South Carolina Code of Regulations
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Current through State Register Volume 37, Issue 9, effective September 27, 2013

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CHAPTER 69.

DEPARTMENT OF INSURANCE

(Statutory Authority: 1976 Code Sections 1-23-10 et seq., 1-23-110 et seq., 34-29-10 et seq., 34-31-10 et seq., 37-4-101 et seq., 38-1-20(34), 38-3-60, 38-3-110 et seq., 38-5-80, 38-9-180, 38-23-10 et seq., 38-33-10 et seq., 38-33-200, 38-38-550, 38-39-10 et seq., 38-43-10 to 38-43-80, 38-43-100, 38-43-106, 38-43-110, 38-45-50, 38-47-10 et seq., 38-47-40, 38-49-10 et seq., 38-50-90, 38-55-50, 38-57-20 et seq., 38-63-10, 38-65-10, 38-69-10, 38-71-730, 38-73-330, 38-73-730, 38-73-735, 38-73-760, 38-77-530, 38-78-110 1975 Act No. 306)

69-1. Adjustment of Claims Under Unusual Circumstances.

1. Licensed Adjusters in South Carolina are authorized to adjust claims for unlicensed companies under the following circumstances:

(a) Where the insured has an accident in South Carolina but is not a resident, being in a status of a transient.

(b) Where the insured is a new resident in the State and has an unexpired policy of an unlicensed company purchased before he moved into the State.

2. The law provides the conditions under which a Non-Resident Adjuster may be licensed. In the event of a catastrophe where there are insufficient Licensed Adjusters in South Carolina to handle claims expeditiously, Non-Resident Adjusters will be permitted to enter the State to handle the adjustments arising out of the catastrophe without being required to be licensed in South Carolina, provided that the Adjuster exhibits evidence of an Adjuster's License in his home state and remains in the State only for the period that is necessary to assist in the adjustments.

3. An unusual circumstance or catastrophe exists when, due to a specific, infrequent, and sudden natural or manmade disaster or phenomenon, there have arisen losses to property in South Carolina that are covered by insurance, and the losses are so numerous and severe that resolution of claims related to such covered property losses will not occur expeditiously without the authorization of emergency adjusters by the Department due to the magnitude of the catastrophic damage.

4. The Department will determine and announce when an emergency or catastrophe exists and also will determine and announce the expiration of the period of emergency or catastrophe.

HISTORY: Amended by State Register Volume 25, Issue No. 6, eff June 22, 2001.

69-3. Definitions.

1. Except as may be otherwise set forth by the Statutes of this State, the following words and phrases, whenever and wherever they appear in matters under the cognizance of this Commission, shall have the meaning ascribed herein:

Accepting insurer--The Company that agrees to insure the risk.

Acquisition cost--That portion of premium, or part of a rate, representing the costs of securing lines of insurance.

Adjustor--A person who determines the extent of insured losses and assists in settling, or attempts to settle claims, usually representing the insurer.

Admitted assets--Those assets of an insurer which conform to the regulations of the South Carolina Insurance Commission.

Advisory organization--An organization that formulates policy and principles without the authority to apply them.

Affiliate--A corporation of which a majority of the capital stock is owned or controlled by any or all of the stockholders, directors or officers of another corporation, who also own or control a majority of the stock of such other corporation.

Agent--As defined in Section 38-43-10 of the S. C. Code of Laws, 1976.

Alien insurer--An insurer formed under the laws of a country other than the United States of America, its States, Commonwealths, Territories or insular possessions.

All risks--A term commonly used in insurance to denote the coverage of damage or loss of property from all hazards except depreciation, deterioration and wear and tear.

Ancillary state--Any state other than a domiciliary state.

Appraisal--Estimate of value made by qualified, impartial and disinterested persons, duly appointed for such purpose.

Articles--Articles of incorporation and all amendments thereto.

Assessment--An apportionment or call made on the entire membership of a mutual company or association for definite contributions or payment of money on account of losses sustained by particular members.

Assigned risk--The protection of a specific insurance risk that has been directed to a given insurer by qualified authority.

Assuming insurer--The company, party to a reinsurance transaction, which assumes insurance, annuity and endowment risks.

Authorized insurer--An insurer duly licensed to do business in this State.

Average rate--A composite unit measuring the various perils of more than a single subject of insurance and usually at separate locations, expressed in dollars and cents per $100.00 of protection.

Basic rate--The foundation unit expressed in monetary amounts to which fractional amounts are added to accurately develop the correct final rate for the insurance exposure.

Blanket coverage--Insurance which contemplates that the risk is shifting, fluctuating or varying, and which covers a class of property or persons rather than any particular thing or persons.

Board of directors--Synonymous with board of trustees, and means the body having power and responsibility for the management and control of a corporation, fraternal benefit association or other association, by whatever name called, and the advisory body having similar powers in reference to a reciprocal insurer or Lloyds underwriters.

Broker--As defined in Section 38-45-10, S. C. Code of Laws, 1976.

Brokerage--Any arrangement or agreement whereby any agent can be held to be the agent of the insured and not of the insurer, or whereby an agent is permitted to solicit or place any class of insurance other than those authorized to be issued in South Carolina by such agent's insurer.

Bureau--An organization designed to render specific services in regard to insurance.

Capital--The aggregate amount paid in on the shares of capital stock of a corporation issued and outstanding, and equal to the par or declared value of the stock issued.

Capital stock--The aggregate amount of the par or declared value of all shares of capital stock.

Ceding company--The Company, party to a reinsurance transaction, whose insurance, annuity and endowment risks or obligations are assumed.

Certificate of insurance--A memorandum copy, complete or abbreviated, of an insurance contract.

Charter--The basic instrument, by whatever name called, prescribing the powers, purposes and organization of a corporation.

Chief Insurance Commissioner--The chief officer of the Insurance Department, appointed by the Insurance Commission.

Co-insurance--A stipulation or requirement that the insured undertakes to be his own insurer to the extent that he fails to maintain insurance of a given percentage of the value of the property against loss or damage.

Commission--That part of the premium paid to the agent as compensation for his services.

Corporation--Except as otherwise indicated, "corporation" means a corporation formed or existing under the laws of this State.

Debit--A defined geographical area assigned to a particular agent, usually for the writing of industrial insurance.

Debit agent--One who collects weekly, bi-weekly or monthly premiums from a number of policyholders, generally small policies, in a designated territory, and generally industrial insurance.

Decreasing interest insurance--Same as decreasing balance insurance. Insurance written on a risk, generally in connection with a loan, wherein the coverage decreases commensurate with the decrease of obligation.

Department--The Insurance Department of this State; also, the Insurance Commission of this State.

Deputy--The first, or other deputy chief insurance commissioner of this State, so appointed by the Chief Insurance Commissioner.

Deviation--A departure, either in rate or coverage, from the prevailing standards.

Dividends--The excess of premiums collected, over costs of insurance, returned or credited to the policyholder.

Domestic insurer--An insurer formed under the laws of this State.

Domiciliary state--The State in which an insurer is incorporated or organized, or in the case of an insurer incorporated or organized in a foreign country, the State in which such insurer, having become authorized to do business in such State, has designated as its domiciliary State and/or State of entry into the United States.

Earned premium--That portion of the gross premium absorbed, at a given time, by costs of administration, risk, and profit.

Fire insurance and Allied lines--Insurance providing indemnity to the insured in case of loss or damage occasioned by fire and such other forms of property insurance as are undertaken by fire insurance companies in addition to marine and inland marine insurance.

Foreign domesticated insurer--A foreign insurer licensed to do business in this State.

Foreign insurer--An insurer, not an alien insurer, formed under laws other than the laws of this State.

Fraternal Benefit Association--As defined in Section 38-37-10, S. C. Code of Laws, 1976.

General Assets--All property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons and as to such specifically encumbered property the term includes such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders, or all policyholders and creditors in the United States, shall be deemed general assets.

Gross Premium--The whole amount of the money consideration, given at fixed intervals during the lifetime of a policy of insurance, in exchange for the insurance set forth in the policy.

Group Insurance--A form of personal insurance which is issued to members of an organized body qualified, and not specifically prohibited, to be an insured, in which individual insurances are placed upon the persons of each member of that group, but in which the group acts as an entity in the payment of premiums, inception of the contract, and the like.

Holding company--Has the same meaning as parent corporation. (See "subsidiary".)

Incorporator--A person, natural or corporate, who signs the articles of incorporation.

Insurance--A contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.

a. Accident Insurance--Insurance against loss or damage due to unexpected injury to the person insured and resulting in disability or death.

b. Casualty Insurance--Those forms of indemnity providing for payment for loss or damage, resulting from accidental or some unanticipated contingency, except fire and the elements.

c. Credit Insurance--An indemnity to merchants or traders against the insolvency of customers to whom they extend credit and under the Small Loan Act, various insurances on the lives, property and health of borrowers to the extent of the amount loaned and unrepaid.

d. Fidelity Insurance--Insurance against loss from the want of honesty, integrity or fidelity of employees or others in a position of trust.

e. Fire Insurance--A contract of indemnity against loss by fire and lightning.

f. Group Insurance--See specific heading.

g. Health Insurance--A contract of indemnity against expense and loss of time resulting from disease.

h. Industrial Insurance--A plan of insurance under which policies of insurance are issued in consideration of weekly, bi-weekly or monthly payments.

i. Inland Marine Insurance--A contract of indemnity against loss suffered in connection with inland land or water transportation or with communications equipment.

j. Liability Insurance--Insurance against loss or liability on account of bodily or property injury sustained by others.

k. Life Insurance--A contract whereby in consideration of the payment of premiums the insurer engages to pay a certain sum upon the death of the insured.

l. Marine Insurance--A contract of indemnity against loss from marine perils.

m. Reciprocal Insurance--See specific heading.

n. Surety Insurance--An insurance contract whereby one, for a consideration, agrees to indemnify another against losses arising from the want of integrity, fidelity or solvency of employees and persons holding positions of trust, or against insolvency of losses from nonpayments of notes and other evidence of indebtedness, or against other breaches of contract. As generally used, this insurance is synonymous with guaranty insurance.

Insurance rate--The mathematical figure per $100 of insurance which determines the premium.

Insurer--Any legal entity, engaged or attempting to engage in the business of making insurance or surety contracts.

Level insurance--Insurance in which the amount of insurance benefit does not decrease during its term.

License--A certificate of authority, issued by a qualified public agency, to act within prescribed limits.

Lien-endorsement coverage--An endorsement added to an automobile physical damage policy indemnifying a lending agency against loss resulting from prior existing liens.

Lodge--As set forth in Section 38-37-20, S. C. Code of Laws, 1976.

Member--One who holds a contract of insurance or is insured in an insurance company other than a stock corporation.

Minimum surplus--The minimum amount by which the admitted assets of an insurer, over and above the capital stock, must exceed its liabilities, in order to be licensed to do business in this State.

Multiple line insurance--A policy of insurance insuring more than one class of risk.

Net premium--That portion of the gross premium remaining after adjustments of debits, credits and dividends.

Non-Recording insurance--An insurance contract protecting a lender from loss occasioned by his failure to record a mortgage given as security for the loan made.

Officer--Any person charged with active management and control, in an executive capacity, of the affairs of a corporation.

Parent corporation--See "subsidiary".

Person--Any legal entity.

Policy--A contract of insurance.

Policyholder--Holder of a contract of insurance.

Preferred claim--Any claim with respect to which the law of a State or of the United States accords priority of payment from the general assets of the insurer.

Premium--Money or any other thing of value paid or given in consideration of a contract of insurance.

Premium reserves--A fund set aside for the payment of future benefits under a policy.

Reciprocal insurance exchange--A group or association of persons cooperating through an attorney-in-fact for the purpose of insuring themselves and each other.

Reinsurance--The assumption of a portion of the risk on a policy by another insurer.

Renewal license--A license which becomes effective immediately following the termination of a license previously issued and in force, and which differs from such previous license only in respect to the date of expiration.

Return premium--Return to the policyholder of the unearned portion of a premium upon cancellation, or adjustment in rate, of a policy.

Shareholder--A holder of record of shares of stock in a corporation.

Short rate--A penalty rate, using percentages slightly higher than would result from pro-rata calculations.

Single interest insurance--Insurance in which the benefit amount decreases during its term in accordance with predetermined scale.

Specific insurance--A contract of insurance which definitively describes the thing insured and the amount of insurance applying thereto.

Subsidiary--A corporation of which the majority of the capital stock is owned or controlled by another corporation, called the "parent corporation".

Surplus to policyholders--The excess of total admitted assets over the liabilities of an insurer which shall be the sum of all capital and surplus accounts minus any impairment thereof.

Unauthorized insurer--Any insurer not authorized to do business in this State.

Unearned premium--That portion of the gross premium, at a given time, that is unearned or unexhausted by the earned premium.

Unearned premium reserve--Funds, equal to the unearned premium, set aside for contingencies.

69-4. Life, Accident and Health Insurance--Reserve Tabulations.

Each and every domestic insurance company having life and/or accident and health insurance in force shall submit, with the annual statement required by this Department, a copy of the valuation tabulation used in the determination of its reported life and accident and health reserve. If the tabulation is a summarization, each company shall be prepared to support each and every phase of the summary by detailed cards, listings, or some form of acceptable running inventory. This detailed information shall be maintained until verification of the valuation has been made by a representative or representatives of this Department.

Each company shall take the necessary steps to acquire and maintain, in its home office, the necessary reserve tables for proper calculation of reserves on all contracts in force as of the applicable valuation date. If the insurance is of such a nature that no appropriate mortality or morbidity tables have been published, the company may use methods and approximations warranted by company experience and approved by the Chief Insurance Commissioner.

69-5. Policy Approvals.

On January 1, 1962, and thereafter, every industrial life insurance policy or contract submitted to this Department for approval by a domestic insurance company, must be accompanied by the appropriate net premium and terminal reserve, except in those instances where the applicable net premiums and terminal reserves have been published.

Every ordinary life policy or contract must be accompanied by the appropriate net premium, terminal and mean reserves, except in those instances when such premiums and reserves have been otherwise published.

If such premiums and reserves are not submitted because of publication, the name of the publication together with a statement that the company possesses and maintains a copy of the publication must be submitted in writing to this Department.

No approval of any industrial life policy or contract or any ordinary life policy or contract will be given except upon compliance with this Regulation.

69-5.1. Minimum Standards for the Readability of Commonly Purchased Insurance Policies.

This Regulation establishes minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

A. Purpose: The purpose of this Regulation is to establish minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

This Regulation is not intended to increase the risk assumed by insurance companies or other entities subject to this Act or to supersede their obligation to comply with the substance of other insurance legislation applicable to such forms of insurance policies. This Regulation is not intended to impede flexibility and innovation in the development of policy forms or content or to lead to the standardization of policy forms or content.

A policy is a legal document. Revision of the policy to make it more readable must not lead to its devaluation as a legal document. The policy must comply with all statutory and regulatory requirements.

B. Definitions--As used in this Regulation:

(1) "Commissioner" means the Chief Insurance Commissioner of this State.

(2) "Policy" or "Policy Forms" means any policy, certificate, rider, amendment, endorsement, contract, plan or agreement of personal insurance, and any renewal thereof including homeowners, dwelling fire, automobile, accident and health, life and all other forms of personal insurance delivered or issued for delivery in this State by any company subject to this Regulation; any certificate, contract or policy issued by a fraternal benefit society, and any certificate issued pursuant to a group insurance policy delivered or issued for delivery in this State. The Commissioner may add other policies as he deems advisable.

(3) "Company" or "Insurer" means any life and health, accident, property and casualty, title or marine insurance company, reciprocal, county mutuals, fraternal benefit society, nonprofit health services corporation, nonprofit hospital service corporation, nonprofit medical service corporation, prepaid health plan, dental care plan, vision care plan, pharmaceutical plan, health maintenance organization, and all similar type organizations.

