Ohio Department of Insurance Company Services

Illustrations

Ohio Administrative Code 3901-6-04 sets forth specific requirements for life insurance illustrations. An illustration is a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years. Each insurer must certify annually whether a policy form will be illustrated. If the insurer certifies the policy form as illustratable, then there must be an illustration provided to the applicant. If the insurer has not certified that the policy form is illustratable, then an illustration must not be provided to the applicant.

The following items are those to which special attention should be given:

• The entire illustration should be retained in the policy file. Compliance cannot be confirmed unless each and every page of the illustration actually provided to the applicant or policy owner is retained.
• For illustrations used in the sale of the policy, the signed and dated numeric summary must be in the file. Both the applicant and the agent must sign on or before the application date.
• If no illustration is used in the sale of the policy for which an illustration is required, the agent must submit a certification with the application signed and dated by both the applicant and agent stating that no illustration was provided and that an illustration will be provided by the insurer with the policy no later than policy delivery.
• Illustrations sent with the policy, including revised illustrations, should be signed no later than date of delivery. An insurer may meet this requirement by providing a self-addressed postage prepaid envelope. The policy file should document compliance with this requirement.
• If a policy is issued other than as applied for, a revised illustration must be sent with the policy and each page of the illustration should be labeled “Revised Illustration”. This illustration must also be signed as described above.
• The narrative summary of all illustrations must contain this specific wording: “This illustration assumes that the currently illustrated non-guaranteed elements used will not change for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown.”

The items shown above are not intended to be an exhaustive list of the requirements of Ohio Administrative Code 3901-6-04. Each insurer’s compliance department should closely review the regulation in its entirety. The Department strongly recommends that policy files be audited to verify compliance.

Replacements

Ohio Administrative Code 3901-6-05 defines replacements and sets forth specific requirements for policies written as replacements for existing policies. The section establishes the duties of agents, the duties of all insurers, and the duties of insurers with respect to direct response sales. It is the company’s responsibility to assure not only compliance with this regulation in company procedures, but also to assure compliance by its agents.

The following items are those to which special attention should be given:

• Applications used in Ohio must contain a statement signed by the applicant as to whether replacement is involved in the transaction.
• When agents are used, the agent must sign a statement as to whether the agent knows replacement is or may be involved in the transaction.
• The application must include a list of all existing life insurance and annuities to be replaced and properly identified by:
  • Name of insurer,
  • Name of insured, and,
  • Contract number.
• A “Notice Regarding Replacement” is included in the Appendix of Ohio Administrative Code 3901-6-05. Both the agent and the applicant must sign this Notice no later than the application date. The Notice must be left with the applicant, and a copy of this Notice must be maintained in the policy file.
• When replacement is involved, the applicant must be given a 20-day “free look” period.
• The existing insurer must be notified within three (3) working days of receiving the life insurance application.

The items shown above are not intended to be an exhaustive list of the requirements of Ohio Administrative Code 3901-6-05. Each insurer’s compliance department should closely review the regulation in its entirety. The Department strongly recommends that policy files be audited to verify compliance.

Interest on Policy Proceeds

Ohio Revised Code 3915.052 provides specific requirements for the payment of interest on proceeds that become due pursuant to the terms of a life insurance policy if the insured was a resident of Ohio on the date of death. Interest must be paid from the date of death to the date of payment. The interest rate paid must be the greater of:

• The annual short-term applicable federal rate in effect for the month in which the insured died; or
• The current rate of interest on proceeds left on deposit with the company under an interest settlement option contained in the life insurance policy.

All companies authorized to do business in Ohio should make certain that procedures have been implemented to assure compliance with Ohio Revised Code Section 3915.052.