Section 625-8 - Life insurance illustrations(a)(1) Each insurer marketing policies to which this act is applicable shall notify the commissioner whether a life insurance policy form is to be marketed with or without an illustration. For all life insurance policy forms being actively marketed on the effective date of this section, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. The notification shall be provided within sixty (60) days of the effective date of this section. For life insurance policy forms approved by the department but not being actively marketed on the effective date of this section, the identification shall be made on or before the time the life insurance policy form is actively marketed. For life insurance policy forms filed with the commissioner after the effective date of this section, the identification shall be made at the time of filing.(2) Any previous identification may be changed by notice to the commissioner. This notice shall be provided on or before the effective date of the change.(3) If the insurer identifies a life insurance policy form as one to be marketed without an illustration, any use of an illustration with any policy using that policy form prior to the first policy anniversary is prohibited.(4) If a life insurance policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this section is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.(5) Potential enrollees for policies and certificates on nonterm group life subject to this section shall show potential policy values from sample ages and policy years on a guaranteed and nonguaranteed 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 life insurance policy or certificate to enrollees for nonterm group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any nonterm group life enrollee who requests it.(b)(1) An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this section, be clearly labeled "life insurance illustration" and contain the following basic information: (ii) Name and business address of producer, if any.(iii) Name, age and sex of proposed insured, except where a composite illustration is permitted under this section.(iv) Underwriting or rating classification upon which the illustration is based.(v) Generic name of policy, the insurer product name, if different, and form number.(vi) Initial death benefit.(vii) Dividend option election or application of nonguaranteed elements, if applicable.(2) When using an illustration in the sale of a life insurance policy, an insurer or its producers shall not: (i) Represent the policy as anything other than a life insurance policy;(ii) use or describe nonguaranteed elements in a manner that is untrue, deceptive or misleading or has the capacity or tendency to mislead;(iii) state or imply that the payment or amount of nonguaranteed elements is guaranteed;(iv) use an illustration that does not comply with the requirements of this act;(v) 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;(vi) provide an applicant with an incomplete illustration;(vii) 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 such representation is true;(viii) use the term "vanish" or "vanishing premium" or any similar term that implies the policy may become paid up to describe a plan whereby nonguaranteed elements are used to pay all or a portion of future premiums;(ix) except for policies that can never develop nonforfeiture values, use a lapse-supported illustration; or(x) use an illustration that is not self-supporting.(3) If an interest rate used to determine the illustrated nonguaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.(c)(1) A basic illustration shall conform with the following requirements:(i) The illustration shall be labeled with the date on which it was prepared.(ii) Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration.(iii) The assumed dates of payment receipt and benefit payout within a policy year shall be clearly identified.(iv) If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the number of years the policy is assumed to have been in force.(v) The assumed payments in 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.(vi) 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.(vii) If the illustration shows any nonguaranteed elements, they cannot be based on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration. These elements shall be clearly labeled nonguaranteed.
(viii) The guaranteed elements, if any, shall be shown before corresponding nonguaranteed elements and shall be specifically referred to on any page of an illustration that shows or describes only the nonguaranteed elements.(ix) 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.(x) 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.(xi) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.(xii) Any illustration of nonguaranteed elements shall contain 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.(C) Actual results may be more or less favorable.(xiii) If the illustration shows that the premium payer may have the option to allow policy charges to be paid using nonguaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlays of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display 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.(xiv) Upon the request of the applicant and at the discretion of the insurer, the illustration may show the use of dividends or policy values, guaranteed or nonguaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, and the impact of such use on future policy benefits and values.(2) A basic illustration shall include the following:(i) A brief description of the policy being illustrated, including a statement that it is a life insurance policy.(ii) A brief description of the premium outlay or contract premium, as applicable for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).(iii) A brief description of any policy features, riders or options, guaranteed or nonguaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy.(iv) Identification and a brief definition of column headings and key terms used in the illustration.(v) A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."
