3901-6-01. Solicitation of life insurance and/or annuity contracts

(A) Purpose and authority

This rule is adopted under the superintendent's authority pursuant to section 3901.041 of the Revised Code. The purpose of this rule is to implement and interpret applicable statutes including sections 3901.19 to 3901.23, 3915.14, 3999.04, 3999.05, 3999.08 and 3999.10 of the Revised Code by identifying and prohibiting certain statements, illustrations, advertisements, circulars, acts, practices and contract forms or unfair, deceptive and unsound methods of transacting the business of life insurance and by establishing certain requirements pertaining to solicitation and sale of life insurance and annuity contracts.

(B) Applicability

This rule applies to all soliciting, marketing, and selling of all life insurance and annuity products solicited, marketed, or sold in this state.

(C) Prohibition of misleading policies

In reviewing policies for approval or disapproval, the superintendent may study and take into consideration the titles, terms and text of such policy, and in addition may request and review the following materials and data in connection therewith:

(1) Any and all advertisements, estimates, comparisons, illustrations, circulars, statements, notices, brochures, pamphlets, letters, posters, announcements, articles, projections, literature, pictures, reports, books, newspapers, magazines, records, films or other matter of any nature whatsoever made, issued, circulated, published, disseminated, delivered, used, referred to or placed before the public in any manner whatsoever relating to or in connection with any such policy.

(2) Any and all oral statements, assertions or representations, the sales techniques or procedures and the training, study or learning devices or programs made, used, followed or employed by the officers, agents, employees or representatives of the insurance company.

(D) Policy name or title

No person, insurance company, insurance agent, insurance broker or insurance company representative shall deliver within this state or issue for delivery within this state, any policy of life insurance or sales or advertising material relating thereto without the use of the words "life insurance" in its name or title unless accompanied by other language clearly indicating that the contract is a policy of life insurance or in the case of an annuity, an annuity contract.

(E) Sales practices

No life insurance company nor any official, employee, broker, agent, solicitor, or other representative, in writing or orally, in order to induce the purchase of any policy, shall within this state:

(1) Make any statement or use any sales or advertising material in connection with any policy which provides a pure guaranteed annual endowment unless the gross premium and the amount of such benefit shall be shown separately and distinctly from the gross premium for and the amount of the life insurance benefit on the same page and without undue emphasis or prominence to either benefit.

(2) Make any statement or use any sales or advertising material, unless the amount of the pure guaranteed annual endowment shall be expressed in dollars and not as a percentage of any premium or benefit.

(3) Make any statement or use any sales or advertising material wherein the pure guaranteed annual endowment is described as a "guaranteed check," "guaranteed dividend," "return," etc., alternatively, anything other than a guaranteed benefit for which a premium is being paid by the policyholder.

(4) While offering a policy containing a series of pure guaranteed annual endowments fail to disclose to the prospect, orally and in writing, in dollars on a year-to-year cumulative basis, the amount of benefit on such annual endowments and the cost, including the amount by which premiums are reduced after maturity of the last endowment. Paragraphs (E)(1) to (E)(4) of this rule shall only apply to pure guaranteed annual endowments that are equal to or less than the gross annual premium for the policy.

(5) Make any statement or reference to dividends on a life insurance policy or annuity contract that would reasonably imply any of the following;

(a) That dividends are anything other than an adjustment of the cost of insurance in the form of an equitable distribution of surplus that reflects the actual experience of the insurance company principally in mortality, interest return on investment and administrative expense.

(b) That dividends to a policyholder are substantially "profits," "earnings," "return," or "investment return" unless and to the extent that aggregate dividends received exceed the gross premiums paid by the policyholder.

(c) That dividends during the premium-paying period are paid on other than a single year's premium.

(d) That dividends are income tax free without an explanation that they constitute a partial refund of the policyholder's premium, and, therefore, would constitute income only when, and to the extent that, distributions during the life of the insured or annuitant exceed the aggregate premiums paid on the policy.

(e) That dividends in the future are apt to increase because of the historical trend of dividend payments by the life insurance company unless there is also a disclosure of any deficit in unassigned surplus during the years those dividend payments were made.

(6) Make any statement or illustration with respect to sharing in divisible surplus or surplus of the company other than because of the company's current dividend scale accompanied by a disclosure that such scale may increase or decrease in the future and, if such is the case, a disclosure that there is a deficit in unassigned surplus.

