File No. 34175
This rule was published in the November 15, 2010, issue (Vol. 2010, No. 22) of the Utah State Bulletin.
Notice of Proposed Rule
DAR File No.: 34175
Filed: 10/28/2010 02:05:25 PM
Purpose of the rule or reason for the change:
The purpose of the rule is to update language, correct code citations, add a penalty and an enforcement section, and require a producer to be licensed as a variable contract producer in order to recommend the termination of a variable contract.
Summary of the rule or change:
The rule includes the following changes in language: "insurance code" to "title", "agent" to "producer", "which" to "that", "company" to "insurer", "National Association of Security Dealers" to Financial Industry Regulatory Authority", and made it gender neutral. The Authority section has been broadened from just covering variable contracts issued by domestic companies to variable contracts issued by any insurer. The definition section has been broadened to include the definitions in Section 31A-1-301, and deletes the definition of "agent" in the rule. Two new sections have been added to the rule, a Penalties section and an Enforcement Date section. The rule will now require producers be licensed as a variable contract producer in order to recommend to consumers that they terminate their variable contract.
State statutory or constitutional authorization for this rule:
- Section 31A-2-201
- Section 31A-5-217.5
Anticipated cost or savings to:
the state budget:
There may be an increase in revenue if producers purchase the variable line of insurance license to be able to recommend that a person terminate their variable contract. The cost for this license is $25 a year. Currently there are around 24,000 life agents. Some of these already have this limited line license. It is unknown how many may add this line to their license.
This rule will have no impact on local governments since it deals solely with the relationship between the department and their licensees.
This could be a big impact on agencies who often pay for exams and license fees for their agents. The cost for a limited line insurance license would cost $25. There would also be the cost for two securities license exams and a broker security license for a total of $284. Currently there are around 24,000 life agents licensed to do business in Utah. Not all of these agents are actively selling life insurance products and some of them already have the limited line license so it is impossible to tell how many will obtain the limited license.
persons other than small businesses, businesses, or local governmental entities:
Those agents who are required to pay for the cost of the limited license and securities exam and license would be required to pay a total of $309.
Compliance costs for affected persons:
Agents or agencies who decide to obtain the limited line insurance license will pay $309 for the cost of the limited license and securities exam and license.
Comments by the department head on the fiscal impact the rule may have on businesses:
This could bring additional licensing revenues into the state and provide consumer protection. Agents who obtain the additional licensing will be more educated and able to direct their clients in regard to variable contracts.
Neal T. Gooch, Commissioner
The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:Insurance
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201
Direct questions regarding this rule to:
- Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at email@example.com
Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:
Interested persons may attend a public hearing regarding this rule:
- 12/07/2010 03:00 PM, State Office Building, 450 N State, Rm 3112, Salt Lake City, UT
This rule may become effective on:
Jilene Whitby, Information Specialist
R590. Insurance, Administration.
R590-133. Variable Contracts.
This rule is adopted pursuant to
Subsection 31A-2-201(3) which authorizes rules to implement [
the Insurance Code] and [ 31A-5-217.5(6)] [ which] gives the commissioner authority to regulate by
rulemaking the issuance and sale of variable contracts.
The term "variable] contract," [ shall mean] a[ ny] policy or contract [ which] provides [ for] life insurance or annuity benefits [ which] may vary according to the investment experience of any
separate account or accounts maintained by the insurer as to the
policy or contract, as provided for in Sections 31A-5-217 and
"Agent," when used in this rule, shall mean any
person licensed as an agent, broker or consultant under the laws of
this state. C.] "Variable contract [ agent]," [ when used in this rule, shall] mean
[ an agent, broker and] consultant [ who is licensed to sell or offer to sell any] variable contract
R590-133-3. Qualification of [
to Issue Variable Contracts.
company] may deliver or issue for delivery
variable contract[ s] within this state unless [ it] is licensed [ or organized] to do a variable life, annuity, or
both, business in this state in accordance with Section
R590-133-4. Governance of Separate Accounts.
All separate accounts shall be governed specifically by Sections 31A-5-217; 31A-5-217.5; 31A-18-102; 31A-20-106; 31A-21-301 and 31A-22-411 and this rule. They shall be governed generally by the provisions of the code applicable to life insurance companies not explicitly exempted by the code.
