Section 1405.10  Authority

 

This Part is issued by the Director of the Department of Insurance (Director) pursuant to Section 401 of the Illinois Insurance Code, which empowers the Director to make reasonable rules and regulations as may be necessary for making effective the insurance laws of this State.  This Part implements Section 143 of the Illinois Insurance Code [215 ILCS 5/143] by establishing a "Policy Form Manual" designed to make uniform the requirements and practices in the filing of certain policy forms with the Director.

 

(Source:  Amended at 34 Ill. Reg. 5835, effective April 7, 2010)

 

Section 1405.15  Definitions

 

Code means the Illinois Insurance Code [215 ILCS 5].

 

Department means the Department of Insurance.

 

Director means the Director of the Department of Insurance.

 

(Source:  Added at 34 Ill. Reg. 5835, effective April 7, 2010)

 

Section 1405.20  Illinois Guidelines for Filing and Approval of Life and Annuity Forms

 

Following are some general requirements that should be helpful to industry personnel involved in drafting and filing policy forms.

 

a)         Policy Forms

 

1)         "Policy Form" Defined.  The term "policy form" as used in this Part is defined in the Insurance Code.  It means any policy, certificate, endorsement, rider, by-law or other matter incorporated by reference or an application blank. It does not include riders or endorsements issued or made at the request of the individual policyholder relating to the manner of distribution of benefits or to the reservation of rights and benefits under a life insurance policy.

 

2)         Policy forms exempt from filing are as follows:

 

A)        Notice Regarding Replacement (see 50 Ill. Adm. Code 917.70).

 

B)        Policy Summaries.

 

C)        Buyer's Guides (see 50 Ill. Adm. Code 930.40(a)).

 

3)         Policy forms prohibited pursuant to Sections 143(1) and 224(1)(c) of the Code are as follows:

 

A)        Certificates issued in lieu of a duplicate insurance policy.

 

B)        Forms containing provisions excluding scuba diving, hang-gliding, motorcycle racing, race car or stock car racing, or hazardous sports.

 

b)         Form Numbers

 

1)         Each "policy form" must be designated by a suitable form number that may be made up of numerical digits or letters, or both, in the lower left‑hand corner of the first page.  The form number shall be sufficient to distinguish the basic form from all others used by the insurer.  Edition date and/or designation of a state where a special edition is required is permitted in this space, and if printed as a continuation of the form number, will be considered a part of the form.  The appearance of a company's stock number and/or printing date in proximity to the form number is permitted.

 

A)        If a descriptive title is in close proximity to the form number, it will not be considered a part of that number for approval purposes unless inclusion is requested by the company.

 

B)        Refer to Section 1405.80 for instructions relating to form numbers when filing a policy on an insert page basis.

 

2)         Since the form number must be sufficient to identify any form that has been issued by a company, each submission must bear a unique number. A recently approved but unissued form may be corrected or changed by filing a substitute page or form, which may retain the original form number.

 

3)         Form numbers may not contain "ICC" at the beginning of the form number due to conflict with Interstate Compact form number requirements.

 

c)         General Form Requirements pursuant to Section 149 of the Code 

 

1)         The name of the company shall appear on the form.

 

2)         Policy shall show location of the home office and principal office, if different.

 

3)         Policy shall include the company's consumer assistance telephone number.

 

4)         Policy shall indicate the issue or policy date and the effective date, if different.

 

5)         Rubber stamp deletions, mechanical overprints or paste-over "stickers" are permitted with the prior approval of the Department (for rubber stamp endorsements, see Section 1405.20(d)(6)).

 

6)         The name or title of any policy or class of policies may not misrepresent the nature of the policy.  The title shall be specifically descriptive, such as: Universal, Term, Annuity, Indexed, Equity Indexed, Indexed Linked, Modified Guaranteed Annuity, Endowment or Whole Life.  Inclusion of words such as "special", "select", "preferred" or "inflation" are not allowed in the title as they imply receiving something not normally offered in a life policy, in violation of Sections 143(1) and 149 of the Code.