(7) State or imply that a policyholder will secure a right to a stated percentage of net gain from operations or other benefits, which are not a part of the policy itself or made a part thereof by rider or other instrument previously approved by the department of insurance.

(8) Use the terms "investment," "investment plan," "expansion plan," "profit," "profits," "profit sharing," and other similar terms in connection with a policy of life insurance or an annuity contract in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospect to believe that he will receive something other than a life insurance policy or annuity contract.

(9) Refer to a policyholder as a "partner" unless he has been advised that he does not have the legal rights of a partner in a statutory or common law sense.

(10) Make any statement or distribute any sales literature which is prepared by an allegedly independent third person or unrelated company which purports to analyze the policy or life insurance company without disclosing the amount of remuneration or fee, if any, paid, directly or indirectly, to such third person or company for its analysis.

(11) Make any statement (such as the policy will be "self-supporting") or imply that projected dividends under a participating policy will be or can be sufficient at any time to assure the receipt of any benefits, such as a paid-up policy, without the further payment of premiums, unless the statement is accompanied but not limited thereto by an adequate explanation as to:

(a) What benefits or coverage would be provided or discontinued at such time; and

(b) The conditions under which this would occur;

(12) Make any statement or reference relating to the growth of the life insurance industry or to the tax status of life insurance companies in connection with any solicitation of an application for life insurance in a context which could reasonably be understood to interest a prospect in the purchase of shares of stock in an insurance company or becoming an investor therein rather than in the purchase of a life insurance policy.

(13) Make any statement that reasonably gives rise to the inference that the policyholder or a prospective policyholder, by virtue of purchasing a policy of life insurance, will enjoy a status common to a stockholder or will acquire a stock ownership interest in the insurance company, its parent, or any affiliated company.

(14) Make any reference to or statement concerning an insurance company's "investment department," "insured investment department," or similar terminology in such a manner as to imply that the policy was sold or issued by the investment department of the life insurance company.

(15) Make any statement or reference which would reasonably imply that by purchasing a policy, the purchaser or prospective purchaser will become a member of a limited group of persons who are to receive special advantages or favored treatment in the payment of dividends unless the policy form filed with and approved by the department of insurance contains such a provision in express and clear terms. (This clause has no relation or applicability to policies under which insured persons of one class or risk may receive dividends at a higher rate than persons of another class of risk nor shall it imply that any policy may contain a preferential benefit which discriminates against future policyholders), except that this paragraph shall not apply to or constitute evidence of the wrongful sale of any policy(s), the form of which has been filed with and not disapproved by the superintendent of insurance pursuant to Chapter 3915. of the Revised Code, if such sale was made prior to the effective date of this rule.

(16) Make any statement or reference concerning a parent or affiliate's growth, earnings or future prospects without a clear explanation that such company is not the life insurance company whose policy is offered for sale.

(17) State or imply that life insurance proceeds payable at death are in lieu of "profits" or shares of surplus the policyholder would have received had he lived or otherwise infer that life insurance protection merely is incidental to the contract.

(18) State or imply that sales of a policy are limited to shareholders, persons recommended by shareholders or to insurance released by shareholders unless an assignable option to purchase life insurance is granted to each shareholder, which option may not be assigned to the life insurance company, and a record of all assignments identifying both assignor and assignee is maintained by the company, except that this paragraph shall not apply to or constitute evidence of the wrongful sale of any policy(s), the form of which has been filed with and not disapproved by the superintendent of insurance pursuant to Chapter 3915. of the Revised Code, if such sale was made prior to the effective date of this rule.

(19) State or imply that policyholders who are said to act as "centers of influence" (or descriptions of similar context) for an insurance company will share, because of so acting, in the company's surplus, earnings or profits in some preferential manner unless the preference is clearly expressed in the provisions contained in the policy form filed with and not disapproved by the department of insurance; (a provision that the "policy shall participate in the surplus of the company" does not create such a preference as such language by statute is common to participating policies), except that this paragraph shall not apply to or constitute evidence of the wrongful sale of any policy(s), the form of which has been filed with and not disapproved by the superintendent of insurance pursuant to Chapter 3915. of the Revised Code, if such sale was made prior to the effective date of this rule.

