California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 12 - Disability Insurance Advertisements › Section 2536.3 - Necessity for Disclosing Policy Provisions Relating to Renewability, Cancellability and Termination

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
When an advertisement, which is an invitation to contract,
					 refers to either a dollar amount or a period of time for which any benefit is
					 payable, or the cost of the policy, or specific policy benefit, or the loss for
					 which such benefit is payable, it shall disclose the provisions relating to
					 renewability, cancellability and termination and any modification of benefits,
					 losses covered or premiums because of age or for other reasons, in a manner
					 which shall not minimize or render obscure the qualifying conditions.
GUIDELINE 2536.3
This Section imposes the same disclosure standards with
					 respect to policy provisions relating to renewability, cancellability and
					 termination, modification of benefits, losses or premiums because of age or
					 otherwise as stated in Guideline 2536.2(b)(1). The comments in that Guideline
					 are equally applicable to this Section. Advertisements of cancellable policies
					 must state that the contract is cancellable or renewable at the option of the
					 company as the case may be. For example the following represent illustrations:
					 A policy which is cancellable shall be advertised in a manner similar to "This
					 policy can be cancelled by the company at any time." A policy which is
					 renewable at the option of the insurance company shall be advertised in a
					 manner similar to "This policy is renewable at the option of the company" or
					 "The company has the right to refuse renewal of this policy" or "Renewable at
					 the option of the insurer." Advertisements of such policies must indicate that
					 the insurer has the right to increase premium rates.
With respect to non-cancellable policies and guaranteed
					 renewable policies, the section requires a summary of the policy provisions
					 with respect to renewability must be set forth and defined where appropriate.
					 The disclosure of provisions relating to renewability requires the use of
					 language such as "non-cancellable," "non-cancellable and guaranteed renewable,"
					 or "guaranteed renewable." The use of those terms and the definitions provided
					 shall be consistent with Insurance Code Sections
					 10273 and
					 10273.3.
The Section also requires a statement of the qualifying
					 conditions which constitute limitations on the permanent nature of the
					 coverage. These customarily fall into three categories;
(1) age limits,
(2) reservation of a right to increase
				  premiums and
(3) the establishment
				  of aggregate limits. For example, "non-cancellable and guaranteed renewable"
				  does not fulfill the requirement of the section if the policy contains a
				  terminal age of 65. In such a case, a proper statement would be
				  "non-cancellable and guaranteed renewable to age 65." If a guaranteed renewable
				  policy reserves the right to increase premiums, the statement must be expanded
				  into language similar to "guaranteed renewable to age 65 but the Company
				  reserves the right to increase premium rates on a class basis." If the contract
				  contains an aggregate limit after which no further benefits are payable, the
				  above statement must be amplified with the phrase "subject to a maximum
				  aggregate amount of $50,000" or similar language. A policy may have one or more
				  than three basic limitations and an advertisement must describe each of those
				  which the policy contains. Currently over 50% of new individual policy issues
				  are guaranteed renewable, therefore, the fact that a policy is guaranteed
				  renewable shall not be exaggerated.
This rule also requires the disclosure of any modification
					 of benefits or losses covered because of age or for other reasons. Provisions
					 for reduction of benefits at stated ages must be set forth. For example, a
					 policy may contain a provision which reduces benefits 50% after age 60 although
					 it is renewable to age 65. Such a reduction would have to be set forth. Also, a
					 provision for the elimination of certain hazards at any specific ages or after
					 the policy has been in force for a specified time would have to be set
					 forth.
An advertisement for a policy which provides for step-rated
					 premium rates based upon the policy year or the insured's attained age must
					 disclose such rate increases and the times or ages at which such premiums
					 increase.
This Section requires that the qualifying conditions of
					 renewability must be disclosed in a manner which does not minimize or render
					 obscure the qualifying conditions of renewal.
1. Amendment
					 filed 11-29-74; effective thirtieth day thereafter (Register 74, No.
					 48).