INSURANCE ADVERTISING IN TEXAS

 

 

 

 

INSURANCE ADVERTISING IN TEXAS

 

 

 

June 2008


Most advertising rules are found in Part I of Title 28, Chapter 21, Subchapter B, of the Texas Administrative Code (TAC). Unless otherwise noted all references in this material are to the TAC.  Frequent references are also made to the Texas Insurance Code (TIC).  Note that both the TAC and TIC may be accessed through links provided at TDI’s Website, www.tdi.state.tx.us.

 

The material presented in these guidelines is for use as a reference and is not intended to replace the Texas Insurance Code or the Texas Administrative Code. Its use does not guarantee that a submitted advertisement will be acceptable for use in Texas. The Advertising Unit has tried to ensure the accuracy of the information presented in this guide, but we cannot take responsibility for any inaccuracies, omissions or ambiguities.

 

The contents of this workbook will also be made available at TDI’s Website, at

http://www.tdi.state.tx.us/consumer/advtable.html


TABLE OF CONTENTS

THE ADVERTISING UNIT................................................................................................... 5

WHAT IS AN ADVERTISEMENT?.................................................................................... 6

WHAT IS NOT AN ADVERTISEMENT?.......................................................................... 6

REQUIRED/NON-REQUIRED FILINGS............................................................................ 7

REQUIRED ADVERTISING FILINGS...................................................................................... 7

NON-REQUIRED ADVERTISING FILINGS.............................................................................. 7

types of ads..................................................................................................................... 7

INSTITUTIONAL.................................................................................................................... 7

Invitation to Inquire...................................................................................................... 8

INVITATION TO CONTRACT.................................................................................................. 8

HOW TO FILE........................................................................................................................ 8

SPEEDING UP YOUR REVIEW......................................................................................... 9

NEW SUBMISSIONS............................................................................................................. 9

RESUBMISSIONS............................................................................................................... 10

OUR REVIEW PROCESS................................................................................................. 10

AUTHORITIES..................................................................................................................... 11

TEXAS INSURANCE CODE................................................................................................. 11

TEXAS ADMINISTRATIVE CODE (TAC)............................................................................... 14

requirements for companies............................................................................. 14

ADVERTISING FILE............................................................................................................ 14

SYSTEM OF CONTROL...................................................................................................... 15

STATEMENT OF COMPLIANCE.......................................................................................... 16

Requirements for agents.................................................................................... 16

AGENT LICENSING........................................................................................................... 17

LICENSES AND APPOINTMENTS....................................................................................... 17

IDENTIFYING THE LICENSED AGENT/AGENCY.................................................................. 17

ENDORSEMENTS & OTHER THIRD-PARTY INVOLVEMENT................................................ 17

Endorsing Individual Insurance Policies............................................................. 17

STRUCTURING ENDORSEMENT COMPENSATION........................................................... 18

Disclosing Paid Endorsements.............................................................................. 18

Endorsing Group Policies....................................................................................... 19

ADVERTISING IN THIRD PARTY MEDIA.............................................................................. 19

advertising guidelines........................................................................................... 19

GENERAL ADVERTISING GUIDELINES.............................................................................. 19

FULL NAME DISCLOSURE............................................................................................... 21

DISCLOSURE VIA LINKS ON INTERNET ADVERTISING.................................................... 22

NONCONTRACTUAL BENEFITS........................................................................................ 22

SOURCE OF STATISTICS AND CITATIONS....................................................................... 23

LEAD SOLICITATIONS..................................................................................................... 23

“SEMINAR/WORKSHOP” ADS.......................................................................................... 24

ACCIDENT & HEALTH (INCLUDING HMO) COVERAGES...................................................... 24

GENERAL A&H GUIDELINES........................................................................................... 24

MEDICARE SUPPLEMENTS............................................................................................ 26

MEDICARE SELECT INSURANCE.................................................................................... 27

LONG TERM CARE INSURANCE...................................................................................... 28

HEALTH MAINTENANCE ORGANIZATIONS (HMOs)........................................................... 29

LIFE AND ANNUITIES......................................................................................................... 30

GENERAL LIFE & ANNUITY GUIDELINES......................................................................... 30

LIFE ILLUSTRATIONS....................................................................................................... 31

EQUITY INDEXED ANNUITIES.......................................................................................... 34

VARIABLE LIFE AND ANNUITIES..................................................................................... 35

LIFE - ACCELERATED BENEFITS.................................................................................... 35

VIATICAL AND LIFE SETTLEMENTS.............................................................................................................. 36

 

 


 

The Advertising Unit is part of the Texas Department of Insurance’s Consumer Protection Program. Consumer Protection also handles consumer complaints, staffs the 1-800 Information Assistance call center, produces educational and informational publications, and coordinates the Speaker’s Bureau which provides Texas Department of Insurance (TDI) expertise to the public and industry.

 

Senior Associate Commissioner Audrey Selden was named to head the Consumer Protection Program in April 1994. Prior to coming to TDI she was Assistant Secretary of State for the State of Texas.

 

Jack Evins has been with TDI since 1974 and with the Consumer Protection Program since 1992.  He became the Director of the Advertising Unit in August 1999.  The Advertising Unit reviewed over 6,000 insurance advertisements this past fiscal year.  The Unit’s other staff have a combined 42 years of TDI experience, with more than 33 of those years within the Advertising Unit.

 

 

Advertising Unit Organizational Chart

 

 

                   Director

                 Jack Evins                           Administrative Asst.

               512/463-6580                              Edward Obregón       

                                                                     |                                          512/475-1940

                                                                     |

                                                           Specialists

     Lynda Hermes             Brenda Luu                    Kevin Monroe                     Janice Mosher 

      512/305-6978              512/305-6742                   512/305-7643                     512/305-6929

 

 

Advertising Unit staff can be reached in any of the following ways:

By Phone:          512/475-1949

By Mail:              Advertising Unit - MC 111- 2A

                        The Texas Department of Insurance

                        PO Box 149091

                        Austin, TX 78714-9091

By Fax:                   512/305-8192

By E-mail:              advertising@tdi.state.tx.us

 

 

 

TDI’s Website:        www.tdi.state.tx.us


 

§21.102(1)

An insurance advertisement is defined very broadly in §21.102(1)(G) as any communication directly or indirectly related to a policy and intended to result in the eventual sale or solicitation of a policy.  Advertisements include but are not limited to:

              

               Printed or published materials                               Radio & TV

               Newspapers & magazines                                     Prepared sales talks

               Billboards                                                            Websites/E-mail

               Representations by agents                                   Leaflets

               Descriptive literature                                             Circulars

               Sales aids                                                            Flyers

               Illustrations                                                          Form letters

               Direct mail                                                           Business cards

               Videos                                                                 Faxes

 

§21.102(2)

The following materials are not considered to be advertising provided they are not used to urge the purchase, increase, modification, or retention of a policy of insurance:

        materials used by an insurance company within its own organization and not for public distribution;

        communications with policyholders;

        a general announcement sent by a group policyholder to members of the eligible group that a policy has been written or arranged; or

        correspondence between a prospective group policyholder and an insurer in the course of negotiating a group contract.

        agent recruitment/training materials, i.e., materials used solely for the training, recruitment, and education of an insurer's personnel, and agents.

Statements in such materials that are intended to be used, or that may be used, in consumer sales presentations are not exempt.  We do not assume that all agent training material is exempt.

Note:  The company may not misrepresent products to its own agents.  §543.001, TIC

 


REQUIRED ADVERTISING FILINGS

The Advertising Unit has developed Guidelines for required filing advertisements. These Guidelines are included elsewhere in this workbook.

Advertising required to be filed and reviewed 60 days prior to intended use:

Medicare Supplement - §3.3313 (Chapter 3, Subchapter T, TAC), and §1652.156, TIC

Long Term Care - §3.3838 (Chapter 3, Subchapter Y, TAC)

Advertising required to be filed and reviewed 45 days prior to intended use:

Medicare HMOs - §11.603 (Chapter 11, Subchapter G, TAC)

Effective December 2000, the Centers for Medicare and Medicaid Services (CMS) issued a finding that state Departments of Insurance authority to regulate “Medicare Advantage” advertising was pre-empted by federal law.  Note:  This preemption does not apply to HMOs having “Medicare Cost” contracts.

Advertising required to be filed but that do not require review prior to use:

Viatical and Life Settlement Companies and Brokers - §3.1707 (Chapter 3, Subchapter R, TAC), and Chapter 1111, TIC

This applies to advertising directed at viators or life settlers.  It does not apply to material directed to potential investors, which advertising is not subject to our review.

 

NON-REQUIRED ADVERTISING FILINGS

While advertisements for other products (e.g., life, annuity, property and casualty) are not required to be filed before they are used, they are not exempt from compliance. Even advertising produced by entities subject to more limited regulation are subject to the Advertising Rules.  §541.002(2), TIC

We will consider all materials submitted to us for review.

 

The type of ad determines the level of disclosure required.

 

INSTITUTIONAL

An Institutional ad is a general advertisement of a company or agent. It is only intended to promote interest in the concept of insurance or to promote an agent or company, per §21.102(6).  Web pages on an Internet website that do not refer to a specific insurance policy, certificate of coverage, or evidence of coverage or that do not provide an opportunity for an individual to apply for coverage or to request a quote are considered to be institutional advertisements.  A brochure about a company’s history, or a company’s or insurance group’s billboards, or Yellow Pages ads that do not uniquely describe or identify an insurer’s specific products are examples. 

 

Invitation to Inquire

An Invitation to Inquire, per §21.102(7), is an advertisement that refers to a specific insurance policy or provides an opportunity to request a quote or that, except for Internet advertising, provides an opportunity to request other information.  An “invitation to inquire” advertisement for accident or health coverage may refer to rates only as permitted under §21.113(b).  This does not apply to specified disease, accidental death and dismemberment, disability income protection coverage, or long term care insurance.  Ads for those lines of insurance that contain rates are considered to be an “invitation to contract.” 

