Section 3209. Life insurance, annuities and funding agreements disclosure requirements

(a) Except as hereafter exempted, this section shall apply  to any solicitation,  negotiation  or  procurement  of  life  insurance,
  annuities  or  funding  agreements  occurring  within  this  state. This
  section shall apply to any issuer of life insurance or annuity contracts
  or funding agreements, including fraternal  benefit  societies  and  the
  life  insurance  department  of  a  savings  and  insurance bank. Unless
  otherwise specifically included, this section shall not apply to: credit
  life insurance; group life insurance; life insurance  policies,  annuity
  contracts,  and funding agreements issued in connection with pension and
  welfare plans as defined by and to the extent  covered  by  the  federal
  Employee  Retirement  Income  Security  Act  of  1974  (ERISA);  funding
  agreements issued to other than individuals pursuant to  subsection  (b)
  of  section  three  thousand two hundred twenty-two of this article; and
  any group  annuity  unless  at  least  one  certificate  is  subject  to
  paragraph  two  of  subsection  (b) of section four thousand two hundred
  twenty-three of this chapter.
    (b) (1) No policy of life insurance shall be delivered or  issued  for
  delivery in this state after the applicable effective date, as set forth
  in  subsection (n) of this section, unless the prospective purchaser has
  been provided with the following:
    (A) a copy of the  most  recent  buyer's  guide  and  the  preliminary
  information  required  by subsection (d) of this section, at or prior to
  the time an application is taken. When sales solicitations are  made  by
  mail,  without  the  involvement  of  an  agent  or broker, each initial
  solicitation must include a copy of the buyer's guide unless the  policy
  for  which  application is made provides for a period of at least thirty
  days  within  which  the  applicant  may  return  the  policy   for   an
  unconditional  refund  of  the premiums paid, in which event the buyer's
  guide must be delivered with the policy or  prior  to  delivery  of  the
  policy;  in  addition,  such  solicitation  must  alert  the prospective
  purchaser of the right to receive, upon request, a buyer's guide  and  a
  policy summary prior to delivery of the policy; and
    (B) a policy summary upon delivery of the policy.
    (2)  No  annuity contract or life insurance policy or certificate with
  an equity index account shall be delivered or  issued  for  delivery  in
  this  state  unless,  no  later  than  at  the  time of application, the
  prospective purchaser has been  provided  with  a  disclosure  statement
  containing the following:
    (A)  a  statement  in  bold  type  to the effect that the equity index
  account provides benefits linked to an external equity  index  and  does
  not participate directly in the equity market;
    (B)  a statement identifying the equity index used in the equity index
  formula, together with a description of any alternate index  should  the
  initial index no longer be publicly available;
    (C)  a  statement  indicating  whether  paid dividends are included in
  changes in the equity index, together with a  description  of  how  such
  dividends,  or  lack  thereof,  would  affect  the changes in the equity
  index; the statement must provide the average  dividend  rate  over  the
  lesser of ten years or the calculable life of the index;
    (D) a statement fully describing the equity index formula;
    (E)  a  statement explaining and illustrating the equity index formula
  including any features of the equity index  formula  subject  to  change
  after issuance of the contract, policy or certificate;
    (F)  a  statement  identifying the initial minimum guaranteed interest
  rate for the minimum accumulation value of an equity index  account  and
  any withdrawal charge;

    (G)  a  statement  identifying  the  initial  current  and the minimum
  specified participation rate, i.e., how much  of  the  increase  in  the
  index  will  be  used  to calculate the indexed linked interest rate, if
  any;
    (H)  a statement identifying the initial current and the minimum upper
  limit or cap on the indexed linked interest rate, if any; and
    (I) other disclosure information the superintendent deems appropriate.
    (c) Every insurer must provide, to any policyholder who so requests, a
  policy summary for each in-force  premium-paying  policy  for  which  no
  policy  summary  has  ever  been  furnished.  The insurer may charge the
  policyholder a reasonable fee for preparation of this  summary,  subject
  to guidelines specified in rules promulgated by the superintendent.
