2013 -- S 0597

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LC01418

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO INSURANCE -- LONG-TERM CARE INSURANCE

     Introduced By: Senators Cote, and Cool Rumsey

     Date Introduced: March 06, 2013

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-34.2-14 of the General Laws in Chapter 27-34.2 entitled "Long-

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Term Care Insurance" is hereby amended to read as follows:

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     27-34.2-14. Standards for marketing. -- (a) Every insurer, health care services plan, or

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other entity marketing long term care insurance coverage in this state, directly or through its

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producers, shall:

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      (1) Establish marketing procedures to assure that any comparison of policies by its

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agents or other insurance producers and agent training requirements will be fair and accurate;

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      (2) Establish marketing procedures to assure excessive insurance is not sold or issued;

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      (3) Display prominently by type, stamp or other appropriate means, on the first page of

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the outline of coverage and policy the following:

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      "Notice to buyer: This policy may not cover all of the costs associated with long term

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care incurred by the buyer during the period of coverage. The buyer is advised to carefully review

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all policy limitations."

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      (4) Inquire and make every reasonable effort to identify whether a prospective applicant

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or enrollee for long term care insurance already has long term care insurance and the types and

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amounts of any insurance; and

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      (5) Every insurer or entity marketing long term care insurance shall establish auditable

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procedures for verifying compliance with this subsection.

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      (6) If the state in which the policy or certificate is to be delivered or issued for delivery

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has a senior insurance counseling program approved by the commissioner, the insurer shall, at

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solicitation, provide written notice to the prospective policyholder and certificateholder that the

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program is available and the name, address and telephone number of the program.

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      (7) For long-term care health insurance policies and certificates, use the terms

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"noncancellable" or "level premium" only when the policy or certificate conforms to section

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6A(3) of this regulation provides that the insured has the right to continue the long-term care

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insurance in force by the timely payment of premiums during which period the insurer has no

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right to unilaterally make any change in any provision of the insurance or in the premium rate.

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      (8) Provide an explanation of contingent benefit upon lapse and, if applicable, the

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additional contingent benefit upon lapse provided to policies with fixed or limited premium

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paying periods.

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      (b) In addition to the practices prohibited in chapter 29 of this title, the following acts

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and practices are prohibited:

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      (1) Twisting. - Knowingly making any misleading representation or incomplete or

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fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or

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tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow

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on or convert any insurance policy or to take out a policy of insurance with another insurer;

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      (2) High pressure tactics. - Employing any method of marketing having the effect of or

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tending to induce the purchase of insurance through force, fright, threat, whether explicit or

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implied, or undue pressure to purchase or recommend the purchase of insurance; and

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      (3) Cold lead advertising. - Making use directly or indirectly of any method of marketing

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which fails to disclose in a conspicuous manner that a purpose of the method of marketing is

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solicitation of insurance and that contact will be made by an insurance producer or insurance

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company.

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      (4) Misrepresentation of a material fact when selling or offering to sell a long-term care

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insurance policy.

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      (c) With respect to the obligations set forth in this section, the primary responsibility of

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an association as described in section 27-34.2-4(4)(ii), when endorsing or selling long term care

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insurance shall be to educate its members concerning long term care issued in general so that its

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members can make informed decisions. Associations shall provide objective information

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regarding long term care insurance policies or certificates endorsed or sold by those associations

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to ensure that members of the associations are fully informed of the benefits and limitations in the

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policies or certificates that are being endorsed or sold.

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      (d) The insurer shall file with the insurance department the following material:

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      (1) The policy and certificate;

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      (2) A corresponding outline of coverage; and

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      (3) All advertisements requested by the insurance department.

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      (e) The association shall disclose in any long term care insurance solicitation:

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      (1) The specific nature and amount of the compensation arrangements, including all fees,

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commissions, administrative fees and other forms of financial support, that the association

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receives from endorsement or sale of the policy or certificate to its members; and

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      (2) A brief description or outline of the process under which the policies and the insurer

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issuing the policies were selected.

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      (f) If the association and the insurer have interlocking directories or trustee

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arrangements, the association shall disclose that fact to its members.