Note:  The definition of an “invitation to inquire” for A&H insurance was modified in 1997 to allow for the advertising of premium rates for certain A&H benefit plans provided certain requirements are met. (Previously, A&H insurance “invitation to inquire” ads could not refer to rates at all.) 

 

INVITATION TO CONTRACT

An Invitation to Contract is an advertisement that includes an application or enrollment form for insurance or which is presented with an opportunity to apply for the advertised coverage. §21.102(8)

An advertisement that is an “invitation to contract” will require a greater standard of disclosure.  In all cases, a situation where a sale can be or is made is an “invitation to contract.”  One can generally assume that, if an agent is present, the situation is an “invitation to contract.”  Prepared material presented to a consumer in such situations must meet the requirements for “invitation to contract” advertising.

 

HOW TO FILE

 

We accept materials by mail, fax or e-mail filed pursuant to the requirements of 28 TAC, § 21.120.  

Send advertising material directly to the Advertising Unit at:

Texas Dept. of Insurance

Advertising Unit, Mail Code 111-2A

333 Guadalupe

P.O. Box 149091

Austin, TX  78714-9104

 

Your submission should include the advertisements to be reviewed and a transmittal letter.  A model transmittal form is available for voluntary use at http://www.tdi.state.tx.us/consumer/advtable.html.  Submissions containing 20 or more pages should not be sent via fax.

There are no fees for filing advertising materials.

In your transmittal letter:

ü  Provide an identifying form number for each advertisement submitted, preferably in the lower left-hand corner.  (Please note that we consider each Internet page and pop-up having a distinct URL to be a distinct form, and thus, each should be assigned a unique form number.)

ü  Indicate the material’s category.  Advertising materials are reviewed as an Invitation to Inquire, an Invitation to Contract, or an Institutional advertisement.

ü  Provide a description of the ad and/or how it will be used.  For example, whether it is intended for use as a letter, an envelope, a script, a brochure, etc.

ü  For “invitation to inquire” and “invitation to contract” advertising, provide the form number(s) of the policy(ies) and any rider(s) advertised and when they were approved for use in Texas.

ü  The form number(s) for all other advertising material to be used with the advertisement(s) being submitted.  If available, also provide the advertising file I.D. under which the form was reviewed.

ü  Any bracketed information will be treated as variable (e.g., agent names, geographic locations, benefits, phone numbers, or information that may change periodically), as long as a change in the bracketed information will not materially change the ad.  In your transmittal letter, you must tell us how the information is expected to change.  However, please note that any variable material (except for phone, address, names) needs to be bracketed and accompanied by a separate explanation page of how this material will vary.  Any changes to text, which was not filed as variable material, will need to be refiled for review.

 

 

New Submissions

You can help us expedite review of your materials by providing everything we need to complete a review.  To assist you in providing the information needed, a model transmittal form is available at http://www.tdi.state.tx.us/consumer/advtable.html for voluntary use.

·         Include the name and direct phone and fax numbers for your company’s compliance person.  List e-mail addresses, if available.

·         Each numbered form is considered a separate advertisement.  More than one advertisement can be submitted under a submission letter.  We assign one Filing ID number per submission letter.

·         Review the ad carefully for compliance with Texas’ advertising, licensing and policy requirements.  We expect you to make a reasonable effort to assure the advertising is in compliance before sending it to TDI.

·         Do not place separate advertising forms in protective sheets or in binders.  This makes them difficult to handle and copy.

·         If you are not sure of an issue or if you feel the rules do not provide enough guidance, call or e-mail us to discuss before you submit materials.  While we will not rewrite your advertisement for you or act as a compliance consultant, we will answer specific technical questions and help you in any other way we can.

·         We do not review advertisements for policies, certificates or riders that are not yet filed as exempt or approved.  Materials submitted before a policy, certificate, application, outline of coverage or other forms are approved/reviewed and entered in TDI’s computer system may be rejected. 

·         Be sure all entities mentioned in an ad and which may appear to be doing the business of insurance are properly licensed/registered.  Provide TDI license numbers if possible.

 

Resubmissions

You can help us expedite review of your materials by providing everything we need to complete review of your resubmission.

·         Refer to the Filing ID number of your previous submission.

·         Identify and briefly describe all changes to the form(s) in your transmittal letter, referencing the specific objections presented in our previous objection letter.

·         Highlight, underline or otherwise distinguish all changes on the form(s).

·         Certify whether any other changes not related to our objections were made to the form(s).

·         Assign a new or modified form number to the revised ad for ease of identification; for example, adding a date after the current form number, e.g., REV 6/08 is an acceptable modification.

·         Do not submit new material with your resubmission, unless requested by the Advertising Unit.

 

 

·         As they are received, we date stamp and log each piece of advertising in our tracking system, which assigns a Filing ID number to each submission.  We do not return reviewed material.

·         Advertisements are generally reviewed in the order they are received.  Specialists are not usually assigned specific companies or files.

·         Our processing time, especially for non-required filings, fluctuates depending on the volume we have pending.  While we have no control over the number of submissions received, we make every effort to review materials quickly and consistently.

·         If there are no problems with your advertisement, we will send you a reply letter, preferably by fax or e-mail.

·         If we think your ad has problems that can be easily brought into compliance, we may call to discuss a solution.  You can usually fax us a revision (with a new form ID) to complete the review.

·         When we note problems, we will notify you by sending you an “objection letter” giving you the reason(s) for the objection(s); we will then close the file. Advertising is often subjective and context is everything. You may call the specialist handling your submission and discuss our objections to seek an agreement on how to correct them.

·         We review advertising for content, context, prominence and position of required disclosures, omissions of required information, and violations of statutes, regulations, policy provisions and licensing requirements.

·         If an advertisement raises more serious or complex issues, we may request additional information or, if the ad is in circulation, request that you voluntarily discontinue the ad.

·         TIC §38.001 requires that licensees provide information or otherwise respond within ten days of receipt of a request from TDI. It is important that you let us know if the information cannot be provided within this timeframe.  We will work with you to resolve any matters of concern.

·         We also process written complaints concerning advertising materials.  We work with the Licensing, Enforcement, and other sections of TDI, when necessary, to complete review of an ad.

·         We consider any substantive change to an advertisement to be a new ad or a revision.  If changes in the policy make revision of the ad necessary, indicate those changes.  We will assign a new Filing ID number to your resubmission.

·         An advertisement subject to requirements regarding filing of the ad with TDI and that is the same as or substantially similar to an ad previously reviewed and accepted by TDI, is not required to be filed for review.  “Substantially similar” means the new ad does not introduce any substantive content not previously reviewed, nor does it eliminate any content satisfying required disclosures or that would render the ad noncompliant.  To introduce a “substantially similar” ad, file a signed written statement that identifies or illustrates the changes to be introduced, and list the previously reviewed and accepted form(s) in which those changes would appear.  Include the form number(s) and TDI’s filing number(s) under which the forms were previously reviewed and accepted.  The model transmittal form located at www.tdi.state.tx.us provides a means for filing notice of the introduction of “substantially similar” forms.

 

 

TEXAS INSURANCE CODE

 

Chapter 541, Subchapter B.  Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined.

The following are hereby defined as unfair methods of competition and unfair and deceptive acts or trade practices in the business of insurance:

§541.051.  Misrepresentation regarding Policy or Insurer.
It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to:
      (1)  make, issue, or circulate or cause to be made, issued, or circulated an estimate, illustration, circular, or statement misrepresenting with respect to a policy issued or to be issued:
            (A)  the terms of the policy;                                                
             (B)  the benefits or advantages promised by the policy; or                
             (C)  the dividends or share of surplus to be received on the policy;       
      (2)   make a false or misleading statement regarding the dividends or share of surplus previously paid on a similar policy;
      (3)   make a misleading representation or misrepresentation regarding:       
             (A)  the financial condition of an insurer; or                              
             (B)  the legal reserve system on which a life insurer operates;            
      (4)   use a name or title of a policy or class of policies that misrepresents the true nature of the policy or class of policies; or
      (5)  make a misrepresentation to a policyholder insured by any insurer for the purpose of inducing or that tends to induce the policyholder to allow an existing policy to lapse or to forfeit or surrender the policy.

 
§541.052.  False Information and Advertising. 
(a)  It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to make, publish, disseminate, circulate, or place before the public or directly or indirectly cause to be made, published, disseminated, circulated, or placed before the public an advertisement, announcement, or 

statement containing an untrue, deceptive, or misleading assertion, representation, or statement regarding the business of insurance or a person in the conduct of the person's insurance business.

(b)  This section applies to an advertisement, announcement, or statement made, published, disseminated, circulated, or placed before the public:
      (1)  in a newspaper, magazine, or other publication;                          
      (2)  in a notice, circular, pamphlet, letter, or poster;                    
      (3)  over a radio or television station;                                      
      (4)  through the Internet; or                                                 
      (5)  in any other manner.                    

 

§541.053.  Defamation of Insurer.
(a)  It is an unfair method of competition or an unfair or deceptive act or practice in 
the business of insurance to directly or indirectly make, publish, disseminate, or circulate or to aid, abet, or encourage the making, publication, dissemination, or circulation of a statement that:
      (1)  is false, maliciously critical of, or derogatory to the financial condition of an insurer; and
      (2)  is calculated to injure a person engaged in the business of insurance. 
(b)  This section applies to any oral or written statement, including a statement in any pamphlet, circular, article, or literature.

