Indiana Administrative Code › Title 760 - DEPARTMENT OF INSURANCE › Article 1 - GENERAL PROVISIONS › Rule 18 - Accident and Sickness Insurance-Advertising › Section 18-6 - Disclosure of renewal, cancellation and termination provisions

Current through July 10, 2024
Authority: IC 27-1-3-7
Affected: IC 27-4-1-4
Sec. 6.
NECESSITY FOR DISCLOSING POLICY PROVISIONS RELATING TO
				  RENEWABILITY, CANCELLABILITY AND TERMINATION. An advertisement which refers to
				  renewability, cancellability or termination of a policy, or which refers to a
				  policy benefit, or which states or illustrates time or age in connection with
				  eligibility of applicants or continuation of the policy, 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 manner which shall not minimize or render obscure the
				  qualifying conditions.
Interpretation of Section B 3
[this
				  section]
Section B 3
[this section]
is divided into
				  two parts. The first part defines the type of advertisement that is subject to
				  the restrictions imposed upon such advertisement by the second part.
The first part of Section B 3
[this section]
reads as follows:
"An advertisement which refers to renewability,
				  cancellability or termination of policy, or which refers to a policy benefit,
				  or which states or illustrates time or age in connection with eligibility of
				  applicants or continuation of the policy ... "
Three distinct categories of advertisements are
				  described:
In the first category is that type of advertisement "which
				  refers to renewability, cancellability or termination of a policy." This
				  language was inserted in the Section to prevent the advertisement of a
				  non-cancellable or guaranteed renewable insurance policy in such a manner as to
				  over-state the non-cancellable or guaranteed renewable feature. For example,
				  suppose a non-cancellable and guaranteed renewable to age 65, at a level
				  premium, loss-of-time policy was advertised briefly in the following manner: "X
				  company sells a non-cancellable loss-of-time benefits policy." In this simple
				  advertisement the insurer has chosen to discuss renewability or as the rule
				  puts it "refers to renewability", etc. It is, therefore, bound by the
				  provisions of Section B 3
[this section]
and the language of
				  its advertisement would have to read something like: "X company sells a
				  non-cancellable and guaranteed renewable to age 65 loss-of-time benefits
				  policy." Statements like "This policy safeguards your renewal" or "Yours for as
				  long as you want it" are further examples of advertisements which refer to
				  renewability so as to make them subject to the limitations imposed by Section B
				  3
[this section]
. It is important to note that the restriction
				  applies only to advertisements of specific policies.
In the second category is that type of advertisement "which
				  refers to a policy benefit." In determining what is meant by the phrase "refers
				  to a policy benefit," we must keep in mind the "Basic Principles of
				  Interpretation." It will be recalled that these principles divide
				  advertisements into three classes: "offers to contract," "invitations to
				  inquire" and "institutional advertisements."
"Offers to contract" invariably describe benefits in
				  considerable detail because their purpose is to convince the reader that he
				  should purchase the policy described. This type of advertisement is always
				  subject to the requirements of Section B 3
[this
				  section]
.
"Invitations to Inquire" are designed to attract the reader's
				  interest in the policy so that he will inquire as to further details and
				  information. Often these are brief advertisements used in television and radio
				  commercials, pre-call letters, newspapers or magazines. The limitations imposed
				  by Section B 3
[this section]
should apply to this type of
				  advertisement to the same extent that the limitations imposed by Section B 2(b)
[
				  760
				  IAC 1-18-5(b) ]
were found to
				  apply to them. In other words, the language of the rule "refers to a policy
				  benefit" should be interpreted to mean that an "invitation to inquire" which
				  discusses dollar, time or cost extensively is subject to the limitations
				  imposed by Section B 3
[this section]
. If, however, the
				  mention of dollar, time or cost is such that the advertisement withholds some
				  facts without which no one could reasonably decide to buy the policies
				  advertised, the advertisement is not subject to the limitations imposed by
				  Section B 3
[this section]
. This is an application to Section
				  B 3
[this section]
of the principle established in the
				  interpretation of Section B 2(b)
[
				  760
				  IAC 1-18-5(b) ]
. The third
				  class outlined in the Basic Principles of Interpretation is the institutional
				  type advertisement. It is unlikely that this type of advertisement will ever be
				  subject to Section B 3
[this section]
unless it "refers to
				  renewability," etc. of a specific policy. As was discussed in an earlier
				  paragraph, it should be remembered that every advertisement, regardless of its
				  class, is always subject to Section B 3
[this section]
if it
				  refers "to renewability, cancellability or termination of a policy." In the
				  third category is that type of advertisement "which states or illustrates time
				  or age in connection with eligibility of applicants or continuation of the
				  policy."
There are advertisements which do not "refer to
				  renewability", etc. nor "refer to a policy benefit" but nevertheless are
				  subject to Section B 3
[this section]
.
These are advertisements which imply permanency by a
				  discussion of age. For example, an advertisement of a cancellable policy may
				  say: "Coverage-Ages 18 to 70", or "does not terminate at any specific age-no
				  reduction in benefits as you grow older." Although technically truthful when
				  standing alone, the above type of statement in an advertisement may imply
				  permanency unless properly qualified. It is not the intent of the rules,
				  however, to bring all statements about eligibility age under Section B 3
[this section]
but only those statements which have the
				  tendency and capacity to mislead as to the permanence and continuability of the
				  protection. Simple statements disclosing the company's underwriting policy with
				  respect to age such as "issued to people between the ages of 55 and 65" do not
				  bring the advertisement under Section B 3
[this section]
. It
				  is essential for the advertiser to use words in describing the issue ages which
				  cannot be construed to imply that the ages refer to renewability. One example
				  has been given. Another approach would be to say something like, "For sale to
				  persons between 18 and 59 years of age."
