California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 10.1 - Investment Annuities › Section 2522.8 - Filing and Approval of Policy Forms

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Since an investment annuity policy, the
				  custodian account agreement and other related documents are complex, and since
				  the annuity benefits vary from year to year based upon the premium payable from
				  the segregated account which will reflect the investment performance of the
				  assets in the segregated custodian account, it is in the public interest to
				  require the filing and approval of investment annuity policy forms delivered or
				  issued for delivery in this State and also the filing and approval of all
				  documents whether attached to or used in conjunction with the policy.
(1) Investment annuity policy forms, as used
				  in this paragraph and the preceding subsection, mean any individual policy or
				  group policy, any application form and any documents, rider or endorsement
				  attached to and made a part of the policies or used in conjunction with the
				  policies, including the custodian account agreement form, the group
				  certificate, the group enrollment card or form and the form or forms used to
				  direct the investment of account assets. No such form shall be delivered or
				  issued for delivery in this State, after the effective date of this Article,
				  unless and until the policy form and any other documents described in this
				  paragraph have been filed with and approved in writing by the
				  Commissioner.
(2) While for the
				  purpose of the insurance laws an investment annuity is not a variable annuity,
				  the fees for approval of such policy forms shall be the same as the fees set
				  forth in Section
				  2201(10),
				  California Administrative Code, Title 10, Chapter 5, Subchapter 2, whether it
				  is a group or an individual policy. In determining the applicable charge the
				  Commissioner will consider all of the sections of Subchapter 2. The provisions
				  of Insurance Code Section
				  12957 shall
				  be applicable to withdrawal of approval of such investment annuity policy
				  forms.
(3) Investment annuity
				  policy forms shall contain provisions which comply with the following
				  requirements:
(A) Group policies may be
				  issued to employers or an association of employers to insure the employees of
				  the employer(s) only, and shall provide that in the event the group
				  policyholder terminates the group policy, the annuitant has the right to obtain
				  an individual policy on terms not less favorable than those of the group
				  policy. Group policies shall not contain any type of an experience rating
				  provision or dividend provision. The approval of a group policy by the
				  Commissioner for issuance to groups other than an employer or an association of
				  employers will be on an instant case filing basis only.
(B) The policy shall provide that, in the
				  event a prescribed premium is not received either because of a breach of the
				  custodian's obligations under the custodian agreement or because of loss in the
				  account other than loss from depreciation in the investment value, the insurer
				  shall not be relieved of its obligation to make annuity payments
				  thereunder.
(C) Neither the
				  custodian account agreement nor the annuity policy shall impose a penalty on
				  the annuitant for failure or delay of the custodian to pay to the insurer any
				  premiums or taxes due the insurer, except the insurer may defer the payment of
				  annuity benefits or other benefits for a period not to exceed sixty (60) days
				  following receipt of such premium or tax payment, at which time all delayed
				  annuity payments shall be made.
(D)
				  All policy forms shall specify that the forms shall be construed according to
				  and be governed by the laws and regulations of the state where the policy is
				  delivered. When the policy or an application attached to the individual policy
				  clearly states the actual state of delivery of the policy, the requirement of
				  the preceding sentence may be complied with by a reference to the documents
				  being construed according to and governed by the laws and regulations of the
				  state where the policy is delivered.
(E) An investment annuity policy shall be
				  either a Single Purchase Investment Annuity Policy or a Recurring Purchase
				  Investment Annuity Policy. Single purchase policies shall have a minimum single
				  initial annuity purchase contribution of not less than ten thousand dollars
				  ($10,000.00), and subsequent optional annuity purchase contributions, if any,
				  shall not be less than one thousand dollars ($1,000.00). The insurer may, in
				  the policy, set forth the maximum amounts of permissible additional purchase
				  contributions. Recurring purchase policies shall have anticipated minimum
				  purchase contributions of not less than twelve hundred dollars ($1,200.00) per
				  year, payable at such specified frequencies within each year as permitted by
				  the policy.
