979;

Amended Eff. February 1, 1996; April 1, 1993; April 1,

1989; July 1, 1986.

 

 

 

11 NCAC 04 .0422             CANCELLATION OF INSURANCE

The

Commissioner shall consider an unfair trade practice the cancellation by an

insurer of any personal lines insurance policy for which the premium has been

paid because there is another policy in force for which the premium has not

been paid.

 

History Note:        Authority G.S. 58‑2-40; 58‑63-40;

Eff. December 15, 1979;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 04 .0423             ETHICAL STANDARDS

(a)  Every agent, limited representative, broker, adjuster,

appraiser, or other insurer's representative shall, when conducting insurance

business with a member of the public:

(1)           identify himself or herself and his or her

occupation; and

(2)           provide his or her National Producer Number

and the Department's website address and phone number for verification of

licensure status when requested to show proof of licensure by any claimant, any

repairer while he or she is investigating a claim or loss, any Department

representative, or any other person with whom he or she has contact while

performing his or her insurance business.

(b)  No claims management person, agent, agency employee,

limited representative, broker, adjuster, appraiser, or other insurer's

representative shall:

(1)           accept any gratuity or other form of

remuneration from any provider of services for recommending that provider to

claimants;

(2)           purchase salvage from a claimant;

(3)           intimidate or discourage any claimant from

seeking legal advice and counsel by withdrawing and reducing a settlement offer

previously tendered to the claimant or threatening to do so if the claimant

seeks legal advice or counsel.  No adjuster shall advise a claimant of the

advisability of seeking legal counsel nor recommend any legal counsel to any

claimant; or

(4)           cause any undue delay in the settlement of

a property damage claim on account of the claimant's choice of a motor vehicle

repair service.

(c)  No claims management person, agent, agency employee,

limited representative, broker, or other insurer's representative shall

recommend the utilization of a particular motor vehicle repair service without

informing the claimant that he is under no obligation to use the recommended

repair service and that he may use the service of his choice.

 

History Note:        Authority G.S. 58-2-40; 58-33-10;

58-33-30; 58-35-25; 58-63-65; 58-65-40;

Eff. December 15, 1979;

Amended Eff. October 1, 2010; April 1, 1993; April 1,

1989; July 1, 1986.

 

11 NCAC 04 .0424             PURPOSE

 

History Note:        Authority G.S. 58‑9;

Eff. April 1, 1989;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 04 .0425             DEFINITIONS

As used in this

Section the following terms shall be construed as follows:

(1)        "After

market part" means a part made by a nonoriginal manufacturer.

(2)        "Insurer"

includes any person authorized to represent the insurer with respect to a claim

and who is acting within the scope of the person's authority.

(3)        "Nonoriginal

manufacturer" means any manufacturer other than the original manufacturer

of a part.

(4)        "Part"

means a sheet metal or plastic part that generally is a component of the

exterior of a motor vehicle, including an inner or outer panel.

 

History Note:        Authority G.S. 58-2-40;

Eff. April 1, 1989.

 

11 NCAC 04 .0426             LIKE KIND AND QUALITY

No insurer

shall require the use of an after market part in the repair of a motor vehicle

unless the after market part is at least equal to the original part in terms of

fit, quality, performance and warranty.  Insurers specifying the use of after

market parts shall include in the estimate the costs of any modifications made

necessary by the use of after market parts.

 

History Note:        Authority G.S. 58-2-40;

Eff. April 1, 1989.

 

11 NCAC 04 .0427             DISCLOSURE REQUIREMENTS

Every insurer that writes motor vehicle

insurance in this state and that intends to require or specify the use of after

market parts must disclose to its policyholders in writing, either in the

policy or on a sticker attached thereto, the following information in no

smaller print than ten point type:

 

IN THE REPAIR OF YOUR COVERED AUTO

UNDER THE PHYSICAL DAMAGE COVERAGE PROVISIONS OF THIS POLICY, WE MAY REQUIRE OR

SPECIFY THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. 

THESE PARTS ARE REQUIRED TO BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY,

PERFORMANCE AND WARRANTY TO THE ORIGINAL MANUFACTURER PARTS THEY REPLACE.

 

All after market parts installed on a motor vehicle shall be

identified on the estimate and invoice for such repair.

 

History Note:        Authority G.S. 58-2-40;

Eff. April 1, 1989;

Amended Eff. March 1, 2004.

 

11 NCAC 04 .0428             ENFORCEMENT

 

History Note:        Authority G.S. 58‑9;

Eff. May 1, 1989;

Repealed Eff. May 3, 1993.

