ENROLLED
H. B. 2937
(By Delegates H. White, R.M. Thompson, Hrutkay,
Perry, Azinger and L. White )
[Passed April 9, 2005; in effect ninety days from passage.]
AN ACT to amend and reenact §33-11-5a of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §33-13-48, all relating to replacement
of life insurance and annuities; unfair trade practices; and
promulgation of emergency and legislative rules.
Be it enacted by the Legislature of West Virginia:
That §33-11-5a of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that said code be amended by adding
thereto a new section, designated §33-13-48, all to read as
follows:
ARTICLE 11. UNFAIR TRADE PRACTICES.
§33-11-5a. Replacement of life insurance.
(a) As used in this section:
(1) "Replacement" means any transaction in which new life insurance is to be purchased and by reason of such transaction
existing life insurance has been or is to be:
(A) Lapsed, forfeited, surrendered or otherwise terminated;
(B) 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;
(C) 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;
(D) Reissued with any reduction in cash value; or
(E) Pledged as collateral or subjected to borrowing, whether
in a single loan or under a schedule of borrowing over a period of
time for amounts in the aggregate exceeding twenty-five percent
(25%) of the loan value set forth in the policy;
(2) "Existing insurer" means the insurance company whose
existing life insurance policy is or will be terminated or
otherwise affected in a replacement transaction;
(3) "Replacing insurer" means the insurance company, including
the same insurer or an insurer in the same group of affiliated
insurers, that issues new life insurance in a replacement
transaction; and
(4) "Existing life insurance" means any life insurance in
force including life insurance under a binding or conditional
receipt or a life insurance policy that is within an unconditional refund period, but excluding life insurance obtained through the
exercise of a dividend option.
(b) No replacing insurer shall issue any life insurance in a
replacement transaction to replace existing life insurance unless
the replacing insurer shall agree in writing with the insured that:
(1) The new life insurance issued by the replacing insurer
will not be contestable by it in the event of such insured's death
to any greater extent than the existing life insurance 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
(2) The new life insurance issued by the replacing insurer may
be voluntarily surrendered by the insured at any time within thirty
(30) days after its delivery to the insured in exchange for a full
refund of premiums paid by the replacing insurer to the insured.
(c) Unless otherwise specifically included, subsection (b) of
this section shall not apply to:
(1) Annuities;
(2) Individual credit life insurance;
(3) Group life insurance, group credit life insurance and life
insurance policies issued in connection with a pension, profit-
sharing or other benefit plan qualifying for tax deductibility of
premiums, provided, however, that as to any plan described in this subsection, full and complete disclosure of all material facts
shall be given to the administrator of any plan to be replaced;
(4) Variable life insurance under which the death benefits and
cash values vary in accordance with unit values of investments held
in a separate account;
(5) An application to the existing insurer that issued the
existing life insurance and a contractual policy change or
conversion privilege or a privilege of policy change granted by the
insurer is being exercised;
(6) 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
(7) Proposed life insurance that is to replace life insurance
under a binding or conditional receipt issued by the same company.
(d) For purposes of inducing or attempting to induce a
policyholder to lapse, forfeit, borrow against, surrender, retain,
exchange, modify, convert, or otherwise alter or dispose of any
insurance policy or coverage, no person shall:
(1) Prepare, make or issue, or cause to be prepared, made or
issued, any written or oral misrepresentation of a material fact
regarding the terms, conditions or benefits of either existing
insurance coverage or proposed replacement insurance coverage; or
(2) Omit information concerning a material fact regarding the
terms, conditions or benefits of either existing insurance coverage or proposed replacement insurance coverage.
(e) The provisions of this section shall have no further force
and effect as of the effective date of the emergency rule
authorized by the provisions of section forty-eight, article
thirteen of this chapter.
ARTICLE 13. LIFE INSURANCE.
§33-13-48. Replacement of existing rule with model rule.
The Commissioner shall propose and file with the Secretary of
State an emergency rule pursuant to the provisions of section
fifteen, article three, chapter twenty-nine-a of this code that is
based on the model regulation regarding the replacement of life
insurance and annuities approved by the National Association of
Insurance Commissioners in nineteen ninety-eight and amended in two
thousand. This emergency rule will be effective upon approval by
the Secretary of State and will replace the legislative rule
previously filed by the Commissioner on the sixteenth day of May,
nineteen ninety-seven as Title 114, Series 8 of the Code of State
Rules: Provided, That the rule filed as an emergency rule pursuant
to this section shall be refiled at the earliest opportunity as a
legislative rule for review and promulgation in accordance with the
provisions of article three, chapter twenty-nine-a of this code.