 

§541.056.  Prohibited Rebates and Inducements.  
(a)  Subject to Section 541.058 and except as otherwise expressly provided by law, it is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to knowingly permit the making of, offer to make, or make a life insurance contract, life annuity contract, or accident and health insurance contract or an agreement regarding the contract, other than as plainly expressed in the issued contract, or directly or indirectly pay, give, or allow or offer to pay, give, or allow as inducement to enter into a life insurance contract, life annuity contract, or accident and health insurance contract a rebate of premiums payable on the contract, a special favor or advantage in the dividends or other benefits of the contract, or a valuable consideration or inducement not specified in the contract, or give, sell, or purchase or offer to give, sell, or purchase in connection with a life insurance, life annuity, or accident and health insurance contract or as inducement to enter into the contract stocks, bonds, or other securities of an insurer or other 
corporation, association, or partnership, dividends or profits accrued from the stocks, bonds, or securities, or anything of value not specified in the contract.
(b)  It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to issue or deliver or to permit an agent, officer, or employee to issue or deliver as an inducement to insurance:
      (1)  company stock or other capital stock;                                    
      (2)  a benefit certificate or share in a corporation;                         
      (3)  securities; or                                                          
      (4)  a special or advisory board contract or any other contract promising returns or profits.
(c)  Subsection (b) does not prohibit issuing or delivering a participating insurance policy otherwise authorized by law.

 

§541.058.  Certain Practices Not Considered Discrimination or Inducement.

(a)  In this section:

      (1)  "Health-related services" means services that are available in connection with an accident and health insurance policy or certificate or an evidence of coverage and that are directed to an individual's health improvement or maintenance.

      (2)  "Health-related information" means that information that is directed to an individual's health improvement or maintenance or to costs associated with particular options available in connection with an accident and health insurance policy or certificate or an evidence of coverage.

(b)  It is not a rebate or discrimination prohibited by Section 541.056(a) or 541.057:

      (1)  for a life insurance or life annuity contract, to pay a bonus to a policyholder or otherwise abate the policyholder's premiums in whole or in part out of surplus accumulated from nonparticipating insurance policies if the bonus or abatement:

             (A)  is fair and equitable to policyholders; and                            

             (B)  is in the best interests of the insurer and its policyholders;       

      (2)  for a life insurance policy issued on the industrial debit plan, to make to a policyholder who has continuously for a specified period made premium payments directly to the insurer's office an allowance in an amount that fairly represents the saving in collection expenses;

      (3)  for a group insurance policy, to readjust the rate of premium based on the loss or expense experience under the policy at the end of a policy year if the adjustment is retroactive for only that policy year;

      (4)  for a life annuity contract, to waive surrender charges under the contract when the contract holder exchanges that contract for another annuity contract issued by the same insurer if the waiver and the exchange are fully, fairly, and accurately

explained to the contract holder in a manner that is not deceptive

or misleading;

      (5)  in connection with an accident and health insurance policy, to provide to policy or certificate holders, in addition to benefits under the terms of the insurance contract, health-related services or health-related information, or to disclose the availability of those additional services and information to prospective policy or certificate holders; or

      (6)  in connection with a health maintenance organization evidence of coverage, to provide to enrollees, in addition to benefits under the evidence of coverage, health-related services or health-related information, or to disclose the availability of those additional services and information to prospective enrollees or contract holders.

 

Chapter 543, §543.001.  Misrepresentation Prohibited

No life insurance company doing business in this State, and no officer, director or agent thereof, shall issue or circulate, or cause or permit to be issued or circulated, any estimate, illustration, circular or statement of any sort misrepresenting the terms of any policy issued by it, or benefits or advantages to be promised thereby, or the dividends or share of surplus to be received thereon.

 

Chapter 4001, Subchapter A. Agent Licensing and General Provisions

§4001.003(1)  Defines “Agent.”

§4001.101  Agent licenses.

§4001.201  Agent appointments.

§4001.051(d) and §4005.053(c)  Referrals and agent license requirements.

 


Chapter 101, §101.051(b)(6)  Conduct that Constitutes the Business of Insurance

(Emphasis added)

Directly or indirectly acting as an agent for or otherwise representing or assisting an insurer or other person in:

(A)   soliciting, negotiating, procuring or effectuating insurance or a renewal of insurance;

(B)   disseminating information relating to coverage or rates;

(C)   forwarding an insurance application;

(D)   delivering an insurance policy or contract;

(E)   inspecting a risk;

(F)    setting a rate;

(G)   investigating or adjusting a claim or loss;

(H)   transacting a matter after the effectuation of a contract; or

(I)     representing or assisting an insurer or other person in any other manner in the transaction of insurance with respect to a subject of insurance resident, located or to be performed in this state.

 

TEXAS ADMINISTRATIVE CODE (TAC)

(Part I of Title 28)

Chapter 21. Insurance Advertising, and Certain Trade Practices, and Solicitation (see especially Subchapters A and B)

This principal body of rules defines general insurance requirements.

 

The following TAC subchapters also contain specific requirements regarding advertising.

 

Chapter 3. Life, Accident and Health Insurance and Annuities

            Subchapter I – Variable Life Insurance

Subchapter R – Viatical and Life Settlements

Subchapter T – Minimum Standards for Medicare Supplement Policies (including Medicare Select)

Subchapter Y – Standards for Long-Term Care Insurance under Individual and Group Policies

 

ADVERTISING FILE

§21.116(a)

Special Enforcement Procedures for Rules Governing Advertising and Solicitation of Insurance

Each insurer, domestic and foreign, must maintain an advertising file at its home office or principal (executive) office. Foreign insurers that have established an office in Texas may maintain the file at that location. Each insurer shall notify TDI in the event the location is planned to be changed and immediately when changed. The file is subject to regular and periodic inspection by TDI. All advertisements shall be maintained for a period of not less than three years.

The advertising file must include:

·         a specimen of every advertisement disseminated in Texas,

·         a notation attached to each advertisement indicating the manner, extent of distribution and form number of any policy advertised in Texas, and

·         an indication that TDI has been notified where the advertising file is being maintained and that access will be provided.

 

SYSTEM OF CONTROL

§21.122

System of Control and Home Office Approval of Advertising Material Naming an Insurer

Scope.

This section shall apply to any advertisement, other than institutional, for policies that are intended for presentation, distribution, or dissemination in this state.

Duty of agent.

Before using an advertisement, an agent must file the advertisement with the home office of the insurer affected by the advertisement for written approval.  An agent is not required to file advertisements received from the insurer.

Duty of insurers.

Every insurer marketing policies in this state shall establish and maintain a system of control over the content, form, and method of dissemination of all advertisements concerning its policies.  A system of control shall include, but is not limited to, requiring the agents, or any other entities who prepare advertisements which name the insurer or advertise its policy, to submit the proposed advertisement to the insurer's home office for written approval of the home office prior to use.  Each insurer shall be responsible for advertisements prepared or approved by it or prepared pursuant to its direction.  No insurer may avoid responsibility for advertisements by directing or authorizing anyone else to prepare or approve them.

Other applicable laws.

Nothing in this section relieves any agent from complying with other applicable laws.

Consider the following when verifying your company's system of advertising control:

         Do you maintain current copies of the Texas Insurance Code and 28 TAC?

         Do you actually review and approve/disapprove, or only file, the material? Approval or disapproval is required.

         Is advertising developed in-house or by an outside firm?

         How do you control advertising developed by third party marketing entities or your agents?

         Who has approval authority for advertising?  Have you delegated approval authority to anyone other than the home office [violation §21.122(d)]?

         Review any monetary agreements with third parties that would constitute paid endorsements.  Verify that marketing materials disclose any paid endorsements, including administrative expense reimbursements, to comply with §21.107(g).

         Verify that advertising materials (except for institutional ads) disclose the full licensed name of the insurer, not just a service mark or trade name, when required by §21.104(a)(1) and (b).

It is the responsibility of the insurer to assure that all ads that affect the company comply and are not deceptive or misleading:

                    Ads developed by the company

                    Ads developed by appointed agents

                                Ads developed by third parties

 

STATEMENT OF COMPLIANCE

§21.116 (b)

All insurance companies filing an annual statement with TDI are required to have an officer of the company, whose duty it is to oversee the company's advertising, file a certificate with their annual statement stating that, to the best of their knowledge, company advertising disseminated by the insurer during the preceding year complied or was made to comply with the provisions of Texas insurance laws and rules as respects its Texas advertising and as its Texas advertising relates to its insureds.

Note:  We are now requiring companies that maintain Internet websites accessible to consumers to identify the address (URL) of their site’s “home page.”

 

 

The only advertisements for which an agent does not need written company approval prior to use, pursuant to §21.122(c), are:

           Institutional ads;

·                     those ads developed by the insurer and provided to the agent;

           "generic" ads limited to information like the agent's name, logo, address, and phone number; and,

           ads that consist only of simple statements describing the availability of lines of insurance, references to experience, service and qualifications; but making no reference to specific policies, benefits, costs or insurers.

Note:    Ads for certain products must be filed with TDI for review prior to use.  Please refer to the section titled, “Required Advertising Filings.”


LICENSES AND APPOINTMENTS

Only properly licensed agents may advertise or solicit insurance. They must have the proper license for the line of insurance they intend to represent.

§101.051(b)(6) of the Texas Insurance Code (TIC) defines the business of insurance.  It specifically includes the direct or indirect solicitation of insurance as an act in the business of insurance.  It is illegal for anyone to act directly or indirectly as an agent for or otherwise represent or aid on behalf of another person or insurer in the solicitation of insurance without proper license.

§4001.003(1), TIC, defines an agent, in part, as anyone who solicits on behalf of any insurance company.  Thus, it is improper for any entity that does not hold an insurance license to solicit for an insurance product, an insurance company, or another agent.

To comply with §19.904, no agent shall make any representation, whether written or oral, that such agent is an authorized representative of any insurer unless the agent has been properly appointed to act as an agent for such insurer.

