760 Ind. Admin. Code 1-18-5
Authority: IC 27-1-3-7
Affected: IC 27-4-1-4
Sec. 5.
ADVERTISEMENTS OF BENEFITS PAYABLE, LOSSES COVERED OR PREMIUMS PAYABLE.
Explanation:
When an advertisement refers to any dollar amount, period of time for which any benefit is payable, cost of policy, or specific policy benefit or the loss for which such benefit is payable, it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity and tendency to mislead or deceive.
Explanation:
When a policy contains a time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such a loss, an advertisement shall disclose the existence of such periods.
Interpretation of Section B 2 [this section] generally
To interpret Section B 2 [this section] properly, it is necessary, first, to distinguish between Sections B 2(a) and B 2(b) [subsections (a) and (b) of this section]. Generally, the purpose of Section B 2(a) [subsection (a) of this section]is to prevent an insurer from exaggerating the extent of policy benefits or minimizing cost by using phraseology which either overstates benefits or is so incomplete as to leave an exaggerated idea of benefits in the mind of the reader. The first sentence of the Section and Explanations (i) and (ii) prohibit and explain exaggeration by overstatement. The second sentence of the Section and Explanations (iii) and (iv) prohibit and explain exaggeration by incompleteness.
Section B 2(b) [subsection (b) of this section] extends this principle of "no exaggeration." In essence it states that in certain types of advertisements the only way that exaggeration of benefits can be avoided is to set forth in the same advertisements certain of the limitations, exceptions and reductions affecting the benefits described.
Section B 2(a) [subsection (a) of this section] applies to any advertisement which discusses benefits. Section B 2(b) [subsection (b) of this section]applies only to an advertisement which discusses benefits to the extent of mentioning the dollar amount or time limit of the benefits or cost of the policy or benefits thereunder.
Because the basic purpose of both Rules [subsections (a) and (b) of this section]is the same-to prevent exaggeration, they must necessarily overlap at times. For example: In advertising a policy which contains an aggregate benefit limit, it would be improper to use alone the phrase, "no limit on the number of claims" because the second sentence of Section B 2(a) [subsection (a) of this section]requires completion of the statement in some manner like "no limit on the number of claims until the aggregate amount X dollars has been paid." If elsewhere the advertisement contains a discussion of dollar amount or time limit of benefits or cost of the policy or its benefits, Section B 2(b) [subsection (b) of this section]requires that the aggregate amount be set forth because it is an important "limitation." Therefore, in this example, the aggregate amount should be set out because both Sections B 2(a) [subsection (a) of this section]and B 2(b) [subsection (b) of this section]require it.
The distinction between Sections B 2(a) [subsection (a) of this section]and B 2(b) [subsection (b) of this section]can best be explained as follows: Section B 2(a) [subsection (a) of this section]is only concerned with phraseology of benefit descriptions in an advertisement. Section B 2(b) [subsection (b) of this section]is not primarily concerned with phraseology, but, in advertisements to which it applies, in having certain limitations, exceptions and reductions set forth. It is simply coincidental that to meet the phraseology requirements of Section B 2(a) [subsection (a) of this section]it may sometimes be necessary to describe a limitation, exception or reduction. Interpretation of Section B 2(a) [subsection (a) of this section]specifically
In interpreting Section B 2(a) [subsection (a) of this section]the following suggestions should be observed:
For example, automobile, air and railroad travel policy advertisements should disclose that they are limited to accidents resulting from automobile, air or railroad travel, as the case may be, as well as the limited manner in which the accident must occur, including any unusual conditions.
Advertising of policies which are specifically tailored to augment benefits available to medicare insureds should disclose in unmistakable language what medicare benefits the policy is designed to supplement, e.g., hospital benefits only and further which medicare benefits it will not supplement, e.g., does not pay doctors bills.
Advertisements shall not state that the insurer-
"pays hospital, surgical, etc. bills,"
"pays dollars to offset the cost of medical care,"
"safeguards your standard of living,"
"pays full coverage" or "pays complete coverage,"
"pays for financial needs,"
"provides for replacement of your lost paycheck," unless the statement in each instance is literally true. Where appropriate such or similar words or phrases may properly be used if preceded by the words "help," "aid," "assist" or similar words or phrases. Advertisements shall not emphasize the total amounts payable under hospital indemnity coverage or other benefits in such policy, such as benefits for private duty nursing, unless it provides with substantially equal prominence and in close conjunction with such statements the actual amounts payable per day for such indemnity or benefit.
That part of Section B 2(b) [subsection (b) of this section]which reads as follows:
"When an advertisement refers to any dollar amount, period of time for which any benefit is payable, cost of policy, or specific policy benefit or the loss for which such benefit is payable, ***." attempts to define the type of advertisement which must meet the requirements set forth in the remaining language of the Section.
The words "dollar amount" appearing above should be interpreted as meaning "dollar amount of benefits."
It is possible to have an advertisement which does not specifically mention dollar, time or cost, but accomplishes the same objective by indirection. For example, if there were a hospital and surgical expense policy which paid all incidental hospital expenses, it might be advertised as follows: "When you are covered under our hospital and surgical expense policy, we pay all your incidental hospital expenses." Or an advertisement of a major medical expense policy may truthfully promise to pay 75% of hospital, medical and surgical expenses in excess of the deductible. In both of these examples, language is employed which is sufficiently specific to indirectly disclose to the reader the dollar amount to which he may become entitled. The language of the rule mentioned above, to wit: "specific policy benefit or the loss for which such benefit is payable" was inserted to describe this type of advertisement.