    (d)  The  preliminary  information shall be in writing and include, to
  the extent applicable, the following:
    (1) the name and address of the insurance agent or broker  or,  if  no
  agent or broker is involved, a statement of the procedure to be followed
  in  order  to  receive responses to inquiries concerning the preliminary
  information;
    (2) the full name and home office, administrative office or branch  or
  agency  office  address  of the company in whose name the life insurance
  policy is to be written;
    (3) the date of the preliminary information and the generic name,  the
  initial amount of insurance and the initial annual premium for the basic
  policy;
    (4)  the  total guaranteed cash surrender values for the basic policy,
  at the end of the tenth and twentieth policy years or at the end of  the
  premium-paying  period  if  earlier.  These values may be shown on a per
  thousand or per unit basis;
    (5) the effective policy loan annual percentage interest rate, if  the
  policy would contain this provision, and whether this rate is applied in
  advance or in arrears, adjustable or fixed;
    (6)  for  the  life  insurance  policies described in paragraph one of
  subsection (n) of this section, life  insurance  cost  indexes  and  the
  equivalent level annual dividend for the basic policy for ten and twenty
  years, but in no case beyond the premium-paying period;
    (7)  in addition, the applicant shall be advised that, when the policy
  is issued, a complete policy summary, including cost data, based on  the
  benefits,  premiums  and  dividends  of  the  policy  as issued, will be
  furnished; and that, following the receipt  of  the  policy  and  policy
  summary,  there  will be a period of not less than ten days within which
  the applicant may return the policy for an unconditional refund  of  the
  premiums paid; and
    (8)  notwithstanding  the  foregoing,  no applicant for life insurance
  shall be prevented or delayed in effecting or applying for  coverage  by
  the  requirements  of  this  section.  In  such  cases  where  prior  to
  application it is impractical to provide any items  prescribed  by  this
  section,  such items may be estimated in good faith or furnished as soon
  thereafter as practical prior to delivery of policy.
    (e) A policy summary shall include the following:
    (1) a prominently placed title as follows:
    "STATEMENT OF POLICY COST AND BENEFIT INFORMATION";
    (2) the name and address of the insurance agent or broker, or,  if  no
  agent or broker is involved, a statement of the procedure to be followed
  in order to receive responses to inquiries regarding the policy summary;
    (3)  the full name and home office, administrative office or branch or
  agency office address of the company in whose name  the  life  insurance
  policy is to be or has been written;
    (4) the generic name of the basic policy and each rider;

    (5)  for  the  life  insurance  policies described in paragraph one of
  subsection (n) of this section, the following amounts, where applicable,
  for  the  first  five  policy  years  and  representative  policy  years
  thereafter  sufficient  to  clearly  illustrate  the premium and benefit
  patterns,  including the years for which life insurance cost indexes are
  displayed and  at  least  one  age  from  sixty  through  sixty-five  or
  maturity, whichever is earlier:
    (A) the annual premium for the basic policy;
    (B) the annual premium for each optional rider;
    (C)  guaranteed  amount  payable  upon  death  at the beginning of the
  policy year regardless of the cause of  death,  other  than  suicide  or
  other specifically enumerated exclusions, which is provided by the basic
  policy  and  each optional rider, with benefits provided under the basic
  policy and each rider shown separately;
    (D) total guaranteed cash surrender values at the end of the year with
  values shown separately for the basic policy and each rider;
    (E) cash dividends payable at the end of the year  with  values  shown
  separately  for  the  basic policy and each rider. Dividends need not be
  displayed beyond the twentieth policy year; and