 

IDENTIFYING THE LICENSED AGENT/AGENCY

28TAC Subchapter J, §19.902(a) requires that an agent file a certificate with the Texas Department of Insurance identifying any assumed names or DBAs used and all offices from which business is conducted.  This is reported on an LHL203 (also known as “LDTL”) form available from our Agent License Division, available on our website at http://www.tdi.state.tx.us/forms/form11.html, or call 512/322-3503. 

Agents may advertise under their own licensed name, a filed agency name or DBA, but not under an employer, association, group or other name, if the employer, association, group or other name is not itself licensed.

Please note that a “shortened” or substitute agency name (e.g., truncated name or abbreviation) may be used if shown in close conjunction with and immediately following the first occurrence of the agency’s full name and differentiated by parentheses or other devices to indicate that it is to represent the agency thereafter in the advertisement.  The advertisement must clearly show and not just imply that the substitute name stands for the full agency licensed name.  Otherwise, any shortened/substitute name must be filed with TDI to be used as an assumed name.

 

ENDORSEMENTS & OTHER THIRD-PARTY INVOLVEMENT

Endorsing Individual Insurance Policies

We have seen associations and other groups endorsing or recommending individual policies of insurance.  The regulatory position on individual policies is very different than on group products.  Any solicitation for an individual policy of insurance requires licensing of the party doing the soliciting.

An endorsement may not directly or indirectly imply that the endorsing association, group, institution, or other entity is involved in the offer of insurance.  The biggest problem an unlicensed third party faces is in avoiding acts that, even indirectly, are acts of an agent.  Under the law, any act of solicitation or effectuation of an insurance policy is an act of an agent.

Remember, an advertisement is defined very broadly in §21.102(1)(G) as any communication directly or indirectly related to a policy and intended to result in the eventual sale or solicitation of a policy.

All insurance advertisements should originate from and be returned to a properly licensed insurance agent or insurer.  Other than as permitted for referral business per §4001.051(d) and §4005.053(c), an unlicensed third-party can only endorse; they cannot become involved in any insurance transactions, or in any direct or indirect solicitation of insurance.

An unlicensed third-party, group or association may:

Ø  Endorse an insurance company, agent or product and provide truthful statements, and testimonials endorsing the insurance products to the insurance company for use in the company's advertisements.

Ø  State the fact that the organization selects and endorses insurance products in brochures, letters, and other media promoting the group, so long as any "paid endorsements" are so identified and disclosed.

Ø  Provide an insurance company with information about its membership and collect compensation for that information.

An unlicensed third-party, group or association may not:

Æ       Distribute information about an individual insurance policy, or about an agent/agency or company in envelopes of the organization, unless (1) the third party is providing only a distribution service for the insurance advertisement and is not itself soliciting the coverage, and (2) the insurance information is a piece separate from any other information distributed by the third party and clearly indicates its origin to be an insurance agency or company, and not the third party.

Æ       Imply that you must become a member of the organization in order to purchase the policy.

Æ       Imply that a purchaser of a policy will become a member of a limited group of persons who will or may receive special advantages from the insurance company not provided for in the policy.

STRUCTURING ENDORSEMENT COMPENSATION

In order to avoid being found to have received commissions, which is an act of an agent, we would advise that the manner in which the group or association is paid not be tied to the volume of sales. This can be arranged in variety of ways, but three are suggested for consideration:

1.   Per Member - This method of payment would reimburse the organization for the number of names provided to the insurance company.  In reality, what the company is buying is access to the membership.

2.   Per Use of Endorser’s Name - This method of payment would reimburse the organization for the number of mailings where the insurance company used their endorsement.  Again, the payment would be tied to the use of the organization’s name.

3.   Per Year - This method would be a flat fee that could be renegotiated each year.  Each year the organization and the insurance company could consider how each has benefited from the arrangement and determine the appropriate value on the endorsement.  This could be made payable monthly, if desired.

Disclosing Paid Endorsements

If the entity making a testimonial, endorsement, or appraisal, receives administrative fees, cost allowances or any other compensation, directly or indirectly, §21.107(g) requires that this shall be disclosed in the advertisement by language substantially as follows: “Paid Endorsement.”

Endorsing Group Policies

·       In a group policy, there is a master policy purchased by a valid group.  In the capacity of group master policyholder, a group is afforded certain exemptions in the Texas Insurance and Administrative Codes.

·       A general announcement by a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged, is not considered advertising, provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage. §21.102(2)(C).

 

ADVERTISING IN THIRD PARTY MEDIA

Advertising material which appears in media operated by unlicensed third parties (e.g., newspapers, magazines, websites) must not give the appearance that the third party is soliciting or otherwise acting or offering to act as an agent.  This has been more frequently a problem with unlicensed parties’ websites containing an insurer’s or agent’s advertising.  The relative position and prominence of the name of unlicensed website “host” as opposed to that of the licensee may confuse the reader as to whether the “host” is offering the coverage.  Careful attention must be given to which entity’s “voice” appears to be soliciting the coverage.  Even if the “host” does not appear to be offering the coverage, it may appear to be endorsing the coverage, in which case, the “paid endorsement” requirements discussed above may be relevant. 

 

 

Note:  The material presented in these guidelines is for use as a reference and is not intended to replace the Texas Insurance Code (TIC) or the Texas Administrative Code (TAC).  Its use does not guarantee that a submitted advertisement will be acceptable for use in Texas.  The Advertising Unit has tried to ensure the accuracy of the information presented in this guide, but we cannot take responsibility for any inaccuracies, omissions or ambiguities.

The following suggested guidelines are offered in addition to the General Guidelines for advertising.  Materials will generally be reviewed without comparing the benefits listed in the advertise­ment to the benefits contained in the policy, riders, certificate, or schedule of benefits.  Based on this limited review, the Department will check for compliance with all applicable statutes, rules, and regulations.  Except as otherwise noted, all references are to Part I, Title 28 of the Texas Administrative Code (TAC).

 

GENERAL ADVERTISING GUIDELINES

 

The following guidelines are applicable to all lines of coverage.  Reference generally §§21.103-21.112.

 

1.   Advertisements must be truthful and not misleading either in fact or in implication.  §21.103(a)

2.   The format and content of an advertisement must be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. §21.103(b)

3.   Whether an advertisement has a capacity or tendency to mislead or deceive is determined from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.  §21.103(b)

4.   All information required to be disclosed must be set out conspicuously and in close conjunction with the statements to which the information relates or with appropriate captions of such prominence that required information is not minimized, rendered obscure, or presented in an ambiguous fashion, or intermingled with the context of the advertisement so as to be confusing or misleading.  §21.103(c)

5.   Words or phrases may not be used which are misleading or deceptive because their meaning is not clear, or is clear only to persons familiar with insurance terminology.  §21.103(d)

6.   An advertisement cannot use misleading words or symbols, or come in an envelope that would imply the material is coming from a governmental entity. §21.104(c)

7.   An advertisement may not contain statements that avoid a clear and unequivocal statement that insurance or an annuity or HMO coverage or prepaid legal services coverage is the subject matter of the solicitation.  §21.104(f)

8.   An advertisement, other than “institutional” shall explicitly and conspicuously disclose the type of product as it is classified or addressed by statute or rule or as the products are filed with TDI.  §21.104(d)

9.   An advertisement that includes an application, and is advertising more than one policy, must clearly disclose the cost and benefit applicable to each separate policy. §21.104(g)

10. The benefits advertised must match the policy benefits. An advertisement must not imply broader benefits than actually exist.  §21.105(a)

11. No advertisement may omit information or use words, phrases, statements, references, or illustrations, if the omission or use of such information has the capacity, tendency, or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any loss covered, premium payable, or policy benefit payable.  §21.105(c)

12. Benefits provided by a rider to a policy shall not be advertised with greater prominence than the primary policy benefits.  §21.105(f)

13. Endorsements, riders, or other benefits available at an additional cost, shall be so advertised to disclose the fact of additional cost.  §21.106(c)

14. An "invitation to contract" advertisement of endorsements, riders, or other optional benefits which may be added to the policy advertised for which premiums are quoted for such policy, must disclose the additional premium for the endorsements, riders, or optional benefits.  If premiums for the policy appear in the advertisement, the premiums for any riders, endorsements, or optional benefits must also separately appear.  §21.106(d)

15. An advertisement may not directly or indirectly unfairly disparage competitors, their policies, services, or business methods, and may not unfairly disparage or minimize competing methods of marketing insurance.  §21.110(a)

16. An advertisement may not contain statements that are untrue in fact or that are misleading by implication in respect of another insurer's assets, corporate structure, financial standing, age, or relative position of the insurer in the insurance business.  §21.110(b), TAC, and §451.053, TIC

17. An advertisement may not directly or indirectly make an unfair or incomplete comparison of policies, benefits, dividends, or rates, or compare non-comparable policies, e.g., whole life vs. term life, major medical vs. indemnity policy, group vs. individual.  §21.111(a)

FULL NAME DISCLOSURE

The full name of the insurer is required to be set out conspicuously in each of its advertisements, other than “institutional” ads, including the portion of the advertisement to be returned to the insurer or agent, if any, per §21.104(a)(1) & (b), 21.103(c).  This required information cannot be minimized, rendered obscure, or presented in an ambiguous fashion, or intermingled with the context of the advertisement so as to be confusing or misleading.  The name must be made conspicuous so that a reasonable person will readily notice it. It can be made conspicuous by presenting it in “all capitals” in a size equal to or greater than, or in contrasting type, font, or color, to the text used in the main body of the advertisement.  The presentation of the insurer must not be relegated to footnotes or copyright notices.

Please note that a “substitute” company name (e.g., service mark) may be used if shown in close conjunction with and immediately following the first occurrence of the insurer’s full name and differentiated by parentheses or other devices to indicate that it is to represent the insurer thereafter in the advertisement.  The advertisement must clearly show and not just infer that the substitute name stands for full licensed company name. 

A shortened (truncated) company name may be used, following the first appearance of the full licensed company name, as long as the word(s) comprising the shortened name can not be confused with the shortened name of another licensed insurer.  Otherwise, a shortened name can only appear if identified in the manner described for “substitute” names, above. 