R590-133-5. Required Reports.
y] [ company] issuing
individual variable contract[ s] providing benefits in variable amounts shall
mail to the contract holder at least once in each contract year
after the first at [ his] last address known to the [ company], a statement or statements reporting the investments
held in the separate account.
B. The [
company] shall submit annually to the [ Insurance Commissioner] a statement of the business of its separate
account or accounts in a form as may be prescribed by the National
Association of Insurance Commissioners.
y] [ company] issuing
individual variable contract[ s] shall mail to the contract holder, at least
once in each contract year after the first, at [ his] last address known to the [ company], a statement reporting as of a date not more than
four months previous to the date of mailing:
(1) in the case of an annuity contract under which payments have not yet commenced:
i]) the number of accumulation units credited to the contract
and the dollar value of a unit; or
ii]) the value of the contract holder's account; and
(2) in the case of a life insurance policy, the dollar amount of the death benefit.
R590-133-6. Foreign [
If the law or rule in the place of
domicile of a foreign [
company] provides a degree of protection to the [ policyholders] and the public [ which] is substantially equal to that provided by this rule,
the commissioner, to the extent deemed appropriate [ by him] in [ his] discretion, may consider compliance
with the law or rule as compliance with this rule.
R590-133-7. Licensing of [
Agents, Brokers and Consultants].
agent, broker] or consultant [ may be] eligible to sell
[ or] offer for sale
variable contract unless [ prior to making any solicitation or sale, he is
]licensed as a variable contract [ agent].
The licensing as a variable contract [
agent] may not become effective until satisfactorily
completing the following requirements:
(1) be licensed in the line of life insurance;
(2) evidence that the applicant has
previously passed [
National Association of Security Dealers] examinations series
six or seven and 63. Approval of registration to take the
examinations is not acceptable;
(3) evidence of being Utah approved from
National Association of Securities Dealers], Central
(4) if the applicant is a non-resident, requirements of the state of domicile may be acceptable; and
(5) every application for a license as a
variable contract [
agent] shall be accompanied by the appropriate fee
designated in the fee schedule adopted by the legislature.
R590-133-8. Additional Provisions Applicable to Variable
ny] person licensed in this state as a variable
contract [ agent] shall immediately report to the commissioner:
(1) any suspension or revocation of [
his] variable contract [ agent's] license or life insurance [ agent's] license in any other state or territory of
the United States;
(2) the imposition of any disciplinary
sanction imposed upon [
him] by any national securities exchange, or
national securities association, or any federal, or state or
territorial agency with jurisdiction over securities or contracts
on a variable basis;
(3) any judgment or injunction entered
on the basis of conduct deemed to have involved
fraud, deceit, misrepresentation, or violation of any insurance or
securities law or rule.
B. The commissioner may reject any
application or suspend or revoke or refuse to renew any variable
agent's] license upon any ground that would bar the
application or [ agent] from being licensed to sell life insurance
contracts in this state. The statutes governing any proceeding
relating to the suspension or revocation of a life insurance [ agent's] license shall also govern any proceeding for
suspension or revocation of a variable contract [ agent's] license.
C. Renewal of a variable contract [
agent's] license shall follow the same procedure
established for renewal of [ an agent's] license[ to sell life insurance contracts in this
(A). The following information shall be
furnished to an applicant for a
of variable life insurance] prior to execution of
(1) a summary description of the [
insurance company] and its principal activities;
(2) a summary explanation in non-technical terms of the principal variable features of the contract and of the manner in which any variable benefits reflect the investment experience of a separate account;
(3) a brief description of the investment policy for the separate account with respect to the contract;
(4) a list of investments in the separate account as of a date not earlier than the end of the last year for which an annual statement has been filed with the commissioner of the state of domicile; and
(5) summary financial statements of the [
insurance company] and the separate account based upon the last annual
statement filed with the commissioner, except that for a period of
four months after the filing of any annual statement
the summary required may be based upon the annual
statement[ ,] immediately preceding the last annual
statement[ ,] filed with the commissioner.
insurance company] may include [ any] additional information as [ it] deems appropriate.
If any provision of this rule or its application to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of the provisions may not be affected.
KEY: insurance law
Date of Enactment or Last Substantive Amendment: [
Notice of Continuation: January 12, 2007
Authorizing, and Implemented or Interpreted Law: 31A-2-201;
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For questions regarding the content or application of this rule, please contact Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at firstname.lastname@example.org.