Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.09-003 - Rule 63 - Preneed Insurance Replacement and Prepaid Funeral Benefits Contract Cancellation Requirements

Current through Register Vol. 49, No. 6, June, 2024
Section
		  1.
Authority
This Rule is issued based upon the authority granted the Arkansas
			 Insurance Commissioner ("Commissioner") under Ark. Code Ann. §§
								23-61-108,
			 23-66-307(c)(2)
			 and the Arkansas Administrative Procedures Act, §§
								25-15-201, et
			 seq., for those sections governing the replacement of preneed insurance. For
			 those sections in this Rule which establish standards related to cancellation
			 of prepaid funeral benefits contracts, this Rule is issued based upon the
			 authority granted the Commissioner under Ark. Code Ann. §
								23-40-108(d).
Section 2.
Scope
Sections Four (4), Five (5), Six (6), Seven (7), and Eight (8) of
			 this Rule apply to insurers and insurance producers involved in the replacement
			 of preneed insurance as defined in Section Four (4) in this Rule. Sections Four
			 (4) and Sections Seven (7) through Fourteen (14) of this Rule apply to all
			 persons engaged in the business of selling prepaid funeral benefits contracts
			 under Ark. Code Ann. §§
								23-40-101,
			 et seq., as amended.
Section
		  3.
Purpose
The purpose of this Rule is to increase written notice and
			 disclosure to insureds who are replacing life insurance policies, certificates
			 of life insurance coverage, or annuities that fund prepaid funeral benefits
			 contracts. The Rule also provides standards for cancellations or transfers of
			 prepaid funeral benefits contracts governed by Ark. Code Ann. §
								23-40-122,
			 the funding mechanisms for such contracts, and revises forms for cancellations
			 or transfers and releases of trust funds under Ark. Code Ann. §
								23-40-114.
Section 4.
Definitions
For the purposes of this Rule:
A. "Cancellation" means the termination or
		  transfer of a prepaid funeral benefits contract by the purchaser, prior to the
		  seller's performance of the contract, as a result of action by the purchaser or
		  his or her agents or assigns including, but not limited to, notifying the
		  seller of the purchaser's intent to cancel the contract, transferring or
		  attempting to transfer the contract or funding mechanism to a substitute
		  provider, changing the beneficiary of a life insurance policy, certificate, or
		  annuity contract used to fund a prepaid funeral benefits contract from the
		  seller to a substitute provider or person or changing an assignment of rights
		  to the proceeds from the seller to a substitute provider or person.
B. "Contract beneficiary" means any natural
		  person designated in a prepaid funeral benefits contract upon whose death
		  funeral services or funeral merchandise, or both, shall be performed, provided,
		  or delivered.
C. "Existing insurer"
		  means the insurance company whose policy or certificate or annuity contract is
		  or will be changed or affected in a manner described within the definition of
		  "replacement."
D. "Existing policy
		  or contract" means an individual life insurance policy (policy), group life
		  insurance policy (or certificate evidencing coverage under a group life
		  insurance policy), or annuity contract (contract) in force, including a policy
		  or certificate under a binding or conditional receipt or a policy, certificate,
		  or annuity contract that is within an unconditional refund period.
E. "Financed purchase" means the purchase of
		  a new insurance policy, certificate, or annuity contract involving the actual
		  or intended use of funds obtained by the withdrawal or surrender of, or by
		  borrowing from, values of an existing policy, certificate, or annuity contract
		  to pay all or part of any premium due on the new policy, certificate, or
		  annuity contract. "Financed purchase" within the meaning of this rule does not
		  constitute an extension of consumer credit for purposes of state or federal
		  law.
F. "Preneed insurance" means
		  any life insurance policy, certificate, or annuity contract which funds a
		  prepaid funeral benefits contract as defined in Ark. Code Ann. §
								23-40-103(10).
G. "Prepaid funeral benefits contract" means
		  a contract as defined in Ark. Code Ann. §
								23-40-103(10).
H. "Producer" means agents, brokers and any
		  other person who has received qualification for a licensure to sell, solicit,
		  or negotiate life insurance under Ark. Code Ann. § 23-64-5 07(a)(1) or
		  permitted to sell funeral expense insurance under Rule 30 of the Arkansas
		  Insurance Department.
I.
		  "Replacement" means a transaction in which a new policy or certificate or
		  annuity contract is to be purchased, and it is known or should be known to the
		  proposing producer, or to the proposing insurer if there is no producer, that
		  by reason of the transaction, an existing policy or certificate or annuity
		  contract has been or is to be:
(1) Lapsed,
		  forfeited, surrendered or partially surrendered, assigned to the replacing
		  insurer or otherwise terminated;
(2) Converted to reduced paid-up insurance,
		  continued as extended term insurance, or otherwise reduced in value by the use
		  of nonforfeiture benefits or other policy values;
(3) Amended so as to effect either a
		  reduction in benefits or in the term for which coverage would otherwise remain
		  in force or for which benefits would be paid;
(4) Reissued with any reduction in cash
		  value; or
(5) Used in a financed
		  purchase.
J. "Replacing
		  insurer" means the insurance company that issues or proposes to issue a new
		  policy or contract that replaces an existing policy or contract or is a
		  financed purchase.
K. "Seller"
		  means the organization selling prepaid funeral benefits or owning any interest
		  in any contract for prepaid funeral benefits.