 

d)         Preparation of Forms

 

1)         "Policy forms" must be submitted pursuant to 50 Ill. Adm. Code 916.

 

2)         All blank spaces of each policy form must be filled in (completed in John Doe manner).  The purpose and use of the form shall be explained in the Filing Description or letter of submission.

 

3)         When submitting a "policy form" to which a previously approved application will be attached, reference must be made to the state/company tracking number or SERFF tracking number and approval date and form number of the previously approved application.

 

4)         On applicable life policy forms, nonforfeiture values, if any, for the age and plan of insurance used in filling in the form must be included.

 

5)         On group forms, variable material may be indicated for language that may vary from case to case.  Variable material consists of benefit provisions and benefit levels.

 

6)         All rubber stamp endorsements should be submitted for approval under the insurer's letterhead and filed in accordance with 50 Ill. Adm. Code 916.

 

7)         Combination forms (for Life and Accident and Health) shall be submitted to both the Life Unit and the Accident and Health Unit of the Product Evaluation Section.

 

e)         Filing Description or Letter of Submission

A letter of submission must be on company letterhead that shows the name of the company for which the forms are being submitted, signed by a representative of the company authorized to submit forms for filing or approval, and submitted under the Supporting Documentation of the filing.  The Filing Description or letter of submission must contain the following information:

 

1)         The identifying form number of each form submitted.

 

2)         If the form is a new one, not replacing an existing form, a statement to that effect.

 

3)         If the form is intended to supersede another approved form, the company tracking number or SERFF tracking number, the form number and the approval date of the superseded form must be stated, together with a statement describing all material changes to the previously approved forms.

 

4)         If a company submits a form that has been previously submitted but has not been approved, the company shall advise the Department of the company tracking number or SERFF tracking number, and the date of submission or disapproval of the previously submitted form and any material changes.

 

5)         If the form is other than a policy or contract, give the company tracking number or SERFF tracking number and the form number of the policy or contract form or forms with which it will be used, or, if for more general use, describe the type or group of such forms.

 

6)         Reference to previously approved forms shall provide date of approval of those forms and company tracking number or SERFF tracking number.

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.30  Applications

 

a)         General

 

1)         The application for a policy shall contain spaces for the name and signature of the producer or other licensee who solicited and wrote the application, pursuant to Section 500-155 of the Code.

 

2)         The size of the type in the declaration portion of an application must meet a reasonable standard of legibility.

 

3)         In applications providing for home office endorsement, there shall be no change in the amount of insurance or benefits, unless agreed to in writing by the applicant.

 

4)         Applications shall fully comply with the applicable Sections of Article XL of the Code (Insurance Information and Privacy Protection).

 

b)         Health Questions

 

1)         Questions requiring applicant's opinion regarding past or present health of a person proposed for coverage shall be asked as to the best of the applicant's knowledge and belief.

 

2)         Questions regarding an applicant's past or present health that are phrased so as to require factual information rather than a statement of the applicant's opinion need not be qualified as described in subsection (b)(1).

 

3)         Medical Authorization in an application may be handled in one of the following ways:

 

A)        By a direct question to be answered "yes" or "no" that clearly indicates the applicant has or has not waived the privilege; or

 

B)        By a statement in the declaration immediately above or in close conjunction to the signature line; or

 

C)        By a separate authorization requiring a separate signature of the applicant or other person granting the authorization.

 

c)         Automatic Premium Loan Provision

The application may provide for a specific election of an automatic premium loan provision if that provision is offered in the policy.  Failure to elect on the part of the applicant shall result in no election of the automatic premium loan provision, as provided for in Section 1405.40(c).

 

d)         Dividend Election

If the contract applied for is participating, the application shall provide for election of all available dividend options, as provided for in Section 1405.40(i).

 

e)         Replacement

Applications shall be drafted to comply with the replacement provisions of 50 Ill. Adm. Code 917.

