Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.98-011 - Rule and Regulation 49 - Life and Disability Insurance Guaranty Fund Notices

Current through Register Vol. 49, No. 6, June, 2024
Section 1.
Purpose
The purpose of this Rule and Regulation ("Rule") is to implement
			 Act 444 of 1989, now codified as Ark. Code Ann. §§
								23-96-101, et
			 seq., as amended by Act 950 of 1997.
Section 2.
Authority
This Rule Is issued pursuant to the authority vested in the
			 Commissioner under Ark. Code Ann. §§
								23-61-108,
			 23-96-105(a)
			 as amended by Act 950 of 1997, and
			 25-15-203.
Section 3.
Applicability and
		  Scope
This Rule applies to every member insurer of the Arkansas Life
			 and Disability Insurance Guaranty Association as defined in Ark. Code Ann.
			 §
								23-96-104(12),
			 as amended by Act 950 of 1997.
Section
		  4.
Notices
Pursuant to Ark. Code Ann. §
								23-96-105,
			 as amended by Act 950 of 1997, the Commissioner hereby promulgates this Rule in
			 order to establish the form and content of the coverage documents to be
			 delivered to policy or contract owners.
Appendix A is to be used by each member insurer and shall be
			 given to each policy and contract owner either prior to or at the time of
			 delivery of the policy or contract. Appendix B may at the option of the member
			 insurer be given to a prospective policy or contract owner at the time of
			 solicitation and sale of a policy or contract.
Section 5.
Severability
Any section or provision of this Rule held by a court to be
			 unconstitutional or otherwise invalid will not affect the validity of any other
			 section or provision of this Rule.
Section 6.
Effective Date
This Rule shall be effective January 1, 1999, upon signature and
			 statutory filling by the Commissioner.
APPENDI X "A"
LIMITATIONS AND EXCLUSIONS UNDER THE ARKANSAS LIFE AND
			 DISABILITY INSURANCE GUARANTY ASSOCIATION ACT
Residents of this state who purchase life insurance, annuities or
			 disability's insurance should know that the insurance companies licensed in
			 this state to write these types of insurance are members of the Arkansas Life
			 and Disability Insurance Guaranty Association ("Guaranty Association"). The
			 purpose of the Guaranty Association is to assure that policy and contract
			 owners will be protected, within certain limits, in the unlikely event that a
			 member insurer becomes financially unable to meet its obligations. If this
			 should happen, the Guaranty Association will assess Its other member Insurance
			 companies for the money to pay the claims of policy owners who live in this
			 state and, In some cases, to keep coverage In force. The valuable extra
			 protection provided by the member Insurers through the Guaranty Association is
			 not unlimited, however. And, as noted In the box below, this protection is not
			 a substitute for consumers' care In selecting Insurance companies that are well
			 managed and financially stable.
DISCLAIMER
The Arkansas Life and Disability Insurance Guaranty
						Association ("Guaranty Association") may not provide coverage for this policy.
						If coverage is provided, It may be subject to substantial limitations or
						exclusions and require continued residency in this state. You should not rely
						on coverage by the Guaranty Association In purchasing an Insurance policy or
						contract.
Coverage Is NOT provided for your policy or contract or
						any portion of it that Is not guaranteed by the insurer or for which you have
						assumed the risk, such as non-guaranteed amounts held In a separate account
						under a variable life or variable annuity contract.
Insurance companies or their agents are required by law
						to provide you with this notice. However, Insurance companies and their agents
						are prohibited by law from using the existence of the Guaranty Association to
						induce you to purchase any kind of insurance policy.
The Arkansas Life and Disability Insurance Guaranty
						Association
C/o The Liquidation Division
1200 West Third Street (Third & Gross)
Little Rock, Arkansas 72201-1904
Arkansas Insurance Department
1200 West Third Street
Little Rock, Arkansas 72201-1904
The state law that provides for this safety-net is called the
			 Arkansas Life and Disability Insurance Guaranty Association Act ("Act"). Below
			 is a brief summary of the Act's coverages, exclusions and limits. This summary
			 does not cover all provisions of the Act; nor does It in any way change
			 anyone's rights or obligations under the Act or the rights or obligations of
			 the Guaranty Association.
COVERAGE
Generally, Individuals will be protected by the Guaranty
			 Association if they live In this state and hold a life, annuity or disability
			 insurance contract or policy, or if they are insured under a group insurance
			 contract Issued by a member insurer. The beneficiaries, payees or assignees of
			 policy or contract owners are protected as well, even If they live in another
			 state.
EXCLUSIONS FROM COVERAGE
However, persons owning such policies are NOT protected by the
			 Guaranty Association if:
* They are eligible for protection under the laws of another
			 state {this may occur when the Insolvent insurer was incorporated In another
			 state whose guaranty association protects insureds who live outside that
			 state);
* The insurer was not authorized to do business in this
			 state;
* Their policy or contract was issued by a nonprofit hospital or
			 medical service organization, an HMO, a fraternal benefit society, a mandatory
			 state pooling plan, a mutual assessment company or similar plan in which the
			 policy or contract owner is subject to future assessments, or by an Insurance
			 exchange.