    (F) guaranteed endowment amounts payable under the  policy  which  are
  not included in guaranteed cash surrender values above;
    (6)  the  effective policy loan annual percentage interest rate if the
  policy contains this provision, specifying whether this rate is  applied
  in  advance or in arrears. If the policy provides for an adjustable loan
  interest rate, the policy summary shall so state, shall  set  forth  the
  frequency  at  which  the  rate is to be determined for that policy, and
  shall describe the index upon which the maximum rate  is  based  at  the
  time the policy is issued;
    (7)  for  the  life  insurance  policies described in paragraph one of
  subsection (n) of this section:
    (A) life insurance cost indexes for ten and twenty  years  but  in  no
  case  beyond  the  premium-paying  period.  Separate  indexes  are to be
  displayed for the basic policy and for each optional term life insurance
  rider.  Such indexes need not be included for optional riders which  are
  limited to benefits such as accidental death benefits, disability waiver
  of premium, preliminary term life insurance coverage of less than twelve
  months  and  guaranteed insurability benefits, nor for basic policies or
  optional riders covering more than one life;
    (B) the equivalent level annual dividend, in the case of participating
  policies and participating optional term life  insurance  riders,  under
  the  same  circumstances  and  for  the  same  durations  at  which life
  insurance cost indexes are displayed;
    (8) a policy summary which includes dividends  shall  also  include  a
  statement  that  dividends  are  based on the company's current dividend
  scale and are not guaranteed; in addition, the summary  shall,  for  the
  life  insurance policies described in paragraph one of subsection (n) of
  this section, include a statement in close proximity to  the  equivalent
  level annual dividend as follows: "An explanation of the intended use of
  the equivalent level annual dividend is included in the buyer's guide";
    (9)  a statement in close proximity to the life insurance cost indexes
  as follows:
    "AN EXPLANATION OF THE INTENDED USE OF THESE INDEXES  IS  PROVIDED  IN
  THE BUYER'S GUIDE"; and
    (10) the date on which the policy summary is prepared.
    (f)  The  policy  summary must be a separate document. All information
  required to be disclosed must be set out in such  a  manner  as  not  to
  minimize or render any portion thereof obscure. Any amounts which remain
  level for two or more years of the policy may be represented by a single

  number  if  it is clearly indicated what amounts are applicable for each
  policy year. Amounts in paragraph five of subsection (e) of this section
  shall be listed in total, not on a per thousand or per  unit  basis.  If
  more  than  one insured is covered under one policy or rider, guaranteed
  death benefits shall be displayed separately for  each  insured  or  for
  each class of insureds if death benefits do not differ within the class.
  Zero  amounts shall be displayed as zero and shall not be displayed as a
  blank space.
    (g) Every insurer shall maintain, at  its  home  office  or  principal
  office,  a complete file containing one copy of each policy summary form
  authorized by the insurer for use pursuant to this section.
    (h) An agent or broker shall inform a prospective purchaser, prior  to
  commencing  a  life insurance sales presentation, that he is acting as a
  life insurance agent or broker, and inform the prospective purchaser  of
  the  full  name  of  the  insurer  which  he  is  representing.  In sale
  situations in which an agent or broker  is  not  involved,  the  insurer
  shall identify its full name.
    (i) As used in this section, "buyer's guide" means a separate document
  published  and  disseminated  by insurers. The language therein shall be
  promulgated by the superintendent, and shall, to the extent  practicable
  and  in  the  public  interest  as  determined by the superintendent, be
  consistent with the latest version of a buyer's guide as adopted by  the
  national association of insurance commissioners.