Full Name on Websites

An Internet page, other than “institutional,” must clearly and conspicuously disclose the full name of the insurance company issuing the coverage advertised.

When considering the proximity and prominence of the name disclosure, it must be assumed that the average consumer does not read an entire website.  Even though the name may be disclosed in a hyperlink page, the repetition of the disclosure is required to ensure the average reader has the opportunity to read it.  The appearance of the full name in a banner or sidebar may satisfy this requirement.  Alternatively, the use of a hyperlink that leads directly to a page prominently disclosing the insurer’s full name is a reasonable method of making such a disclosure.  Such a hyperlink must appear on each page and have a label that displays the important nature of the information and makes the link obvious.  Additionally, the link must appear near the relevant information to which it relates.  The reader must be able to easily and readily identify that there is a hyperlink that will identify who the insurer is.  This requires the conspicuous display of the hyperlink whenever the reader would need to know who the insurer is, e.g., with any product description.

Full Name with Co-Branding Advertisements

When there is more than one entity disclosed in an advertisement, it must be clear who will actually issue the product.  This required information cannot be minimized, rendered obscure, or presented in an ambiguous fashion, or intermingled with the context of the advertisement so as to be confusing or misleading.  The reader must be able to easily and readily identify the issuing company.  The prominence and repetition given to another entity not issuing the product may be confusing to the reader.  Additionally, §21.104(h) prohibits an advertisement’s having a capacity or tendency, directly or indirectly to mislead or deceive prospective purchasers with respect to an insurer’s assets, financial standing, relative position in the insurance business, etc.  Therefore, we require co-branding advertising to make it clear that the non-issuing entity has no financial responsibility for the product of the issuing company.  §21.104(i)

Full Name with Audio/Visual Advertisements

Please note because ads appearing in media like television may employ two modes of communication, audio and video, the full name of the insurer will need to be clearly presented in both the audio and video portions.

 

DISCLOSURE VIA LINKS ON INTERNET ADVERTISING

Certain required disclosures may be provided through a conspicuous and clearly labeled link, provided that the link must be placed near the relevant information to which it relates, and must connect directly to the information necessary to comply with the applicable requirements.  §21.104(c)

The disclosure requirements which may be met by via links are as follows:

·         Identification of the full name of the entity responsible for the advertising pursuant to §21.104(a).

·         The disclosures required under §21.104(i) regarding the issuing insurer’s sole financial responsibility for its own products, if contained on the same page satisfying the §21.104(a) requirement regarding full name disclosure, noted above.

·         Identification of national or regional references of “average” costs or savings, pursuant to §21.108(c).

·         Certain disclosures required regarding illustrated rates in “invitation to contract” advertising for eligible accident and health coverages, pursuant to §21.113(b)(2)-(4).

·         Form, rider and endorsement rider identification in accident and health, life, and invitation to contract advertising, under §21.113(c)(1) and §21.114(1)(A).

·         Exclusions, reductions and limitations in accident and health advertising invitation to contract advertising that refers to a dollar amount, a period of time for which a benefit is payable, the cost of the policy, or a specific policy benefit or the loss for which such benefit is payable, pursuant to §21.113(d)(1).

·         Definitions of pre-existing conditions, and how such conditions may affect coverage, in accident and health advertising, pursuant to §21.113(f).

 

NONCONTRACTUAL BENEFITS

Advertising material that references noncontractual services and benefits is subject to certain rules and statutes.  To comply with §21.109(a), an advertisement may not state or imply anything offering or tending to offer a good, service, or other guarantee or contractual right of pecuniary value outside of the express terms of the policy being advertised.  Offering anything of value not specified in the contract as an inducement to purchase the contract constitutes a rebate, defined as an unfair method of competition and an unfair and deceptive act or practice or otherwise prohibited under TIC §§541.056(a) (regarding life, health and annuity coverages) 1806.104(c) (regarding property and casualty coverages), and 4005.053(c) (regarding agents).

However, advertisements for health and accident coverages are subject to certain exceptions regarding references to noncontractual health-related information and/or services, pursuant to §21.109(a)(1) and §541.058, TIC.  “Health-related information” is information directed to an individual's health improvement or maintenance or to costs associated with particular options available in connection with an accident and health insurance policy or certificate or an evidence of coverage.  “Health-related services” are services directed to an individual's health improvement or maintenance available in connection with an accident and health insurance policy or certificate or an evidence of coverage.

Nevertheless, an advertisement that references noncontractual health-related information or services must disclose that access to such information/services are not a part of the policy, may be discontinued at any time and, if applicable, may be subject to geographic availability.

Additionally, §21.109(c) permits an advertisement to offer an incentive to inquire about a policy or obtain a quote provided that it includes a clear and conspicuous disclosure that no purchase is required in order to receive the incentive.  This would permit, for example, an advertisement to offer a gift certificate to consumers requesting a quote, so long as it is clear that the consumers are under no obligation to buy insurance to receive the gift.

To be in compliance with these rules and statutes, your advertising material must not have the potential to mislead consumers as to the insurance/HMO contractual benefits or otherwise constitute an unlawful inducement or rebate.  Any advertising material referring to noncontractual services and benefits that does not appropriately address applicable clarifications may be found to violate the regulations cited above.  However, you may inform covered persons of the availability of the services or benefits after the coverage is in effect and the “free look” period has expired.

 

SOURCE OF STATISTICS AND CITATIONS

The source of statistics or citations must be identified.  Such sources must include the publication name and date.  A source shall not be more than five years old unless the advertiser certified to TDI through a statement in the transmittal letter that the source is the most recent available.  §21.108(b)

Where “average” costs or savings are referenced in an advertisement, the ad must indicate whether such statistics are national or regional and, if regional, must identify the region.  §21.108(c)

The word "recent" should not be used to characterize a source or other development that first appeared more than a year ago. 

We have seen instances were websites are cited as the source for statistics.  Because information provided on a website can change or be deleted, it is imperative that the source can be otherwise accessed even if no longer available on the website.  Expert opinion has stated that the average life span of web page is 100 days.  Therefore, we may object to your using a website that is not under your own control as a source for statistics.  We recommend you do not provide websites, alone, as a source.  If you wish to use these websites as the sources, then your company must also provide the name of the publication or article to direct the reader on how to locate the sources for those who do not have access to the Internet.

 

LEAD SOLICITATIONS

Lead solicitations are communications distributed to the public which, regardless of form, content, or stated purpose, are intended to result in the compilation or qualification of a list containing names or other personal information regarding persons who have expressed a specific interest in a product or coverage and which are intended to be used to Texas residents for the purchase of a policy. §21.102(1)(F) 

Insurers or agents that obtain a list of potential customers derived from lead solicitations are responsible for the content of the lead solicitation(s) that generated the list. §21.121(a)

A lead solicitation must prominently disclose that an insurer or agent may contact the recipient of the solicitation, if that is a fact. Further, if an insurer or agent does contact a consumer as a result of acquiring the consumer’s name from a lead solicitation, the insurer/agent must disclose that fact upon initial contact with the consumer.  §21.121(b)

 

“SEMINAR/WORKSHOP” ADS

An advertisement may include an invitation to an event or group meeting where information will be disseminated regarding insurance products, insurance products will be offered for sale, or individuals will be enrolled, educated or assisted with the selection of insurance products.  Such advertising may only use the terms "seminar," "class," "informational meeting," "retirement," "estate planning," "financial planning," "living trust," or substantially equivalent terms to characterize the purpose of the gathering/event if it adds the words "and insurance sales presentation" immediately following those terms in the same type size and font as those terms.  §21.121(c).

 

ACCIDENT & HEALTH (INCLUDING HMO) COVERAGES

 

GENERAL A&H GUIDELINES

Reminder:  In addition to the following, the “General Advertising Guidelines,” discussed above, also apply to accident and health advertising.

1.      An advertisement must not use the phrase “low cost” or “low cost plan” or similar words without providing a composite of lower production, administrative, and claim cost resulting in a low premium rate to the public. §21.113(h)(5)

2.      An advertisement may not words such as “all” or “100%” in a misleading way -- their use usually exaggerates the payment of benefits; often deductibles or co-payments must be paid.  §21.113(d)(14)

3.      An “invitation to inquire” ad (excepting those for specified disease, accidental death and dismemberment, disability, and long-term care insurance), may refer to cost or include rate information without including information about all exclusions and limitations, but only if the advertisement includes certain prominent disclaimers.  As required under §21.113(b), those disclaimers must clearly indicate that:

(1)    the rates are illustrative only;

(2)    a person should not send money to the issuer of the health benefit plan in response to the advertisement;

(3) a person cannot obtain coverage under the health benefit plan until the person completes an application for coverage; and

(4)  benefit exclusions and limitations may apply to the health benefit plan.

 

In addition, any such rate shall indicate the age, gender, and geographic location on which the rate is based.

4.      An advertisement must disclose, in prominent type, that the product is a LIMITED BENEFIT, SUPPLEMENTAL, INDEMNITY ONLY, CANCER ONLY, or SPECIFIED DISEASE POLICY, when applicable.  §21.113(d)(19)

5.      Premiums must be shown and broken down by cost of basic policy and riders.  Considerations paid on individual policies, including policy fees, must be referred to as premium, cost, consideration, or purchase payments. §21.106(c) & §21.113(h)(1)

6.      An advertisement may not imply that there are advantages that usually apply to group coverage, and/or use words such as certificate or enrollment, when the policy offered is actually an individual policy. (There are some individual policies that have discounted rates for minimum levels of participation; those ads may contain such language.) Neither may an advertisement imply that prospective policyholders would become part of a group or other relationship that does not, in fact, exist.  §21.113(k)(1)

7.      An advertisement that describes the policy as “Guaranteed Renewable” shall have a clear and conspicuous statement that coverage may terminate at certain ages, if such is a fact, per §21.113(g)(2)(A).  In addition, such advertisement must include, in a prominent place, a statement indicating that rates for the policy may change if the advertisement suggests or implies that rates for the product will not change.  Such statement must generally identify the manner in which rates may change, such as by age, by health status, by class, or through application of other general criteria.  §21.113(g)(2)(B).