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      (g) The board of directors of associations selling or endorsing long term care insurance

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policies or certificates shall review and approve the insurance policies as well as the

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compensation arrangements made with the insurer.

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      (h) The association shall also:

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      (1) At the time of the association's decision to endorse, engage the services of a person

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with expertise in long term care insurance not affiliated with the insurer to conduct an

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examination of the policies, including benefits, features, and rates and update the examination

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thereafter in the event of material change.

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      (2) Actively monitor the marketing efforts of the insurer and its insurance producers; and

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      (3) Review and approve all marketing materials or other insurance communications used

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to promote sales or sent to members regarding the policies or certificates.

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      (4) Subdivisions (h)(1), (h)(2) and (h)(3) shall not apply to qualified long-term care

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insurance contracts.

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      (i) No group long term care insurance policy or certificate may be issued to an

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association unless the insurer files with the director the information required in this section.

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      (j) The insurer shall not issue a long term care policy or certificate to an association or

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continue to market the policy or certificate unless the insurer certifies annually that the

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association has complied with the requirements set forth in this section.

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     SECTION 2. Section 27-35-3 of the General Laws in Chapter 27-35 entitled "Insurance

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Holding Company Systems" is hereby amended to read as follows:

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     27-35-3. Registration of insurers. -- (a) Registration. - Every insurer which is

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authorized to do business in this state and which is a member of an insurance holding company

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system shall register with the commissioner, except a foreign insurer subject to registration

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requirements and standards adopted by statute or regulation in the jurisdiction of its domicile

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which are substantially similar to those contained in:

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      (1) this section;

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      (2) section 27-35-4(a)(1), (b) and (d) and

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      (3) Either subdivision 27-35-4(a)(2) or a provision such as the following: Each registered

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insurer shall keep current the information required to be disclosed in its registration statement by

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reporting all material changes or additions within fifteen (15) days after the end of the month in

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which it learns of each change or addition.

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      Any insurer which is subject to registration under this section shall register fifteen (15)

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days after it becomes subject to registration, and annually thereafter by March May 1 of each year

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for the previous calendar year, unless the commissioner for good cause shown extends the time

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for registration, and then within the extended time. The commissioner may require any insurer

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authorized to do business in the state which is a member of an insurance holding company system

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and which is not subject to registration under this section to furnish a copy of the registration

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statement, the summary specified in subsection (c) of this section or other information filed by the

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insurance company with the insurance regulatory authority of domiciliary jurisdiction.

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      (b) Information and form required. - Every insurer subject to registration shall file a

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registration statement with the commissioner on a form and in a format prescribed by the NAIC,

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which shall contain the following current information:

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      (1) The capital structure, general financial condition, ownership, and management of the

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insurer and any person controlling the insurer;

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      (2) The identity and relationship of every member of the insurance holding company

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system;

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      (3) The following agreements in force and transactions currently outstanding or which

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have occurred during the last calendar year between the insurer and its affiliates:

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      (i) Loans, other investments or purchases, sales or exchanges of securities of the

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affiliates by the insurer or of the insurer by its affiliates;

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      (ii) Purchases, sales, or exchanges of assets;

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      (iii) Transactions not in the ordinary course of business;

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      (iv) Guarantees or undertakings for the benefit of an affiliate which result in an actual

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contingent exposure of the insurer's assets to liability, other than insurance contracts entered into

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in the ordinary course of the insurer's business;

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      (v) All management service contracts, service contracts and all cost sharing

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arrangements;

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      (vi) Reinsurance agreements;

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      (vii) Dividends and other distributions to shareholders; and

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      (viii) Consolidated tax allocation agreements;

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      (4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling

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affiliate, for a loan made to any member of the insurance holding company system;

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      (5) If requested by the commissioner, the insurer shall include financial statements of or

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within an insurance holding company system, including all affiliates. Financial statements may

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include, but are not limited to, annual audited financial statements filed with the U.S. Securities

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and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as amended, or the

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Securities Exchange Act of 1934, as amended. An insurer required to file financial statements

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pursuant to this paragraph may satisfy the request by providing the commissioner with the most

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recently filed parent corporation financial statements that have been filed with the SEC;

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      (6) Other matters concerning transactions between registered insurers and any affiliates

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as may be included from time to time in any registration forms adopted or approved by the

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commissioner;

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      (7) Statements that the insurer's board of directors oversees corporate governance and

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internal controls and that the insurer's officers or senior management have approved,

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implemented, and continue to maintain and monitor corporate governance and internal control

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procedures; and

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      (8) Any other information required by the commissioner by rule or regulation.