(F) The insurer may
				  issue recurring purchase annuities of less than twelve hundred dollars
				  ($1,200.00) per year on a payroll deduction or reduction basis or an employer
				  contribution basis, if the insurer files with the Commissioner, in addition to
				  the information otherwise required, a justification of such lower contribution
				  levels, including that the issuance of such annuities will not adversely affect
				  the solvency or operations of the insurer, explaining the relevant
				  characteristics of the market to be serviced, the need for the lower
				  contribution level, and any other information which the Commissioner may
				  require. Such approvals, if granted by the Commissioner, will be granted on an
				  instant case basis only for the employees of the specified employer.
(G) Every individual investment annuity
				  policy shall have printed on the application furnished to the applicant a
				  notice stating, in substance, that, at any time within ten (10) days after the
				  signing of the application, the applicant may request cancellation of the
				  application by delivering or mailing notice to that effect to the insurer or to
				  the life insurance agent through whom the policy was purchased, and that all
				  annuity purchase contributions paid shall be returned to the applicant. Neither
				  the insurer nor the custodian shall be required to comply with any investment
				  instructions during such ten (10) day period, and any such annuity purchase
				  contributions which are received may remain unprocessed during such ten (10)
				  day period, unless such ten (10) day period to request cancellation is
				  specifically and separately waived in writing on the application by the
				  applicant.
(H) A clear and
				  prominent statement shall appear on the first page of the policy and the group
				  certificate and clearly and prominently in the application stating:
1. That the policy is an investment annuity
				  policy; and
2. That the annuity
				  benefits payable will vary at established intervals and are based upon the
				  premiums payable from the segregated account which will reflect the net
				  investment performance of the assets in the segregated custodian
				  account.
(I) The policy
				  shall contain a provision which clearly specifies and defines the assumed
				  investment increment factor to be used in computing the dollar amount of
				  investment annuity benefits or other contractual payments or value thereunder,
				  and a provision which shall guarantee that neither the expenses of the insurer
				  nor the mortality experience of the insurer shall adversely affect such dollar
				  amounts. "Expenses," as used herein, may exclude some or all taxes, as
				  stipulated in the policy.
(J) The
				  policy shall contain a provision which provides that in computing the dollar
				  amount of investment annuity benefits or other contractual payments or values
				  under an investment annuity policy, the assumed investment increment rate
				  established by the insurer shall not exceed 6% per annum. A higher rate or
				  lower rate may be selected by the policyowner, subject to the approval of the
				  insurer.
(K) The policy shall
				  contain a table of the premiums payable and the annuity benefits provided
				  during the lifetime of the annuitant and, if the policy or annuity continues
				  after the death of the annuitant, the premiums payable, if any, and the annuity
				  benefits provided. Such table shall specify the net assumed investment
				  increment rate used by the insurer. In the event the policyowner selects an
				  assumed investment increment rate higher or lower than the rate stated in the
				  policy, an appropriate premium and annuity schedule, based upon the rate
				  selected, shall be issued by the insurer as an amendment to the policy and
				  furnished to the policyowner and to the annuitant if the annuitant is a person
				  other than the policyowner.
(L) The
				  policy and the group certificate shall contain a provision stating that annuity
				  benefits are based upon premiums paid from the segregated custodian
				  account.
(M) The policy shall
				  contain a provision that the policyowner, or the policyowner's chosen
				  investment manager, and not the insurer, shall direct the custodian as to the
				  investment of the assets in the account from time to time during the time the
				  annuity policy remains in force.
(N) In the event a policy provides any
				  penalty for a default in the payment of annuity purchase contributions or of
				  premiums from the account, the following non-forfeiture provisions shall be
				  included in the policy giving the policyowner the right to correct such
				  default.
