Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Division 01 - Legal Division › Rule 054.01.20-008 - Final Amended Rule 49 "Life and Annuity Insurance Guaranty Association Notices"

Current through Register Vol. 49, No. 6, June, 2024
Section 1.
Authority
This Rule is issued pursuant to the authority vested in the
				Commissioner under Ark. Code Ann. §§
									25-15-201,
et
				seq.,
23-61-108,
				23-96-107(c)(2)
				and other provisions of the Arkansas Insurance Code.
Section 2.
Purpose and Scope
The purpose of this Rule is to implement and provide guidance
				for compliance with the Arkansas Life and Health Insurance Guaranty Association
				Act, Ark. Code Ann. §§
									23-96-101,
et
				seq.
This Rule applies to every member insurer of the Arkansas Life
				and Health Insurance Guaranty Association as defined in Ark. Code Ann. §
									23-96-104(13).
Section 3.
Notices
Pursuant to Ark. Code Ann. §§
									23-96-105 and
				23-96-107(c), 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 or contract owner prior to or at the time of delivery of
				the policy or contract. At the option of the member insurer, Appendix B may be
				given to a prospective policy or contract owner at the time of solicitation and
				sale of a policy or contract.
Section
			 4.
Severability
Any section or provision of this Rule held by a court of
				competent jurisdiction to be unconstitutional or otherwise invalid will not
				affect the validity of any other section or provision of this Rule.
Section 5.
Effective
			 Date
This Rule shall be effective upon the date of the
				Commissioner's signature.
APPENDIX "A"
LIMITATIONS AND EXCLUSIONS UNDER THE
ARKANSAS LIFE AND HEALTH INSURANCE
GUARANTY ASSOCIATION ACT
Residents of this state who purchase life insurance, annuities
				or health insurance should know that the insurance companies licensed in this
				state to write these types of insurance are members of the Arkansas Life and
				Health 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 and contract owners who live in this state
				and, in some cases, to keep coverage in force. Please note that the valuable
				extra protection provided by the member insurers through the Guaranty
				Association is limited. This protection is not a substitute for a consumers'
				careful consideration in selecting insurance companies that are well managed
				and financially stable.
DISCLAIMER
The Arkansas Life and Health Insurance Guaranty
						  Association ("Guaranty Association") provides coverage of claims under some
						  types of policies or contracts if the insurer or health maintenance
						  organization becomes impaired or insolvent. COVERAGE MAY NOT BE AVAILABLE FOR
						  YOUR POLICY. Even if coverage is provided, there are significant limits and
						  exclusions. Coverage is always conditioned on residence in the State of
						  Arkansas. Other conditions may also preclude coverage.
The Guaranty Association will respond to any questions
						  you may have which are not answered by this document. Your insurer or health
						  maintenance organization and agent are prohibited by law from using the
						  existence of the association or its coverage to sell you an insurance policy or
						  health maintenance organization coverage.
You should not rely on availability of coverage under
						  the Guaranty Association when selecting an insurer or health maintenance
						  organization.
The Arkansas Life and Health Insurance Guaranty
						  Association
c/o The Liquidation Division
1023 West Capitol Avenue
Little Rock, Arkansas 72201
Arkansas Insurance Department
1 Commerce Way, Suite 102
Little Rock, Arkansas 72202
The state law that provides for this safety net is called the
				Arkansas Life and Health Insurance Guaranty Association Act ("Act"), which is
				codified at Ark. Code Ann. §§
									23-96-101,
et seq.
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 any person'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 health
				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;
				or
* Their policy or contract was issued by a hospital or medical
				service organization, 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, voting rights, and experience rating
				credits;
* Credits given in connection with the administration of a
				policy by a group contract holder;
* Employer 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 or in connection with
				benefit plans protected under the Federal Pension Benefit Corporation ("FPBC"),
				regardless of whether the FPBC is yet liable;
* 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 not meet filing requirements, claims for policy
				misrepresentations, and extra-contractual or penalty claims; or
* 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 trustee(s).
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 in life
				insurance death benefits without regard to the number of policies and contracts
				there were with the same company, even if they provided different types of
				coverages. The Guaranty Association will pay a maximum of $500,000 in health
				benefits, provided that coverage for disability insurance benefits and
				long-term care insurance benefits shall not exceed $300,000. The Guaranty
				Association will pay $300,000 in present value of annuity benefits, including
				net cash surrender and net cash withdrawal values. There is a $1,000,000 limit
				with respect to any contract holder for unallocated annuity benefits. These are
				limitations under which the Guaranty Association is obligated to operate prior
				to considering either its subrogation and assignment rights or the extent to
				which those benefits could be provided from assets of the impaired or insolvent
				insurer.
APPENDIX "B"
NOTICE OF THE ARKANSAS LIFE AND HEALTH INSURANCE GUARANTY
				ASSOCIATION ACT
The Arkansas Life and Health Insurance Guaranty Association Act
				(the "Act") provides protection, subject to certain limitations and exclusions,
				against loss under life and health insurance policies and annuity contracts
				issued by insolvent insurers licensed in this state.
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 Guaranty Association cannot pay more than what the
				insurance company would owe under a policy, contract, or certificate. Also, for
				any one insured life, the Guaranty Association will pay a maximum of $300,000
				in life insurance death benefits without regard to the number of policies and
				contracts there were with the same company, even if they provided different
				types of coverages. The Guaranty Association will pay a maximum of $500,000 in
				health benefits, provided that coverage for disability insurance benefits and
				long-term care insurance benefits shall not exceed $300,000. The Guaranty
				Association will pay $300,000 in present value of annuity benefits, including
				net cash surrender and net cash withdrawal values. There is a $1,000,000 limit
				with respect to any contract holder for unallocated annuity benefits. These are
				limitations under which the Guaranty Association is obligated to operate prior
				to considering either its subrogation and assignment rights or the extent to
				which those benefits could be provided from assets of the impaired or insolvent
				insurer.
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 or organization 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 health insurance policy, annuity contract, or when selecting
				an insurer. 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 Health
Insurance Guaranty Association
c/o The Liquidation Division
1023 West Capitol, Suite 2
Little Rock, AR 72201
Arkansas Insurance Department
1 Commerce Way, Suite 102
Little Rock, AR 72202