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Rules concerning the replacement of life insurance policies
Issued and entered April 13, 1984 by Nancy A. Baerwaldt, Commissioner of Insurance
I. BACKGROUND
In August 1983, life insurance companies doing business in Michigan received a copy of proposed amendments to rules R 500.601 through R 500.606 which concern the replacement of life insurance policies. Along with the rules, insurers received copies of proposed revisions to the "notice to applicants regarding replacement of life insurance" and "information statement."
The Joint Administrative Rules Committee of the Michigan Legislature approved the amendments to the rules on March 20, 1984. The rules, a copy of which is attached, take effect April 19, 1984.
Major changes in the rules include:
-- Agents involved in either replacing or conserving existing life insurance policies must leave with the applicant a copy of all sales proposals used in their presentation. An agent who is attempting to conserve an existing policy also must submit a copy of the sales proposal to the existing insurer.
-- Life insurers involved in the replacement of a policy must notify the existing insurer and send a copy of the sales proposal within a specified period of time.
-- Replacement transactions involving the same insurer or an affiliate of the existing insurer are exempt from the replacement rules.
II. FORMS WITH INSTRUCTIONS
Attached are the revised "notice to applicants regarding replacement of life insurance" and "information statement," issued pursuant to rule R 500.601 et seq. of the Michigan Administrative Code. Note that the attached forms differ from the proposed forms sent to insurers for comment in August 1983. No other forms may be used to comply with these rules and insurance companies are expected to reproduce their own forms.
Insurers may begin using the revised notice and information statement immediately and must begin using them when existing supplies of the forms prescribed by Bulletin 78-5 are exhausted.
The notice and information statement must be furnished to the applicant prior to completion of the application. The applicant signs both forms and the agent signs the information statement. It will no longer be necessary for a non-agency company representative to sign the information statement prior to issuance of the policy.
You should be aware that completion of the information statement does not create presumption that all company and agent responsibilities under Section 500.2064 of the Michigan Insurance Code, regarding misrepresentations and incomplete comparisons, are satisfied.
I look forward to your cooperation in assuring that the representatives of your company are furnished with, and properly instructed in the use of, the attached notice and information statement.
This bulletin supersedes Bulletin 78-5.