8.      Use of the word “plan” without identifying the subject as an insurance or HMO plan violates §21.113(c)(3). (Refer also to §§21.104(d) and (f).  These regulations require that advertisements explicitly and conspicuously disclose that the product concerned is insurance, and prohibit statements that avoid a clear and unequivocal statement that insurance is the subject matter of the solicitation.)

9.      An advertisement for life, accident and health, or annuities may not use the existence of the Guaranty Association (“guaranty fund”) for the purposes of selling, soliciting or inducing the purchase of coverage.  Art. 21.28-D, §19, TIC

10.    The form number or numbers of the policy advertised, and of any riders or endorsements and any other forms that directly affect the policy, must be clearly identified in an “invitation to contract” advertisement.  See §21.113(c)(1); also §21.102(3), regarding riders, endorsements, etc.

11.    An advertisement that is an “invitation to contract” must disclose the applicable free examination period provision and the full refund of all premiums paid. §21.113(g)(5)

12.    An advertisement that uses the term “pre-existing condition” must define that term, per §21.113(f)(1).  If the advertisement is an “invitation to contract,” it must disclose the extent to which a loss is not covered if traceable to a pre-existing condition.  §21.113(f)(2)

13.    If the terms of a policy limit any insurance coverage of benefits to a certain age group, or reduce such benefits at a certain age, an “invitation to contract” ad must clearly and conspicuously disclose this fact.  §21.113(d)(6)

14.    An advertisement that is an “invitation to contract” must include all limitations and exclusions affecting the payment of benefits or costs of a policy.  §21.113(d)(1)

15.    An “invitation to contract” ad shall disclose any waiting, elimination, probationary or similar period of time between the date of loss and the date benefits begin to accrue for such loss.  §21.113(e)(1)

 


MEDICARE SUPPLEMENTS

TIC §1652.156 and TAC §3.3313(1) require that all Medicare supplement advertisements be submitted for review 60 days prior to use.

Reminder:  In addition to the following, the “General A&H Guidelines,” discussed above, also apply to Medicare supplement advertising.

1.     Advertisements referenced as being "Important Notices" or similar language and directed primarily to Medicare recipients or senior citizens are presumed to be misleading or having the capacity or tendency to mislead unless shown otherwise.  §21.113(d)(13)

2.     When a Medicare related advertisement is used primarily as a source for leads in the solicitation of insurance, it shall prominently state this fact.  The advertisement shall state in a prominent place the following or similar words: "Not connected with or endorsed by the United States government or the federal Medicare program.”  §21.113(d)(11)

3.     A lead card or other cold lead advertisement must disclose in a conspicuous manner that the purpose of the advertisement is to solicit insurance and that contact will be made by an insurance agent or insurance company, per §3.3319(c)(3).  Further, an advertisement must not state or imply that an obligation is imposed by the receipt of advertising material offering assistance or information concerning Medicare.  §21.113(d)(10)

4.     An advertisement must not state or imply that an obligation is imposed by the receipt of advertising material offering assistance or information concerning Medicare.  §21.113(d)(9) 

5.     The plans offered by an advertisement must be identified as A - L and must disclose that consumers have the choice of 12 standardized benefit packages, including a basic core benefit package.  §21.105(c) and §3.3306(2)&(4)  [If a Medicare supplement insurer offers fewer than the 12 plans, one plan must be the PLAN A benefit package.]

6.     An advertisement for a policy that pays benefits in conjunction with Medicare must disclose the specific Medicare benefits (Parts A or B) the policy is designed to supplement.  §21.113 (d)(10)

7.     A Medicare supplement advertisement cannot use the phrases usual and customary, reasonable and customary or words of similar import in describing standards for the payment of policy benefits.  §3.3308(a)(3) and §21.103(a).

8.     An advertisement must disclose charge limitations established by Medicare. [Applies only to plans F, G, I and J.]  §21.105(b), refer to §3.3306(3)(D) and (E)

9.     The material must include a statement that the insured is responsible for non-covered charges.  §21.105(c) and §21.112

10.  An advertisement cannot describe limitations that are more restrictive than Medicare.  §21.105(c) and §3.3305

11.  An advertisement that is an “invitation to contract” shall include the following statement:  “The benefits and premiums under your Medicare supplement policy can be suspended, if requested, during your entitlement to benefits under Medicaid for 24 months. You must request this suspension within 90 days of becoming eligible for Medicaid. If you are no longer entitled to Medicaid, your policy will be reinstituted if requested within 90 days of losing Medicaid eligibility.” §3.3324(f)

12.  An advertisement that is an “invitation to contract” must describe complete information regarding all available “open enrollment” opportunities or prominently disclose a means of obtaining complete information regarding such opportunities.  §21.113(k)(3)(C) and §3.3324(a).

13.  If an “invitation to contract” advertisement makes reference to medically necessary emergency care in a foreign country, the term emergency care must be defined as: care needed immediately because of an illness of sudden and unexpected onset, which care began during the first 60 consecutive days of travel outside the United States.  §3.3306(3)(H) and §21.105(c)

14.  If the policy contains a pre-existing provision, an "invitation to contract" advertisement must disclose that creditable coverage may reduce or waive the pre-existing condition limitations during the open enrollment period. §21.105(c), §3.3324(c), and §3.3306(1)(A)(iii). 

 

MEDICARE SELECT INSURANCE

Medicare Select coverage is designed to provide benefits at competitive rates through the use of network providers and the network restrictions that are a part of the Medicare Select operating plan arrangement.

Reminder:  In addition to the following, the “General A&H Guidelines,” discussed above, also apply to Medicare Select insurance advertising.

1.     In all Medicare Select advertising we require that the product be clearly identified as Medicare Select insurance.  §21.104(d) & (f) and §21.105(c)

2.     A disclaimer is required in all Medicare Select advertisements clearly stating the restrictions that apply to the use of network and non-network providers.  At minimum the statement should read:  “Network Restrictions Apply.”  §21.105(c) and §3.3325(k)(3).

3.     Plan providers must be clearly identified as Network Providers.  The terms participating or preferred are not acceptable because they are generally only used for PPOs or HMOs, e.g., “The ABC Insurance Company, Medicare Select Program is endorsed by XYZ Hospital, your network hospital.”  §3.3325(c)(6), and §21.103(a)

4.     While the use of the phrase, “lower premiums,” would ordinarily be a violation of §21.113(h)(5), we can allow its use in Medicare Select advertisements.

5.     In an “invitation to contract,” we require a disclosure that network restrictions means that no benefits or reduced benefits are payable to providers outside the network except for travel, emergencies, or other accommodations stated in the policy contract, if such is the case.  §§21.103(a), 21.105(c) and 3.3325(i)(2) & (j)

6.     An “invitation to contract” must disclose that the individual has the opportunity to purchase any Medicare supplement policy offered by the insurer.  §21.105(c) and §3.3325(n)

7.     The advertisements must disclose, "Only certain hospitals are network providers under this policy. Check with your physician to determine if he or she has admitting privileges at the network hospital. If he or she does not, you may be required to use another physician at time of hospitalization or you will be required to pay for all expenses."  An “invitation to contract" advertisement, as that term is defined in §21.102(8), shall include this statement.  §3.3325(k)(8) & §21.112

8.     An “invitation to contract” should clearly state that if an insured moves out of the service area, they will no longer have coverage and will have the opportunity to purchase any Medicare supplement policy with comparable or lesser benefits offered by the insurer or Medicare supplement/Select plans A, B, C or F from any insurer, within 63 days of termination.  §§21.113(d)(1), and 3.3312(b)(2)(B) & (b)(3)(D)

 


LONG TERM CARE INSURANCE

Section 3.3838 requires that all Long-Term Care insurance advertisements be submitted for review 60-days prior to use. 

Reminder:  In addition to the following, the “General A&H Guidelines,” discussed above, also apply to long term care insurance advertising.

1.     An outline of coverage shall be delivered to an applicant at the time of initial solicitation through means which prominently direct the attention of the recipient to the document and its purpose.  An “invitation to contract” advertising package must include the Outline of Coverage unless all the requirements of an "invitation to contract" ad are met in the advertising material itself.  If the company is relying on the Outline of Coverage to provide certain required disclosures, a conspicuous statement must be made on the advertisement directing the readers’ attention to the Outline of Coverage and informing him/her of its purpose.  §3.3832(a)

2.     An ad that is an “invitation to inquire” may not include any references to cost or include premium amounts. §21.113(b).  Please note, Art. 21.20-2, Sec. 1 (b)(2), Texas Insurance Code, specifically excludes long-term care insurance from the provisions of §21.113(b).

3.     A lead card or other cold lead advertisement must disclose in a conspicuous manner that the purpose of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.  §3.3839(d)(3)

4.     Advertisements referenced as being "Important Notices" or similar language and directed primarily to Medicare recipients or senior citizens are presumed to be misleading or having the capacity or tendency to mislead unless shown otherwise.  §21.113(d)(13)

5.     An ad containing representations of an aggregate amount payable must contain a clear and conspicuous disclosure in close conjunction therewith of any maximum daily benefit and maximum time limit.  §21.113(d)(7)

6.     Advertisements for policies providing benefits for which payment is conditioned upon confinement in a hospital, extended care facility, or at home, may not advertise the amount of benefit payable on a monthly or weekly basis if, in fact, benefits are payable based upon a daily pro rata basis relating to the number of days of such confinement, unless such statements are followed immediately by equally prominent statements of the daily benefit payable.  If the policy limits the number of days of coverage provided, such limit must also be disclosed.  §21.113(d)(8)

7.     An advertisement must define benefit standards such as or similar to “usual and customary” or “reasonable and customary.” §21.105(c) and §21.112.  Also refer to §3.3829(a)(3).