C. Applicability:

(1) This Regulation shall apply to all policies delivered or issued for delivery in this State by any insurer on or after the date such forms must be approved under this Regulation, but nothing in this Regulation shall apply to:

(a) Any policy which is a security subject to Federal jurisdiction;

(b) Any group policy; however, this shall not exempt any certificate issued pursuant to a group policy delivered or issued for delivery in this State or mass marketed certificates subject to approval by this Department;

(c) Any group annuity contract which serves as a funding vehicle for pension, profit-sharing, or deferred compensation plans;

(d) Commercial, fleet vehicle and incidental personal coverages which are a part of a commercial policy;

(e) Any life, accident and health form used in connection with, as a conversion from, as an addition to, in exchange for or issued pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the date such forms must be approved under this Regulation;

(f) Renewal of a life or accident and health policy delivered or issued for delivery prior to the date such forms must be approved under this Regulation;

(g) Surety or Fidelity bonds.

D. Minimum Policy Readability Standards:

(1) In addition to any other requirements of law, no policy forms of personal insurance except as stated in Section C, shall be delivered or issued for delivery in this State on or after the dates such forms must be approved under this Regulation unless:

(a) The text achieves a minimum score of 40 on the Flesch Reading Ease Test or an equivalent score on any other comparable test as provided in subsection (3) of this Section;

(b) It is printed, except for specification pages, schedules and tables, in not less than ten point type, one point leaded;

DRAFTING NOTE: This subsection is not intended to include minor instructions concerning the preparation of an application which becomes part of the policy within the type size requirement (e. g., "Last Name," "RFD or Box Number.")

(c) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or riders; and

(d) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words or if the policy is printed on more than 3 pages.

(2) For the purposes of this Section, a Flesch Reading Ease Test Score shall be measured by the following method:

(a) For a policy containing 10,000 words or less of text, the entire policy shall be analyzed. For a policy containing more than 10,000 words, the readability of two 100 word samples per page may be analyzed instead of the entire form. The samples shall be separated by at least 20 printed lines.

(b) The number of words and sentences in the text shall be counted and the total number of words divided by the total number of sentences. The figure obtained shall be multiplied by a factor of 1.015.

(c) The total number of syllables shall be counted and divided by the total number of words. The figure obtained shall be multiplied by a factor of 84.6.

(d) The sum of the figures computed under (b) and (c) subtracted from 206.835 equals the Flesch Reading Ease Test Score for the policy form.

(e) For purposes of this Section, the following procedures shall be used:

(1) A contraction, hyphenated word, numbers and letters when separated by spaces shall be counted as one word;

(2) A unit of words ending with a period, semicolon, or colon, but excluding headings and captions shall be counted as a sentence;

(3) A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. Where the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.

(f) The term "text" as used in this Section shall include all printed matter except the following:

(1) The name and address of the insurer; the name, number or title of the policy; the table of contents or index; captions and subcaptions; specification pages, schedules or tables;

(2) Any policy language which is drafted to conform to the requirements of any federal law, regulation or agency interpretation; any policy language required by any collectively bargained agreement; any medical terminology; any words which are defined in the policy; and any policy language required by law or regulation; provided, however, the insurer identifies the language or terminology excepted by this subsection and certifies, in writing that the language or terminology is entitled to be excepted by this subsection.

(3) Any other reading test may be approved by the Commissioner for use as an alternative to the Flesch Reading Ease Test if it is comparable in result to the Flesch Reading Ease Test.

DRAFTING NOTE: The Flesch Reading Ease Test (Rudolph Flesch, The Art of Readable Writing, 1949, as revised 1974) is the basic test set forth in this Regulation.

(4) Filings subject to this Section shall be accompanied by a certificate signed by an officer of the insurer or filing organization stating that it meets the minimum reading ease score on the test used or stating that the score is lower than the minimum required but should be approved in accordance with Section F of this Regulation. To confirm the accuracy of any certification, the Commissioner may require the submission of further information to verify the certification in question. If it is necessary to alter coverage, such change must be noted and explained upon submission for filing.

(5) At the option of the insurer, riders, endorsements, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.

E. Powers of the Commissioner: The Commissioner may approve a policy which does not meet the minimum Flesch Reading Ease Test Score required herein whenever, in his sole discretion, he finds such approval:

(1) will provide a more accurate reflection of the readability of a policy form;

(2) is warranted by the nature of a particular policy, or

(3) is warranted by certain policy language which is drafted to conform to the requirements of any State law, Regulation or Agency interpretation.

F. Approval of Forms: A policy meeting the requirements of Section (D)(1) shall be approvable notwithstanding the provisions of any other law which specify the content of policies, if the policy provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.

G. Effective Dates:

(1) Except as provided in Section C, no policy shall be delivered or issued for delivery in this State on or after two years next following final promulgation of this Regulation unless approved by the Commissioner or permitted to be issued under this Regulation. Any policy which has been approved or permitted to be issued prior to and which meets the standards set by this Regulation need not be refiled for approval, but may continue to be lawfully delivered or issued for delivery in this State upon the filing with the Commissioner of a list of such policies identified by form number, edition date, previous approval date accompanied by a certificate as to each such policy in the manner provided in Section D(4).

(2) In addition to the above requirements the effective date for all property and casualty policies shall be as follows:

(a) Renewal policies or continuous policies shall be reissued using forms in compliance with this Regulation on the first anniversary or billing date which occurs after a two year period following the final promulgation of this Regulation.

(b) The insurer shall provide, in the conversion to readable policies, generally and in overall effect, coverage which is substantially equal to or superior to that afforded by policies which they replace.

(c) If there are substantive differences in coverages, the insurer must explain in writing to the insured such differences.

(3) The Commissioner shall reserve the right to withdraw approval of all existing policies of commonly purchased insurance that do not comply with the provisions of this Regulation. The Commissioner may, in his sole discretion, extend the dates in Section G(1).

H. Penalties: Attention is directed to the penalties found in Section 5 of Act 550, "Any insurer who violates the provisions of this Act shall be deemed guilty of misdemeanor and upon conviction shall be fined not more than one thousand dollars for each offense and the Commissioner may revoke the license of any insurer who violates the provisions of this Act."

HISTORY: Added by State Register Volume 3, eff July 13, 1979.

69-6. Brokers' Licenses.

1. No person shall be licensed as an insurance broker to represent citizens of this State for the placing of insurance unless such person, at the time the initial or renewal application is made for an insurance broker's license, possesses a valid, current insurance agent's license for that line of business for which the brokerage authority is intended to apply, and has been so licensed as such an insurance agent for not less than two (2) years.

2. Every broker's license issued shall be restricted to those lines of business for which specific application is made and must be supported by record of prior issuance of agent's license for such lines of business. The limits of authority of all broker's licenses shall be plainly set forth on the face of the license.

69-7. Minimum Reserve Standards for Individual and Group Accident and Health Insurance Contracts.

Section I. Introduction.

A. Scope.

1. These standards apply to all individual and group accident and health insurance coverages except credit insurance.

2. When an insurer determines that adequacy of its accident and health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that insurer.

3. With respect to any block of contracts, or with respect to an insurer's accident and health business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

4. Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's accident and health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium, and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards.

5. Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

B. Categories of Reserves.

1. The following sections set forth minimum standards for three categories of accident and health insurance reserves:

a. Section II. Claim Reserves.

b. Section III. Premium Reserves.

c. Section IV. Contract Reserves.

2. Adequacy of an insurer's accident and health insurance reserves is to be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of the three categories separately.

C. Appendices.

1. These standards contain two appendices which are an integral part of the standards, and one additional "supplementary" appendix which is not part of the standards as such, but is included for explanatory and illustrative purposes only.

2. Appendix A. Specific minimum standards with respect to morbidity, mortality, and interest, which apply to claim reserves according to year of incurral and to contract reserves according to year of issue.

3. Appendix B. Glossary of Technical Terms Used.

4. Appendix C. (Supplementary) Waiver of Premium Reserves.

Section II. Claim Reserves.

A. General.

1. Claim reserves are required for all incurred but unpaid claims on all accident and health insurance policies.

2. Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.

3. All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.

B. Minimum Standards for Claim Reserves.

1. Disability Income.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity. Minimum standards with respect to morbidity are those specified in Appendix A; except that, at the option of the insurer: (i) For claims with a duration from date of disablement of less than two years, reserves may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities. (ii) For group disability income claims with a duration from the date of disablement of more than two years but less than five years, reserves may, with the approval of the Director of Insurance, be based upon the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis must include:

(I) An analysis of the credibility of the experience;

(II) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(III) A description and quantification of the margins to be included;

(IV) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(V) A copy of the approval of the proposed plan of modification by the commissioner of the state of domicile; and

(VI) Any other information deemed necessary by the Director of Insurance.

DRAFTING NOTE: For experience to be considered credible for purposes of (ii), the company should be able to provide claim termination patterns over no more than six (6) years reflecting at least 5,000 claim terminations during the third through fifth claim durations on reasonably similar applicable policy forms.

For claim reserves to reflect "sound values" and/or reasonable margins, reserve tables based on credible experience should be adjusted regularly to maintain reasonable margins. Demonstrations may be required by the commissioner of the state of domicile based on published literature (e.g. Goldman, TSA XLII).

c. Duration of Disablement. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

2. All Other Benefits.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity or Other Contingency. The reserve should be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

C. Claim Reserve Methods Generally.

1. Any generally accepted or reasonable actuarial method or combination of methods may be used to estimate all claim liabilities.

2. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

Section III. Premium Reserves.

A. General.

1. Unearned premium reserves are required for all contracts with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

2. If premiums due and unpaid are carried as an asset, such premiums must be treated as premiums in force, subject to unearned premium reserve determination. The value of unpaid commissions, premium taxes, and the cost of collection associated with due and unpaid premiums must be carried as an offsetting liability.

3. The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum.

B. Minimum Standards for Unearned Premium Reserves.

1. The minimum unearned premium reserve with respect to any contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with such premium determined on the basis of:

a. The valuation net modal premium on the contract reserve basis applying to the contract; or

b. The gross modal premium for the contract if no contract reserve applies.

2. However, in no event may the sum of the unearned premium and contract reserves for all contracts of the insurer subject to contract reserve requirements be less than the gross modal unearned premium reserve on all such contracts, as of the date of valuation. Such reserve shall never be less than the expected claims for the period beyond the valuation date represented by such unearned premium reserve to the extent not provided for elsewhere.

C. Premium Reserve Methods Generally.

1. The insurer may employ suitable approximations and estimates including, but not limited to groupings, averages, and aggregate estimation, in computing premium reserves.

2. Such approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.

Section IV. Contract Reserves.

A. General.

1. Contract reserves are required, unless otherwise specified in Section IV.A.2. for:

a. all individual and group contracts with which level premiums are used; or

b. all individual and group contracts with respect to which, due to the gross premium pricing structure at issue, the value of the future benefits at any time exceeds the value of any appropriate future valuation net premiums at that time. The values specified in this subparagraph b. shall be determined on the basis specified in Section IV.B.

2. Contracts not requiring a contract reserve are:

a. contracts which cannot be continued after one year from issue; or

b. contracts already in force on the effective date of these standards for which no contract reserve was required under the immediately preceding standards.

3. The contract reserve is in addition to claim reserves and premium reserves.

4. The methods and procedures for contract reserves should be consistent with those for claim reserves for any contract, or else appropriate adjustment must be made when necessary to assure provision for the aggregate liability. The definition of the date of incurral must be the same in both determinations.

B. Minimum Standards for Contract Reserves--Basis.

1. Morbidity or Other Contingency.

a. Minimum standards with respect to morbidity are those set forth in Appendix A. Valuation net premiums used under each contract must have a structure consistent with the gross premium structure at issue of the contract as this relates to advancing age of insured, contract duration, and period for which gross premiums have been calculated.

b. Contracts for which tabular morbidity standards are not specified in Appendix A shall be valued using tables established for reserve purposes by a qualified actuary and acceptable to the Director of Insurance.

2. Interest. The maximum interest rate is specified in Appendix A.

3. Termination Rates.

a. Termination rates used in the computation of reserves shall be on the basis of a mortality table as specified in Appendix A. except as noted in the following paragraph.

b. Under contracts for which premium rates are not guaranteed, and where the effects of insurer underwriting are specifically used by policy duration in the valuation morbidity standard or for return of premium or other deferred cash benefits, total termination rates may be used at ages and durations where these exceed specified mortality table rates, but not in excess of the lesser of:

(1) Eighty percent of the total termination rate used in the calculation of the gross premiums, or

(2) Eight percent.

c. Where a morbidity standard specified in Appendix A is on an aggregate basis, such morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration. The adjustments must be appropriate to the underwriting and be acceptable to the Director of Insurance.

4. Reserve Method.

a. For insurance except long-term care and return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated on the two-year full preliminary term method; that is, under which the terminal reserve is zero at the first and also the second contract anniversary.

b. For long-term care insurance, the minimum reserve is the reserve calculated as follows:

(1) For individual policies and group certificates issued on or before December 31, 1997, reserves calculated on the two-year full preliminary term method.

(2) For individual policies and group certificates issued on or after January 1, 1998, reserves calculated on the one-year full preliminary term method.

c. For return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated as follows:

(1) On the one year preliminary term method if such benefits are provided at any time before the twentieth anniversary.

(2) On the two year preliminary term method if such benefits are only provided on or after the twentieth anniversary.

d. The preliminary term method may be applied only in relation to the date of issue of a contract. Reserve adjustments introduced later as a result of rate increases, revisions in assumptions (e.g., projected inflation rates) or for other reasons, are to be applied immediately as of the effective date of adoption of the adjusted basis.

5. Negative Reserves. Negative reserves on any benefit may be offset against positive reserves for other benefits in the same contract, but the total contract reserve with respect to all benefits combined may not be less than zero.

C. Alternative Valuation Methods and Assumptions Generally.

1. Provided the contract reserve on all contracts to which an alternative method or basis is applied is not less in the aggregate than the amount determined according to the applicable standards specified above, an insurer may use any reasonable assumptions as to interest rates, termination and/or mortality rates, and rates of morbidity or other contingency.

2. Also, subject to the preceding condition, the insurer may employ methods stated above in determining a sound value of its liabilities under such contracts, including, but not limited to the following:

a. The net level premium method;

b. The one-year full preliminary term method;

c. Prospective valuation on the basis of actual gross premiums with reasonable allowance for future expenses;

d. The use of approximations such as those involving age groupings, groupings of several years of issue, average amounts of indemnity, grouping of similar contract forms;

e. The computation of the reserve for one contract benefit as a percentage of, or by other relation to, the aggregate contract reserves exclusive of the benefit or benefits so valued; and

f. The use of a composite annual claim cost for all or any combination of the benefits included in the contracts valued.

D. Tests for Adequacy and Reasonableness of Contract Reserves.

1. Annually, an appropriate review shall be made of the insurer's prospective contract liabilities on contracts valued by tabular reserves, to determine the continuing adequacy and reasonableness of the tabular reserves giving consideration to future gross premiums. The insurer shall make appropriate increments to such tabular reserves if such tests indicate that the basis of such reserves is no longer adequate; subject, however, to the minimum standards of Section IV.B.

2. In the event a company has a contract or a group of related similar contracts, for which future gross premiums will be restricted by contract, insurance department regulations, or for other reasons, such that the future gross premiums reduced by expenses for administration, commissions, and taxes will be insufficient to cover future claims, the company shall establish contract reserves for such shortfall in the aggregate.

Section V. Reinsurance.