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.40  Policy Forms

 

a)         Payment of Premiums

 

1)         Advance Premium Deposits – A fund or account for payment of unspecified premiums (whether by policy or by rider) must conform to the requirements of Section 240 of the Code.

 

2)         Grace Period – Policy must provide for continuance in force during the grace period and deduction (not necessarily payment) of any unpaid premium in settlement under the policy pursuant to Section 224(1)(b) of the Code.

 

b)         Continuation of Premiums Beyond Maturity

If a policy provides for continuation of premiums, on an optional basis, beyond an initial or normal maturity date, it must be made clear that coverage and all applicable policy provisions also continue while premiums are being paid.  The policyholder must be made aware of applicable policy values while premiums are so continued:  either by including those values in the policy or by specifying that notices of the current value will be sent to the policyholder upon request.

 

c)         Automatic Premium Loan Provision

 

1)         Policy may provide benefit on a positive elective basis, but not as an automatic nonforfeiture benefit.  For provisions regarding automatic premium loans in applications, see Section 1405.30(c).

 

2)         Provision must conform to the loan provision of the policy, subject to Sections 224(1)(f), 229.3 and 229.5 of the Code. The provision must permit revocation of election upon written request.

 

3)         Notification of the policyholder with respect to the initial interest rate on an automatic premium loan must be made as soon as it is reasonably practicable after making the initial loan, but in no event more than 90 days after the initial loan is made.  Notification need not be given to the policyholder when a further premium loan is added unless a loan rate increase occurs (Section 229.5(b)(5)(ii) and (iii) of the Code). When a loan rate increase occurs, reasonable advance notice of any increase in rate must be made. In no event shall the notice be given less than 15 days prior to the increase in rate.  

 

d)         Loan Interest Rate

 

1)         Provision must conform to Sections 224(1)(f), 229.3 and 229.5 of the Code.  Any variable rate must include a specified maximum rate of interest.  The Department requires filing of a description of procedure for changing a variable rate and notifying those policyowners who have outstanding loans of the rate change, which must be made on a non-discriminatory basis.

 

2)         The interest rate charged on a policy loan or the interest rate charged upon reinstatement of any policy form that was made under a policy issued after January 1, 1982 will not exceed the rate prescribed in Section 229.5 of the Code, either as a maximum rate of not more than 8% or an adjustable maximum interest rate established from time to time by the life insurer as permitted by law, unless the policyholder agrees in writing to the applicability of those provisions.

 

e)         Contestability in Life Policies

The period of contestability shall be determinable from the policy, i.e., by reference to a specified issue date, policy date or effective date, as referred to in subsection (t).

 

f)         Limitation of Coverage

Any limitation of coverage in event of death by suicide or other specified causes must be confined within the contestability period of the policy to comply with Section 225(l)(c) and (l)(f) of the Code.  Exceptions to this restricted limitation are given in Section 224(l)(c) of the Code and subsection 1405.40(t)(2) of this Section.

 

g)         Time Limit on Claims

 

1)         Filing of Death Claims – There is no time limit for filing death claims if the claim is not conditioned upon other contingencies, i.e., prior disability or accident. Section 224(1)(j) of the Code requires, when there is a claim on a policy due to the death of the insured, settlement shall be made upon receipt of due proof of death.  For purposes of this subsection (g)(1), due proof consists of sufficient evidence to establish in a court a prima facie case for payment of the claim.  Therefore, any limitation with respect to death claims arising during and contingent upon the insured's continued disability must be limited to a requirement that proof of disability be furnished within a stipulated period as a condition precedent to consideration of a death claim.

 

2)         Filing of Disability Claims – Reasonable limits are permitted.  The form may require notification of disability during lifetime and continuance of disability and may eliminate accrual of benefits because of any disability that was in existence more than one year prior to furnishing proof of disability.

 

h)         Participating or Non-Participating

A policy must indicate whether the policy is participating or non-participating.

 

i)          Dividend Provisions

The following is applicable to individual policy forms:

 

1)         Disposition of Dividends Left With the Company – The policy must indicate what disposition will be made of outstanding dividend credits in event of lapse, termination or maturity of the policy.

