Download as PDF
304.12-030 Replacement life insurance -- "Twisting" prohibited.
(1)
(2)
As used in this section:
(a) "Replacement" means any transaction in which a new life insurance
policy or annuity contract is to be purchased and it is known or should be
known to the proposing producer, or to the proposing insurer if there is no
producer, that by reason of the transaction, an existing life insurance
policy or annuity contract has been or is to be:
1.
Lapsed, forfeited, surrendered or partially surrendered, assigned to
the replacing insurer, or otherwise terminated;
2.
Converted to reduced paid-up insurance, continued as extended
term insurance, or otherwise reduced in value by the use of
nonforfeiture benefits or other policy values;
3.
Amended so as to effect either a reduction in benefits or in the term
for which coverage would otherwise remain in force or for which
benefits would be paid;
4.
Reissued with any reduction in cash value; or
5.
Used in a financed purchase;
(b) "Existing insurer" means the insurance company whose existing life
insurance policy or annuity contract is or will be changed or affected in a
manner described within the definition of replacement transaction;
(c) "Replacing insurer" means the insurance company that issues or
proposes to issue a new life insurance policy or annuity contract that
replaces an existing policy or contract or is a financed purchase;
(d) "Existing life insurance policy or annuity contract" means any individual
life insurance policy or annuity in force, including a life insurance policy
under a binding or conditional receipt or a life insurance policy or annuity
contract that is within an unconditional refund period;
(e) "Financed purchase" means the purchase of a new policy involving the
actual or intended use of funds obtained by the withdrawal or surrender
of, or by borrowing from values of, an existing policy to pay all or part of
any premium due on the new policy. If a withdrawal, surrender, or
borrowing involving the policy values of an existing policy is used to pay
premiums on a new policy owned by the same policyholder and issued by
the same company within four (4) months before or thirteen (13) months
after the effective date of the new policy, it is prima facie evidence of the
policyholder's intent to finance the purchase of the new policy with
existing policy values. This prima facie standard does not affect the
monitoring obligations of the existing insurer; and
(f) "Direct-response solicitation" means a solicitation through a sponsoring or
endorsing entity or individual solely through mails, telephone, the Internet.
or mass communication media.
No replacing insurer shall issue any life insurance policy or annuity contract in
a replacement transaction to replace an existing life insurance policy or annuity
contract unless the replacing insurer shall agree in writing with the insured that:
(a) The new life insurance policy or annuity contract issued by the replacing
(3)
insurer will not be contestable by it in the event of such insured's death to
any greater extent than the existing life insurance policy or annuity
contract would have been contestable by the existing insurer had such
replacement not taken place provided, however, that this paragraph shall
not apply to that amount of insurance written and issued which exceeds
the amount of the existing life insurance; and
(b) The policy or contract owner shall have the right to return the policy or
contract within thirty (30) days of the delivery of the policy or contract and
receive an unconditional full refund of all premiums or considerations paid
on it, including any policy fees or charges, or in the case of a variable or
market adjustment policy or contract, a payment of the cash surrender
value provided under the policy or contract plus the fees and other
charges deducted from the gross premiums or considerations or imposed
under such policy or contract.
Unless otherwise specifically included, subsection (2) of this section shall not
apply to:
(a) Credit life insurance;
(b) Group life insurance or group annuities where there is no direct
solicitation of individuals by an insurance producer. Direct solicitation shall
not include any group meeting held by an insurance producer solely for
the purpose of educating or enrolling individuals or, when initiated by an
individual member of the group, assisting with the selection of investment
options offered by a single annuity provider in connection with enrolling
that individual. The commissioner shall promulgate administrative
regulations for group life insurance or group annuity certificates marketed
through direct response solicitation;
(c) Group life insurance and annuities used to fund prearranged funeral
contracts;
(d) An application to the existing insurer that issued the existing policy or
contract when a contractual policy change or conversion privilege is being
exercised, or when the existing policy or contract is being replaced by the
same insurer pursuant to a program filed with and approved by the
commissioner;
(e) Existing life insurance that is a nonconvertible term life insurance policy
which will expire in five (5) years or less and cannot be renewed; or
(f) Proposed life insurance that is to replace life insurance under a binding or
conditional receipt issued by the same company;
(g) Policies or contracts used to fund:
1.
An employee pension or welfare benefit plan that is covered by the
Employee Retirement and Income Security Act (ERISA);
2.
A plan described by Sections 402(a), 401(k) or 403(b) of the Internal
Revenue Code, where the plan, for purposes of ERISA, is
established or maintained by an employer;
3.
A governmental or church plan defined in Section 414 of the Internal
Revenue Code, a governmental or church welfare benefit plan, or a
deferred compensation plan of a state or local government or tax
(4)
exempt organization under Section 457 of the Internal Revenue
Code; or
4.
A nonqualified deferred compensation arrangement established or
maintained by an employer or plan sponsor.
Notwithstanding the provisions of this paragraph, subsection (2) of this
section shall apply to policies or contracts used to fund any plan or
arrangement that is funded solely by contributions an employee elects to
make, whether on a pre-tax or after-tax basis, and where the insurer has
been notified that plan participants may choose from among two (2) or
more insurers and there is a direct solicitation of an individual employee
by an insurance producer for the purchase of a contract or policy. As used
in this paragraph, direct solicitation shall not include any group meeting
held by an insurance producer solely for the purpose of educating
individuals about the plan or arrangement or enrolling individuals in the
plan or arrangement or, when initiated by an individual employee,
assisting with the selection of investment options offered by a single
insurer in connection with enrolling that individual employee;
(h) Where new coverage is provided under a life insurance policy or contract
and the cost is borne wholly by the insured's employer or by an
association of which the insured is a member;
(i) Immediate annuities that are purchased with proceeds from an existing
contract. Immediate annuities purchased with proceeds from an existing
policy are not exempted from the requirements of this section; or
(j) Structured settlements.
No person shall make or issue, or cause to be made or issued, any written or
oral statement of a material fact which is untrue or omit to state a material fact
necessary in order to make the statements made, in the light of circumstances
under which they were made, not misleading with respect to comparisons as to
the terms, conditions, or benefits contained in any policy for the purpose of
inducing or attempting or tending to induce the policyholder to lapse, forfeit,
borrow against, surrender, retain, exchange, modify, convert, or otherwise
affect or dispose of any insurance policy.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1106, effective July 15, 2010. -Amended 2005 Ky. Acts ch. 47, sec. 1, effective June 20, 2005. -- Amended
1986 Ky. Acts ch. 437, sec. 17, effective July 15, 1986. -- Amended 1984 Ky.
Acts ch. 322, sec. 19, effective July 13, 1984. -- Amended 1980 Ky. Acts
ch. 386, sec. 1, effective July 15, 1980. -- Created 1970 Ky. Acts ch. 301,
subtit. 12, sec. 3, effective June 18, 1970.
Legislative Research Commission Note (6/20/2005). Subsection (3)(g)2. of this
statute contains a reference to Section 402(a) of the Internal Revenue Code.
According to an executive agency that assisted in the drafting of this statute
(2005 Ky. Acts ch. 47, sec. 1), the reference should be to Section 401(a) of the
Internal Revenue Code.
Disclaimer: These codes may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.