(3)(i) 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 five (5), ten (10) and twenty (20) and at age seventy (70), if applicable. For multiple life policies the summary shall show policy years five (5), ten (10), twenty (20) and thirty (30).(ii) This numeric summary shall be shown for the required policy years for the following three bases: (B) Insurer's or fraternal benefit society's illustrated scale.(C) Insurer's or fraternal benefit society's illustrated scale used but with the nonguaranteed elements reduced as follows:(1) Dividends at fifty per centum (50%) of the dividends contained in the illustrated scale used.(2) Nonguaranteed credited interest at rates that are the arithmetic average of the guaranteed rates and the rates contained in the illustrated scale used.(3) All nonguaranteed charges, including, but not limited to, term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.(iii) In addition, if coverage would cease prior to maturity or age one hundred (100) for a policy without a maturity date, on any of the three bases stated in subparagraph (ii), the years in which coverage ceases shall be identified.(4) Statements substantially similar to the following shall be included on the same page as the numeric summary: (i) A statement to be signed and dated by the applicant or the policy owner in the case of an illustration provided at time of delivery, reading as follows: "I have received a copy of this illustration and understand that any nonguaranteed elements illustrated are subject to change and could be either higher or lower. The producer has told me they are nonguaranteed."
(ii) A statement to be signed and dated by the producer, reading as follows: "I certify that this illustration has been presented to the applicant or the policy owner and that I have explained that any nonguaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."
(5)(i) A basic illustration shall include the following for at least each policy year from one (1) to ten (10) and for every fifth policy year thereafter ending at the later of age one hundred (100), policy maturity or final expiration; and except for term insurance beyond the twentieth year, for any year in which the premium outlay and contract premium, if applicable, is to change: (A) The premium outlay, the payment mode the applicant plans to use and the contract premium, as applicable.(B) The corresponding guaranteed death benefit, as provided in the policy.(C) The corresponding guaranteed value available upon surrender, as provided in the policy.(ii) For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender shall correspond to the contract premium.(iii) Nonguaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer's current practice is to pay terminal dividends. If any nonguaranteed elements are shown they must be shown, at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a nonguaranteed benefit or value is shown, a zero shall be displayed in the guaranteed column.(d)(1) A supplemental illustration may be provided so long as:(i) It is appended to, accompanied by or preceded by a basic illustration that complies with this section.(ii) The nonguaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration.(iii) It contains the statement referenced in subsection (c)(1)(xii), exactly as contained in the basic illustration.(iv) For a policy that provides for 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 basic illustration.(2) The supplemental illustration shall include a notice referring to the basic illustration and that the basic illustration contains guaranteed elements and other important information.(e)(1) The following applies if a basic illustration is used by a producer in the sale of a life insurance policy. (i) If the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this section, shall be submitted to the insurer no later than the time the policy application is sent to the insurer. A copy shall also be provided to the applicant no later than the time the application is signed by the applicant.(ii) If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be mailed or delivered with the policy. The revised illustration shall conform to the requirements for basic illustrations contained in this act and shall be labeled "Revised Illustration." The statement required by subsection (c)(4) shall be signed and dated by the policy owner and producer no later than the time the policy is delivered. A copy shall be provided to the policy owner no later than the time the policy is delivered and to the insurer as soon as practical after the policy is delivered.(2) The following applies if no illustration is used by a producer in the sale of a life insurance policy or if a computer screen illustration is displayed. (i) The producer shall certify in writing on a form provided by the insurer that no illustration was used in the sale of the life insurance policy. On the same form the applicant shall acknowledge that no illustration 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 as soon as practical after the application is signed by the applicant.(ii) Where a computer screen illustration is used, the producer shall certify in writing on a form provided by the insurer that a computer screen illustration was displayed. Such form shall require the producer to provide, as applicable, the generic name of the policy and any riders illustrated, the guaranteed and nonguaranteed interest rates illustrated, the number of policy years illustrated, the initial death benefit, the premium amount illustrated and the assumed number of years of premiums. On the same form, the applicant shall further acknowledge that an illustration matching that which was displayed on the computer screen will be provided no later than the time the application is provided to the insurer. A copy of this signed form shall be provided to the applicant at the time it is signed.