Insurance, Administration

Rule R590-155

Disclosure of Life and Health Guaranty Association Limitations

Notice of Proposed Rule

(Amendment)

DAR File No.: 33591
Filed: 04/29/2010 12:14:55 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule is being updated to correct the address of the association and increase the amount for annuities along with other housekeeping revisions.

Summary of the rule or change:

The changes to this rule include: 1) the change in the title of the rule; 2) correcting the address of the association; 3) increasing the amount for annuities; 4) standardizing the notice to conform with the National Association of Insurance Commissioner's (NAIC) template; 5) transferring the notice from the body of the rule to an attachment; 6) standardizing the Enforcement section; 7) moving the severability section to the end of the rule; and 8) adding a Penalties section.

State statutory or constitutional authorization for this rule:

• Section 31A-2-201
• Section 31A-28-119

Anticipated cost or savings to:

the state budget:

Licensed health and life insurers will be required to file their revised guarantee notices with the department, which will increase the department's workload, but not to the extent that a full or part time person will need to be hired. These filings will not create a change in the department or state's revenues since insurers pay a set fee once a year.

local governments:

The changes to this rule will not affect local governments since the rule deals solely with the relationship of the department with its licensees.

small businesses:

This rule and its changes should have no effect on small businesses. The rule affects insurance companies licensed to do business in Utah. All insurers would be considered large insurers.

persons other than small businesses, businesses, or local governmental entities:

Life and Health insurers will need to take the revised notice attached to this rule and make a few changes to it to personalize it. If they keep hard copies of the notice on hand they will need to replace it which would create a minor expense for them. The form would then need to be filed with the department but this is done electronically resulting in no mailing costs and no additional filing fee over that paid when the company renews its license with the department. As a result, there should be no pass along cost to their insureds.

Compliance costs for affected persons:

There are no compliance costs involved in the changes to this rule. Filing fees are no longer charged for individual filings. They are paid at the time of the license is issued or renewed.

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes to this rule will have no fiscal impact on businesses.

Neal T. Gooch, Acting Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at jwhitby@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/14/2010

Interested persons may attend a public hearing regarding this rule:

• 06/01/2010 03:00 PM, State Office Bldg, 450 N State St, Room 3112, Salt Lake City, UT

This rule may become effective on:

06/21/2010

Authorized by:

Jilene Whitby, Information Specialist

R590. Insurance, Administration.

R590-155. [Disclosure of Life and Health Guaranty Association Limitations]Utah Life and Health Insurance Guaranty Association Summary Document.

R590-155-1. Authority.

This rule is promulgated pursuant to:

(1) Subsection 31A-2-201(3)(a), in which the commissioner is empowered to administer and enforce this title and to make rules to implement the provisions of this title; and[ pursuant to the specific authority of]

(2) Subsection 31A-28-119[(4)], to provide guidelines [to enable insurers to comply with the requirement to disclose to insureds the extent that contractual guarantees are not covered or have limited coverage by]for the Utah Life and Health Insurance Guaranty Association summary and disclaimer document.

 

R590-155-2. Purpose and Scope.

[A]1. The purpose of this rule is to specify the form and content of the summary and disclaimer document for insurers to disclose to [insureds]policy or contract holders the extent that contractual guarantees are not covered or have limited coverage by the Utah Life and Health Insurance Guaranty Association as required by Section 31A-28-119.

[B]2. The rule shall apply to all insurance transactions in this state involving [direct ]life and health insurance policies and annuity contracts as specified in Subsection 31A-28-103(2).

 

R590-155-3. Rule.

[A]1. An insurer authorized to do business in this state, which is subject to the Utah Life and Health Insurance Guaranty Association Act, shall disclose to its policy or contract holders that its contractual guarantees may not be covered by the Utah Life and Health Insurance Guaranty Association.

[B]2. For the purpose of this rule, the [statutory ]term "policy or contract holders" shall also mean insureds or certificate holders of group policies.

[C]3. Disclosure shall be made in writing using the [Utah Insurance Department summary document]text [entitled "Utah Life and Health Insurance Guaranty Association, Notice to Policyholders," as follows:]in the attachment to this Rule.

 

[TABLE

  

 NOTICE TO POLICYHOLDERS

 (Boldface Type)

 Insurance companies licensed to sell life insurance,

health insurance, or annuities in the State of Utah are

required by law to be members of an organization called the

Utah Life and Health Insurance Guaranty Association ("ULHIGA").

If an insurance company that is licensed to sell insurance in

Utah becomes insolvent (bankrupt), and is unable to pay claims

to its policyholders, the law requires ULHIGA to pay some of

the insurance company's claims. The purpose of this notice is

to briefly describe some of the benefits and limitations

provided to Utah insureds by ULHIGA.



 PEOPLE ENTITLED TO COVERAGE

 (Boldface Type)

 You must be a Utah resident

 You must have insurance coverage under an individual or group policy.



 POLICIES COVERED

 (Boldface Type)

 ULHIGA provides coverage for certain life, health and annuity insurance policies.



 EXCLUSIONS AND LIMITATIONS

 (Boldface Type)

 Several kinds of insurance policies are specifically

excluded from coverage. There are also a number of

limitations to coverage. The following are not covered by ULHIGA:

 Coverage through an HMO

 Coverage by insurance companies not licensed in Utah.

