Department updates life insurance buyers guide.
TRENTON N.J., October 16 -- The Insurance Department is proposing to alter rules and regulations on selling life insurance in New Jersey as well as updating its 30-year-old life insurance buyers guide for the public.
The new rules could be enacted after November 30, the deadline for receiving public comments. The proposals would affect the 379 life insurance companies in the state who racked up life insurance premiums of $6.1 billion last year.
One of the big changes proposed would eliminate all references to life insurance cost comparison indexes because, the department contends, "they are no longer necessary." The department is relying on the NAIC model regulations of 2000, which found such indices were not very helpful in determining whether a particular policy was a good value.
The proposed buyers guide will be changed and all references to cost indexes will be replaced with more comprehensive information about the various types of life insurance policies.
The proposed regulations also remove definitions of "equivalent level annual dividend," "equivalent level death benefit riders," and "life insurance cost indexes."
The regulations would allow companies to charge $10 for preparing a policy data statement. The current fee is $5.
The department proposal states that all of these changes provide life insurance information that is "delivered to consumers more readily comprehensible, and should enable prospective purchasers to make more educated and appropriate choices."
Under the proposal, insurance producers are being banned from falsely using terms such as financial planner, investment advisor, financial consultant, and financial counsel in such a way as to imply that they are primarily engaged in an advisory business unrelated to insurance sales.
The new proposals do not address disclosures related to life insurance policies that fund prepaid funeral agreements. The department explained that the division of consumer affairs regulates pre-arrangements for funeral costs because technically these arrangements are contracts; not insurance policies.
The buyers guide is aimed at helping consumers decide how much insurance they need and what they can afford when buying the policy. It warns that quitting during the early years of a policy can be very costly. The guide also warns of the hazards of dropping one policy to buy another without thorough deliberation because that, too, could be costly. The guide also explains the differences between life insurance, term insurance, and cash value insurance.
The new rules would not apply to individual and group annuity contracts, credit life insurance, group life insurance, life insurance policies issued in connection with pension and welfare plans, and variable life insurance.
Insurance companies already have their own buyers guides, but the changes proposed by the department, once enacted, would have to be included in the companies' guides.
Comments on these changes are to be sent to Robert Melillo, chief of legislative and regulatory affairs, Trenton, N.J. 08625-0325.
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|Title Annotation:||NEW JERSEY|
|Author:||Zarate, Vincent R.|
|Date:||Oct 22, 2007|
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