Increases to, or credits against reserves carried, arising because of reinsurance assumed or reinsurance ceded, must be determined in a manner consistent with these minimum reserve standards and with all applicable provisions of the reinsurance contracts which affect the insurer's liabilities.

Section VI. Appendix A. Specific Standards for Morbidity, Interest and Mortality.

A. Morbidity.

1. Minimum morbidity standards for valuation of specified individual contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and prior to January 1, 1968: Conference Modification of Class III Disability Table.

(b) Contracts issued on or after January 1, 1968, and prior to January 1, 1990: The 1964 Commissioners Disability Table (64 CDT).

(c) Contracts issued on or after January 1, 1992: The 1985 Commissioners Individual Disability Tables A (85CIDA); or the 1985 Commissioners Individual Disability Tables B (85CIDB).

(1) Each insurer shall elect, with respect to all individual contracts issued in any one statement year, whether it will use Tables A or Tables B as the minimum standard.

(2) The insurer may, however, elect to use the other tables with respect to any subsequent statement year.

(d) Contracts issued during 1990 or 1991: Optional use of either the 1964 Table or the 1985 Tables.

(2) Claim Reserves: The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred.

b. Hospital Benefits, Surgical Benefits, and Maternity Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and before January 1, 1990: The1956 Intercompany Hospital-Surgical Tables.

(b) Contracts issued on or after January 1, 1992: The 1974 Medical Expense Tables, Table A, Transactions of the Society of Actuaries, Volume XXX, page 63. Refer to the paper (in the same volume, page 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.

(c) Contracts issued during 1990 or 1991: Optional use of either the 1956 Tables or the 1974 Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

c. Cancer Expense Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves: Contracts issued on or after January 1, 1992: The 1985 NAIC Cancer Claim Cost Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

d. Accidental Death Benefits.

(1) Contract Reserves: Contracts issued on or after January 1, 1968: The 1959 Accidental Death Benefits Table.

(2) Claim Reserves: Actual amount incurred.

e. Other Individual Contract Benefits.

(1) Contract Reserves: For all other individual contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

2. Minimum morbidity standards for valuation of specified group contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued prior to January 1, 1992: The same basis, if any, as that employed by the insurer as of January 1, 1992;

(b) Contracts issued on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT).

(2) Claim Reserves:

(a) For claims incurred on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT);

(b) For claims incurred prior to January 1, 1992: Use of the 87CGDT is optional.

b. Other Group Contract Benefits.

(1) Contract Reserves: For all other group contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

B. Interest.

1. For contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. For claim reserves, on policies that require contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the claim incurral date.

3. For claim reserves on policies not requiring contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of single premium immediate annuities issued on the same date as the claim incurred date, reduced by one hundred basis points.

C. Mortality.

1. Except as provided in subsection 2, the mortality basis used shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. Other mortality tables adopted by the NAIC and promulgated by the Director of Insurance may be used in the calculation of the minimum reserves if appropriate for the type of benefits and if approved by the Director of Insurance. The request for such approval must include the proposed mortality table and the reason that the standard specified in Subsection 1 is inappropriate.

Section VII. Appendix B. Glossary of Technical Terms Used.

A. Annual-Claim Cost. The net annual cost per unit of benefit before the addition of expenses, including claim settlement expenses, and a margin for profit or contingencies. For example, the annual claim cost for a $100 monthly disability benefit, for a maximum disability benefit period of one year, with an elimination period of one week, with respect to a male at age 35, in a certain occupation might be $12, while the gross premium for this benefit might be $18. The additional $6 would cover expenses and profit or contingencies.

B. Claims Accrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services which have been rendered on or prior to the valuation date, and for the payment of benefits for days of hospitalization and days of disability which have occurred on or prior to the valuation date, which the insurer has not paid as of the valuation date, but for which it is liable, and will have to pay after the valuation date. This liability is sometimes referred to as a liability for "accrued" benefits. A claim reserve, which represents an estimate of this accrued claim liability, must be established.

C. Claims Reported. When an insurer has been informed that a claim has been incurred, if the date reported is on or prior to the valuation date, the claim is considered as a reported claim for annual statement purposes.

D. Claims Unaccrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services expected to be rendered after the valuation date, and for benefits expected to be payable for days of hospitalization and days of disability occurring after the valuation date. This liability is sometimes referred to as a liability for unaccrued benefits. A claim reserve, which represents an estimate of the unaccrued claim payments expected to be made (which may or may not be discounted with interest), must be established.

E. Claims Unreported. When an insurer has not been informed, on or before the valuation date, concerning a claim that has been incurred on or prior to the valuation date, the claim is considered as an unreported claim for annual statement purposes.

F. Date of Disablement. The earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctor's evaluation or other evidence. Normally, this date will coincide with the start of any elimination period.

G. Elimination Period. A specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.

H. Gross Premium. The amount of premium charged by the insurer. It includes the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit, or contingencies.

I. Level Premium. A premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. The premium need not be guaranteed, in which case, although it is calculated to remain level, it may be changed if any of the assumptions on which it is based are revised at a later time.

1. Generally, the annual claim costs are expected to increase each year and the insurer, instead of charging premiums that correspondingly increase each year, charges a premium calculated to remain level for a period of years or for the lifetime of the contract. In this case the benefit portion of the premium is more than needed to provide for the cost of benefits during the earlier years of the policy and less than the actual cost in the later years.

2. The building of a prospective contract reserve is a natural result of level premiums.

J. Long-Term Care Insurance. Any insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than twelve (12) consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis; for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital. Such term also includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance may be issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations or any similar organization to the extent they are otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.

K. Modal Premium. This refers to the premium paid on a contract based on a premium term which could be annual, semi-annual, quarterly, monthly, or weekly. Thus, if the annual premium is $100 and if, instead, monthly premiums of $9 are paid, then the modal premium is $9.

L. Negative Reserve. Normally the terminal reserve is a positive value. However, if the values of the benefits are decreasing with advancing age or duration it could be a negative value, called a negative reserve.

M. Preliminary Term Reserve Method. Under this method of valuation, the valuation net premium for each year falling within the preliminary term period is exactly sufficient to cover the expected incurred claims of that year, so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary term period, a new constant valuation net premium (or stream of changing valuation premiums) becomes applicable such that the present value of all such premiums is equal to the present value of all claims expected to be incurred following the end of the preliminary term period.

N. Present Value of Amounts Not Yet Due on Claims. The reserve for "claims unaccrued" (see definition), which may be discounted at interest.

O. Reserve. The term "reserve" is used to include all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued.

1. An insurer under its contracts promises benefits which result in claims which have been incurred, that is, for which the insurer has become obligated to make payment, on or prior to the valuation date. On these claims, payments expected to be made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer which should be provided for by establishing claim reserves; or

2. An insurer under its contracts promises benefits which result in claims which are expected to be incurred after the valuation date. Any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.

P. Terminal Reserve. This is the reserve at the end of a contract year, and is defined as the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums.

Q. Unearned Premium Reserve. This reserve values that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Thus if an annual premium of $120 was paid on November 1, $20 would be earned as of December 31 and the remaining $100 would be unearned. The unearned premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.

R. Valuation Net Modal Premium. This is the modal fraction of the valuation net annual premium that corresponds to the gross modal premium in effect on any contract to which contract reserves apply. Thus, if the mode of payment in effect is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net annual premium.

Section VIII. Appendix C. Reserve for Waiver of Premium--(Supplementary explanatory material).

A. Waiver of premium reserves involve several special considerations. First, the disability valuation tables promulgated by the NAIC are based on exposures that include contracts on premium waiver as in-force contracts. Hence, contract reserves based on these tables are not reserves on "active lives" but rather reserves on contracts "in force." This is true for the 1964 CDT and for both the 1985 CIDA and CIDB tables.

B. Accordingly, tabular reserves using any of these tables should value reserves on the following basis:

1. Claim reserves should include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

2. Premium reserves should include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.

3. Contract reserves should include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.

C. If an insurer is, instead, valuing reserves on what is truly an active life table, or if a specific valuation table is not being used but the insurer's gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, then it may not be necessary to provide specifically for waiver of premium reserves. Any insurer using such a true "active life" basis should carefully consider, however, whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.

HISTORY: Amended by State Register Volume 15, Issue No. 3, eff March 22, 1991; State Register Volume 21, Issue No. 6, Part 2, eff June 27, 1997.

69-8. Reserves for Mortgage Guaranty Insurance.

This Regulation shall apply to all insurers writing mortgage guaranty insurance in South Carolina. Mortgage guaranty insurance is defined for the purposes of this Regulation as the insurance of mortgage lenders against loss by reason of nonpayment of mortgage indebtedness by borrowers, and should not be confused with other kinds of insurance written incidental to mortgage loan transactions such as mortgage redemption life insurance, hazard insurance covering improvements to real property, and credit accident and health coverages.

1. Unearned premium reserves for mortgage guaranty insurance shall be computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180 which specify that such reserves are to be computed by the use of annual or more frequent pro rata fractions.

2. In addition to the unearned premium reserve, every mortgage guaranty insurer writing business in this State must establish and maintain a contingency reserve, computed as hereinafter described, for the further protection of such companies and their policyholders against the adverse effects of economic cycles and other causes of excessive loss experience. The contingency reserve shall be credited not less frequently than annually, as of the end of each calendar year, with an amount equal to fifty per cent of the premiums earned during the year, computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180. Each such amount credited to the contingency reserve shall be carried as a liability for fifteen years following the year for which the credit is established, unless used to pay mortgage guaranty losses as hereinafter provided.

3. If for any year the incurred losses and loss expenses for mortgage guaranty insurance shall exceed forty per cent of the premiums earned on such business, the contingency reserve may be charged with the amount of such excess if such charge is approved by the Chief Insurance Commissioner. Any such annual charges shall be treated so as to reduce or remove the amounts originally credited to said reserve on a first-in, first-out basis.

4. Annual statements reflecting mortgage guaranty insurance transactions by licensed insurers must be prepared in compliance with this Regulation to meet the requirements of Section 38-13-100.

69-9. Proxies, Consents and Authorizations of Domestic Insurers.

Effective Date: The following regulation shall be effective on and after April 1, 1966.

Section 1. Application of Regulation-- This regulation is applicable to all domestic insurers having one hundred or more stockholders; provided, however, that this regulation shall not apply to any insurer if ninety-five per cent or more of its stock is owned or controlled by a parent or an affiliated insurer and the remaining shares are held by less than five hundred stockholders. A domestic insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities and Exchange Act of nineteen hundred thirty-four and the Securities and Exchange Acts Amendments of nineteen hundred sixty-four and Regulation X-14 of the Securities and Exchange Commission promulgated thereunder shall be exempt from the provisions of this regulation.

Section 2. Proxies, Consents and Authorizations-- any director, officer or employee of such insurer subject to Section 1 hereof, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent, or authorization in respect of any stock of such insurer in contravention of this regulation and Schedules A and B hereto annexed and hereby made a part of this regulation.

Section 3. Disclosure of Equivalent Information-- or authorizations in respect of a stock of a domestic insurer subject to Section 1 hereof are solicited by or on behalf of the management of such insurer from the holders of record of stock of such insurer in accordance with this regulation and the Schedules thereunder prior to any annual or other meeting, such insurer shall, in accordance with this regulation and/or such further regulations as the Commissioner may adopt, file with the Commissioner and transmit to all stockholders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

Section 4. Definitions.

1. The definitions and instructions set out in Schedule SIS, as promulgated by the National Association of Insurance Commissioners, shall be applicable for purposes of this regulation.

2. The terms "solicit" and "solicitation" for purposes of this regulation shall include:

(a) any request for a proxy, whether or not accompanied by or included in a form of proxy; or

(b) any request to execute or not to execute, or to revoke, a proxy; or

(c) the furnishing of a proxy or other communication to stockholders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

3. The terms "solicit" and "solicitation" shall not include:

(a) any solicitation by a person in respect of stock of which he is the beneficial owner;

(b) action by a broker or other person in respect to stock carried in his name or in the name of his nominee in forwarding to the beneficial owner of such stock soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date;

(c) the furnishing of a form of proxy to a stockholder upon the unsolicited request of such stockholder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy.

Section 5. Information to Be Furnished to Stockholders.

1. No solicitation subject to this regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule A.

2. If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of stockholders at which directors are to be elected, each proxy statement furnished pursuant to Subsection 1 hereof shall be accompanied or preceded by an annual report (in preliminary or final form) to such stockholders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Stockholders." Subject to the foregoing requirements with respect to financial statements, the annual report to stockholders may be in any form deemed suitable by the management.

3. Two copies of each report sent to the stockholders pursuant to this Section shall be mailed to the Commissioner not later than the date on which such report is first sent or given to stockholders or the date on which preliminary copies of solicitation material are filed with the Commissioner pursuant to Subsection 1 of Section 7, whichever date is later.

Section 6. Requirements as to Proxy.

1. The form of proxy (a) shall indicate in bold face type whether or not the proxy is solicited on behalf of the management, (b) shall provide a specifically designated blank space for dating the proxy and (c) shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management or stockholders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to Subsection 3 hereof.

2. Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold face type how it is intended to vote the shares or authorization represented by the proxy in each such case.

3. A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy.

4. No proxy shall confer authority (a) to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (b) to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to stockholders.

5. The proxy statement or form of proxy shall provide, subject to reasonable, specified conditions, that the proxy will be voted and that where the person solicited specifies by means of ballot provided pursuant to Subsection 2 hereof a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made.

6. The information included in the proxy statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements shall be clearly and legibly presented.

Section 7. Material Required to Be Filed.

1. Two preliminary copies of the proxy statement and form of proxy and other soliciting material to be furnished to stockholders concurrently therewith shall be filed with the Commissioner at least ten days prior to the date definitive copies of such material are first sent or given to stockholders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor.

2. Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to stockholders subsequent to the proxy statements shall be filed with the Commissioner at least two days (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to stockholders or a shorter period prior to such date as the Commissioner may authorize upon a showing of good cause therefor.

3. Two definitive copies of the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to stockholders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the stockholders.

4. Where any proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes and shall be so filed with the Commissioner as herein provided.

5. Copies of replies to inquiries from stockholders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this Section.

6. Notwithstanding the provisions of Subsections 1 and 2 hereof and of Subsection 5 of Section 10, copies of soliciting material in the form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by Subsection 3 hereof not later than the date such material is used or published. The provisions of Subsections 1 and 2 hereof and Subsection 5 of Section 10 shall apply, however, to any reprints or reproductions of all or any part of such material.

Section 8. False or Misleading Statements--No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

Section 9. Prohibition of Certain Solicitations--No person making a solicitation which is subject to this regulation shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the stockholder.

Section 10. Special Provisions Applicable to Election Contests.

1. Applicability--This Section shall apply to any solicitation subject to this regulation by any person or group for the purpose of opposing a solicitation subject to this regulation by any other person or group with respect to the election or removal of directors at any annual or special meeting of stockholders.

2. Participant or Participant in a Solicitation

(a) For purposes of this Section, the term "participant" and "participant in a solicitation" include: (i) the insurer; (ii) any director of the insurer, and any nominee for whose election as a director proxies are solicited; (iii) any other person, acting alone or with one or more other persons, committees or groups in organizing, directing or financing the solicitation.

(b) For the purpose of this Section, the terms "participant" and "participant in a solicitation" do not include: (i) a bank, broker, or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of stock and who is not otherwise a participant; (ii) any person or organization retained or employed by a participant to solicit stockholders or any person who merely transmits proxy soliciting material or performs ministerial or clerical duties; (iii) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (iv) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (v) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant.

3. Filing of Information Required by Schedule B.

(a) No solicitation subject to this Section shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed with the Commissioner, by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by Schedule B and a copy of any material proposed to be distributed to stockholders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to stockholders should be deferred until the Commissioner's comments have been received and complied with, or until fifteen days have elapsed whichever shall first occur.