8.     The term "level premium" may only be used to describe long-term care coverage that is non-cancellable. The term "noncancellability" may be used only when the policyholder has the right to continue the long-term care insurance in force by the timely payment of premiums during which period the insurer has no right to make any change in any provision of the insurance or in the premium rate. Please note phrases such as “guaranteed premium,” “premium never changes,” “set premium,” and the like are considered to imply “level premium” and thus are also in violation. §3.3810(a) and (c)

9.     An advertisement must not make statements such as “the policy has no lifetime maximum” or list the maximum benefit as a large sum, if such statements are dependent upon multiple confinements.  §21.4(2) and (3), and §21.103(a)

10.  An “invitation to contract” advertisement must clearly disclose that the mandated offer of inflation protection in §3.3820(a) must be rejected before other forms of inflation protection can be offered. Depending on the content and overall appearance of the advertisement, this rule may also be applied to “invitation to inquire advertisements.”  §3.3820(f) and §21.105(c).

11.  An "invitation to contract" advertisement must offer a nonforfeiture benefit.  Depending on the content and overall appearance of the advertisement, this rule may also be applied to "invitation to inquire" ads.  §3.3844(a) and §21.105(c)

12.  An “invitation to contract” advertisement must disclose that if the nonforfeiture offer is rejected a contingent benefit upon lapse will be provided and give a description of the contingent benefit.  §3.3844(a) and §21.105(c)

13.  An “invitation to contract” ad must disclose whether the policy is intended to be tax-qualified or not.  §3.3829(a)(10) and (11).

14.  If a policy pays varying amounts of benefits for the same loss occurring under different conditions, or pays benefits only when a loss occurs under certain conditions, an “invitation to contract” ad referencing these benefits must also clearly and conspicuously disclose those different or limited conditions.  All “invitation to contract” ads must include standards for eligibility of benefits.  §§21.113(d)(2) and 3.3818

15.  An “invitation to contract” ad must disclose the 65-day period for late premium payments.  §21.105(c) and §21.112

 

HEALTH MAINTENANCE ORGANIZATIONS (HMOs)

Medicare Cost HMO Advertising

Advertisements offering Medicare Cost coverage to Medicare beneficiaries are required to be filed and reviewed by TDI 45 days prior to the date of their intended use. §11.603

Reminder:  In addition to the following, the “General A&H Guidelines,” discussed above, also apply to Medicare Cost HMO advertising.

1.     Providers may not advertise or otherwise solicit directly or indirectly for an HMO. TIC §§101.052, 4001.051 and 400.101

2.     Use of phrases such as: “Unlike traditional/conventional insurance...,” violates §843.005, TIC. and §21.110(a), TAC. An HMO is not "insurance" and cannot use such terms.

3.     The full name of the insurer must be disclosed in the advertisement (i.e., Scott & White’s full licensed name is Scott and White Health Plan), as required by §21.104(a)(1).  A product name is NOT an acceptable substitute, §21.104(b).

4.     An ad must disclose that the company advertising the product is a Health Maintenance Organization, as required by §21.104(d).

5.     Phrases such as “no deductible” and “prepaid” are misleading under §21.103(a) when co-payments must be paid in order to receive benefits.

6.     Be sure all limitations, exclusions, and reasons for termination are disclosed in “invitation to contract” packages.  Service area maps, as well as lists of participating providers should be included.

 


LIFE AND ANNUITIES

GENERAL LIFE & ANNUITY GUIDELINES

Reminder:  In addition to the following, the “General Advertising Guidelines,” discussed above, also apply to life and annuity advertising.

 

Misrepresentation

Misrepresentations of these products, especially life insurance, have frequently exhibited one or more of the following problems:

1.     The policies are represented as something they are not.

2.     Life policies are characterized as savings plans, retirement plans, college funding plans, mortgage pre-payment plans, etc.

3.     Life and annuity policies/contracts are represented to perform “just like a CD,” or similar language.

4.     The emphasis is on tax deferral, interest rates and cash accumulation rather than on providing for loss of income due to a premature death.

5.     No attempt is made to determine a need for or an amount of death benefit. Often the amount of premium dictates the face amount.

6.     The purchaser is given the impression or led to believe that the advertised interest rate is a yield on premiums paid.

7.     It is not made clear that the advertised rate is not a promise of future performance.

8.     Costs are not disclosed. Front-end charges, surrender charges and penalties, and administrative fees all reduce the amount of cash accumulation.

Disclosures

1.     An advertisement for an interest-sensitive policy (e.g., annuity, universal life) may not advertise a current or illustrated rate of interest that is higher than the guaranteed rate of interest without also displaying the guaranteed rate of interest paid by the policy with equal prominence.  §21.114(2)(G)

2.     The time period during which current interest rates are guaranteed payable must be disclosed.  §21.114(2)(H)

3.     Advertising for a deferred annuity plan must not present interest rates in a manner that implies that the complete premium will accumulate interest at those rates unless such is the fact.  It must clearly disclose any loading, policy fees, charges, or other items that represent expenses to the policyholder. Subchapter K, §3.1007(a)

4.     The form number or numbers of the policy advertised, and of any riders or endorsements and any other forms that directly affect the policy, must be clearly identified in an “invitation to contract” advertisement.  §21.114(1)(A); see also §21.102(3), regarding riders, endorsements, etc.

5.     An “invitation to contract” must include all limitations and exclusions.  For life and annuity this includes the waiting period for suicide. Any other restrictions on, or access to, policy values must be disclosed.  §21.114(2)(A)

6.     An “invitation to contract” must disclose all costs and expenses such as policy fees, service fees, and administration fees.  Administration fees, "front end" loads and surrender charges, if any, must be disclosed fully, either as a percentage of premium, cash value or a dollar amount, whichever is applicable.  §21.114(2)(J)

 


Prohibited Terms

1.     The words "savings," "investment," "deposit," "investment plan" and similar terms cannot be used to refer to the premium or to the interest to be credited to the contract in a context or under such circumstances or conditions that have the capacity or tendency to confuse or mislead the proposed purchaser as to the nature and limitations of the product or to any benefits received therefrom. §§21.103(a), 21.114(1)(B), 21.114(1)(C), 21.114(3)(F) & 21.114(3)(G)

2.     An advertisement must not use the phrase “low cost” or “low cost plan” without providing a demonstration that a composite of lower production, administrative, and claim cost resulting in a low premium rate to the public.  §21.114(3)(E)

3.     An advertisement may not imply that there are advantages that usually apply to group coverage, and/or uses words such as certificate or enrollment, when the policy offered is actually an individual policy. (There are some individual policies that have discounted rates for minimum levels of participation; ads for such policies may describe those discounts.) Neither may an advertisement imply that prospective policyholders would become part of a group or other relationship that does not, in fact, exist.  §21.114(5) & (7)(A)

4.     An advertisement for life, accident and health, or annuities may not use the existence of the Guaranty Association (fund) as an inducement to purchase coverage.  Art. 21.28-D, TIC

 

LIFE ILLUSTRATIONS

Illustrations are considered an “invitation to contract.”

An Introduction to the Basic Requirements for Life Insurance Illustrations

Sections 21.2201-21.2214 govern the use of illustrations in the sale of life insurance. The rules apply to all group and individual life policies and certificates except for variable life, annuities, credit life and life policies with no illustrated death benefits exceeding $10,000 on any one individual. The following is a brief summary of the basic points of these rules. Please note that this introduction is not an exhaustive review of these rules and should not be relied upon as a substitute for reviewing the rules.

Policies to Be Illustrated §21.2205

Only those policy forms that have been filed with the Life/Health division of TDI as policies that will be marketed with an illustration may be illustrated during the sales process. If a policy form is identified as marketed without an illustration, a company may not use an illustration before the first policy anniversary. If illustrations are used, a basic illustration conforming to the rule must be provided. The rule makes certain exceptions for group policies.

Definitions - §21.2204

The most significant definitions include:

Contract premium - the gross premium required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

Non-guaranteed elements - the premiums, benefits, values, credits or charges under a life insurance policy that are not guaranteed or not determined at issue.

Currently payable scale - a scale of non-guaranteed elements in effect for a policy form as of the illustration date or declared to become effective within 95 days of the illustration date.

Disciplined current scale - a scale of non-guaranteed elements that constitute a limit on an insurance company's currently used illustrations. The scale must be reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Standards of the Actuarial Standards Board may be relied upon for guidance if they are:

·         consistent with all provisions of the rule;

·         limit a disciplined current scale to reflect only actions that already have been taken or events that already have occurred;

·         do not permit a disciplined current scale to include projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and

·         do not permit assumed expenses to be less than minimum assumed expenses.

Illustrated scale - a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

·         the disciplined current scale or

·         the currently payable scale.

Illustration - a presentation or depiction used in the solicitation or sale of a life insurance policy that includes non-guaranteed elements of the policy over a period of years and includes but is not limited to:

·         a basic illustration, which is one showing both guaranteed and non-guaranteed elements.

·         a supplemental illustration furnished in addition to a basic illustration. It must meet basic requirements of the rule and may be presented in a format different from the basic illustration. It may depict only a scale of non-guaranteed elements that is permitted in a basic illustration.

·         an in-force illustration, which is one furnished at any time after the policy has been in force for one year or longer.

General Requirements and Prohibitions - §21.2206

·       Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium must be shown and clearly labeled as guaranteed.

·       An illustration may not base non-guaranteed elements on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration. These elements must be clearly labeled as non-guaranteed.

