Wisconsin Administrative Code › Office of the Commissioner of Insurance › Chapter Ins 2 - Life Insurance › Section Ins 2.02

Current through June 24, 2024
Before issuing a new or renewal license to transact
				  insurance in this state, the commissioner of insurance is required by ss.
				  201.045 and 201.34, Stats., to be satisfied that the methods and practices of
				  the insurer adequately safeguard the interests of its policyholders and the
				  people of this state. Section 206.13, Stats., provides for the issuance of
				  participating life insurance policies by stock companies.
The nature of participating policies is that the premium
				  charge includes an additional loading which acts as the safety factor to
				  provide for various contingencies that may develop during the term of the
				  policy. The additional premium thus collected is then returned to the
				  policyholder in the form of dividends. Section 201.36, Stats., provides for the
				  annual apportionment and return of such sums after making provision for
				  required reserves and liabilities.
In respect to those policies in which the policyholder is
				  entitled to share in the surplus, s. 206.36, Stats., provides for the payment
				  of authorized dividends on capital stock from the surplus accumulations of the
				  participating business of the company. Section 201.54, Stats., authorizes
				  distribution of savings, earnings, or surplus to any class of policyholder by
				  filing a schedule thereof with the commissioner in those cases where such a
				  distribution was not specified in the policy. In such cases the commissioner
				  has an obligation to be satisfied that the methods and practices of the company
				  are such as to safeguard the interest of the policyholders.
The principal portion of the earnings on participating
				  policies is due to the additional loading in the premium charged for the
				  policy. It would be a misrepresentation of the participating provisions of any
				  such policy or contract if a substantial portion of the profits accruing from
				  such policies or contracts were not to be returned to the policyholders.
				  Sections 206.51(1) and 207.04(1) (a), Stats., prohibit the misrepresentation of
				  the dividends or share in surplus to be received on any policy.
It is evident that a stock insurance corporation should not
				  have complete freedom in determining the amounts that are to be removed from
				  the funds accumulated or belonging to the participating class of policyholders
				  and used for the benefit of stockholders. A reasonable limitation in the
				  amounts that shall inure to the benefit of stockholders is necessary for the
				  fair and equitable treatment of stock life insurance corporations,
				  stockholders, and policyholders. Section 216 (6) of the New York insurance
				  statutes provides for a limitation comparable to that stated in the rule. The
				  record in that state indicates such a limitation to be reasonable and workable
				  and we believe it to be a proper safeguard of the interests of the people of
				  this state. All present tense statutory references herein are to 1973
				  Stats.