Md. Code Regs. 31.15.01.09

Current through Register Vol. 51, No. 21, October 18, 2024

Section 31.15.01.09 - Misleading Sales Practices

A. An insurer, agent, or broker may not within this State:

(1) Make any statement or reference relating to the growth of the life insurance industry or to the tax status of life insurers in connection with any solicitation of an application for life insurance or annuity contract in a context which could reasonably be understood to interest a prospect in the purchase of shares of stock in an insurer rather than in the purchase of a life insurance policy or annuity contract;

(2) Make any statement which reasonably gives rise to the inference that an insured or a prospective insured, by virtue of purchasing a policy of life insurance or an annuity contract, will enjoy a status common to a stockholder or will acquire a stock ownership interest in the insurer (nothing in this section is intended to prohibit the practice of pointing out those aspects in which the status of a policyholder in a mutual life insurer is similar to that of a stockholder in a stock life insurer);

(3) Make any reference to or statement concerning an insurer's "investment department", "insured investment department", or similar terminology in such a manner as to imply that the policy was sold or issued by the investment department of the life insurer;

(4) Make any statement or reference which would reasonably tend to imply that by purchasing a policy, the purchaser or prospective purchaser will become a member of a limited group of persons who may receive special advantages, or favored treatment in the payment of dividends unless the benefits are specifically provided in the insurance contract (this clause has no relation or applicability to policies under which insured persons of one class of risk may receive dividends at a higher rate than persons of another class of risk);

(5) State or imply that a particular kind of policy is available for only a limited time or that only a limited number of a particular kind of policy will be offered for sale or that only a limited number of persons, or a limited class of persons, will be eligible to buy a particular kind of policy, unless the limitation is related to recognized underwriting practices and can be verified by the underwriting practices of the insurer;

(6) State or imply that policyholders who are said to act as centers of influence or as an advisory board for an insurer will share, because of so acting, in the insurer's surplus earnings in some manner not available to other policyholders who are otherwise in the same class;

(7) Describe or refer to premium payments in language which states that the payment is a deposit unless:

(a) The payment establishes a debtor-creditor relationship between the life insurer and the policyholder and a showing is made as to when and how the deposit may be withdrawn,

(b) The term is used in conjunction with the word premium in such a manner as to indicate clearly the true character of the payment, or

(c) The term is used in connection with pension trust or deposit administration plans;

(8) Provide any illustration or projection of future dividends on a policy unless the illustration or projection:

(a) Is based upon the experience currently used by the insurer for dividends or upon a scale adopted by the insurer, and

(b) Clearly indicates that the dividends shown are not guaranteed;

(9) Use the words "dividends", "cash dividends", "surplus", or similar phrases in such a manner as to state or imply that the payment of dividends is guaranteed or certain to occur;

(10) State or imply that a purchaser of a policy will share in a stated percentage or portion of the earnings of the insurer (nothing in this section is intended to prohibit a representation that a holder of a participating life insurance policy or annuity contract will participate in the share of the divisible surplus, if any, apportioned to the policy or contract by the insurer);

(11) Make any statement or implication that projected dividends under a participating policy will be or can be sufficient at any time to assure the receipt of benefits, such as a paid-up policy, without the further payment of premiums, unless the statement is accompanied by an adequate explanation as to:

(a) What benefits or coverage would be provided at that time, and

(b) The conditions under which this would occur;

(12) State that the insured is guaranteed certain benefits if the policy is allowed to lapse without making an adequate explanation of the nonforfeiture benefits;

(13) Describe a life insurance policy or annuity contract or premium payments therefore in terms of "units of participation" unless accompanied by other language clearly indicating the reference to a life insurance policy or annuity contract or to premium payments, as the case may be;

(14) Include in sales kits and prepared sales presentations proposed answers, to be used in response to a prospect's questions as to whether life insurance policies or annuity contracts are being sold, which are designed to avoid a clear and unequivocal statement that life insurance or annuities are the subject matter of the solicitation;

(15) In connection with the proposed sale of a life insurance policy or annuity contract or guaranteed endowment benefits, display in any manner to a prospective policyholder any sales material which includes monetary illustrations showing dollar amounts unless the material clearly identifies the source and nature of the dollar amounts illustrated and the subject to which the amounts pertain;

(16) Make any general statement that insurers make a profit as a result of policy lapses or surrenders;

(17) Make unfair or misleading comparisons to the past experience of other life insurers as a means of projecting possible experience of the soliciting insurer when those comparisons are designed to enhance the characteristics of the policy being sold by confining the comparisons to insurers having favorable experience with that type of policy without a fair disclosure of other insurers which have had unfavorable experience with that type of policy;

(18) Represent guaranteed annual endowment benefits as earnings on premiums invested, or represent that a guaranteed annual endowment benefit in a policy is anything other than a guaranteed benefit for which a premium is being paid by the policyholder;

(19) State that a policy contains certain features which are not found in other life insurance policies or annuity contracts, unless that is true;

(20) Represent an option to purchase insurance in the future in such a manner that the policyholder might reasonably infer that he is purchasing term insurance or some other form of life insurance that would result in a payment to the beneficiary in the event of the death of the policyholder; or

(21) Make any reference to a policy of life insurance or an annuity contract in such a manner as to misrepresent the true nature of the policy or contract.

B. The above listing of proscribed acts is not intended to be exhaustive. Other acts, not listed above but otherwise unlawful, will not be condoned.

Md. Code Regs. 31.15.01.09