(b) Within five business days after a solicitation subject to this Section is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by Schedule B.

(c) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this Section in opposition thereto, a statement in duplicate containing the information specified in Schedule B shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

(d) If, subsequent to the filing of the statements required by paragraphs (a), (b) and (c) of this Subsection, additional persons become participants in a solicitation subject to this rule, there shall be filed with the Commissioner, by or on behalf of each such person, a statement in duplicate containing the information specified by Schedule B, within three business days after such person becomes a participant, or such longer period as the Department may authorize upon a showing of good cause therefor.

(e) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner.

(f) Each statement and amendment thereto filed pursuant to this paragraph shall be part of the public files of the Commissioner.

4. Solicitations Prior to Furnishing Required Written Proxy Statement--Notwithstanding the provisions of Subsection 1 of Section 5, a solicitation subject to this Section may be made prior to furnishing stockholders a written proxy statement containing the information specified in Schedule A with respect to such solicitation, provided that:

(a) The statements required by Subsection 3 hereof are filed by or on behalf of each participant in such solicitation.

(b) No form of proxy is furnished to stockholders prior to the time the written proxy statement required by Subsection 1 of Section 5 is furnished to such persons; provided, however, that this paragraph (b) shall not apply where a proxy statement then meeting the requirements of Schedule A has been furnished to stockholders.

(c) At least the information specified in paragraphs (b) and (c) of the statements required by Subsection 3 hereof to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to stockholders in connection with the solicitation.

(d) A written proxy statement containing the information specified in Schedule A with respect to a solicitation is sent or given stockholders at the earliest practicable date.

5. Solicitations Prior to Furnishing Required Written Proxy Statement--Filing Requirements--Two copies of any soliciting material proposed to be sent or given to stockholders prior to the furnishing of the written proxy statement required by Subsection 1 of Section 5 shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such persons, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor.

6. Application of This Section to Report--Notwithstanding the provisions of Subsections 2 and 3 of Section 5, two copies of any portion of the report referred to in Subsection 2 of Section 5 which comments upon or refers to any solicitation subject to this Section, or to any participant in any such solicitation, other than the solicitation by the management, shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to stockholders.

Schedule A

Information Required in Proxy Statement

Item 1 Revocability of Proxy--State whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, briefly describe such limitation or procedure.

Item 2 Dissenters' Right of Appraisal--Outline briefly the rights of appraisal or similar rights of dissenting stockholders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such stockholders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, state whether the person solicited will be notified of such date.

Item 3 Persons Making Solicitations Not Subject to Section 10

1. If the solicitation is made by the management of the insurer, so state. Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose.

2. If the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly.

3. If the solicitation is to be made by specially engaged employees or paid solicitors, state (a) the material features of any contract or arrangement for such solicitation and identify the parties, and (b) the cost or anticipated cost thereof.

Item 4 Interest of Certain Persons in Matters to Be Acted Upon--Describe briefly any substantial interest, direct or indirect, by stockholders or otherwise, of any director, nominee for election for director, officer, and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than elections to office.

Item 5 Stocks and Principal Stockholders

1. State, as to each class of voting stock of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled.

2. Give the date as of which the record list of stockholders entitled to vote at the meeting will be determined. If the right to vote is not limited to stockholders of record on that date, indicate the conditions under which other stockholders may be entitled to vote.

3. If action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly the conditions precedent to the exercise thereof.

Item 6 Nominees and Directors--If action is to be taken with respect to the election of directors, furnish the following information in tabular form to the extent practicable, with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting:

1. Name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting.

2. State his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on. Furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of stockholders at a meeting for which proxies were solicited under this regulation.

3. If he is or has previously been a director of the insurer, state the period or periods during which he has served as such.

4. State, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or any of its parents, subsidiaries or affiliates other than directors' qualifying shares, beneficially owned directly or indirectly by him. If he is not the beneficial owner of any such stocks, make a statement to that effect.

Item 7 Remuneration and Other Transactions With Management and Others--Furnish the information reported or required in Item 1 of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to (a) the election of directors, (b) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate, (c) any pension or retirement plan in which any such person will participate, or (d) the granting or extension to any such person of any options, warrants or rights to purchase any stocks, other than warrants or rights issued to stockholders, as such, on a pro-rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item 1A of the aforesaid heading of Schedule SIS.

Item 8 Bonus, Profit Sharing and Other Remuneration Plans--If action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, of the insurer furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. The amounts which would have been distributable under the plan during the last calendar year to (a) each person named in Item 7 of this schedule, (b) directors and officers as a group, and (c) all other employees as a group, if the plan had been in effect.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in paragraph 2 of this item, the nature of such amendments should be specified.

Item 9 Pension and Retirement Plans--If action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. State (a) the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period; (b) the estimated annual payment to be made with respect to current services; and (c) the amount of such annual payments to be made for the benefit of (i) each person named in Item 7 of this schedule, (ii) directors and officers as a group, and (iii) employees as a group.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in sub-paragraph 2(c) of this item, the nature of such amendments should be specified.

Item 10 Options, Warrants, or Rights--If action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrants") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all stockholders on a pro-rata basis, furnish the following information:

1. The title and amount of stock called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the stock called for or to be called for by the warrants, as of the latest practicable date.

2. If known, state separately the amount of stock called for or to be called for by warrants received or to be received by the following persons, naming each such person:

(a) each person named in Item 7 of this schedule, and

(b) each other person who will be entitled to acquire five per cent or more of the stock called for or to be called for by such warrants.

3. If known, state also the total amount of stock called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them.

Item 11 Authorization or Issuance of Stock

1. If action is to be taken with respect to the authorization or issuance of any stock of the insurer, furnish the title, amount and description of the stock to be authorized or issued.

2. If the shares of stock are other than additional shares of common stock of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive, and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity.

3. If the shares of stock to be authorized or issued are other than additional shares of common stock of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report.

Item 12 Mergers, Consolidations, Acquisitions and Similar Matters

1. If action is to be taken with respect to a merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information:

(a) The rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon. Indicate any procedure required to be followed by dissenting stockholders in order to perfect such rights.

(b) The material features of the plan or agreement.

(c) The business done by the company to be acquired or whose assets are being acquired.

(d) If available, the high and low sales prices for each quarterly period within two years.

(e) The percentage of outstanding shares which must approve the transaction before it is consummated.

2. For each company involved in a merger, consolidation or acquisition, the following financial statements should be furnished:

(a) A comparative balance sheet as of the close of the last two fiscal years.

(b) A comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earning per share after related taxes and cash dividends paid per share.

(c) A pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company.

Item 13 Restatement of Accounts--If action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information:

1. State the nature of the restatement and the date as of which it is to be effective.

2. Outline briefly the reasons for the restatement and for the selection of the particular effective date.

3. State the name and amount of each account affected by the restatement and the effect of the restatement thereon.

Item 14 Matters Not Required to Be Submitted--If action is to be taken with respect to any matter which is not required to be submitted to a vote of stockholders, state the nature of such matter, the reason for submitting it to a vote of stockholders and what action is intended to be taken by the management in the event of a negative vote on the matter by the stockholders.

Item 15 Amendment of Charter, By-Laws, or Other Documents--If action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

Schedule B

Information to be Included in Statements Filed By or on Behalf of a Participant (Other Than the Insurer) in a Proxy Solicitation in an Election Contest

Item 1 Insurer--State the name and address of the insurer.

Item 2 Identity and Background

1. State the following:

(a) Your name and business address;

(b) Your present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on.

2. State the following:

(a) Your residence address;

(b) Information as to all material occupations, positions, offices or employments during the last ten years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on.

3. State whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past ten years. If so, identify the principals, the subject matter and your relationship to the parties and the outcome.

4. State whether or not, during the past ten years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. A negative answer to this sub-item need not be included in the proxy statement or other proxy soliciting material.

Item 3 Interest in Stock of the Insurer

1. State the amount of each class of stock of the insurer which you own beneficially, directly or indirectly.

2. State the amount of each class of stock of the insurer which you own of record but not beneficially.

3. State with respect to the stock specified in 1 and 2 the amounts acquired within the past two years, the dates of acquisition and the amounts acquired on each date.

4. If any part of the purchase price or market value of any of the stock specified in paragraph 3 is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such stock, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction and state the names of the parties.

5. State whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any stock of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so, name the persons with whom such contracts, arrangements, or understandings exist and give the details thereof.

6. State the amount of stock of the insurer owned beneficially, directly or indirectly, by each of your associates and the name and address of each such associate.

7. State the amount of each class of stock of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly or indirectly.

Item 4 Further Matters

1. Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.

2. Describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company or any of its subsidiaries or affiliates was or is to be a party.

3. State whether or not you or any of your associates have any arrangement or understanding with any person

(a) with respect to any future employment by the insurer or its subsidiaries or affiliates; or

(b) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of the parties thereto.

Item 5 Signature--The statement shall be dated and signed in the following manner:

I certify that the statements made in this statement are true, complete, and correct to the best of my knowledge and belief.

____ ______________________________________________________

Date Signature of participant or authorized representative

69-10. Premium Service Companies.

1. Every premium service agreement which confers upon a premium service company authority to cause a policy of insurance covering lives, property or interests situate in South Carolina to be terminated shall be deemed made in South Carolina and such policy shall be so terminated only in accordance with the provisions of Chapter 39 of Title 38, Code of Laws of South Carolina, 1976, and the Regulations pursuant thereto.

2. The provisions of this Regulation do not apply to premiums financed under revolving charge account arrangements by a licensee which is a subsidiary of an insurer or group of affiliated insurers where maximum charges do not exceed 7% per annum on the amount actually financed. Such revolving charge account arrangements shall be submitted to the Commissioner for approval or disapproval by specific order for each such arrangement.

3. No licensee nor other person acting for or in behalf of the licensee shall retain the original policy in connection with any premium service agreement, and any such retention of the original contract shall be deemed cause for the revocation of, or refusal to renew, the license of such licensee.

4. Every application for a license or renewal of the license as a premium service company shall be made on the form prescribed by the Chief Insurance Commissioner which shall be completed and filed in accordance with the instructions of the Commissioner accompanied by all required supporting documents and the applicable fee.

5. In the case of an original application for a license, the application shall be signed by:

(a) The sole proprietor, if the applicant is a sole proprietor; or

(b) A general partner, if the applicant is a partnership;

(c) The chief executive officer and the secretary if the applicant is a corporation or other business entity whose ownership is manifested by shares. Such original application shall be accompanied by the certified resolution of the board of directors or similar governing body of the corporation or other entity.

6. In the case of the renewal of an existing license or a change in such license, reference may be made to the earlier application and only those sections of the application form where changes are necessary need be completed, provided the signators to the original application certify under the pains and penalties of perjury that no change has occurred which would require an answer differing from that contained in the original application.

7. Licenses hereunder are hereby declared personal and issued by reason of special confidence in the licensee so licensed. No license may be transferred, directly or indirectly, nor shall such license be used for, or in behalf of, any person, firm or corporation whatsoever other than the licensee. Any such transfer, attempted transfer or use shall be void and shall be deemed sufficient grounds for the revocation of, or refusal to renew, the license.

8. Every corporation, or similar business entity, partnership, or proprietor doing business under a name, other than his or its own, shall file, and keep on file, with the Commissioner, the names and addresses of officers, directors, partners and proprietors and shall designate therein the name and address of the person upon whom service of process may be made.

9. No foreign corporation or similar business entity shall be licensed as a premium service company unless it shall first become domesticated in South Carolina. Certification of such domestication by the Secretary of State of South Carolina shall accompany the application of each such foreign corporation or similar business entity.

10. Transfer or assignment to another, or a series of transfers or assignments within a 6 month period, of 10% or more of the premium service agreements of a licensee shall be deemed a bulk transfer or assignment. No licensee shall effect a bulk transfer or assignment of premium service agreements unless it shall first file the proposed agreement with, and secure the approval of, the Commissioner who shall grant such approval only if he is satisfied that such arrangements are just and equitable, that provision has been made for adequate notice to the insureds and insurers, that all funds due or payable to insureds and insurers have been paid or adequately secured, that the transferee or assignee has expressly assumed the obligations of the transferor or assignor arising out of such premium service agreements and/or that the transferor or assignor has provided indemnity or security with respect to such obligations.

11. Death of a proprietor shall terminate the license. Death or withdrawal of a partner shall suspend the license if the licensee is a partnership; provided, however, that if notice of such death or withdrawal is furnished to the Commissioner within 10 days of the event and the Commissioner is satisfied, by examination or otherwise, that the interests of insureds and insurers have been adequately protected, he may reinstate the suspended license.

Appointment of referee, receiver or trustee incident to bankruptcy or insolvency proceedings against the licensee shall suspend the license which may be reinstated only if the Commissioner finds that such proceedings have terminated and that the interests of insureds and insurers have been adequately protected.

12. The Commissioner shall be notified by registered or certified mail not later than 10 days after the event upon the occurrence of any of the following:

(a) When a partner dies or withdraws from a partnership which is a licensee, or when a new partner is admitted.

(b) When an officer, director or person owning or controlling 10% or more of the stock of a corporation or similar business entity, which is a licensee, ceases to be such, or, when a person becomes an officer, director or person owning or controlling 10% or more of the stock of such licensee.

(c) When any licensee, or any person who is a partner, officer, director or who owns 10% or more of the shares of the licensee is arrested, indicted or convicted with respect to any State or Federal offense involving moral turpitude other than a misdemeanor resulting from the operation of a motor vehicle.

(d) When a licensee suffers a revocation or suspension of license or is refused a license as a premium service company, premium finance company, insurance agency, or agent, in any other jurisdiction.

(e) When a voluntary or involuntary petition of bankruptcy or prayer for the appointment of a receiver or trustee is filed against the licensee or when the licensee enters into any assignment for the benefit of creditors or composition among creditors.

In the event of any of the foregoing, the Commissioner may conduct such examination and investigation as he deems necessary or appropriate for the protection of insureds and insurers, the expense of which shall be borne by the licensee. Without limitation upon the generality, he may require any of the affected persons to respond to interrogatories under oath or appear before him to testify under oath and may require such other or further disclosure as he deems necessary or appropriate.

13. Every premium service company shall, prior to their use, file the following forms with the Commissioner and receive his written approval:

(a) Insurance premium service agreement.

(b) Payment book.

(c) Notice of overdue payment.

(d) Request for cancellation.

(e) Notice to insurer that premium is financed under premium service agreement.

(f) Such other forms, other than advertising material and rate charts, as the licensee prepares or uses for delivery or mailing to insureds, insurers or insurance agents. This section does not apply to individual correspondence.

14. Forms filed with the Commission for approval shall be so filed in duplicate, one copy of which will be returned to the licensee endorsed with the approval or disapproval of the Commissioner.

15. No form, the filing of which is required hereunder, shall be used prior to its approval, and use of any such form which has not been approved, or which has been disapproved, shall constitute grounds for the revocation, suspension or refusal of renewal of the license or for the imposition of such penalty in lieu thereof as the Commissioner deems appropriate.

16. The records of the licensee relating to its business as a premium service company shall be kept entirely separate and distinct from records of any other business conducted by the licensee, and all items of accounts, whether real or nominal, control or subsidiary, in connection with its premium service company business shall be maintained separately and distinctly from accounts reflecting other business conducted by the licensee. Records and accounts with respect to premium service company business done in this State need not be maintained separately and distinctly from records of such business done in other states. Upon violation of this provision, the Commissioner may suspend the license of the licensee until such time as he has become satisfied, as a result of examination at the expense of the licensee, that proper separation and distinction of accounts has been made and will be maintained.