(iii) If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed by the policy owner no later than the time the policy is delivered. A copy shall be provided to the policy owner at the time the policy is delivered and to the insurer as soon as practical after the policy is delivered.(3) The following applies if an illustration is used by a producer in the sale of a life insurance policy but the policy applied for is other than as illustrated. (i) The producer shall certify in writing on a form provided by the insurer that the policy applied for is other than as illustrated. On the same form the applicant shall acknowledge that the policy applied for is other than as illustrated 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 or fraternal benefit society as soon as practical after the application is signed by the applicant.(ii) If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed by the policy owner no later than the time the policy is delivered. A copy shall be provided to the policy owner no later than the time the policy is delivered and to the insurer as soon as practical after the policy is delivered.(4) If the basic or revised illustration is mailed to the applicant or policy owner by the insurer, the applicant or policy owner shall be instructed 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 a diligent effort has been made 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.(5) 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 (3) years after the policy is no longer in force. A copy need not be retained if no policy is issued.(f)(1) The board of directors of each insurer shall appoint one or more illustration actuaries.(2) The illustration actuary shall certify that the disciplined current scale used in illustrations in conformity with the Actuarial Standard of Practice for Compliance promulgated by the Actuarial Standards Board and that the illustrated scales used in insurer authorized illustrations meet the requirements of this section.(3) The illustration actuary shall:(i) Be a member in good standing of the American Academy of Actuaries.(ii) Be familiar with the standard of practice regarding life insurance policy illustrations.(iii) Not have been found guilty of fraudulent or dishonest practices by a court of competent jurisdiction.(iv) Not have been found by the commissioner, following appropriate notice and 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 duties as an illustration actuary;(B) demonstrated his or her incompetence, lack of cooperation or untrustworthiness to act as an illustration actuary; or(C) resigned or been removed as an illustration actuary within the past five (5) 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.(v) Not fail to notify the commissioner of any action taken by a commissioner of another state similar to that of subparagraph (iv).(4) The illustration actuary shall disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five (5) years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in-force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in-force policies are not consistent with the nonguaranteed elements actually being paid, charged or credited, this must be disclosed in the annual certification.(5) The illustration actuary shall disclose in the annual certification the method used to allocate overhead expenses for all illustrations: (i) fully allocated expenses;(ii) marginal expenses; or(iii) a generally recognized expense table based on fully allocated expense representing a significant portion of insurance companies and approved by the commissioner.(6) The illustration actuary shall file a certification with the insurer's or fraternal benefit society's board and with the commissioner:(i) Annually for all life insurance policy forms for which illustrations are used.(ii) Before a new life insurance policy form is illustrated.(7) 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 in writing.(8) If an illustration actuary is unable to certify the scale for any life insurance policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the commissioner promptly in writing of his or her inability to certify.(9) A responsible officer of the insurer, other than the illustration actuary, shall certify annually that: (i) 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.(ii) The insurer has provided its producers with information about the expense allocation method used by the insurer in its illustrations and has made the disclosure required in paragraph (5).(10) The annual certification required by paragraph (6)(i) shall be provided to the commissioner each year by a date determined by the insurer but no later than one year after the effective date of this section. Subsequent annual certifications shall be provided within thirty (30) days before or after the anniversary of the first certification. The certification required by paragraph (6)(ii) shall be provided at least thirty (30) days prior to using an illustration with a new life insurance policy form.(11) If an insurer changes the illustration actuary responsible for all or a portion of the company's policy forms, the insurer shall notify the commissioner of that fact promptly in writing and disclose the reason for the change.(g) This section shall not apply to:(1) Variable life insurance.(2) Credit life insurance.(3) Life insurance issued in connection with a pension, profit-sharing or other benefit plan qualifying for deductibility of premiums.(4) Life insurance policies for which there are no illustrated death benefits exceeding ten thousand dollars ($10,000) on any individual.(h) This section shall expire on the effective date of approved final-form regulations promulgated hereunder as published in the Pennsylvania Bulletin under the provisions of the act of June 25, 1982 (P.L. 633, No. 181), known as the "Regulatory Review Act."1921, May 17, P.L. 682, No. 284, added 1996, Dec. 18, P.L. 1003, No. 154, § 3, effective 7/1/1997.