·       Any illustration depicting non-guaranteed elements over a period of years must include a conspicuous disclaimer that:

1.     Identifies benefits and values that are not guaranteed.

2.     Identifies the assumptions on which the illustration is based.

3.     Discloses that the assumptions for the years shown are likely to change and, in fact, are subject to change by the insurer.

4.     States that actual results may be more or less favorable.

5.     Either generally identifies the factors that may affect future policy performance, such as death claims, investment earnings and overhead costs, or refers to the narrative that identifies these factors.

7.     An acceptable disclaimer might say: "The values shown in the current and mid-point columns are not guaranteed and assume that our current scale for interest credited, cost of insurance and expense charges will remain unchanged for the years shown. This is not likely to occur, and actual results may be more or less favorable. Future credits for interest and deductions for mortality and expenses can vary at the company's discretion, depending upon factors such as death claims, investment earnings and overhead costs."

8.     Any illustration that indicates a consumer might use non-guaranteed values to pay premiums or other policy charges must disclose clearly that, depending on actual results, a policy owner might need to continue or resume premium payments to keep a policy in force.

9.     Insurers are explicitly prohibited from representing a policy as anything other than life insurance.

10.  Illustrations may not depict policy performance as more favorable to the policy owner than that produced by the insurance company's illustrated scale.

11.  The interest rate used to determine illustrated non-guaranteed elements cannot exceed the smaller of

A.    the earned interest rate underlying the disciplined current scale, or

B.   the interest rate for the currently payable scale.

12.  An illustration may not depict a persistency bonus, a specified additional amount or a specified reduction in mortality costs or expenses in a specified policy year (after the first year) unless it:

A.    Represents an express obligation of the insurance company in the contract or policy, and

B.    Meets lapse-support and self-supporting tests required by the rules.

"Concept" Illustrations

1.     A basic or supplemental illustration or both may depict a "concept," such as “vanishing premium” or an income stream. If the concept is shown in a basic illustration, an extended numeric summary must be used. If not shown in a basic illustration, a concept may be shown in an extended numeric summary appended to the basic or in a supplemental illustration.

2.     Supplemental illustrations may depict a concept in one of three ways:

A.   a single illustration that calculates values based on both the illustrated scale and on an alternative scale contained in the rules;

B.   a single illustration that calculates values based on the illustrated scale, provided an extended numeric summary is attached that calculates values based on both the illustrated scale and one of the alternative scales; or

C.   two illustrations, one that calculates values based on the illustrated scale and another that calculates values based on one of the alternative scales.

Standards for Basic Illustrations - §21.2207

1.     Basic illustrations (aside from the coverage page) must begin with a narrative summary that includes a brief description of the policy (including a statement that it is a life insurance policy) and a brief description of the premium to be paid. Narrative summaries also must briefly describe policy features, riders or options —guaranteed or non-guaranteed— and their potential impact on policy benefits and values. A basic illustration also must include the disclaimer, outlined above, concerning non-guaranteed values and benefits.

2.     A basic illustration for an individual life policy must include a "numeric summary" showing premiums, death benefits and values at policy years 5, 10 and 20 and at age 70. The summaries must be presented on three bases:

A.    policy guarantees,

B.    insurer's illustrated scale and


C.    insurer's illustrated scale with non-guaranteed elements reduced as follows:

                                                        i.        Dividends at 50 percent of the dividends contained in the illustrated scale.

                                                       ii.        Non-guaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale.

                                                      iii.        All non-guaranteed charges, including but not limited to term insurance charges, mortality charges and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale.

3.     A certification, signed by both agent and customer, that a copy of the illustration has been provided to the customer must be included on the same page as the numeric summary.

4.     Finally, a basic illustration must provide the following "tabular detail" for policy years 1- 10 and for every fifth policy year thereafter until age 100, policy maturity or final expiration and (except for term insurance beyond the 20th year) for any year in which the premium is to change:

A.    the premium outlay and mode the applicant plans to pay 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.

Standards for Supplemental Illustrations - §21.2208

Insurers may provide supplemental illustrations if:

1.     they are attached to, accompanied by or preceded by a basic illustration that complies with the rule;

2.     the non-guaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration;

3.     they conform to the General Rules and Prohibitions section of the rule; and

4.     the premium underlying the supplemental illustration is equal to the premium shown in the basic illustration.

§§21.2209 - 21.2214 set out the requirements and guidelines for delivery of an illustration, the nature of illustrations in annual reports, and the requirements for the insurer to provide an annual certification filing.

 

EQUITY INDEXED ANNUITIES

Reminder:  In addition to the following, the “General Life & Annuity Guidelines,” discussed above, also apply to equity indexed annuity advertising.

An equity indexed annuity (EIA) is a fixed, deferred single or flexible premium annuity contract that is generally linked or tied to the performance of the S&P 500 index.  Since EIAs are rather complex contracts, our main goal is to have advertisements accurately describe the “pros” and “cons” of the contract, e.g., disclosing the indexing formula, participation rates, any caps, surrender charges, and the guaranteed elements of the contract.  EIA advertisements should not imply that the contract is an investment tied to individual stocks or that it is a variable product.

 


VARIABLE LIFE AND ANNUITIES

Reminder:  In addition to the following, the “General Life & Annuity Guidelines,” discussed above, also apply to variable life and annuity advertising.

These must include a prospectus as required by the Securities and Exchange Commission. We do not generally review the prospectus itself. However, required disclosures, if found prominently stated in the prospectus, may suffice to bring an “invitation to contract” package into compliance.

Pursuant to §3.803, an insurer issuing flexible premium variable life contracts shall provide, to all prospective purchasers, an illustration of cash surrender values prior to or at the time of delivery of the contract. Any illustration of cash surrender values delivered to an applicant or prospective applicant pursuant to this subsection shall:

·         include a hypothetical gross investment return of 0.0%, and when other hypothetical gross investment returns are included, the current gross investment return must, to the extent permitted by federal law, be included;

·         give equal prominence to both guaranteed and nonguaranteed aspects of the contract if guarantees are included in the contract;

·         prominently display, by way of written statement, the hypothetical nature of the illustration as it relates to investment returns;

·         prominently state that a contract may terminate due to insufficient premiums and/or poor investment performance; and

·         prominently show, by way of written statement, that excessive loans or withdrawals may cause the contract to lapse due to insufficient cash surrender value and, at the option of the insurer, prominently display the effects of loans or withdrawals on contract values.

 

LIFE - ACCELERATED BENEFITS

Reminder:  In addition to the following, the “General Life & Annuity Guidelines,” discussed above, also apply to advertising of life insurance with accelerated benefits.

“Accelerated benefits” refers to a policy or contract that provides life insurance benefits which may become payable prior to death.  Under certain conditions a person with a terminal illness, long-term care illness, or specified disease, can access all or a portion of the death benefit.  This money can then be used by the insured or their family as "living benefits." §3.4302(a); see also TIC §1111.051, et seq.

Rules for the offering of these benefits within a life insurance policy are found in Chapter 3, Subchapter CC, §§3.4301 – 3.4317, Standards for Acceleration of Life Insurance Benefits.  These benefits can be a part of the policy contract or be added to an existing policy through the filing of an endorsement or rider.

The title of any acceleration-of-life-insurance benefits shall be descriptive of the coverage provided and shall use such terms as “acceleration-of-life-insurance benefit,” “accelerated benefit,” or words of similar import. §3.4312(a)(2)

An “invitation to contract” ad must clearly and concisely disclose the illness, condition, care, or confinement necessary to trigger eligibility for any acceleration-of-life-insurance benefit. §3.4313(a)(1)

An “invitation to contract” ad must clearly and concisely disclose the effect of any acceleration of the life insurance benefit provision on the death benefit and/or other values available under the life policy. This can be accomplished with a statement substantially as follows: “Death benefits, cash values, and loan values will be reduced if an accelerated benefit is paid.”  §3.4313(a)(2)

An “invitation to contract” ad shall include tax-related disclosures contained in either subsection (a) or (b) of §3.4316, as appropriate, and the disclosure in subsection (c) of §3.4316, or disclosures substantially similar to these disclosures. §3.4313(a)(3)

It is not permissible to mention, illustrate, or refer to a policy or rider offering acceleration-of-life-insurance benefits as an alternative or substitute for catastrophic major medical health insurance. §3.4313(b)

It is not permissible to advertise benefits offered by a rider with more prominence than the benefits of the underlying policy. §21.105(f)

Note: when an acceleration-of-life-insurance benefit policy provides for payment of long-term care expenses through an extension of benefits rider, all advertising requirements found under the long-term care guidelines must be met.

 

VIATICAL AND LIFE SETTLEMENTS

Viatical and life settlement agreements are not contracts of insurance.  However, they are regulated by TDI.

Each registered viatical or life settlement provider, provider representative, or broker must file with the department's Advertising Unit all advertising or other solicitation materials used to market viatical or life settlements, including materials pertaining to the services they provide in this state, on or before the date the materials are disseminated.  The advertisements are filed for informational purposes and may be used without the prior review of the department.  §3.1707

Viatical/ life settlement advertisements are defined under §3.1702(a)(1).

All advertisements must clearly disclose that this is a solicitation for a viatical or life settlement.  §21.104(f)

All advertisements must include the full name of the registered provider (company) or broker, pursuant to §§3.1703(3) and 21.104(a). Further viatical or life settlement providers, representatives or brokers are subject to §19.902, which requires the registration of any assumed name used in the conduct of viatical or life settlement business.

With each application for a viator or life settlement, the registered provider, provider representative, or broker shall deliver to the viator or life settlor and owner required written disclosures.  §3.1708

The company is required to disclose that individuals wishing to sell their policies may have alternatives to viatical or life settlement, such as loans secured by the policy, cash surrender values, or accelerated benefits offered under the policy. The company should provide a copy of the form/document that includes this disclosure and certify that it will always accompany the application; otherwise, the ads must include this required disclosure.  §3.1708(b)(2)(A)

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