1. A provision that there shall be a
				  period of grace of one (1) month within which any payment may be made and
				  during which period of grace the policy shall continue in force. The policy
				  shall include a statement of the basis for determining the date as of which any
				  such payment received during the period of grace shall be applied to produce
				  the values, if any, under the policy and arising therefrom.
2. A provision providing that at any time
				  within two (2) years from the date of default in making payments during the
				  life of the annuitant under a recurring purchase contract, unless the policy
				  has been surrendered and the surrender value has been paid, the policy may be
				  reinstated upon payment of such overdue payments, and of any indebtedness to
				  the insurer on the policy, including interest on such indebtedness at a rate
				  not to exceed 6%. The policy shall include a statement of the basis for
				  determining the date as of which the amount to cover such overdue payments and
				  indebtedness shall be applied to produce the values under the policy and
				  arising therefrom. In lieu of a reinstatement provision, the policy may contain
				  another provision more favorable to the policyowner and annuitant.
3. A provision specifying the options
				  available in the event of default in annuity purchase contributions or premium
				  payments. Such provision may include an option to request either a partial or a
				  complete surrender of the policy for account market value, less a surrender
				  charge to the insurer. Such a provision may also include an option to receive a
				  paid-up annuity if the policy has not been surrendered. The amount of such
				  paid-up annuity may be subject to a minimum established by the insurer and
				  shall be determined by applying the account market value at the annuity
				  commencement date. The minimum partial cash surrender may be a reasonable
				  amount of the market value of the segregated account of the annuitant, and the
				  policy may contain other reasonable restrictions if the market value of the
				  segregated account is less than five thousand dollars
				  ($5,000.00).
(O) The
				  policy shall contain a provision that it is incontestable by the insurer after
				  the policy has been in force for two (2) years during the lifetime of the
				  annuitant.
(P) The policy shall
				  contain a provision or provisions clearly stating the premiums charged on
				  annuity purchase contributions, the premiums charged on the account market
				  value and the calculation of any other premiums or charges made by the insurer
				  to provide benefits under the policy.
(Q) The policy shall contain in addition to
				  the other provisions required by this Article, but not necessarily limited to,
				  the following appropriate provisions relating to: Entire Contract; Beneficiary
				  Designation; Ownership; Assignment; Misstatement of Age or Sex; Proof of Death;
				  Proof of Survival and Identity, and Facility of Payment.
(R) Subject to other provisions of this
				  Article the policy shall contain a provision for the partial or the complete
				  surrender of the policy prior to the commencement of life contingency annuity
				  benefits.
(S) Each group
				  certificate shall contain in addition to other group certificate provisions
				  required by this Article, but not necessarily limited to, the following:
1. The name and home office address of the
				  insurer;
2. Identification of the
				  master policy;
3. A description of
				  the coverages and benefits offered thereunder together with any exceptions,
				  limitations, and restrictions;
4.
				  Appropriate provisions with respect to assignment and beneficiary designations,
				  incontestability and conversion;
5.
				  Provisions with respect to the right to terminations, withdrawal and cash
				  surrender benefits, if any, of the certificateholders;
6. Optional annuity date provisions, if any,
				  and
7. Settlement
				  options.
(T) A group
				  investment annuity policy shall not contain any provision which permits or
				  provides in any manner whatsoever for any reimbursement to the group
				  policyholder or certificateholder of the expenses of administration or any
				  other form of compensation, directly or indirectly, from the insurer. This
				  provision shall not prohibit the payment of commission to a life agent who may
				  be a policyholder or certificateholder.
(U)
1. If
				  the policyowner is other than the annuitant, the policy shall state (i) whether
				  the policyowner or the annuitant shall select the investments, and (ii) whether
				  the policyowner, the annuitant, or both, may make annuity purchase
				  contributions under the policy.
2.
				  All custodian reports shall be furnished to the person who has the right to
				  direct the investments in the account.
3. In the event the policy is a group policy,
				  the group policyholder shall not exercise the right of selection of investments
				  unless the group policyholder makes a contribution to the segregated custodian
				  account.