 

 

 

11 NCAC 04 .0429             COMMINGLING

The accounting

records maintained by agents, brokers, and limited representatives shall be

separate and apart from any other business records and demonstrate at all times

that collected funds due to insurers and return premiums due to policyholders

are available at all times.

 

History Note:        Authority G.S. 58-2-40; 58-2-195;

Eff. February 1, 1993;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 04 .0430             PROOF OF MAILING; AUTOMOBILE

INSURANCE

As used in G.S. 58-36-85, "proof of mailing" means

a certificate issued by and bearing the date stamp of the United States Postal

Service or an official United States Postal Service tracking number or similar

proof of mailing.

 

History Note:        Authority G.S. 58-2-40; 58-36-85;

Eff. February 1, 1993;

Amended Eff. July 1, 2012; February 1, 1996.

 

11 NCAC 04 .0431             DEFINITION OF CLAIMANT

As used in this

Section, unless the context clearly indicates otherwise, "claimant"

means a first party claimant or a third party claimant.

 

History Note:        Authority G.S. 58‑2‑40(1); 58‑3‑100(5);

58‑63‑15;

Eff. April 1, 1993.

 

 

11 NCAC 04 .0432             REFUND OF EXCESS PREMIUM ON

SCHEDULED ITEMS

If an insured has any scheduled item covered by a

homeowner's or personal inland marine insurance policy, and that item is

replaced for less than the scheduled amount of coverage, the insurer shall

refund the insured the difference in premium charged between the scheduled

amount of coverage and the actual amount of the loss paid by the insurer, if

the refund per policy term is greater than five dollars ($5.00).  Any refund

shall be computed from the date of issuance of the policy or five years,

whichever is less.

 

History Note:        Authority G.S. 58-2-40; 58-43-10;

58-63-65;

Eff. April 1, 1995;

Amended Eff. July 1, 2012.

 

11 NCAC 04 .0433             REFUND OF AUTO INSURANCE PREMIUM ON

NEW BUSINESS

If an insured

asks an insurer to cancel a newly issued motor vehicle insurance policy on or

before the premium billing due date, the unearned premium refund made by the

insurer shall be made on a pro rata rather than a short rate basis, and the

refund shall be based on the premium initially quoted by the insurer if both of

the following conditions are met:

(1)        The

insured provided the insurer with accurate and complete rating information.

(2)        The

insurer subsequently calculated the premium to be greater than the premium

initially quoted.

 

History Note:        Authority G.S. 58-2-40; 58-36-85;

58-63-65;

Eff. April 1, 1995.

 

 

 

CHAPTER 4 ‑ CONSUMER SERVICES DIVISION

 

SECTION .0500 ‑ LIFE INSURANCE ILLUSTRATIONS

 

 

11 NCAC 04 .0501             SCOPE AND DEFINITIONS

(a)  These Rules apply to all policies sold on and after the

effective dates of these Rules and to all certificates issued under those

policies.

(b)  As used in this Section, the following terms have the

following meanings:

(1)           "Actuarial Standards Board" means

the board established by the American Academy of Actuaries to develop and

promulgate standards of actuarial practice.

(2)           "Basic illustration" means a

ledger or proposal used in the sale of a policy that shows both guaranteed and

non‑guaranteed elements.

(3)           "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.

(4)           "Currently payable scale" means a

scale of non‑guaranteed elements in effect for a policy as of the

preparation date of the illustration or declared to become effective within the

next 95 days.

(5)           "Disciplined current scale" means

a scale of non‑guaranteed 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.

(6)           "Guaranteed elements" means the

premiums, benefits, values, credits, or charges under a policy that are

guaranteed and determined at issue.

(7)           "Illustrated scale" means a scale

of non‑guaranteed elements currently being illustrated that is not more

favorable to the policy owner than the lesser of:

(A)          The disciplined current scale; or

(B)          The currently payable scale.

(8)           "Illustration" means a

presentation or depiction that includes non‑guaranteed elements of a

policy over a period of years and that is either a basic illustration, in‑force

illustration, or a supplemental illustration.

(9)           "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.

(10)         "Illustration actuary" means an

actuary meeting the requirements of 11 NCAC 4 .0509 who certifies to

illustrations based on the standard of practice promulgated by the Actuarial

Standards Board.

(11)         "Lapse‑supported

illustration" means an illustration of a policy failing the test of self‑supporting

as defined in this Section, 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.