 

2)         Other Dividend Options – In addition to the dividend options required under Section 224(1)(e) of the Code, provisions pertaining to the automatic withdrawal of any accumulated dividends, or current and unapplied dividends for the purpose of paying premiums unpaid at the end of a grace period, may be included if the policy provides for the notification of the policyholder of the application of dividends and the policyholder is given a minimum of 30 days after the date of the notice within which to direct the insurer to reverse the dividend transaction.

 

3)         One-Year Term Insurance Dividend Option – Provision must be made for the disposition of the value of any one-year term insurance addition in the event of lapse of the policy.  The policy may either provide for application of any cash value of the remaining one-year term insurance under nonforfeiture options, or a continuation of the term insurance.

 

j)          Nonforfeiture Values

The nonforfeiture value table must illustrate loan values and options available for each of the first 20 years of the policy or its term, if less, and include a provision that, upon request, the company will furnish an extension of the table.  Values and statements in the policy must fulfill the requirements of Section 229.2 of the Code.

 

k)         Standard Nonforfeiture Law – Paid-up Insurance Upon Death of Insured (Family Policy)

A spouse or children entitled to paid-up insurance upon the death of a covered person under a family or parent-child policy shall be given the right to obtain the net cash surrender value of the paid-up insurance, and the form shall so state.  In lieu of a table of such values, a statement may be included that a notice of the current values will be furnished by the company on request, as provided for in Section 229.2(6) of the Code.

 

l)          Inapplicable Language

Inapplicable language is prohibited if the inclusion of that language results in inconsistencies or ambiguities or is misleading, as is required by Section 143 of the Code.

 

m)        Back Dating of Life Policy

While the Code prohibits a provision under which any policy purports to be issued or take effect more than six months before the original application was made, this limitation is not applicable in conversion from or exchanges of one form of policy or annuity to or for another form provided credit is given for the reserve accumulation of the converted or terminated policy, and the form clearly spells out acceptable provisions relating to indebtedness, tabular cash values, dividends, effective date, and dividend accumulations, if any, under the new policy, as is prohibited by Section 225(1)(b) of the Code.  The conversion or exchange may not result in the policyholder being charged for insurance protection that was not received.

 

n)         Settlement at Maturity – Commuted Value of Unpaid Installments

The form shall:

 

1)         provide the basis for determining any commuted value, as is provided for by Section 224(1)(k) of the Code; and

 

2)         indicate whether benefits at death shall be payable to an estate or to a named beneficiary.

 

o)         Supplemental Benefits

 

1)         Supplemental Death and Dismemberment benefits may be added to a life policy when limited to accidental cause only.

 

2)         Language in such supplemental benefits that does not employ "result" language, and that establishes an accidental means test or uses words such as "external", "violent", or "visible wound" is prohibited. Additionally, contributory language (e.g., "or indirectly", "wholly or in part", or "contributed to by") is also prohibited.  For purposes of this subsection (o)(2), "result" language includes, but is not limited to, death as a result of war, death as a result of suicide and death as a result of flying.  For purposes of this subsection (o)(2), "accidental means test" requires that both the cause and result of the accident be an accident.

 

3)         Provisions for loss due to accident or accidental injury shall not contain language limiting, reducing or excluding liability for a loss resulting from purely accidental circumstances (e.g., involuntary or unintentional ingestion of poison or an infectious organism, or inhalation of poisonous gases or fumes) as provided for by Section 143 of the Code.

 

4)         Other supplemental benefits may be added to the policy for conditions that result in a total and permanent disability, as provided by Section 4 of the Code.  For purposes of this subsection (o)(4), "total and permanent disability" means an inability to work and earn money because of an injury or illness from which recovery is unlikely at any time in the future and that is expected to continue indefinitely or result in death.

 

p)         Combination Life and Accident and Health Coverages in Individual Policies

Life and Accident and Health coverages may be combined in an individual policy, provided all statutory requirements are met and the form meets the other tests for approval in Section 143.  All individual policies submitted must contain a premium breakdown as to coverages.

