Md. Code Regs. 31.15.01.05

Current through Register Vol. 51, No. 12, June 14, 2024

Section 31.15.01.05 - Charter or Founders' Policies

A. A charter policy or founders' policy is that form of life insurance policy or annuity contract usually issued by a newly organized insurer, which is sold on the basis that its availability will be limited to a specific predetermined number of units of a fixed dollar amount and which generally provides that the policyholder shall participate in the earnings resulting from either the participating policies or the nonparticipating policies sold by the insurer, or perhaps both. The prospective purchaser may be led to believe that he will receive a special advantage in any future distribution of earnings, profits, or dividends not available to those persons holding other types of policies issued by the insurer.

B. The sale of charter policies and founders' policies represents an unfair method of competition. They purport to offer certain benefits which are not authorized by statute and are without reasonable expectation of achievement. These policies misrepresent the responsibility and obligation of an insurer for equitable distribution of dividends. Therefore, a charter policy or founders' policy may not be approved for use and a charter policy or founders' policy heretofore approved may not be issued or delivered in this State on or after September 1, 1970.