760 Ind. Admin. Code 1-18-6
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.
760 IAC 1-18-6