This completes a determination of the type of advertisement
				  subject to Section B 3
[this section]
. The remainder of
				  Section B 3
[this section]
relates to compliance and reads as
				  follows:
"*** 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."
The word "provisions" used above does not contemplate that
				  the policy language must be used. Rather, the rule requires a summary of the
				  pertinent information with respect to renewability, etc. This word was used
				  merely to distinguish it from the word "conditions" used later in the
				  paragraph.
In applying Section B 3
[this section]
, the
				  advertiser of a cancellable or optional-renewal policy is concerned only with
				  the requirement that a summary of policy renewal provisions be set forth and is
				  not concerned with that part of the rule which deals with "qualifying
				  conditions." Advertisements of cancellable policies that come under Section B 3
[this section]
must state that the contract in question is
				  cancellable or renewable at the option of the company, as the case may be. For
				  example, a policy which is cancellable should be advertised in a manner similar
				  to, "This policy can be cancelled by the company at any time." Policies which
				  are renewable at the company's option should be advertised in a manner similar
				  to, "Renewable at the option of the Company," or "The company has the right to
				  refuse renewal of this policy" or "The acceptance of a renewal premium is
				  optional with the company."
With respect to the non-cancellable or guaranteed renewable
				  type policy, the rule requires two things, first that a summary of the policy
				  provisions with respect to renewability be set forth and, second, that anything
				  that modifies the permanent character of the policy be set forth. The
				  disclosure of provisions relating to renewability, etc., will require the use
				  of language such as "non-cancellable", "guaranteed renewable", "non-cancellable
				  and guaranteed renewable" or "renewable at the option of the insured."
In addition to the requirement for disclosure of "provisions
				  relating to renewability", etc., the rule 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 change premiums and (3) the establishment of
				  aggregate limits. For example, "non-cancellable and guaranteed renewable" does
				  not fulfill the requirement of Section B 3
[this section]
. If
				  the policy contains a terminal insurance age of 65 a proper statement would be,
				  "Non-cancellable and guaranteed renewable to age 65". An advertisement is not
				  required to distinguish among terminations (a) on the insured's birthday, (b)
				  on the policy anniversary nearest or following such date, (c) on the premium
				  date following such date, or (d) any similar method of defining the termination
				  date. If a right to change premiums is reserved, the statement must be
				  amplified to language similar to, "guaranteed renewable to age 65 but the
				  company reserves the right to change 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
				  maximum dollar amounts payable by the company as set out in the policy", or
				  similar language. It should be borne in mind that one policy may have one or
				  more of the three basic limitations. The advertisement must show those which
				  the policy contains.
In addition to the above basic requirements, the rule
				  necessitates a disclosure of "*** any modification of benefits, losses covered
				  or premiums because of age or for other reasons ***". Because of the context of
				  the section as a whole, this must be interpreted to mean only "modification of
				  benefits", etc. which detract from the permanent nature of the coverage being
				  offered. In other words, the rule is not a repetition of Section B 2(b)
[
				  760
				  IAC 1-18-5(b) ]
which
				  requires the setting forth of certain limitations, exceptions and reductions
				  when an advertisement describes benefits extensively. Rather, Section B 3
[this section]
, under certain circumstances, requires only the
				  description of those limitations which directly affect the permanent nature of
				  the policy. For example, a provision for modification of benefits or increase
				  of premium on account of change of occupation does not affect the permanent
				  nature of the policy and, therefore, is not required to be disclosed by Section
				  B 3
[this section]
. Another example of a modification of
				  benefits which does not affect the permanent nature of the coverage is a
				  terminal reduction, i.e., a provision for the termination of benefit payments
				  at or about the terminal age (65 for example). On the other hand, provisions
				  for reduction of benefits at stated ages, other than terminal reductions, would
				  have to be set forth because such a reduction does affect the permanent nature
				  of the coverage. For example, a policy may contain a provision which reduces
				  benefits 50% after age 50 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 affects the permanent nature of the coverage and would have to
				  be set forth. In this same category is the policy which provides for a
				  stepped-up premium periodically. This, too, affects the permanency of coverage
				  and would have to be set forth.
The foregoing is related to the type of advertisements
				  subject to Section B 3
[this section]
and what must be
				  disclosed. The remainder of this interpretation relates to how the qualifying
				  conditions must be disclosed. The language of the section reads:
"*** in a manner which shall not minimize or render obscure
				  the qualifying conditions." The qualifying conditions should be set forth with
				  the language describing renewability. For example, "Non-cancellable and
				  guaranteed renewable to age 65." In this example, "to age 65" is properly
				  stated with the words "non-cancellable and guaranteed renewable."
It should be mentioned that when Section B 3
[this
				  section]
requires that an advertisement state the terminal age of a
				  permanent type policy, the statement of the age limit in the advertisement does
				  not of itself bring the advertisement under Section B 2(b)
[
				  760
				  IAC 1-18-5(b) ]
.
In an advertisement of a group plan, subject to Section B 3
[this section]
, it is not necessary to describe the terms of
				  the policy concerning cancellability or non-renewability but the certificate
				  holder must be advised therein that during the continuance of the contract his
				  benefits are contingent upon his continued membership in the group.