17. To comply with Section 38-39-50(b), every licensee shall maintain on file each premium service agreement, or a duplicate original or photocopy thereof, and every original document relating thereto, all of which must bear an identifying account number.

Every such licensee shall maintain records which will readily disclose, as to each premium service agreement:

(a) Date of contract or acquisition.

(b) Name of the insured.

(c) Account number.

(d) Name of agent or producer of record.

(e) Principal balance at inception.

(f) Amount of service charge.

(g) Time balance.

(h) Initial charge.

(i) Number, interval and amount of payments.

(j) Exact disbursement of proceeds including the date, amount and purpose of all payments and names of all persons to whom any part of proceeds was paid, credited or allocated.

(k) Date of notice to insured that cancellation would be requested.

(l) Date of request for cancellation to insurer and requested cancellation date.

(m) Amount of return premium and its disposition.

18. The service charge in connection with a premium service agreement shall be applied only to the difference between the down payment and the total premium and shall not apply as to the initial charge which may be added only after computation of the service charge.

19. No notice of intent to request cancellation shall be given in advance of an actual default on the premium service agreement. Upon the occurrence of such default, the licensee may notify the insured by mail of its intention to request cancellation of the policies which are the subject of the agreement not less than 10 days after the date of mailing unless all payments then in default are received before the end of such 10 day period.

20. Not less than 5 days after the expiration of such period, if the default has not been cured, the licensee may mail a request for cancellation to the insurer, which request shall be accompanied by the proffer of the original or a photocopy of its authorization if such original or photocopy was not earlier furnished to the insurer, in which event reference may be made thereto.

The licensee shall mail a copy of the request for cancellation to the insured, and with respect to a policy of automobile liability insurance, such copy shall expressly and prominently inform the insured of his statutory duty to replace such insurance on or before the date of cancellation.

21. Every insurer, upon receipt of such request for cancellation, shall, subject to Section 22 hereof, cancel such contract as of the date requested and shall within a reasonable time, not more than 30 days, cause the gross return premium, if any, to be computed and paid or credited to, or for, the account of the licensee. A copy of the statement relating to such return premiums shall be furnished by the insurer to the insured.

22. Where a valid statutory, regulatory or contractual provision requires that notice be given a particular period of time before cancellation shall become effective, the insurer shall not be required to effect cancellation prior to the elapse of the period of time prescribed by such statute, regulation or contract; the running of such time shall commence the second business day following receipt by the insurer of the request for cancellation.

23. Any excess of return premium over the amount to which the licensee is properly entitled under the premium service agreement shall be held and accounted for by the licensee in its fiduciary capacity and shall be promptly paid, and in no event more than 30 days after its receipt, to the insured.

Failure so to pay such funds to insureds or the commingling of such fiduciary funds with other funds of the licensee for longer than 30 days shall constitute sufficient grounds for the revocation, suspension or refusal of renewal of the license or the imposition of such lesser penalty as the Commissioner may deem appropriate.

24. This Regulation applies to a life insurance contract assigned to a licensee in connection with a premium service agreement and surrendered by such licensee for return by the insurer of any cash surrender value to the licensee; provided, however, that with respect to a life insurance contract, the licensee may retain, and the insurer may require surrender of, the original insurance contract.

25. In the event of cancellation of a premium service agreement by the insured, refund of the unearned service charge shall be in accordance with the customary short rate tables as used by insurers, copies of which are attached to and form a part of this Regulation.

26. No licensee shall sell or offer for sale, in connection with a premium service agreement or an application or request for such agreement, any insurance, commodity, or service of whatsoever nature as an inducement, condition, or consideration for entering into any such agreement.

The violation of this section shall constitute sufficient grounds for the revocation, suspension or refusal to renew the license.

27. No premium service agreement shall include, nor relate to, any subject other than the financing of premium with respect to the specific insurance policy or policies identified therein; and every agreement, undertaking or understanding relating to, affecting, or touching upon such premium service agreement shall be expressly incorporated therein so as to become a part thereof.

28. Each licensee shall furnish to the Commissioner, not later than March 1 of each year, on forms prescribed by him, an Annual Report on all business conducted under the license.

A special report shall be filed with the Commissioner each 6 months setting forth for each month of that period the following with totals:

(a) Number of premium service agreements written.

(b) Total premiums thereunder.

(c) Principal balances thereunder.

(d) Total service and initial charges.

(e) Number of policies cancelled pursuant to request.

29. No licensee shall accept or act pursuant to a premium service agreement which is not complete, nor shall any licensee or other person acting in its behalf complete, alter, vary or sign any such agreement except pursuant to the express, written instructions of the insured, a copy of which shall be retained and kept on file.

30. No premium service company, nor any employee, agent, or other person, acting in its behalf, shall give or offer to give any monies, supplies or services of whatsoever nature to any agent, producer of record or any other person as an inducement to such agent, producer or person to place premium service agreements with such premium service company; nor shall any such premium service company make or offer any rebate or other advantage or benefit to any borrower as an inducement to the effecting of a premium service agreement. Nothing herein shall preclude a premium service company from distributing advertising pieces or gifts containing the name and address of such premium service company and costing not more than one dollar.

31. Manifestly, in enacting the Premium Service Company Act of 1967, the General Assembly was responding to a vital public need, particularly with respect to the financing of premiums referable to automobile insurance, generally, and assigned risks, in particular. The legislation discloses a clear legislative design to erect safeguards around the financing of premiums for the protection not only of the insuring public but of the insurers themselves. In view of the General Assembly's obvious recognition of the public interest in connection with the subject of the financing of premiums, serious questions must arise as to whether any insurer which refuses recognition to premium service arrangements complying with the Act is serving the public trust implicit in its being licensed by South Carolina.