(12)         "Non‑guaranteed elements"

means the premiums, benefits, values, credits, or charges under a policy that

are not guaranteed or not determined at issue.

(13)         "Policy" means a group or

individual life insurance policy or certificate.  "Policy" does not

include:

(A)          A variable life insurance policy or certificate.

(B)          An annuity contract.

(C)          A credit life insurance policy or certificate.

(D)          A life insurance policy with no illustrated death

benefit on any individual exceeding ten thousand dollars ($10,000).

(14)         "Policy owner" means the owner

named in a policy or the certificate holder in the case of a group policy.

(15)         "Premium outlay" means the amount

of premium assumed to be paid by the policy owner or other premium payer out‑of‑pocket.

(16)         "Self‑supporting

illustration" means an illustration of a policy 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 fifteenth policy

anniversary or the twentieth 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.

(17)         "Supplemental illustration" means

an illustration furnished in addition to a basic illustration that meets the

applicable requirements of this Section, and that may be presented in a format

differing from the basic illustration, but may only depict a scale of non‑guaranteed

elements that is permitted in a basic illustration.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0502             ASSUMED EXPENSES AND CURRENT SCALE

(a)  As used in this Rule, "minimum assumed

expenses" means the minimum expenses used in the calculation of the

disciplined current scale for a policy.  An insurer may choose to designate

each year the method of determining assumed expenses for all policies from the

following:

(1)           Fully allocated expenses.

(2)           Marginal expense.

(3)           A table of fully allocated expenses

developed by the Actuarial Standards Board and approved by the National

Association of Insurance Commissioners.

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.

(b)  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 this

Section.

(2)           Limit a disciplined current scale to

reflect only actions that have been taken on 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.

(4)           Do not permit assumed expenses to be less

than minimum assumed expenses.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0503             ILLUSTRATED POLICIES

(a)  Each insurer marketing policies to which this Section

applies 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 this Section, the insurer shall identify in writing those

policy forms and whether or not an illustration will be used with them.  For

policy forms filed after the effective date of this Section, the identification

shall 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 before the first

policy anniversary for any policy form using that policy is prohibited.

(c)  If a policy form is identified by an insurer as one to

be marketed with an illustration, the insurer shall prepare and deliver a basic

illustration in accordance with this Section, except that a basic illustration

need not be provided to individual members of a single employer group or to

individuals insured under multiple lives coverage issued to a single applicant

unless the coverage is marketed to those individuals.  The illustration

furnished to an applicant for a group policy 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)  As used in this Paragraph, "non‑term group

life" means a group policy or individual policies of traditional permanent

or universal life insurance issued to members of a single employer group where:

(1)           Every plan of coverage was selected by the

employer.

(2)           The premium is paid by the employer or

through payroll deduction.

(3)           Group underwriting or simplified

underwriting is used.

Potential enrollees for policies and certificates of non‑term

group life subject to this Section shall be furnished a quotation with the

enrollment materials.  The quotation shall show potential policy values for

sample ages and policy years on a guaranteed and non‑guaranteed basis

appropriate to the group and the coverage.  This quotation shall not be

considered an illustration for purposes of this Section, but all information

provided shall be consistent with the illustrated scale.  A basic illustration

shall be provided at delivery of the policy or certificate to enrollees for non‑term

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 non‑term group life enrollee who requests

it.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0504             GENERAL RULES

(a)  As used in this Rule, "generic name" means a

short title descriptive of the policy being illustrated, such as "whole

life", "term life", or "flexible premium adjustable

life."  An illustration used in the sale of a policy shall satisfy the

applicable requirements of this Section, 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 this Section.

(4)           Underwriting or rating classification upon

which the illustration is based.

(5)           Generic name of the policy, the company product

name, if different, and policy form number.

(6)           Initial death benefit.

(7)           Dividend option election or application of

non‑guaranteed elements, if applicable.

(b)  When using an illustration in the sale of a policy, an

insurer or its agents or other authorized representatives shall not:

(1)           Represent the policy as anything other than

a life insurance policy;

(2)           Use or describe non‑guaranteed

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 non‑guaranteed elements is guaranteed;

(4)           Use an illustration that does not comply

with the requirements of this Section;

(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 non‑guaranteed 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

non‑guaranteed elements is shown, it shall not be greater than the earned

interest rate underlying the disciplined current scale.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0505             STANDARDS FOR BASIC ILLUSTRATIONS

(a)  Format.  A basic illustration shall conform with the

following requirements:

(1)           The illustration shall be labeled with the

date on which it was prepared.