The Guaranty Association also does NOT provide coverage
			 for:
* Any policy or contract or portion thereof which is not
			 guaranteed by the Insurer or for which the owner has assumed the risk, such as
			 non-guaranteed amounts held in a separate account under a variable life or
			 variable annuity contract;
* Any policy of reinsurance (unless an assumption certificate was
			 Issued);
* Interest rate yields that exceed an average rate;
* Dividends and voting rights and experience rating
			 credits;
* Credits given in connection with the administration of a policy
			 by a group contract holder;
* Employers' plans to the extent they are self-funded (that Is,
			 not insured by an insurance company, even if an insurance company administers
			 them);
* Unallocated annuity contracts (which give rights to group
			 contractholders, not individuals);
* Unallocated annuity contracts Issued to/in connection with
			 benefit plans protected under Federal Pension Benefit Corporation ("FPBC")
			 (whether the FPBC is yet liable or not);
* Portions of an unallocated annuity contract not owned by a
			 benefit plan or a government lottery (unless the owner is a resident) or issued
			 to a collective investment trust or similar pooled fund offered by a bank or
			 other financial institution);
* Portions of a policy or contract to the extent assessments
			 required by law for the Guaranty Association are preempted by State or Federal
			 law;
* Obligations that do not arise under the policy or contract,
			 including claims based on marketing materials or side letters, riders, or other
			 documents which do mot meet filing requirements, or claims for policy
			 misrepresentations, or extra-contractual or penalty claims;
* Contractual agreements establishing the member insurer's
			 obligations to provide book value accounting guarantees for defined
			 contribution benefit plan participants (by reference to a portfolio of assets
			 owned by a nonaffiliate benefit plan or Its trustees).
LIMITS ON AMOUNT OF COVERAGE
The Act also limits the amount the Guaranty Association Is
			 obligated to cover: The Guaranty Association cannot pay more than what the
			 insurance company would owe under a policy or contract Also, for any one
			 insured life, the Guaranty Association will pay a maximum of $300,000 - no
			 matter how many policies and contracts there were with the same company, even
			 if they provided different types of coverages. Within this overall $300,000
			 limit, the Association will not pay more than $100,000 In health insurance
			 benefits, $100,000 in present value of annuity benefits, or $100,000 in life
			 insurance death benefits or net cash surrender values - again, no matter how
			 many policies and contracts there were with the same company, and no matter how
			 many different types of coverages. There is a $1,000,000 limit with respect to
			 any contract holder for unallocated annuity benefits, irrespective of the
			 number of contracts held by the contract holder. These are limitations for
			 which the Guaranty Association is obligated before taking into account either
			 its subrogation and assignment rights or the extent to which those benefits
			 could be provided out of the assets of the impaired or insolvent
			 insurer.
APPENDIX "B"
NOTICE OF THE ARKANSAS LIFE AND DISABILITY INSURANCE
			 GUARANTY ASSOCIATION ACT
The Arkansas Life and Disability Insurance Guaranty Association
			 Act. (the "Act") provides protection, subject to certain limitations and
			 exclusions, against loss under life and' disability, (health and accident)
			 insurance policies and annuity contracts Issued by Insolvent insurers licensed
			 In this state. Some limitations and exclusions apply; some are listed
			 below.
This notice is provided to you only to make you aware of the
			 existence of the limited protection under the Act It confers no rights to any
			 policyholder or contract holder not provided under the Act. It does not change
			 or vary any exclusion or limitation contained In the Act. Specific reference
			 must be made to the Act to determine whether any particular policy or contract
			 is covered, the amount of any coverage which may be available, and applicable
			 limitations or exclusions.
Some of the limitations and exclusions are as follows:
1. The Act limits the amount the Guaranty Association Is
			 obligated to pay: The Association cannot pay more than what the Insurer would
			 owe under a policy or contract. Also, for any one insured, the Guaranty
			 Association will pay a maximum of $300,000 no matter how many policies or
			 contracts you have with the same insurer even If they provide different
			 coverages. Within this overall $300,000 limit, the Association will pay a
			 maximum of $100,000 in net cash surrender values, $100,000 in life insurance
			 death benefits, $100,000 In present value of annuities, and 5100,000 in
			 disability or health insurance benefits. There Is a $1,000,000 limit with
			 respect to any one contract holder for unallocated annuity benefits
			 irrespective of the number of participants In the plan.
2. You are not covered:
a. If you are not a resident of Arkansas at the time the order of
			 the insurer's Insolvency was issued;
b. Your insurer was not licensed in this state; or,
c. Your insurer was a self-insured plan, trust or other similar
			 entity, health maintenance organization or other entity excluded under the
			 Act
3. Obligations not specifically provided In the policy or
			 contract are not covered by the Act Examples of obligations, which are not
			 covered by the Act, Include damages or loss due to misrepresentations of policy
			 benefits, Inaccurate solicitation material, unfiled policy documents or
			 endorsements, and extra-contractual damages, penalties and similar damages or
			 claims.
4. Dividends or interest rate yields that do not meet
			 specifications described in the Act are not covered under the Act
You should not rely upon coverage under the Act when buying
			 a life or disability insurance policy or selecting an insurer, and neither
			 agents nor insurers should use the existence of the Guaranty Association to
			 induce you to purchase a product from them.
For more information relative to the Act, you may contact
The Arkansas Life and Disability
Insurance Guaranty Association
C/o The Liquidation Division
1200 West Third Street
Little Rock, AR 72201-1904
Arkansas Insurance Department
1200 West Third Street
Little Rock, AR 72201-1904