One Month Short Rate Table

Days Policy in Force Percent of One Month Premium

1.................... 11%

2.................... 17

3.................... 20

4.................... 24

5.................... 27

6.................... 30

7.................... 34

8.................... 37

9.................... 40

10.................... 43

11.................... 47

12.................... 50

13.................... 53

14.................... 57

15.................... 60

16.................... 63

17.................... 65

18.................... 68

19.................... 70

20.................... 73

21.................... 76

22.................... 78

23.................... 81

24.................... 84

25.................... 86

26.................... 89

27.................... 92

28.................... 94

29.................... 97

30.................... 100

Two Month Short Rate Table

Days Policy in Force Percent of Two Month Premium

1.................... 8%

2.................... 11

3.................... 14

4.................... 17

5.................... 19

6.................... 20

7.................... 22

8.................... 24

9.................... 25

10.................... 27

11.................... 29

12.................... 30

13.................... 32

14.................... 34

15.................... 35

16.................... 37

17.................... 38

18.................... 40

19.................... 42

20.................... 43

21.................... 45

22.................... 47

23.................... 48

24.................... 50

25.................... 52

26.................... 53

27.................... 55

28.................... 57

29.................... 58

30.................... 60

31.................... 61

32.................... 63

33.................... 64

34.................... 65

35.................... 67

36.................... 68

37.................... 69

38.................... 71

39.................... 72

40.................... 73

41.................... 75

42.................... 76

43.................... 77

44.................... 79

45.................... 80

46.................... 81

47.................... 83

48.................... 84

49.................... 85

50.................... 87

51.................... 88

52.................... 89

53.................... 91

54.................... 92

55.................... 93

56.................... 95

57.................... 96

58.................... 97

59.................... 99

60.................... 100

Three Month Short Rate Table

Days Policy in Force Percent of Three Month Premium

1.................... 6%

2.................... 7

3.................... 9

4.................... 12

5.................... 16

6.................... 17

7.................... 18

8.................... 19

9.................... 20

10.................... 21

11.................... 22

12.................... 23

13.................... 24

14.................... 26

15.................... 27

16.................... 28

17.................... 29

18.................... 30

19.................... 31

20.................... 32

21.................... 33

22.................... 34

23.................... 36

24.................... 37

25.................... 38

26.................... 39

27.................... 40

28.................... 41

29.................... 42

30.................... 43

31.................... 44

32.................... 46

33.................... 47

34.................... 48

35.................... 49

36.................... 50

37.................... 51

38.................... 52

39.................... 53

40.................... 54

41.................... 56

42.................... 57

43.................... 58

44.................... 59

45.................... 60

46.................... 61

47-48................. 62

49.................... 63

50.................... 65

51-52................. 66

53.................... 67

54.................... 68

55.................... 69

56-57................. 70

58.................... 71

59.................... 73

60-61................. 74

62.................... 75

63.................... 76

64.................... 77

65-66................. 78

67.................... 79

68.................... 81

69-70................. 82

71.................... 83

72.................... 84

73.................... 85

74-75................. 86

76.................... 87

77.................... 89

78-79................. 90

80.................... 91

81.................... 92

82.................... 93

83-84................. 94

85.................... 95

86.................... 97

87-88................. 98

89.................... 99

90-92................. 100

Four Month Short Rate Table

Days Policy in Force Percent of Four Month Premium

1................... 7%

2................... 8

3................... 10

4................... 11

5................... 13

6................... 14

7................... 16

8................... 17

9................... 18

10................... 19

11-12................ 20

13................... 21

14................... 22

15................... 23

16-17................ 24

18................... 25

19................... 26

20................... 27

21................... 28

22-23................ 29

24................... 30

25................... 31

26................... 32

27................... 33

28-29................ 34

30................... 35

31................... 36

32................... 37

33-34................ 38

35................... 39

36................... 40

37................... 41

38................... 42

39-40................ 43

41................... 44

42................... 45

43................... 46

44-45................ 47

46................... 48

47................... 49

48................... 50

49................... 51

50-51................ 52

52................... 53

53................... 54

54................... 55

55................... 56

56-57................ 57

58................... 58

59................... 59

60................... 60

61-62................ 61

63................... 62

64-65................ 63

66................... 64

67-68................ 65

69................... 66

70-71................ 67

72................... 68

73-74................ 69

75-76................ 70

77................... 71

78-79................ 72

80................... 73

81-82................ 74

83................... 75

84-85................ 76

86................... 77

87-88................ 78

89................... 79

90-91................ 80

92................... 81

93-94................ 82

95................... 83

96-97................ 84

98................... 85

99-100............... 86

101................... 87

102-103............... 88

104................... 89

105-106............... 90

107................... 91

108-109............... 92

110................... 93

111-112............... 94

113-114............... 95

115................... 96

116-117............... 97

118................... 98

119-120............... 99

121-122............... 100

Five Month Short Rate Table

Days Policy in Force Percent of Five Month Premium

1................... 6%

2................... 8

3................... 9

4................... 10

5................... 11

6................... 12

7................... 14

8................... 15

9................... 16

10................... 17

11-12................ 18

13................... 19

14-15................ 20

16................... 21

17-18................ 22

19................... 23

20-21................ 24

22................... 25

23-24................ 26

25-26................ 27

27................... 28

28................... 29

29-30................ 30

31................... 31

32-33................ 32

34................... 33

35-36................ 34

37-38................ 35

39................... 36

40-41................ 37

42................... 38

43................... 39

44-45................ 40

46-47................ 41

48................... 42

49-50................ 43

51................... 44

52-53................ 45

54................... 46

55-56................ 47

57................... 48

58-59................ 49

60-61................ 50

62................... 51

63................... 52

64-65................ 53

66................... 54

67-68................ 55

69................... 56

70-71................ 57

72-73................ 58

74................... 59

75-76................ 60

77-78................ 61

79................... 62

80-81................ 63

82-83................ 64

84-85................ 65

86-87................ 66

88-89................ 67

90-91................ 68

92-93................ 69

94-95................ 70

96................... 71

97-98................ 72

99-100............... 73

101-102............... 74

103-104............... 75

105-106............... 76

107-108............... 77

109-110............... 78

111-112............... 79

113................... 80

114-115-116........... 81

117................... 82

118-119............... 83

120-121............... 84

122-123............... 85

124-125............... 86

126-127............... 87

128-129............... 88

130-131............... 89

132-133............... 90

134................... 91

135-136............... 92

137-138............... 93

139-140............... 94

141-142............... 95

143-144............... 96

145-146............... 97

147-148............... 98

149-150............... 99

151-152............... 100

Six Month Short Rate Table

Days Policy in Force Percent of Six Month Premium

1................... 6%

2................... 7

3................... 8

4................... 9

5................... 10

6................... 11

7................... 12

8................... 13

9................... 14

10................... 15

11................... 16

12................... 17

13-14................ 18

15-16................ 19

17-18................ 20

19-20................ 21

21................... 22

22-23................ 23

24-25................ 24

26-27................ 25

28-29................ 26

30-31................ 27

32................... 28

33-34................ 29

35-36................ 30

37-38................ 31

39-40................ 32

41................... 33

42-43................ 34

44-45................ 35

46-47................ 36

48-49................ 37

50-51................ 38

52................... 39

53-54................ 40

55-56................ 41

57-58................ 42

59-60................ 43

61-62................ 44

63................... 45

64-65................ 46

66-67................ 47

68-69................ 48

70-71................ 49

72-73................ 50

74................... 51

75-76................ 52

77-78................ 53

79-80................ 54

81-82................ 55

83................... 56

84-85................ 57

86-87................ 58

88-89................ 59

90-91................ 60

92-93................ 61

94-95................ 62

96-98................ 63

99-100............... 64

101-102............... 65

103-104............... 66

105-107............... 67

108-109............... 68

110-111............... 69

112-114............... 70

115-116............... 71

117-118............... 72

119-120............... 73

121-123............... 74

124-125............... 75

126-127............... 76

128-130............... 77

131-132............... 78

133-134............... 79

135-136............... 80

137-139............... 81

140-141............... 82

142-143............... 83

144-145............... 84

146-148............... 85

149-150............... 86

151-152............... 87

153-155............... 88

156-157............... 89

158-159............... 90

160-161............... 91

162-164............... 92

165-166............... 93

167-168............... 94

169-171............... 95

172-173............... 96

174-175............... 97

176-177............... 98

178-180............... 99

181-184............... 100

Seven Month Short Rate Table

Days Policy in Force Percent of Seven Month Premium

1................... 6%

2................... 7

3................... 8

4................... 9

5-6................. 10

7................... 11

8................... 12

9................... 13

10................... 14

11................... 15

12-13................ 16

14................... 17

15-16-17............. 18

18................... 19

19-20-21............. 20

22-23................ 21

24-25................ 22

26-27................ 23

28-29-30............. 24

31................... 25

32-33-34............. 26

35-36................ 27

37-38................ 28

39-40................ 29

41-42................ 30

43-44................ 31

45-46................ 32

47-48................ 33

49-50-51............. 34

52-53................ 35

54-55................ 36

56-57................ 37

58-59................ 38

60-61................ 39

62-63................ 40

64-65-66............. 41

67................... 42

68-69-70............. 43

71-72................ 44

73-74................ 45

75-76................ 46

77-78-79............. 47

80................... 48

81-82-83............. 49

84-85................ 50

86-87................ 51

88-89................ 52

90-91................ 53

92-93................ 54

94-95................ 55

96-97................ 56

98-99-100............ 57

101-102............... 58

103-104............... 59

105-106............... 60

107-108-109........... 61

110-111............... 62

112-113-114........... 63

115-116............... 64

117-118-119........... 65

120-121-122........... 66

123-124-125........... 67

126-127............... 68

128-129-130........... 69

131-132-133........... 70

134-135............... 71

136-137-138........... 72

139-140............... 73

141-142-143........... 74

144-145-146........... 75

147-148-149........... 76

150-151............... 77

152-153-154........... 78

155-156-157........... 79

158-159............... 80

160-161-162........... 81

163-164............... 82

165-166-167........... 83

168-169-170........... 84

171-172............... 85

173-174-175........... 86

176-177-178........... 87

179-180-181........... 88

182-183............... 89

184-185-186........... 90

187-188............... 91

189-190-191........... 92

192-193............... 93

194-195-196........... 94

197-198-199........... 95

200-201-202........... 96

203-204-205........... 97

206-207............... 98

208-209-210........... 99

211-212-213........... 100

Eight Month Short Rate Table

Days Policy in Force Percent of Eight Month Premium

1................... 6%

2................... 7

3-4................. 8

5................... 9

6................... 10

7................... 11

8-9................. 12

10................... 13

11-12................ 14

13................... 15

14................... 16

15-16................ 17

17-18-19............. 18

20-21................ 19

22-23-24............. 20

25-26................ 21

27-28................ 22

29-30-31............. 23

32-33-34............. 24

35-36................ 25

37-38................ 26

39-40-41............. 27

42-43................ 28

44-45-46............. 29

47-48................ 30

49-50................ 31

51-52-53............. 32

54-55................ 33

56-57-58............. 34

59-60................ 35

61-62................ 36

63-64-65............. 37

66-67-68............. 38

69-70................ 39

71-72................ 40

73-74-75............. 41

76-77................ 42

78-79-80............. 43

81-82................ 44

83-84................ 45

85-86-87............. 46

88-89-90............. 47

91-92................ 48

93-94................ 49

95-96-97............. 50

98-99................ 51

100-101-102........... 52

103-104............... 53

105-106............... 54

107-108-109........... 55

110-111............... 56

112-113-114........... 57

115-116............... 58

117-118............... 59

119-120-121........... 60

122-123-124........... 61

125-126-127........... 62

128-129-130........... 63

131-132-133........... 64

134-135-136........... 65

137-138-139........... 66

140-141-142........... 67

143-144-145........... 68

146-147-148........... 69

149-150-151-152....... 70

153-154............... 71

155-156-157-158....... 72

159-160............... 73

161-162-163-164....... 74

165-166............... 75

167-168-169-170....... 76

171-172-173........... 77

174-175-176........... 78

177-178-179........... 79

180-181-182........... 80

183-184-185........... 81

186-187-188........... 82

189-190-191........... 83

192-193-194........... 84

195-196-197........... 85

198-199-200........... 86

201-202-203........... 87

204-205-206........... 88

207-208-209........... 89

210-211-212........... 90

213-214-215........... 91

216-217-218........... 92

219-220-221........... 93

222-223-224........... 94

225-226-227-228....... 95

229-230............... 96

231-232-233-234....... 97

235-236............... 98

237-238-239-240....... 99

241-242-243........... 100

Nine Month Short Rate Table

Days Policy in Force Percent of Nine Month Premium

1................... 5%

2-3................. 7

4................... 8

5-6................. 9

7................... 10

8-9................. 11

10................... 12

11-12................ 13

13................... 14

14-15................ 15

16................... 16

17-18-19............. 17

20-21-22............. 18

23-24................ 19

25-26-27............. 20

28-29-30............. 21

31-32................ 22

33-34-35............. 23

36-37-38............. 24

39-40................ 25

41-42-43............. 26

44-45-46............. 27

47-48-49............. 28

50-51-52............. 29

53-54-55............. 30

56-57................ 31

58-59-60............. 32

61-62................ 33

63-64-65............. 34

66-67-68............. 35

69-70................ 36

71-72-73............. 37

74-75-76............. 38

77-78-79............. 39

80-81-82............. 40

83-84-85............. 41

86-87................ 42

88-89-90............. 43

91-92-93............. 44

94-95................ 45

96-97-98............. 46

99-100-101........... 47

102-103............... 48

104-105-106........... 49

107-108-109........... 50

110-111-112........... 51

113-114-115........... 52

116-117............... 53

118-119-120........... 54

121-122-123........... 55

124-125............... 56

126-127-128........... 57

129-130-131........... 58

132-133............... 59

134-135-136........... 60

137-138-139-140....... 61

141-142-143........... 62

144-145-146-147....... 63

148-149-150........... 64

151-152-153-154....... 65

155-156-157........... 66

158-159-160........... 67

161-162-163........... 68

164-165-166-167....... 69

168-169-170-171....... 70

172-173-174........... 71

175-176-177-178....... 72

179-180-181........... 73

182-183-184........... 74

185-186-187........... 75

188-189-190-191....... 76

192-193-194-195....... 77

196-197-198........... 78

199-200-201-202....... 79

203-204-205........... 80

206-207-208........... 81

209-210-211........... 82

212-213-214-215....... 83

216-217-218........... 84

219-220-221-222....... 85

223-224-225-226....... 86

227-228-229........... 87

230-231-232........... 88

233-234-235........... 89

236-237-238-239....... 90

240-241-242........... 91

243-244-245-246....... 92

247-248-249........... 93

250-251-252-253....... 94

254-255-256........... 95

257-258-259........... 96

260-261-262-263....... 97

264-265-266........... 98

267-268-269-270....... 99

271-272-273-274....... 100

Ten Month Short Rate Table

Days Policy in Force Percent of Ten Month Premium

1.................... 5%

2.................... 6

3.................... 7

4-5.................. 8

6-7.................. 9

8.................... 10

9-10................. 11

11-12................. 12

13.................... 13

14-15................. 14

16-17................. 15

18.................... 16

19-20-21.............. 17

22-23-24.............. 18

25-26-27.............. 19

28-29-30.............. 20

31-32-33.............. 21

34-35-36.............. 22

37-38-39.............. 23

40-41-42.............. 24

43-44-45.............. 25

46-47-48.............. 26

49-50-51-52........... 27

53-54................. 28

55-56-57.............. 29

58-59-60-61........... 30

62-63................. 31

64-65-66-67........... 32

68-69................. 33

70-71-72.............. 34

73-74-75-76........... 35

77-78................. 36

79-80-81-82........... 37

83-84-85.............. 38

86-87................. 39

88-89-90-91........... 40

92-93-94.............. 41

95-96-97.............. 42

98-99-100............. 43

101-102-103............ 44

104-105-106............ 45

107-108-109............ 46

110-111-112............ 47

113-114-115............ 48

116-117-118............ 49

119-120-121-122........ 50

123-124................ 51

125-126-127............ 52

128-129-130............ 53

131-132-133............ 54

134-135-136-137........ 55

138-139................ 56

140-141-142............ 57

143-144-145-146........ 58

147-148................ 59

149-150-151-152........ 60

153-154-155-156........ 61

157-158-159............ 62

160-161-162-163........ 63

164-165-166-167........ 64

168-169-170-171........ 65

172-173-174............ 66

175-176-177-178........ 67

179-180-181-182........ 68

183-184-185-186........ 69

187-188-189-190........ 70

191-192-193............ 71

194-195-196-197........ 72

198-199-200-201........ 73

202-203-204-205........ 74

206-207-208............ 75

209-210-211-212........ 76

213-214-215-216-217.... 77

218-219-220............ 78

221-222-223-224........ 79

225-226-227............ 80

228-229-230-231-232.... 81

233-234-235............ 82

236-237-238-239........ 83

240-241-242............ 84

243-244-245-246-247.... 85

248-249-250-251........ 86

252-253-254............ 87

255-256-257-258........ 88

259-260-261-262........ 89

263-264-265-266........ 90

267-268-269............ 91

270-271-272-273........ 92

274-275-276-277........ 93

278-279-280-281........ 94

282-283-284-285........ 95

286-287-288............ 96

289-290-291-292........ 97

293-294-295-296........ 98

297-298-299-300........ 99

301-302-303-304........ 100

Eleven Month Short Rate Table

Days Policy in Force Percent of Eleven Month Premium

1.................... 5%

2.................... 6

3-4.................. 7

5.................... 8

6-7.................. 9

8-9.................. 10

10-11................. 11

12-13................. 12

14-15................. 13

16.................... 14

17-18................. 15

19-20................. 16

21-22-23.............. 17

24-25-26-27........... 18

28-29................. 19

30-31-32-33........... 20

34-35-36-37........... 21

38-39................. 22

40-41-42-43........... 23

44-45-46-47........... 24

48-49................. 25

50-51-52-53........... 26

54-55-56-57........... 27

58-59-60.............. 28

61-62-63.............. 29

64-65-66-67........... 30

68-69-70.............. 31

71-72-73.............. 32

74-75-76.............. 33

77-78-79-80........... 34

81-82-83.............. 35

84-85-86.............. 36

87-88-89-90........... 37

91-92-93.............. 38

94-95-96.............. 39

97-98-99-100.......... 40

101-102-103-104........ 41

105-106................ 42

107-108-109-110........ 43

111-112-113-114........ 44

115-116................ 45

117-118-119-120........ 46

121-122-123-124........ 47

125-126................ 48

127-128-129-130........ 49

131-132-133-134........ 50

135-136-137............ 51

138-139-140............ 52

141-142-143............ 53

144-145-146-147........ 54

148-149-150............ 55

151-152-153............ 56

154-155-156-157........ 57

158-159-160............ 58

161-162-163............ 59

164-165-166-167........ 60

168-169-170-171........ 61

172-173-174-175........ 62

176-177-178-179-180.... 63

181-182-183............ 64

184-185-186-187-188.... 65

189-190-191-192........ 66

193-194-195-196........ 67

197-198-199-200........ 68

201-202-203-204........ 69

205-206-207-208-209.... 70

210-211-212-213........ 71

214-215-216-217........ 72

218-219-220-221........ 73

222-223-224-225........ 74

226-227-228-229........ 75

230-231-232-233-234.... 76

235-236-237-238........ 77

239-240-241-242........ 78

243-244-245-246-247.... 79

248-249-250............ 80

251-252-253-254-255.... 81

256-257-258............ 82

259-260-261-262-263.... 83

264-265-266-267........ 84

268-269-270-271........ 85

272-273-274-275-276.... 86

277-278-279-280........ 87

281-282-283-284........ 88

285-286-287-288........ 89

289-290-291-292........ 90

293-294-295-296........ 91

297-298-299-300-301.... 92

302-303-304............ 93

305-306-307-308-309.... 94

310-311-312-313........ 95

314-315-316-317........ 96

318-319-320-321-322.... 97

323-324-325............ 98

326-327-328-329-330.... 99

331-332-333-334-335.... 100

One Year Short Rate Table

Days Policy in Force Percent of One Year Premium

1................... 5%

2................... 6

3-4................. 7

5-6................. 8

7-8................. 9

9-10................ 10

11-12................ 11

13-14................ 12

15-16................ 13

17-18................ 14

19-20................ 15

21-22................ 16

23-25................ 17

26-29................ 18

30-32................ 19

33-36................ 20

37-40................ 21

41-43................ 22

44-47................ 23

48-51................ 24

52-54................ 25

55-58................ 26

59-62................ 27

63-65................ 28

66-69................ 29

70-73................ 30

74-76................ 31

77-80................ 32

81-83................ 33

84-87................ 34

88-91................ 35

92-94................ 36

95-98................ 37

99-102............... 38

103-105............... 39

106-109............... 40

110-113............... 41

114-116............... 42

117-120............... 43

121-124............... 44

125-127............... 45

128-131............... 46

132-135............... 47

136-138............... 48

139-142............... 49

143-146............... 50

147-149............... 51

150-153............... 52

154-156............... 53

157-160............... 54

161-164............... 55

165-167............... 56

168-171............... 57

172-175............... 58

176-178............... 59

179-182............... 60

183-187............... 61

188-191............... 62

192-196............... 63

197-200............... 64

201-205............... 65

206-209............... 66

210-214............... 67

215-218............... 68

219-223............... 69

224-228............... 70

229-232............... 71

233-237............... 72

238-241............... 73

242-246............... 74

247-250............... 75

251-255............... 76

256-260............... 77

261-264............... 78

265-269............... 79

270-273............... 80

274-278............... 81

279-282............... 82

283-287............... 83

288-291............... 84

292-296............... 85

297-301............... 86

302-305............... 87

306-310............... 88

311-314............... 89

315-319............... 90

320-323............... 91

324-328............... 92

329-332............... 93

333-337............... 94

338-342............... 95

343-346............... 96

347-351............... 97

352-355............... 98

356-360............... 99

361-365............... 100

69-11.1. Regulation of Credit Insurance.

This regulation replaces Regulation 69-11 and provides one comprehensive regulation for all insurance sold in connection with the Consumer Finance Act or the Consumer Protection Code, as amended.

A. Background and Purpose. 1976 Code Sections 34-29-10 et seq. is known as the Consumer Finance Act and provides that accident and health or property insurance sold in conjunction with consumer loans, as defined in Act 988, shall be subject to rules and regulations adopted by the South Carolina Insurance Commission. Such rules and regulations are contained in Regulation 69-11 issued October 13, 1967. 1976 Code Title 37 is known as the South Carolina Consumer Protection Code. Act 686 of 1976 amended Act 1241 in many particulars, but neither Act 1241 nor Act 686 amended any of the insurance or provisions of 1976 Code Sections 34-29-10 et seq., except to provide that such sections shall apply only to restricted loans and restricted lenders, as defined in Act 686. It is the purpose of this Regulation to replace Regulation 69-11 and provide one comprehensive regulation for all insurance sold in connection with the Consumer Finance Act (1976 Code Sections 34-29-10 et seq) or the Consumer Protection Code (1976 Code Title 37 as amended by Act 686 of 1976).

B. Definitions. For the purpose of this Regulation definitions of words or phrases herein relating to types of loans and other financial transactions on which insurance is permitted and relating to all types of lenders and financial organizations that are subject to the types of supervision or regulation as defined in the Consumer Finance Act or the Consumer Protection Code, shall be those definitions set forth in said Act and said Code, respectively.

C. Provisions Applicable to Restricted Loans and Restricted Lenders.

(1) Forms.

(a) General: All forms of policies, certificates, or other evidence of insurance used in South Carolina or covering South Carolina lives, property or interests must be filed with and approved by the Chief Insurance Commissioner before use in this State. Forms offered for filing and approval must be submitted in duplicate and, if approved for use in the State, one counterpart of each form will be marked as approved and returned to the insurer affected to serve as evidence of compliance with the Act and Section 38-61-20 of the 1976 Code. Filing and approval of forms as required hereunder shall be deemed prima facie evidence of compliance with the provisions of the South Carolina Consumer Finance Act by the insurer and the agent.

The Chief Insurance Commissioner shall disapprove any form if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or which encourages misrepresentation of coverage or is contrary to any provision of the South Carolina Code of Laws or any rule or regulation issued thereunder.

(b) Life Insurance: Where the borrower pays for the cost of credit life insurance written individually or under a group contract, no form will be approved unless the insurer can demonstrate that the coverage provided in such form bears a reasonable and bona fide relation to the hazard or risk of loss to be assumed by the insurer proposing to issue such form of contract.

No form providing level term life insurance will be approved unless the insurer offering such form can demonstrate to the satisfaction of the Commission that the coverage provided thereunder is a lawful requirement of the Act.

If individual life insurance policies do not state the reserve method used by the insurer, the insurer must notify the Insurance Department of its reserve method pursuant to Sections 38-5-60, 38-9-170, and 38-9-180 of the 1976 Code.

(c) Accident and Health Insurance: All coverages must be written on forms providing for a maximum three (3) day waiting period for a covered disability with benefits to be retroactive to the first day of disability.

(d) Property Insurance: Property insurance must cover the property of a borrower used to secure a loan, and the amount of insurance must not exceed the reasonable value of the property insured.

Single interest coverage and dual interest coverage may be offered pursuant to the Act, but the borrower must have the option to purchase either single interest or dual interest. If the lender does not represent an insurer writing dual interest property insurance, a reasonable effort must be made by the lender to obtain dual interest property insurance for the account of the borrower if he requests such coverage. When a borrower specifically requests dual interest coverage, he may also request a term of coverage to exceed the term of the secured loan.