(2)           Each page, including any explanatory notes

or pages, shall 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 shall be labeled "page 4 of 7 pages").

(3)           The assumed dates of payment receipt and

benefit pay‑out within a policy year shall be clearly identified.

(4)           If the age of the proposed insured is shown

as a component of the tabular detail, it shall be issue age plus the numbers of

years the policy is assumed to have been in force.

(5)           The assumed payments on which the

illustrated benefits and values are based shall be identified as premium outlay

or contract premium, as applicable.  For policies that do not require a

specific contract premium, the illustrated payments shall be identified as

premium outlay.

(6)           Guaranteed death benefits and values

available upon surrender, if any, for the illustrated premium outlay or

contract premium shall be shown and clearly labeled guaranteed.

(7)           If the illustration shows any non‑guaranteed

elements, they shall not be based on a scale more favorable to the policy owner

than the insurer's illustrated scale at any duration.  These elements shall be

clearly labeled non‑guaranteed.

(8)           The guaranteed elements, if any, shall be

shown before corresponding non‑guaranteed elements and shall be

specifically referred to on any page of an illustration that shows or describes

only the non‑guaranteed elements (e.g., "see page one for guaranteed

elements").

(9)           The account or accumulation value of a

policy, if shown, shall 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 shall be

identified by the name this value is given in the policy being illustrated and

shall 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 non‑guaranteed

elements shall be accompanied by a statement indicating that:

(A)          The benefits and values are not guaranteed;

(B)          The assumptions on which they are based are subject

to change by the insurer; and

(C)          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 non‑guaranteed

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 shall be made for

premium outlay of lesser amounts or shorter durations than the contract

premium.  If a contract premium is due, the premium outlay shall 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.

(14)         If the applicant plans to use dividends or

policy values, guaranteed or non‑guaranteed, 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 effect on future policy benefits

and values.

(b)  Narrative Summary.  A basic illustration shall 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

policy, 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 non‑guaranteed, shown in the basic

illustration and the effect 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.

(5)           A statement containing the following: This

illustration assumes that the currently illustrated non-guaranteed elements

will continue unchanged for all years shown.  This is not likely to occur. 

Actual results may be more or less favorable than those shown.

(c)  Numeric Summary.

(1)           Following the narrative summary, a basic

illustration shall 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 shall

be based on the contract premium.  This summary shall be shown for at least

policy years 5, 10 and 20 and at age 70, if applicable, on the three bases

shown below.  For multiple life policies the summary shall show policy years 5,

10, 20 and 30.  The columns of the numeric summary shall be as follows:

(A)          Policy guarantees;

(B)          Insurer's illustrated scale; and

(C)          Insurer's illustrated scale used but with the non‑guaranteed

elements reduced as follows:

(i)            Dividends at 50 percent of the dividends

contained in the illustrated scale used;

(ii)           Non‑guaranteed credited interest at rates

that are the average of the guaranteed rates and the rates contained in the

illustrated scale used; and

(iii)          All non‑guaranteed 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.

(2)           In addition, if coverage would cease before

policy maturity or age 100, the year in which coverage ceases shall be

identified for each of the three bases.

(d)  Statements.  Statements substantially similar to the

following shall 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 this Section.

(1)           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 non‑guaranteed elements

illustrated are subject to change and could be either higher or lower.  The

agent has told me they are not guaranteed."

(2)           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 non‑guaranteed elements

illustrated are subject to change.  I have made no statements that are

inconsistent with the illustration."

(e)  Tabular Detail.

(1)           A basic illustration shall include the

following for at least each policy year from one to 10 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 to change:

(A)          The premium outlay and mode the applicant plans to

pay and the contract premium, as applicable;

(B)          The corresponding guaranteed death benefit, as

provided in the policy; and

(C)          The corresponding guaranteed value available upon

surrender, as provided in the policy.

(2)           For a policy that provides for a contract

premium, the guaranteed death benefit and value available upon surrender shall

correspond to the contract premium.

(3)           Non‑guaranteed elements may be shown

if described in the policy.  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 non‑guaranteed

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 non‑guaranteed benefit or value

is shown, a zero shall be displayed in the guaranteed column.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0506             STANDARDS FOR SUPPLEMENTAL

ILLUSTRATIONS

(a)  A supplemental illustration may be provided as long as:

(1)           It is appended to, accompanied by or

preceded by a basic illustration that complies with this Section;

(2)           The non‑guaranteed 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 non‑guaranteed 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 shall be equal to the premium outlay shown in the illustration.

