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Bulletin No. 00-02
Policy Information Required to be Furnished to an Applicant for Universal Life Insurance
Issued and entered May 10, 2000 by Frank M. Fitzgerald, Commissioner of Financial and Insurance Services
On April 3, 2000, the Michigan Insurance Bureau, Financial Institutions Bureau, and Securities Division became the Office of Financial and Insurance Services.
BACKGROUND AND APPLICABLE LAW
1993 PA 349, MCL 500.4037; MSA 24.14037 amended the Michigan Insurance Code to grant the Insurance Commissioner specific regulatory authority for universal life insurance policies. Section 4038 specified the information that must be included in a statement of policy information furnished to each applicant for universal life insurance "in a format approved by the commissioner." In response to this legislation, the commissioner issued Bulletin 95-04, which contained forms, instructions, a format, and procedural guidelines to implement Section 4038.
In 1995, the National Association of Insurance Commissioners (NAIC) adopted a Life Insurance Illustrations Model Regulation. This model was designed for the illustration of all life policies including, but not limited to, universal life policies. In response to this NAIC model regulation, the commissioner issued Bulletin 97-06, essentially approving with a few exceptions the use of this NAIC model as an option to the disclosure format established in Bulletin 95-04 for companies writing universal life policies. Though Bulletin 97-06 withdrew Bulletin 95-04, it permitted the continued use of the approved format contained in it.
Section 7(C)(1)(c) of the 1995 NAIC model allowed a "midpoint illustration" of interest rates on universal life policies. This provision conflicted with the then-effective portion of MCL 500.4038(3); MSA 24.14038(3) that prohibited insurers writing universal life policies in Michigan from illustrating policy provisions by use of any interest rates other than those being paid on policies currently in force or guaranteed in the policy being illustrated. Bulletin 97-06 cautioned insurers that the use of the NAIC model was acceptable except to the extent it conflicted with Michigan law, particularly MCL 500.4038(3); MSA 24.14038(3).
1998 PA 107 amended Section 4038(3) of the Insurance Code. The current version of MCL 500.4038(3); MSA 24.14038 (3) provides as follows:
This 1998 legislation no longer conflicts with Section 7(C)(1)(c) of the NAIC Life Insurance Illustrations Model Regulation permitting "midpoint illustration," and that portion of Bulletin 97-06 is outdated.
This Bulletin is intended to clarify the options available to insurers writing universal life policies in order to comply with MCL 500.4038(3); MSA 24.14038(3). The statement of policy information required by Section 4038 (3) shall be provided in connection with all individual policies meeting the definition of "universal life insurance" in Section 4001 of the Code, regardless of whether or not the policy is referred to as a universal life policy by title or in related marketing materials. The statement of policy information is not required for variable contracts.
Insurers are reminded that Section 7(D) of the NAIC Life Insurance Illustrations Model Regulation requires statements to be signed by the applicant and agent (producer).
This Bulletin is not an announcement that Michigan has adopted the NAIC's Life Insurance Illustrations Model Regulation, but merely allows that the statement of policy information issued in connection with a universal life insurance policy pursuant to Section 4038 may be issued in the format contained within that model.
With respect to the statement of policy information required by Section 4038 for universal life insurance policies, insurers may adopt and use any format previously approved for use in Michigan or the format that meets the requirements contained in the National Association of Insurance Commissioners' Life Insurance Illustrations Model Regulation as adopted in December 1995, including the required applicant and agent (producer) signatures. Although the NAIC Model allows companies to choose not to illustrate a policy, this is not an option available for universal life policies written in Michigan. Universal life policies must be illustrated following the format set out in the NAIC Model or through the use of any format previously approved for use in Michigan. The Annual Certification required in Section 11 of the Model Regulation is not part of the approved format and is not required.
Any questions regarding this bulletin should be referred to:
This guideline supersedes the guideline put forth in Bulletin 97-06. Bulletin 97-06 is hereby withdrawn.
In accordance with Section 3(6) of the Administrative Procedures Act of 1969, as amended, MCL 24.203(6); MSA 3.560(103)(6), this guideline is a statement of policy or declaration which the agency intends to follow, which does not have the force or effect of law, and which binds the agency but does not bind any other person.