 

q)         Spendthrift and Creditor Clause

The policy may include a Spendthrift and Creditor Clause providing in substance that, except as may be otherwise provided in the policy, a Beneficiary may not, at or after the maturity of the policy, assign, transfer or encumber any benefits payable under the policy and, to the extent permitted by law, any such benefits shall not be subject to the claims of any creditor of any Beneficiary.  Because of the limitations in the statutory provisions relating to the exemption from execution, attachment, garnishment or other process for the debts or liabilities of the insured, no reference to these statutory exemptions is required as is provided for by Sections 238 and 241 of the Code.

 

r)          Family Policy – Names of Spouse and Children

 

1)         It is necessary to name the spouse and/or children in either the application or policy only when a separate premium is charged for the individual insured in either of such categories.

 

2)         For additional family policy guidelines, refer to 50 Ill. Adm. Code 1403.

 

s)         Term Life Insurance – Conversion of Term Life Insurance

A form providing term life insurance with conversion rights without evidence of insurability may not withhold such right of conversion because the covered person has established a waiver of premium disability claim.  The form may, however, withhold waiver of premium benefits under any new policy resulting from the conversion, or, as an alternative, reduce the face amount in the new policy by not exceeding 25% if waiver of premium benefits is requested and provided in the new policy.

 

t)          Option to Purchase Additional Life Insurance – Incontestability and Suicide Clause

 

1)         Any new policy issued pursuant to a purchase option guaranteeing insurability shall provide that the period specified in the incontestability clause shall expire no later than two years from the latter of date of issue of the original policy, date of issue of the rider containing the purchase option, date of change of the original policy requiring proof of insurability or date of last reinstatement of original policy, as is provided for by Section 224(1)(c) of the Code.

 

2)         Any new policy issued pursuant to a purchase option may contain a limitation of coverage with respect to death by suicide during the period the policy would be contestable in the absence of issuance under the purchase option, as provided for by subsection (f).

 

3)         Company shall indicate to the Department how the incontestability provision of the new policy will be amended.

 

4)         The request form for the exercise of a purchase option shall be furnished to the Department.  It may contain medical questions provided it is clearly stated that such questions are to be answered only if coverages additional to those permitted under the option are applied for.

 

u)         Insurable Interest at time of Exercising Option

In a guaranteed purchase option, a provision may not be included requiring the existence of an insurable interest when the person exercising the right to purchase is other than the insured.

 

v)         Riders and Endorsements

 

1)         Descriptive Title – Unless the nature of the rider or endorsement is obvious (e.g., Home Office Endorsement), the form shall contain a correct descriptive title.  Use of words such as "preferred", "special", "select" or "inflation" is prohibited as provided for by Section 143 of the Code.

 

2)         Effective Date – Rider or endorsement shall show its effective date, if other than effective date of policy, either within the text or by reference to a policy provision or in the schedule of benefits.

 

3)         Format – Riders and endorsements that are forwarded to the policyowner for attachment to the policy shall contain the following information:

 

A)        Name of company.

 

B)        Identity of policy and insured, e.g., Attached to and made a part of Policy No._____ Insured: __________.

 

C)        Effective date of the rider or endorsement.

 

D)        Signature of at least one company official.

 

4)         Reduction of Benefits – If benefits are reduced, the reduction may be made only pursuant to a signed request or acceptance of the policy owner.

 

5)         Riders or endorsements may not be used to amend another rider or endorsement.

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.50  Group Insurance

 

a)         Group Insurance is defined in Section 230.1 of the Code.   Standard Provisions for Group Policies are cited in Section 231.1 of the Code.

 

b)         Group Insurance Contributory or Non-Contributory

The policy shall state whether it is either contributory or non-contributory.

 

c)         Paid-Up Term Life Insurance Benefit in Group Ordinary Life

Any group ordinary life insurance form providing a paid-up term life insurance benefit may contain a limitation to the effect that, when the paid-up benefit amounts to less than $1,000, only the alternative cash value as provided in the form shall be payable.