As was noted in the "Basic Principles of Interpretation" advertisements generally fall within three categories. To properly apply the philosophy expressed in the first paragraph of the "Basic Principles", the meaning of Section B 2(b) [subsection (b) of this section] must be examined in the light of each category. The first category of advertisements includes those which are the direct or principal sales inducements and are designed to invite offers to contract, i.e., clearly attempt to persuade the reader or listener to purchase the policy or policies advertised. When such an advertisement mentions dollar amount or time limit of benefits or cost of policy or policy benefits, it is always subject to the limitations imposed by the mandatory portion of Section B 2(b) [subsection (b) of this section].
The second category of advertisements includes those designed to attract the reader's interest in the policy or policies advertised so that he will inquire for further details and information. This type of advertisement usually describes benefits broadly. It may make some mention of dollar amount, time limits or cost. Such mention, however, does not in itself mean that the requirements of Section B 2(b) [subsection (b) of this section] are applicable if the advertisement clearly falls within the category of an invitation to inquire.
To illustrate the foregoing: A brief television commercial or a direct mail card may state, "X company invites you to inquire for full information about their $14 a day hospital expense policy." This advertisement is obviously not in the first category, an invitation to contract, but rather in the second category, an invitation to inquire. The viewer or reader could not reasonably decide to purchase the policy described on the basis of the information given even though it does mention a dollar amount.
But suppose the advertisement states, "X company invites you to inquire for full information about its $14 a day hospital expense policy which will cost you only 4¢ a day." Unlike the first example, it is more than a mere invitation to inquire for further details and should fall within the scope of Section B 2(b) [subsection (b) of this section]. The distinction between the two advertisements is plain, if it is borne in mind, in the examples given that at least two kinds of information are needed by a prospective purchaser to determine whether he wishes to buy. He needs to know (1) what he will get, and (2) what it will cost. If he only knows what he will get without knowing the cost or if he knows only what he must pay without knowing what he will get, his only reasonable course is to seek further information. The principle followed in the above examples is that if those advertisements which fall within the category of an invitation to inquire withhold some facts without which no one could reasonably decide to buy the policies advertised, such advertisements are not subject to the limitations imposed by Section B 2(b) [subsection (b) of this section]. It should be recognized that there is no single conclusive test and that each advertisement is weighed individually.
It is also true that if the description of dollar, time or cost is merely for the purpose of identifying the policy, Section B 2(b) [subsection (b) of this section]should not apply. Conversely, if the mention of dollar, time or cost is for the purpose of doing more than identifying the policy, Section B 2(b) [subsection (b) of this section], may apply.
Thus, it can be seen that many advertisements falling within the "invitation to inquire" category are not subject to the requirements of Section B 2(b) [subsection (b) of this section], but as has been shown, there will be times when their language is such as to make compliance necessary.
The third category of advertisements includes those of an institutional type. Rarely is it likely that dollar amounts, time limits, or cost will be mentioned in this class. Section B 2(b) [subsection (b) of this section], therefore, has little or no application to advertisements in this category.
The phrase "no medical examination required" and phrases of similar import referred to in Rule B 2(b) (ii) (b) [subsection (b) (ii) (b) of this section]may be used, provided that (1) they are modified to indicate that they apply only to the issuance of the policy or to both issuance of the policy and payment of claims, whichever the case may be, (e.g. "No medical examination required to apply"; "No medical examination to apply for the policy or any benefits") and (2) additional wording is included in close conjunction with the phrases to indicate any time period following the effective date of the policy during which losses traceable to preexisting conditions are not covered. (E.g., "preexisting conditions not covered during first _____ years the policy is in force.")
We turn now to consideration of the mandatory portion of Section B 2(b) [subsection (b) of this section]which reads as follows:
"*** it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity and tendency to mislead or deceive."
Where Section B 2(b) [subsection (b) of this section] applies, it is clear that it is not necessary to disclose all exceptions, reductions and limitations. The following are examples of exceptions, reductions and limitations that generally do affect the basic provisions and "without which the advertisement would have the capacity and tendency to mislead or deceive." Also included are examples of those that generally are not of sufficient significance to affect the basic provisions or to mislead if omitted. The lists are not intended to be complete and the advertiser should use the lists as a guide in determining the character of exceptions, reductions and limitations that do not appear.
GENERALLY DO AFFECT THE BASIC PROVISIONS AND WITHOUT WHICH THE ADVERTISEMENT WOULD HAVE THE CAPACITY AND TENDENCY TO MISLEAD OR DECEIVE
GENERALLY DO NOT AFFECT THE BASIC PROVISIONS AND WITHOUT WHICH THE ADVERTISEMENT WOULD NOT HAVE THE CAPACITY AND TENDENCY TO MISLEAD OR DECEIVE
Some advertisements of the first category relating to hospital indemnity coverage when used in newspaper and magazine advertising, which contain an application form or otherwise invite offers to contract, may disclose exceptions, reductions or limitations as required by Section B 2(b) [subsection (b) of this section]but the advertisement is so lengthy as to obscure the disclosure of the preexisting condition exclusion, the limitation on the payment of benefits for the first _____ days of hospital confinement if any, or the fact that the policy does not pay physician's benefits. In such circumstances special emphasis shall be given to such applicable exceptions, reductions or limitations in a prominent or clearly noticeable area in such advertisement.
760 IAC 1-18-5