    (j)  For life insurance policies, except term life insurance policies,
  which are to be issued  to  qualify  for  special  tax  treatment  under
  subsection  (b)  of  section  four hundred three of the Internal Revenue
  Code of 1986, as amended, a written notice shall  be  delivered  to  the
  proposed  insured  in  a manner satisfactory to the superintendent at or
  prior to the time an application is taken and  shall  read  as  follows:
  "The  purchase  of  a  life  insurance  policy  with  cash  value, which
  qualifies for special tax treatment under section 403(b) of the Internal
  Revenue Code of 1986, as amended, may not be appropriate for individuals
  seeking to maximize the accumulation of  funds  for  retirement  or  for
  individuals  seeking  life  insurance  coverage  primarily  to provide a
  survivorship benefit for the spouse in  the  event  of  death  prior  to
  retirement.   If   an   individual  needs  coverage  to  continue  after
  retirement,  current  tax  laws  require  the  commencement  of  taxable
  distributions  under  the tax sheltered annuity plan (TSA) no later than
  age seventy and one-half which may necessitate some  adjustment  in  the
  cash  value  life  insurance policy or may result in increased insurance
  costs in future policy years. You should consult with your  tax  advisor
  before  purchasing  life  insurance  with  cash  value  as part of a tax
  sheltered annuity (TSA)."
    (k) The superintendent shall promulgate by regulation the contents and
  allowable format of the preliminary information and the  information  to
  appear  in  the policy summary. The superintendent shall also promulgate
  by regulation  standards  governing  the  content,  format  and  use  of
  illustrations  of  individual  life insurance policies and certain group
  life  insurance  policies  and  certificates,  life  insurance  policies
  subject to section four thousand two hundred thirty-two of this chapter,
  variable life insurance policies under which the death benefits and cash
  values  vary in accordance with the unit values of investments held in a
  separate  account   and   individual   annuities,   individual   funding
  agreements,  variable  annuities,  and  group  annuity  contracts if any
  certificate is issued to  which  paragraph  two  of  subsection  (b)  of
  section  four thousand two hundred twenty-three of this chapter applies.
  The illustration regulation shall be consistent, to the greatest  extent
  practicable   and   in   the   public  interest  as  determined  by  the

  superintendent, with the illustration  regulations  as  adopted  by  the
  national  association  of insurance commissioners. The superintendent in
  developing  regulations  to  govern  the  content  and  format  of   the
  preliminary  information,  policy summary and illustrations shall ensure
  that such forms are presented in an easy, concise and meaningful way  to
  enable consumers to understand the operation of the policy or contract.
    (l)  An  insurer  of  any  life  insurance  policy or annuity contract
  subject to this section shall  notify  the  superintendent  whether  its
  policies or contract forms have been or will be marketed with or without
  an  illustration.  For  those  policies  and  contracts marketed with an
  illustration which complies with the regulations promulgated pursuant to
  subsection (k) of this section, no  preliminary  information  or  policy
  summary  shall  be  required.  For those policies which are not marketed
  with an illustration, the preliminary  information  and  policy  summary
  shall be provided pursuant to the provisions of this section.
    (m)   The   superintendent,   by   regulation,   shall  determine  the
  applicability of the illustration  regulation  promulgated  pursuant  to
  subsection  (k)  of  this  section  to group life insurance policies and
  group annuities and funding  agreements.  Such  determination  shall  be
  consistent,  to  the  greatest  extent  practicable  and  in  the public
  interest, with the illustration regulations as adopted by  the  national
  association of insurance commissioners.
    (n) The effective dates of this section as applied to policies of life
  insurance,  annuity  contracts,  and  funding  agreements  shall  be  as
  follows:
    (1)  for  individual  life  insurance  policies,  certain  group  life
  insurance  policies and certificates and life insurance policies subject
  to section four thousand two hundred thirty-two of this chapter, January
  first, nineteen hundred ninety-eight;
    (2) for annuities and funding agreements, the date of promulgation  of
  regulations  by  the  superintendent  pursuant to subsection (k) of this
  section but not later than June thirty, nineteen hundred ninety-eight;
    (3) for variable life insurance policies and variable  annuities,  the
  date  of promulgation of regulations by the superintendent but not later
  than January first, nineteen hundred ninety-nine.
    No less than  three  months  prior  to  promulgating  the  regulations
  required  to  implement  subsection  (k)  of  this  section  pursuant to
  paragraphs two and three of this subsection,  the  superintendent  shall
  hold public hearings on such regulations.