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.60  Franchise Life Insurance

 

Franchise (or Wholesale) Life Insurance is a form of personal coverage issued under individual policies to a group under conditions which are similar to Group Insurance but which do not necessarily qualify under the Group Insurance definition.

 

a)         Identity of Insureds

            Franchise life insurance policies shall not be used to insure heterogeneous groups, e.g., insureds in a state or locality.

 

b)         Termination or Non-Renewal of Individual Coverage

            Termination either by cancellation or refusal to renew any individual contracts of the group is prohibited, unless all like contracts of the group are terminated or non-renewed at the expiration of the contract.  The termination or non-renewal conditions which may be included in such contracts are those which terminate coverage because of non-payment of premium, discontinuance of employment of the insured by the named employer, discontinuance of employee as a member of a class of eligible employees, or the discontinuance of membership in the designated organization or association, and in addition, coverage may be automatically terminated at a designated attained age.  Any other termination or non-renewal conditions must be approved by the Director.

 

Section 1405.70  Annuities

 

a)         Group Variable Annuities

The applicable jurisdiction for group variable annuity contracts is the jurisdiction where the group master policy is delivered.

 

b)         Fixed Dollar or Flexible Premium Individual Annuity Contracts – Options to Purchase Additional Annuity

If options for the purchase of additional annuity benefits are provided, including a flexible annuity plan, it must be made clear that the payments are considered "premiums" or purchase payments, rather than deposits, to distinguish annuity premiums from premiums placed in a Premium Deposit Reserve Account, as provided for by Section 240 of the Code.

 

c)         Notice to Policyholder

 

1)         The policyholder must be made aware of the amount of annuity purchased, either by including a table of values in the contract, or by specifying in the contract that notices of the current or other values will be sent to the policyholder upon request.

 

2)         The charges, including but not limited to withdrawal and surrender charges, minimum guaranteed interest rates, and a statement of the mortality table to be used must be incorporated in the policy as provided for by Section 229.4a of the Code.

 

d)         Reinstatement

Evidence of insurability may not be required in order to reinstate an annuity benefit.  However, such evidence may be a requirement for reinstatement of any supplemental benefits that may be attached to an annuity contract.

 

e)         An annuity contract must be incontestable from the date of issue unless it includes an application asking health questions, as provided for by Section 226(1)(b) of the Code.

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.80  Alternate and/or Insert Pages

 

For "alternate" and/or "insert" pages, a company may use the following guideline:

 

a)         If the policy jacket or the outside covers are to be used with more than one plan of insurance, the form shall be submitted on this basis. The usual title and brief explanation of the type of policy need not be placed on the jacket or covers if the front cover is less than a full policy page, or if the cover contains a window.  In those instances, the applicable material shall be placed in a position on the first (or specification) page so that it would be exposed even when the cover jacket is over the first page, as provided for by Section 224(1)(m) of the Code.

 

b)         If the policy is submitted and the review is desired with consideration given to each individual page, the insert pages shall be properly identified and the letter of submittal shall list each page as a form.

 

c)         For submittal of alternate or insert pages to be used with existing policies in supply, if the page is to be inserted at the date of issue of the policy, consideration will be given if the form is properly identified. The submittal letter shall fully explain the changes that would be made.

 

d)         If a change is to be made on a previously issued policy, with the consent of the policyholder, this change shall be accomplished by an endorsement or rider approved for use in the State of Illinois, as provided for by Section 1405.40(v) .

 

(Source:  Amended at 43 Ill. Reg. 3259, effective February 25, 2019)

 

Section 1405.90  Substitution Filings

 

A substitution filing of a new form for a previously approved form having the same form number must contain the following:

 

           

a)         The approval date of the original form and a statement that the original form was never used; and

 

b)         A red-lined version of the changes to the previously approved form.

 

(Source:  Amended at 34 Ill. Reg. 5835, effective April 7, 2010)