(20) Describe or refer to premium payments in language that states that the payment is a "deposit" unless:

(a) The payment establishes a debtor-creditor relationship between the life insurance company and the policyholder and a showing is made as to when and how the deposit may be withdrawn: or

(b) The term is used in conjunction with the word "premium" in such manner as to indicate clearly the true character of the payment;

(21) Provide any illustration or projection of future dividends on a policy unless:

(a) The illustration or projection is based upon the experience currently used by the insurance company for dividends or upon a scale adopted by the company, and

(b) The illustration or projection clearly indicates that the dividends shown are not guaranteed;

(22) Use the words "dividends," "cash dividends," "surplus," or similar phrases in such a manner as to state or imply that the payment of dividends in any amount is guaranteed or certain to occur.

(23) State or imply that a purchaser of a policy will share in all or part of the earnings, profits or net operating gains of the insurance company (nothing in this subsection is intended to prohibit a representation that a holder of a participating life insurance policy will participate equitably in any future distributions out of the surplus of the company).

(24) State that the insured is guaranteed certain benefits if the policy is allowed to lapse without making an adequate explanation of the nonforfeiture benefits.

(25) Describe a life insurance policy or premium payments therefor in terms of "units of participation" or "units,", or use the words "contract,", "contract plan,", "plan" or similar terms unless accompanied by other language clearly indicating the reference is to a life insurance policy.

(26) Include in sales kits and prepared sales presentations proposed answers, to be used in response to a prospect's questions as to whether life insurance is being sold, which are designed to avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation.

(27) Display in any manner to a prospective policyholder any material which includes illustrations, using dollar amounts, in connection with the proposed sale of a life insurance policy or endowment benefits unless the material clearly identifies the source of the dollar amounts and the subject to which such amounts pertain.

(28) Make any general statement that insurance companies make a profit because of policy lapse or surrenders.

(29) Make any comparison to the past experience of life insurance companies that issued a policy represented to be similar to that being offered if such policy currently is unlawful to issue and without making a fair and reasonable disclosure of other companies that have had unfavorable experience with such type of policy.

(30) State or imply that possession of a license to sell life insurance or a charter to engage in the business of life insurance is unique, or anything other than that which is required of all persons or companies who market life insurance.

(31) State that the sales presentation delivered to the prospect is on file with the department of insurance of this state.

(32) State that a policy contains certain features that are not found in other life insurance policies, unless that is true.

(33) Represent that an option to purchase insurance in the future is equivalent to having in force currently the amount of insurance obtainable through exercise of the option.

(34) Offer to sell any life insurance policy or annuity contract in any capacity other than that of a fully licensed life insurance agent.

(35) Make reference to a policy of life insurance or an annuity contract in such a manner as to misrepresent the true nature of the policy or contract.

(36) Distribute any literature or make any statement about any other company or any of its policies based upon the company's being required to change any policy forms or its sales or other related materials or presentations for the purpose of inducing any policyholder or prospect to purchase, amend, lapse, forfeit, change or surrender insurance.

(37) State or imply that a prospective policyholder must purchase a policy immediately upon initial contact of such prospective policyholder by agent or lose the opportunity to purchase such policy.

(38) The above listing of proscribed acts is not intended to be exhaustive; other acts, not listed above but otherwise unlawful, will not be condoned.

(F) Penalties

A violation of any of the provisions of this rule by whatever means, including but not being limited to the use of presentations, whether involving language or illustrations disseminated by means of sales kits, policy jackets, letters, personal confrontations, visual aids or other media, shall be deemed to be in violation of the insurance law of this state and shall subject any person, firm or corporation so violating any provisions of this rule to all penalties provided by law.

(G) Consumer information

Information about the insurance products referenced in this rule, including consumer guides, and definitions of insurance terms, is available to consumers at the Ohio department of insurance website, www.ohioinsurance.gov. Consumers may also contact the department's consumer services division at 800-686-1526 for information and assistance.

(H) Severability

If any provision of this rule or the application to any person or circumstance is held invalid, the remainder of the rule and the application of the provision to other persons or circumstances shall not be affected.

Five Year Review (FYR) Dates: 8/30/2018 and 08/30/2023
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3901.19 to 3901.23, 3915.14, 3999.04, 3999.05, 3999.08, 3999.10
Prior Effective Dates: 08/01/1972, 10/01/1997, 01/01/2009

Prior History: (R.C. 119.032 review dates: 01/08/2014 and 08/31/2018
Promulgated Under: 119.03
Statutory Authority: 3901-041
Rule Amplifies: 3901.19, 3901.23, 3915.14, 3999.05, 3999.08, 3999.10
Prior Effective Dates: 8/1/1972, 10/1/1997, 1/1/2009)