HOUSE BILL No. 5535


     February 4, 1998, Introduced by Reps. Gubow and Llewellyn and referred to the Committee on Insurance.


        A bill to amend 1956 PA 218, entitled

   "The insurance code of 1956,"

   by amending section 4038 (MCL 500.4038), as added by 1993 PA

   349.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 1         Sec. 4038.  (1) As used in this section, "policy cost

 2    factors" means those amounts that affect the price per thousand

 3    of life insurance coverage or other benefits.  They include

 4    interest, mortality, expense charges, and fees, including any

 5    surrender or withdrawal charges, but not persistency

 6    assumptions.

 7         (2) Unless a statement of policy information is provided

 8    pursuant to subsection (3), for initial disclosure in connection

 9    with any advertising, solicitation, or negotiation of a universal

10    life insurance policy all of the following are required:


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 1         (a) Any statement of policy cost factors or benefits shall

 2    contain all of the following:

 3         (i) The corresponding guaranteed policy cost factors or ben-

 4    efits, clearly identified.

 5         (ii) A statement explaining the nonguaranteed nature of any

 6    current interest rates, charges, or other fees applied to the

 7    policy, including the insurer's rights to alter any of these

 8    factors.

 9         (iii) Any limitation on the crediting of interest, including

10    identification of those portions of the policy to which a speci-

11    fied interest rate shall be credited.

12         (b) Any illustration of the policy value shall be accom-

13    panied by the corresponding net cash surrender value.

14         (c) Any statement regarding the crediting of a specific cur-

15    rent interest rate shall also contain the frequency and timing by

16    which that rate is determined.

17         (d) If any statement refers to the policy being

18    interest-indexed, the index shall be described.  In addition, a

19    description shall be given of the frequency and timing of deter-

20    mining the interest rate and of any adjustments made to the index

21    in arriving at the interest rate credited under the policy.

22         (e) Any illustrated benefits based upon nonguaranteed inter-

23    est, mortality, or expense factors shall be accompanied by a

24    statement indicating that these benefits are not guaranteed.

25         (f) If the guaranteed cost factors or initial policy cost

26    factor assumptions would result in policy values becoming

27    exhausted  prior to  BEFORE the policy's maturity date, that fact



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 1    shall be disclosed, including notice that coverage will terminate

 2    under  such  THOSE circumstances.

 3         (3) At the time the agent takes an application for a policy,

 4    except as provided in subsection (4), the agent shall furnish to

 5    the applicant a statement of policy information for the applicant

 6    in a format approved by the commissioner.  The illustration of

 7    policy premium, death benefit, and cash value shall be shown for

 8    AN INTEREST RATE NO HIGHER THAN the current interest rate actu-

 9    ally being paid on  existing  CURRENTLY ISSUED policies  in

10     force  and for the interest rate guaranteed in the policy.   No

11     interest  INTEREST rates  other  HIGHER than these  may  SHALL

12    NOT be illustrated.  The commissioner shall issue guidelines for

13    the statement of policy information.

14         (4) If the policy information for the applicant is not fur-

15    nished at the time of application, it shall be delivered within

16    15 working days after the application is taken, but at least 5

17    days before delivery of the policy.

18         (5) If the policy is delivered sooner than 5 days after the

19    policy information for the applicant, the free-look period shall

20    be extended to 15 days.  If the statement of policy information

21    for applicant is not delivered at the time of application, the

22    disclosure shall be accompanied by a statement that it is deliv-

23    ered for the express purpose of allowing comparison with other

24    policies.

25         (6) For direct response solicitation methods, the statement

26    of policy information for the applicant in compliance with the

27    guidelines may be furnished at the time of delivery of the



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 1    policy,  so long as  IF the purchaser is given an unconditional

 2    refund provision of at least 10 days.




















































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