 Self-funded and self-insured coverage provided by an

employer that is only administered by an insurance company.

 Policies protected by another state's guaranty

association.

 Policies where the insurance company does not guarantee

the benefits.

 Policies where the policyholder bears the risk under the policy.

 Re-insurance contracts.

 Annuity policies that are not issued to and owned by an

individual, unless the annuity policy is issued to a pension

benefit plan that is covered.

 Policies issued to pension benefit plans protected by the

Federal Pension Benefit Guaranty Corporation.

 Policies issued to entities that are not members of

ULHIGA, including health plans, fraternal benefit societies,

state pooling plans and mutual assessment companies.



 LIMITS ON AMOUNT OF COVERAGE

 (Boldface Type)

 Caps are placed on the amount ULHIGA will pay. These

caps apply even if you are insured by more than one policy

issued by the insolvent company. The maximum ULHIGA will pay

is the amount of your coverage or $500,000 -- whichever is

lower. Other caps also apply:

 $200,000 in net cash surrender values.

 $500,000 in life insurance death benefits (including cash

surrender values).

 $500,000 in health insurance benefits.

 $200,000 in annuity benefits -- if the annuity is issued

to and owned by an individual or the annuity is issued to a

pension plan covering government employees.

 $5,000,000 in annuity benefits to the contract holder of

annuities issued to pension plans covered by the law.  (Other

limitations apply).

 Interest rates on some policies may be adjusted downward.



 DISCLAIMER

 (Boldface Type

 to, but not to include, the

 two addresses at the end.)

 PLEASE READ CAREFULLY:

 COVERAGE FROM ULHIGA MAY BE UNAVAILABLE UNDER THIS

POLICY. OR, IF AVAILABLE, IT MAY BE SUBJECT TO SUBSTANTIAL

LIMITATIONS OR EXCLUSIONS. THE DESCRIPTION OF COVERAGES

CONTAINED IN THIS DOCUMENT IS AN OVERVIEW. IT IS NOT A

COMPLETE DESCRIPTION. YOU CANNOT RELY ON THIS DOCUMENT AS A

DESCRIPTION OF COVERAGE. FOR A COMPLETE DESCRIPTION OF

COVERAGE, CONSULT THE UTAH CODE, TITLE 31A, CHAPTER 28.

 COVERAGE IS CONDITIONED ON CONTINUED RESIDENCY IN THE

STATE OF UTAH.

 THE PROTECTION THAT MAY BE PROVIDED BY ULHIGA IS NOT A

SUBSTITUTE FOR CONSUMERS' CARE IN SELECTING AN INSURANCE

COMPANY THAT IS WELL-MANAGED AND FINANCIALLY STABLE.

 INSURANCE COMPANIES AND INSURANCE AGENTS ARE REQUIRED BY

LAW TO GIVE YOU THIS NOTICE. THE LAW DOES, HOWEVER, PROHIBIT

THEM FROM USING THE EXISTENCE OF ULHIGA AS AN INDUCEMENT TO

SELL YOU INSURANCE.

 THE ADDRESS OF ULHIGA, AND THE INSURANCE DEPARTMENT ARE

PROVIDED BELOW.

 Utah Life and Health Insurance Guaranty Association,

955 E. Pioneer Rd., Draper, Utah 84020

 Utah Insurance Department, State Office Building,

Room 3110, Salt Lake City, Utah 84114]

 

[D]4. Disclosure shall be given [by]before or at the time of delivery of the policy, contract, or certificate. The summary and disclaimer document shall also be available upon request by a policy or contract holder.

[E. As provided under Subsection 31A-21-201(3), each]5. Each insurer shall [file]submit a copy of the [form]summary and disclaimer document to the commissioner for approval.

 

R590-155-4. [Severability.

If any provision or clause of this rule or the application of it to any person is for any reason held to be invalid, the remainder of the rule and the application of any provisions to other persons or circumstances shall not be affected.

 

R590-155-5. Compliance]Enforcement Date.

[This rule is in effect on the date stated in the Notice of Effective Date form relating to this rule that the department files with the Division of Administrative Rules (the "effective date". The effective date will follow a period of 45 days during which interested parties will have time to prepare to be in compliance with this rule. It will also be the date on which the department will begin enforcing this rule. The Notice of Effective Date form is published in the Utah State Bulletin, a publication of the Division of Administrative Rules. The Utah State Bulletin is found at the website, www.rules.state.ut.us. In addition, the effective date may be found at the department's website, www.insurance.state.ut.us, by clicking on "Industry Resources" and then "Rules" and scrolling down to the appropriate reference to the rule.]The commissioner will begin enforcing this rule 45 days from the effective date of this rule.

 

R590-155-5. Penalties.

A person found to be in violation of this rule shall be subject to penalties as provided under Section 31A-2-308.

 

R590-155-6. Severability.

If any provision or clause of this rule or the application of it to any person is for any reason held to be invalid, the remainder of the rule and the application of any provisions to other persons or circumstances shall not be affected.

 

KEY: insurance

Date of Enactment or Last Substantive Amendment: [August 20, 2001] 2010

Notice of Continuation: December 17, 2007

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-28-119