(b)  The supplemental illustration shall include a notice

referring to the basic illustration for guaranteed elements.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0507             DELIVERY OF ILLUSTRATION AND RECORD

RETENTION

(a)  If a basic illustration is used by an insurance agent

or other authorized representative of the insurer in the sale of a policy and

the policy is applied for as illustrated, a copy of that illustration, signed

in accordance with this Section, shall be submitted to the insurer at the time

of policy application.  A copy also shall be provided to the applicant.

(b)  If the policy is issued other than as applied for, a

revised basic illustration conforming to the policy as issued shall be sent

with the policy.  The revised illustration shall conform to the requirements of

this Section, shall be labeled "Revised Illustration" and shall 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 shall be provided to the insurer and the policy owner.

(c)  If no illustration is used by an insurance agent or

other authorized representative in the sale of a 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.

(d)  If the policy is issued, a basic illustration

conforming to the policy as issued shall be sent with the policy and signed no

later than the time the policy is delivered.  A copy shall be provided to the insurer

and the policy owner.

(e)  If the basic illustration or revised illustration is

sent to the applicant or policy owner by mail directly from the insurer, it

shall 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 subsection shall 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 shall 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.

(f)  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, shall 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.

 

History Note:        Authority G.S. 58-2-40; 58-58-1;

58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0508             ANNUAL REPORTS AND NOTICES TO POLICY

OWNERS

(a)  In the case of a policy designated as one for which an

illustration will be issued, the insurer shall provide each policy owner with

an annual report on the status of the policy that shall contain the information

specified in this Rule.

(b)  For universal life policies, the report shall 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 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)           Either:

(A)          For fixed premium policies:  If, 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 shall be included in the report; or

(B)          For flexible premium policies:  If, 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 shall be included in the report.

(c)  For all other policies, where applicable, the report

shall contain:

(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 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 shall contain the following notice in boldface print with a

capitalized heading "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 of your

policy.  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 an 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 the 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 shall

comply with the requirements of 11 NCAC 4 .0504(a), .0504(b), .0505(a), and

.0505(e).  No signature or other acknowledgment of receipt of this illustration

shall be required.

(g)  If an adverse change in any non‑guaranteed

element that could affect the policy has been made by the insurer since the

last annual report, the annual report shall contain a brief notice of that fact

and a description of the change, which notice and description shall be printed

in boldface print in a type at least two points larger than the report.

 

History Note:        Authority G.S. 58-2-40; 58-58-1; 58-58-40;

58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.

 

 

 

11 NCAC 04 .0509             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 this Section.

(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 opportunity for hearing to have:

(A)          Violated any provision of, or any obligation imposed

by, the insurance law or other law in the course of his or her dealings as an

illustration actuary;

(B)          Been found guilty of fraudulent or dishonest

practices;

(C)          Demonstrated his or her incompetence, lack of

cooperation, or untrustworthiness to act as an illustration actuary; or

(D)          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 an insurance regulator of another state similar to that under

Subparagraph (c)(3) of this Rule;

(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 shall 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 form, this shall be disclosed

in the annual certification; and

(6)           Disclose in the annual certification which

of the following methods are used to allocate overhead expenses for all

illustrations:

(A)          Fully allocated expenses;

(B)          Marginal expenses; or

(C)          A table of fully allocated expenses developed by the

Actuarial Standards Board and approved by the National Association of Insurance

Commissioners.

(d)  The illustration actuary shall file a certification

with the board and with the Commissioner:

(1)           Annually for all policies for which

illustrations are used; and

(2)           Before a new policy is illustrated.

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 illustration the insurer intends to use, the actuary shall

notify the board of directors of the insurer and the Commissioner promptly of

his or her inability to certify.

(f)  A responsible officer of the insurer, other than the

illustration actuary, shall certify annually that the illustration formats meet

the requirements of this Section and that the scales used in insurer‑authorized

illustrations are those scales certified by the illustration actuary and that

the company has provided its agents with information about the expense

allocation used by the company in its illustrations and disclosed as required

in 11 NCAC 4 .0509(c)(6).

(g)  The annual certifications shall 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 policies, the insurer shall

notify the Commissioner of that fact promptly and disclose the reason for the

change.

 

History Note:        Authority G.S. 58-2-40; 58-2-171;

58-58-1; 58-58-40; 58-60-15; 58-60-20; 58-63-15; 58-63-65;

Eff. January 1, 1997.