No insurer or agent may lawfully issue a policy or charge an insurance premium to cover property securing a loan if such a property is not eligible for coverage under the forms approved for use by such insurer in this State.

(e) Non-Filing Insurance: Non-filing insurance is authorized under the provisions of the South Carolina Consumer Protection Code, and such coverage may be written on forms and rates as approved by the Chief Insurance Commissioner, provided that the premiums payable for such insurance in lieu of perfecting a security interest do not exceed the fees and charges authorized by law.

(2) Basic Statistical Plan. To comply with 1976 Code Section 34-29-160, which specifies that credit accident and health and credit property insurance rates shall be deemed excessive if the loss ratio resulting from their use may reasonably be expected to be less than fifty percent, the Commission has adopted a Basic Statistical Plan to be used by all insurers writing insurance pursuant to the Act. The data specified in the Basic Statistical Plan shall be filed under oath by March 1 of each year for the business of the preceding calendar year, and shall be submitted both as part of the Annual Statement, on forms prescribed by the Chief Insurance Commissioner, and as a separate document, sworn to by an officer of the company. The data required are:

Line of Insurance Direct Direct Direct Direct

Premiums Premiums Losses Losses

Written Earned Paid Incurred

(Deducting

Salvage)

Accident & Health (1) (2) (3) (4)

(1) Group and Individual

Accident and

Health

Property

(1) Automobile Fire and Theft

Single Interest

(2) Automobile Collision

Single Interest

(3) Household Goods

Single Interest

(4) Household Goods

Dual Interest

The definitions of Direct Premiums Written, Direct Premiums Earned, Direct Losses Paid (Deducting Salvage) and Direct Losses Incurred shall be the definitions applicable to the Annual Statement.

The Commission may take all reasonable steps to insure the accuracy of the data submitted. Failure of the entries submitted as part of the Annual Statement to agree with the corresponding entries submitted as a separate document will be prima facie evidence of inaccuracy. Other indications of possible inaccuracy may be investigated.

(3) Compilation of Statistics by Commission--Determination of Rates. As soon as practicable after March 1 of each year, after satisfying itself of the accuracy of the data submitted under the Basic Statistical Plan, the Commission will compile the total earned premiums and incurred losses for all insurers submitting data, for each line of insurance, for the preceding calendar year. These totals, together with such corresponding totals for previous calendar years as are available, will be adjusted to a common rate base, to determine the rate for each line of insurance which may reasonably be expected to produce a loss ratio of not less than fifty percent for the following calendar year. In making this determination the Commission shall give due consideration to past and prospective loss experience and to all other relevant factors within and outside of this State.

(4) Promulgation of Tentative Rates by Commission. On or before August 1 of each year, the Commission shall notify all insurers writing credit insurance under 1976 Code Sections 34-29-10 et seq, of the rates which it believes may reasonably be expected to produce a loss ratio of not less than fifty percent in the following calendar year. Every insurer which feels aggrieved by any of the rates so promulgated shall have fifteen days to request a public hearing with respect to such rate or rates. Following such hearing or hearings, the Commission shall either modify its previous determination or reaffirm it. Such modification or reaffirmation shall be made before October 1.

(5) Promulgation of Final Rates by Commission. On or before October 1 of each year, the Commission shall notify all insurers of the rates which shall become effective on new policies issued on or after January 1 of the following year.

(6) Filing of Rates by Insurers. On or before December 1 of each year, each insurer shall notify the Commission of its intention to use rates no higher than the final rates promulgated by the Commission for the lines of insurance which it writes.

D. Provisions Applicable to Lenders and Financial Organizations and to Loans and Other Financial Transactions Subject to Article 4 of the Consumer Protection Code [1976 Code Title 37, Chapter 4].

(1) Application. These provisions are applicable to insurance provided or to be provided in relation to a consumer credit sale, a consumer credit lease, or a consumer loan, other than as excepted in 1976 Code Section 37-4-102, Subsection (2) of the Consumer Protection Code.

(2) Forms.

(a) General: All forms of policies, certificates or other evidence of insurance used in South Carolina or covering South Carolina lives, property or interests must be filed with and approved by the Chief Insurance Commissioner before use in this State. Forms offered for filing and approval must be submitted in duplicate, and if approved for use in the State, one counterpart of each form will be marked as approved and returned to the insurer affected to serve as evidence of compliance with the South Carolina Consumer Protection Code and Section 38-61-20 of the 1976 Code. Filing and approval of forms as required hereunder shall be deemed prima facie evidence of compliance with the provisions of the South Carolina Consumer Protection Code by the insurer and the agent.

The Chief Insurance Commissioner shall disapprove any form if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or encourages misrepresentation of coverage, or is contrary to any provision of the South Carolina Code of Laws or any rule or regulation issued thereunder.

(b) Life Insurance: Where the borrower pays for the cost of credit life insurance written individually or under a group contract, no form will be approved unless the insurer can demonstrate that the coverage provided in such form bears a reasonable and bona fide relation to the hazard or risk of loss to be assumed by the insurer proposing to issue such form of contract.

If individual life insurance policies do not state the reserve method used by the insurer, the insurer must notify the Insurance Department of its reserve method pursuant to Sections 38-5-60, 38-9-170 and 38-9-180 of the 1976 Code.

(c) Accident and Health Insurance: All coverages of credit accident and health insurance written hereunder must be written on forms providing for either a fourteen (14) or thirty (30) day retroactive coverage.

(d) Property Insurance: Property insurance must cover the property of a borrower used to secure a loan, and the amount of insurance must not exceed the reasonable value of the property insured.

No insurer or agent may lawfully issue a policy or charge an insurance premium to cover property securing a loan if such property is not eligible for coverage under the forms approved for use by such insurer in this State.

(e) Non-Filing Insurance. Non-filing insurance is authorized under the provisions of the South Carolina Consumer Protection Code, and such coverage may be written on forms and rates as approved by the Chief Insurance Commissioner, provided that the premiums payable for such insurance in lieu of perfecting a security interest do not exceed the fees and charges authorized by law.

(3) Basic Statistical Plan. To comply with 1976 Code Section 37-4-203(4) of the South Carolina Consumer Protection Code, which provides that premium rates and premium rate levels for credit accident and health insurance shall be calculated to produce and maintain a ratio of losses incurred to premiums earned, or reasonably expected to be earned, of approximately fifty percent, the Commission has adopted a Basic Statistical Plan to be used by all insurers writing such insurance under the Code. The data specified in the Basic Statistical Plan shall be filed under oath by March 1 of each year for the business of the preceding calendar year, and shall be submitted both as a part of the Annual Statement, and on separate forms prescribed by the Chief Insurance Commissioner, sworn to by an officer of the company.

The Commission may take all reasonable steps to insure the accuracy of the data submitted. Failure of the entries submitted as a part of the Annual Statement to agree with the corresponding entries submitted on the separate forms prescribed by the Chief Insurance Commissioner will be deemed prima facie evidence of inaccuracy. Other indications of possible inaccuracy may be investigated.

(4) Compilation of Statistics by Commission--Determination of Rates. As soon as practicable after March 1 of each year, after satisfying itself of the accuracy of the data submitted under the Basic Statistical Plan, the Commission will compile the total earned premiums and incurred losses for all insurers submitting data, for such credit accident and health insurance, for the preceding calendar year. These totals, together with such corresponding totals for previous calendar years as are available, will be adjusted to a common rate base, to determine the rate for each plan of benefits and class of business for credit accident and health insurance which may be calculated to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of approximately fifty percent. In making this determination, the Commission shall give due consideration to past and prospective loss experience and to all other relevant factors within and outside of this State.

(5) Promulgation of Tentative Rates by Commission. On or before August 1 of each year, the Commission shall notify all insurers writing credit accident and health insurance through Supervised Lenders under the South Carolina Consumer Protection Code, of the rates which it believes may reasonably be expected to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of approximately fifty percent in the following calendar year. Every insurer which feels aggrieved by any of the rates so promulgated shall have fifteen days to request a public hearing with respect to such rate or rates. Following such hearing, or hearings if more than one, the Commission shall either modify its previous determination or reaffirm it. Such modification or reaffirmation shall be made before October 1.

(6) Promulgation of Final Rates by Commission. On or before October 1 of each year, the Commission shall notify all insurers of the rates which shall become effective on new policies of credit accident and health insurance issued hereunder on or after January 1 of the following year.

(7) Filing of Rates by Insurers. On or before December 1 of each year, each insurer shall notify the Commission of its intention to use rates no higher than the final rates of credit accident and health insurance promulgated by the Commission for the plan of benefits of such insurance which it writes.

(8) Implementation of this Regulation. The Basic Statistical Plan applicable to all credit insurance sold in conjunction with Restricted loans, as defined in B., shall be the Basic Statistical Plan prescribed by C.(2). This Plan shall be used for the recording of statistics by insurers for calendar year 1977, to be reported by March 1, 1978.

The Basic Statistical Plan applicable to all credit insurance sold in conjunction with Supervised Loans, as defined in B., shall be in conformance with D.(3), and as promulgated by Order 01-77.

The South Carolina Insurance Commission will notify all interested insurers by Order of any change in either Basic Statistical Plan applicable to the business of a calendar year by July 1 of the preceding calendar year.

69-12. Variable Contracts.

PART A--VARIABLE ANNUITIES

Article I: Authority.

Part A of this Regulation, applicable to variable annuities, is promulgated under the authority of S. C. Code Section 38-67-40 (1976).

Article II: Definitions.

As used in Part A of this Regulation:

(1) The term "variable annuity" shall mean any policy or contract which provides for annuity benefits which vary according to the investment experience of any separate account or accounts maintained by the insurer as to such policy or contract, as provided for in S. C. Code Section 38-67-10 (1976) or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

(2) "Agent" shall mean any individual licensed by the Commissioner as a life insurance agent.

(3) "Commissioner" shall mean the Chief Insurance Commissioner of South Carolina.

Article III: Qualification of Insurance Companies to Issue Variable Annuities.

(1) No insurance company shall deliver or issue for delivery variable annuities within this State unless (a) it is licensed or organized to do a life insurance or annuity business in this State, and (b) the Commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this State. In this connection, the Commissioner shall consider among other things:

(i) The history and financial condition of the company;

(ii) The character, responsibility and fitness of the officers and directors of the company;

(iii) The law and regulation under which the company is authorized in its state of domicile to issue variable annuities.

(2) If the company is a subsidiary of an admitted life insurance company, or affiliated with such company by common management or ownership, it may be deemed by the Commissioner to have satisfied the provisions of clause (b) of Paragraph (1) hereof if either it or such admitted life company satisfies the aforementioned provisions; provided, further, that companies licensed and having a satisfactory record of doing business in this State for a period of at least three years may be deemed to have satisfied the Commissioner with respect to clause (b) of Paragraph (1) above.

(3) Before any company shall deliver or issue for delivery variable annuities within this State it shall submit to the Commissioner (a) a general description of the kinds of variable annuities it intends to issue, (b) if requested by the Commissioner, a copy of the statutes and regulations of its state of domicile under which it is authorized to issue variable annuities, and (c) if requested by the Commissioner, biographical data with respect to officers and directors of the company on such forms as the Commissioner may approve.

Article IV: Separate Account.

A domestic company issuing variable annuities shall establish one or more separate accounts pursuant to S. C. Code Section 38-67-10 (1976), subject to the following provisions of this Article:

(1)(a) Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in Paragraph (1)(b), (i) amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this State governing the investments of life insurance companies, and (ii) the investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.



(b) Reserves for (i) benefits guaranteed as to dollar amount and duration, and (ii) funds guaranteed as to principal amount or stated rate of interest may be maintained in a separate account, if a portion of the assets of such separate account at least equal to such reserve liability is invested in accordance with the laws and regulations of this State governing the investments of life insurance companies. Such portion of the assets also shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

(c) With respect to 75% of the market value of the total assets in a separate account, no company shall purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States, if immediately after such purchase or acquisition the market value of such investment, together with prior investments of such separate account in such security taken at market, would exceed 10% of the market value of the assets of said separate account; provided, however, that the Commissioner may waive such limitation if, in his opinion, such waiver will not render the operation of such separate account hazardous to the public or policyholders in this State.

(d) Unless otherwise permitted by law or approved by the Commissioner, no company shall purchase or otherwise acquire for its separate accounts the voting securities of any issuer if as a result of such acquisition the insurance company and its separate accounts, in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer; provided, that the foregoing shall not apply with respect to securities held in separate accounts, the voting rights in which are exercisable only in accordance with instructions from persons having interest in such accounts.

(e) The limitations provided in Paragraphs (1)(c) and (1)(d) above shall not apply to the investment with respect to a separate account in the securities of an investment company registered under the Investment Company Act of 1940, provided that the investments of such investment company comply in substance with Paragraphs (1)(c) and (1)(d) hereof.

(2) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to such separate account; provided, that unless otherwise approved by the Commissioner, the portion, if any, of the assets of such separate account equal to the company's reserve liability with regard to the benefits and funds referred to in clauses (i) and (ii) of Paragraph (1)(b) shall be valued in accordance with the rules otherwise applicable to the company's assets.

(3) If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct.

(4) Notwithstanding any other provisions of law, a company may

(a) with respect to any separate account registered with the Securities and Exchange Commission as a unit investment trust, exercise voting rights in connection with any securities of a regulated investment company registered under the Investment Company Act of 1940 and held in such separate accounts in accordance with instructions from persons having interests in such accounts ratably as determined by the company, or

(b) with respect to any separate account registered with the Securities and Exchange Commission as a management investment company, establish for such account a committee, board, or other body, the members of which may or may not be otherwise affiliated with such company and may be elected to such membership by the vote of persons having interests in such account ratably as determined by the company. Such committee, board or other body may have the power, exercisable alone or in conjunction with others, to manage such separate account and the investment of its assets.

A company, committee, board or other body may make such other provisions in respect to any such separate account as may be deemed appropriate to facilitate compliance with requirements of any federal or state law now or hereafter in effect; provided that the Commissioner approves such provisions as not hazardous to the public or the company's policyholders in this State.

(5) No sale, exchange or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made (a) by a transfer of cash, or (b) by a transfer of securities having a valuation which could be readily determined in the marketplace, provided that such transfer of securities is approved by the Commissioner. The Commissioner may authorize other transfers among such accounts, if, in his opinion, such transfers would not be inequitable.

(6) The company shall maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities with respect to such account, except as may otherwise be approved by the Commissioner.

(7) Rules under any provision of the insurance laws of this State or any regulation applicable to the officers and directors of insurance companies with respect to conflict of interest shall also apply to members of any separate accounts committee, board or other similar body. No officer or director of such company nor any member of the committee, board or body of a separate account shall receive directly or indirectly any commission or any other compensation with respect to the purchase or sale of assets of such separate account.

Article V: Filing of Contracts.

The filing requirements applicable to variable annuities shall be those filing requirements otherwise applicable under existing statutes and regulations of this State with respect to individual and group life insurance and annuity contract form filings, to the extent appropriate.

Article VI: Variable Annuity Contracts.

(1) Any variable annuity providing benefits payable in variable amounts delivered or issued for delivery in this State shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will vary to reflect investment experience and shall contain on its first page a clear and prominent statement to the effect that the benefits thereunder are on a variable basis.

(2) Illustrations of benefits payable under any variable annuity shall not include projections of past investment experience into the future or attempted predictions of future investment experience; provided that nothing contained herein is intended to prohibit use of hypothetical assumed rates of return to illustrate possible levels of benefits.