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      (c) Summary of Changes to Registration Statement. - All registration statements shall

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contain a summary outlining all items in the current registration statement representing changes

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from the prior registration statement.

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      (d) Materiality. - No information need be disclosed on the registration statement filed

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pursuant to subsection (b) of this section if that information is not material for the purposes of this

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section. Unless the commissioner by rule, regulation, or order provides otherwise, sales,

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purchases, exchanges, loans, or extensions of credit, investments or guarantees involving one-half

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of one percent (.5%) or less of an insurer's admitted assets as of the 31st day of December next

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preceding shall not be deemed material for purposes of this section.

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      (e) Reporting of Dividends to Shareholders. - Subject to subsection 27-35-4(b), each

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registered insurer shall report to the commissioner all dividends and other distributions to

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shareholders within fifteen (15) business days following the declaration thereof.

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      (f) Information of Insurers. - Any person within an insurance holding company system

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subject to registration shall be required to provide complete and accurate information to an

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insurer, where the information is reasonably necessary to enable the insurer to comply with the

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provisions of this act.

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      (g) Termination of registration. - The commissioner shall terminate the registration of

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any insurer that demonstrates that it no longer is a member of an insurance holding company

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system.

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      (h) Consolidated filing. - The commissioner may require or allow two (2) or more

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affiliated insurers subject to registration to file a consolidated registration statement.

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      (i) Alternative registration. - The commissioner may allow an insurer that is authorized

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to do business in this state and which is part of an insurance holding company system to register

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on behalf of any affiliated insurer which is required to register under subsection (a) and to file all

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information and material required to be filed under this section.

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      (j) Exemptions. - The provisions of this section shall not apply to any insurer,

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information, or transaction if and to the extent that the commissioner by rule, regulation, or order

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shall exempt from the provisions of this section.

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      (k) Disclaimer. - Any person may file with commissioner a disclaimer of affiliation with

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any authorized insurer or a disclaimer may be filed by the insurer or any member of an insurance

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holding company system. The disclaimer shall fully disclose all material relationships and bases

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for affiliation between the person and the insurer as well as the basis for disclaiming the

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affiliation.

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      A disclaimer of affiliation shall be deemed to have been granted unless the

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commissioner, within thirty (30) days following receipt of a complete disclaimer, notifies the

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filing party that the disclaimer is disallowed. In the event of disallowance, the disclaiming party

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may request an administrative hearing, which shall be granted. The disclaiming party shall be

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relieved of its duty to register under this section if approval of the disclaimer has been granted by

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the commissioner, or if the disclaimer is deemed to have been approved.

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      (l) Enterprise Risk Filing. - The ultimate controlling person of every insurer subject to

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registration shall also file an annual enterprise risk report. The report shall, to the best of the

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ultimate controlling person's knowledge and belief, identify the material risks within the

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insurance holding company system that could pose enterprise risk to the insurer. The report shall

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be filed with the lead state commissioner of the insurance holding company system as determined

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by the procedures within the financial analysis handbook adopted by the national association of

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insurance commissioners.

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      (m) Violations. - The failure to file a registration statement or any summary of the

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registration statement or enterprise risk filing required by this section within the time specified for

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the filing shall be a violation of this section.

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     SECTION 3. This act shall take effect upon passage.

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LC01418

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE -- LONG-TERM CARE INSURANCE

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     This act would amend the registration filing date for insurance companies governed by

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the applicable provisions of the general laws and would provide that long-term health care

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insurance policies and certificates include the terms "noncancellable" or "level premium" only

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under certain circumstances.

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     This act would take effect upon passage.

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LC01418

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