(3) No individual variable annuity contract calling for the payment of periodic stipulated payments to the insurer shall be delivered or issued for delivery in this State unless it contains in substance the following provision or provisions which in the opinion of the Commissioner are more favorable to the holders of such contracts:

(a) A provision that there shall be a period of grace of 30 days or of one month, within which any stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract shall continue in force. The contract may include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values under the contract arising therefrom;

(b) A provision that, at any time within one year from the date of default, in making periodic stipulated payments to the insurer during the life of the annuitant and unless the cash surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by the contract, and of all indebtedness to the insurer on the contract, including interest. The contract may include a statement of the basis for determining the date as of which the amount to cover such overdue payments and indebtedness shall be applied to produce the values under the contract arising therefrom;

(4) Any variable annuity contract delivered or issued for delivery in this State shall stipulate the investment increment factors to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder, and may guarantee that expense and/or mortality results shall not adversely affect such dollar amounts. In the case of an individual variable annuity contract under which the expense and mortality results may adversely affect the dollar amount of benefits, the expense and mortality factors shall be stipulated in the contract.

In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:

(a) The annual net investment increment assumption shall not exceed 5% except with the approval of the Commissioner.

(b) To the extent that the level of benefits may be affected by future mortality results, the mortality factor shall be determined from the Annuity Mortality Table for 1949, ultimate, or any modification of that table not having a lower life expectancy at any age, or, if approved by the Commissioner, from another table.

"Expense" as used in this Paragraph, may exclude some or all taxes, as stipulated in the contract.

(5) The reserve liability for variable annuities shall be established pursuant to the requirements of S. C. Code Section 38-9-180 (1976) (the Standard Valuation Law) in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

Article VII: Nonforfeiture Benefits.

(1) This Article shall not apply to any (i) reinsurance, (ii) group annuity contract purchased in connection with one or more retirement plans or plans of deferred compensation established or maintained by or for one or more employers (including partnerships or sole proprietorships), employee organizations, or any combination thereof, or other than plans providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (iii) premium deposit fund, (iv) investment annuity, (v) immediate annuity, (vi) deferred annuity contract after annuity payments have commenced, (vii) reversionary annuity, or to any (viii) contract which is to be delivered outside this state through an agent or other representative of the company issuing the contract.

(2) To the extent that any variable annuity contract provides benefits which do not vary in accordance with the investment performance of a separate account before the annuity commencement date, such contract shall contain provisions which satisfy the requirements of Chapter 69 of Title 38 of 1976 Code, (the Standard Nonforfeiture Law for Deferred Annuities) and shall not otherwise be subject to this Article.

(3) In the case of a contract issued one hundred eighty (180) days after the effective date of this regulation, no variable annuity contract, except as stated in Paragraphs (1) and (2), shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Commissioner are at least as favorable to the contractholder, upon cessation of payment of considerations under the contract:

(a) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan described in the contract that complies with Paragraph (7). Such description will include a statement of the mortality table, if any, and guaranteed or assumed interest rates used in calculating annuity payments.

(b) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit as described in the contract that complies with Paragraph (8). The contract may provide that the company reserves the right, at its option, to defer the determination and payment of any cash surrender benefit for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such determination and payment impractical.

(c) A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.

(4) The minimum values as specified in this Article of any paid-up annuity, cash surrender or death benefits available under a variable annuity contract shall be based upon nonforfeiture amounts meeting the requirements of this paragraph.

The minimum nonforfeiture amount on any date prior to the annuity commencement date shall be an amount equal to the percentages of net considerations (as specified in Paragraph 5) increased (or decreased) by the net investment return allocated to the percentages of net considerations, which amount shall be reduced to reflect the effect of:

(i) any partial withdrawals from or partial surrenders of the contract;

(ii) the amount of any indebtedness on the contract, including interest due and accrued;

(iii) an annual contract charge not less than zero and equal to (a) the lesser of thirty dollars ($30.00) and 2% of the end of year contract value less (b) the amount of any annual contract charge deducted from any gross considerations credited to the contract during such contract year; and

(iv) a transaction charge of ten dollars ($10.00) for each transfer to another separate account or to another investment division within the same separate account.

"Net investment return" means the rate of investment return to be credited to the variable annuity contract in accordance with the terms of the contract after deductions for tax charges, if any, and for asset charges either at a rate not in excess of that stated in the contract, or in the case of a contract issued by a non-profit corporation under which the contractholder participates fully in the investment, mortality and expense experience of the account, in an amount not in excess of the actual expense not offset by other deductions. The net investment return to be credited to a contract shall be determined at least monthly.

The annual contract charge of thirty dollars ($30.00) and the transaction charge of ten dollars ($10.00) referred to above will be adjusted to reflect changes in the Consumer Price Index in accordance with Paragraph (6).

(5) The percentages of net considerations used to define the minimum nonforfeiture amount in Paragraph (4) shall meet the requirements of this paragraph.

(a) With respect to contracts providing for periodic considerations, the net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of thirty dollars ($30.00) and less a collection charge of one dollar and twenty-five cents ($1.25) per consideration credited to the contract during that contract year less any charges for premium taxes. The percentages of net considerations shall be sixty-five percent (65%) for the first contract year and eighty-seven and one-half percent (87 1/2 %) for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be sixty-five percent (65%) of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was sixty-five percent (65%).

(b) With respect to contracts providing for a single consideration, the net consideration used to define the minimum nonforfeiture amount shall be the gross consideration less a contract charge of seventy-five dollars ($75.00) and less any charge for premium taxes. The percentage of the net consideration shall be ninety percent (90%).

The annual contract charge of thirty dollars ($30.00), the collection charge of one dollar and twenty-five cents ($1.25) per collection, and the single consideration contract charge of seventy-five dollars ($75.00) referred to above, will be adjusted to reflect changes in the Consumer Price Index in accordance with Paragraph (6).

(6) Demonstration that a contract's nonforfeiture amounts comply with this Article shall be based on the following assumptions:

(a) Values should be tested at the ends of each of the first twenty (20) contract years;

(b) A net investment return of 7% per year should be used;

(c) If the contract provides for transfers to another separate account or to another investment division within the same separate account, one transfer per contract year should be assumed;

(d) In determining the state premium tax, if any, applicable to the contract, the state of residence should be assumed to equal the state of delivery;

(e) With respect to contracts providing for periodic considerations, monthly considerations of $100 should be assumed for each of the first 240 months;

(f) With respect to contracts providing for a single consideration, a $10,000 single consideration should be assumed; and

(g) The following contract charges should be used:

(1) For contracts filed in 1980 or earlier, the annual contract charge of thirty dollars ($30.00) referred to in Paragraphs (4) and (5), the charge of ten dollars ($10.00) per transfer referred to in Paragraph (4), the collection charge of one dollar and twenty-five cents ($1.25) per consideration referred to in Paragraph (5), and the contract charge of seventy-five dollars ($75.00) referred to in Paragraph (5)(b).

(2) For contracts filed in 1981 or later, the above contract charges multiplied by the ratio of (i) the Consumer Price Index for June of the calendar year preceding the date of filing, to (ii) the Consumer Price Index for June, 1979.

(h) If the contract provides for allocation of considerations to both fixed and variable accounts, 100% of the considerations should be assumed to be allocated to the variable account.

As used herein, the Consumer Price Index means such Index for all urban consumers for all items as published by the Bureau of Labor Statistics of the United States Department of Labor or its successor.

If publication of the Consumer Price Index ceases, or if such Index otherwise becomes unavailable or is altered in such a way as to be unusable, the Commissioner will substitute an index he deems to be suitable.

(7) Any paid-up annuity benefit available under a variable annuity contract shall be such that its present value on the annuity commencement date is at least equal to the minimum nonforfeiture amount on the date. Such present value shall be computed using the mortality table, if any, and the guaranteed or assumed interest rates used in calculating the annuity payments.

(8) For variable annuity contracts which provide cash surrender benefits, the cash surrender benefit at any time prior to the annuity commencement date shall not be less than the minimum nonforfeiture amount next computed after the request for surrender is received by the company. The death benefit under such contracts shall be at least equal to the cash surrender benefits.

(9) Any variable annuity contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the annuity commencement date shall include a statement in a prominent place in the contract that such benefits are not provided.

(10) Notwithstanding the requirements of this Article, a variable annuity contract may provide under the situations specified in (a) or (b) below that the company, at its option, may cancel the annuity and pay the contractholder its accumulated value and by such payment be released of any further obligation under such contract:

(a) if at the time the annuity becomes payable the accumulated value is less than $2,000, or would provide an income the initial amount of which is less than $20 per month; or

(b) if prior to the time the annuity becomes payable under a periodic payment variable annuity contract no considerations have been received under the contract for a period of two (2) full years and both (i) the total considerations paid prior to such period, reduced to reflect any partial withdrawals from or partial surrenders of the contract and (ii) the accumulated value, amount to less than $2,000.

(11) For any variable annuity contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of Paragraph (4), additional benefits payable (a) in the event of total and permanent disability, (b) as reversionary annuity or deferred reversionary annuity benefits, or (c) as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this Article. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.

Article VIII: Required Reports.

(1) Any company issuing individual variable annuities shall mail to the contractholder at least once in each contract year after the first at his last address known to the company, a statement or statements reporting the investments held in the separate account. The company shall submit annually to the Commissioner a statement of business of its separate account or accounts in such form as may be approved by the Commissioner.

(2) Any company issuing individual variable annuities shall mail to the contractholder at least once in each contract year after the first at his last address known to the company a statement reporting as of a date not more than four months previous to the date of mailing. In the case of an annuity contract under which payments have not yet commenced, the report shall contain (a) the number of accumulation units credited to such contract and the dollar value of a unit, or (b) the value of the contractholder's account.

Article IX: Foreign Companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to policyholders and the public which is substantially equal to that provided by these regulations, the Commissioner, to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with these regulations.

Article X: Qualifications of Agents for the Sale of Variable Annuities.

(1)(a) No person may sell or offer for sale in this state any variable annuity contract unless such person is an agent and has filed with the Commissioner, in a form satisfactory to the Commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable annuity contracts by any federal or state securities law.



(b) Any examination required by the Commissioner for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of this regulation, include such questions concerning the history, purpose, regulation, and sale of variable annuity contracts as the Commissioner deems appropriate.

(2) Any person qualified in this state under this Article to sell or offer to sell variable annuity contracts shall immediately report to the Commissioner:

(a) Any suspension or revocation of his agents license in any other state or territory of the United States;

(b) The imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable annuity contracts;

(c) Any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

(3) The Commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this Article to sell or offer to sell variable annuity contracts or impose monetary penalties upon any ground that would warrant similar disciplinary action arising out of the agent's sale of other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable annuity contracts.

PART B--VARIABLE LIFE INSURANCE

Article I: Authority.

Section 1. Authority.

Part B of this Regulation, applicable to variable life insurance, is promulgated under the authority of S. C. Code Section 38-67-40 (1976).

Article II: Definitions.

As used in Part B of this Regulation:

Section 1. Affiliate.

"Affiliate" of an insurer means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its separate accounts for which a specific fee or commission is charged; or any director, officer, partner, or employee of such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

Section 2. Agent.

"Agent" means any individual licensed by the Commissioner as a life insurance agent.

Section 3. Assumed Investment Rate.

"Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

Section 4. Benefit Base.

"Benefit base" means the amount to which the net investment return is applied.

Section 5. Commissioner.

"Commissioner" means the Chief Insurance Commissioner of South Carolina.

Section 6. Control.

"Control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non-management services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than ten (10) percent of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the Commissioner that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

Section 7. Flexible Premium Policy.

"Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy as defined in this Article.

Section 8. General Account.

"General account" means all assets of the insurer other than assets in separate accounts established pursuant to S. C. Code Section 38-67-10 (1976) or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

Section 9. Incidental Insurance Benefit.

"Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability benefits, guaranteed insurability options, family income, or term riders.

Section 10. May.

"May" is permissive.

Section 11. Minimum Death Benefit.

"Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

Section 12. Net Investment Return.

"Net Investment Return" means the rate of investment return in a separate account to be applied to the benefit base.

Section 13. Person.

"Person" means an individual, corporation, partnership, association, trust, or fund.

Section 14. Policy Processing Day.

"Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.

Section 15. Scheduled Premium Policy.

"Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

Section 16. Separate Account.

"Separate account" means a separate account established pursuant to S. C. Code Section 38-67-10 (1976), or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

Section 17. Shall.

"Shall" is mandatory.

Section 18. Variable Death Benefit.

"Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of any minimum death benefit.

Section 19. Variable Life Insurance Policy.

"Variable life insurance policy" means any individual policy which provides for life insurance the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, pursuant to S. C. Code Section 38-67-10 (1976), or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

Article III: Qualification of Insurer to Issue Variable Life Insurance.

The following requirements are applicable to all insurers either seeking authority to issue variable life insurance in this state or having authority to issue variable life insurance in this state.

Section 1. Licensing and Approval to do Business in this State.

An insurer shall not deliver or issue for delivery in this state any variable life insurance policies unless:

(a) the insurer is licensed or organized to do a life insurance business in this state;

(b) the insurer has obtained the written approval of the Commissioner for the issuance of variable life insurance policies in this state. The Commissioner shall grant such written approval only after he has found that:

(1) the plan of operation for the issuance of variable life insurance policies is not unsound;

(2) the general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this state; and

(3) the present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies is not likely to render its operation hazardous to the public or its policyholders in this state. The Commissioner shall consider, among other things:

(A) the history of operation and financial condition of the insurer;

(B) the qualifications, fitness, character, responsibility, reputation and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer;

(C) the applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose; and

(D) if the insurer is a subsidiary of, or is affiliated by common management or ownership with another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meets these standards.

Section 2. Filing for Approval to do Business in this State.

The Commissioner may, at his discretion, require that an insurer, before it delivers or issues for delivery any variable life insurance policy in this state, file with this Department the following information for the consideration of the Commissioner in making the determination required by Section 1, subsection (b) of this Article:

(a) copies of and a general description of the variable life insurance policies it intends to issue;

(b) a general description of the methods of operation of the variable life insurance business of the insurer, including methods of distribution of policies and the names of those persons or firms proposed to supply consulting, investment, administrative, custodial or distributive services to the insurer;

(c) with respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the issuer intends to follow for the investment of the assets held in such separate account, and a statement of procedures for changing such investment policy. The statement of investment policy shall include a description of the investment objectives intended for the separate account;

(d) a description of any investment advisory services contemplated as required by Section 10 of Article VI;

(e) a copy of the statutes and regulations of the state of domicile of the insurer under which it is authorized to issue variable life insurance policies;

(f) biographical data with respect to officers and directors of the insurer on forms approved by the Commissioner; and

(g) a statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

Section 3. Standards of Suitability.

Every insurer seeking approval to enter into the variable life insurance business in this state shall establish and maintain a written statement specifying the Standards of Suitability to be used by the insurer. Such Standards of Suitability shall specify that no recommendation shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy shall be issued in the absence of reasonable grounds to believe that the purchase of such policy is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or the agent making the recommendation.

Section 4. Use of Sales Materials.

An insurer authorized to transact variable life insurance business in this state shall not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this state which is false, misleading, deceptive, or inaccurate.

Section 5. Requirements Applicable to Contractual Services.

Any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial, or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Commissioner with any information or reports in connection with such services which the Commissioner may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with these regulations, and any other applicable law or regulations.

Section 6. Reports to the Commissioner.

Any insurer authorized to transact the business of variable life insurance in this state shall submit to the Commissioner, in addition to any other materials which may be required by this regulation or any other applicable laws or regulations:

(a) an Annual Statement of the business of its separate account or accounts in such forms as may be approved by the Commissioner; and

(b) prior to its use in this state, any information furnished to applicants as provided for in Article VII; and

(c) prior to its use in this state, the form of any of the Reports to Policyholders as provided for in Article IX; and

(d) such additional information concerning its variable life insurance operations or its separate accounts as the Commissioner shall deem necessary.

Any material submitted to the Commissioner under this Section shall be disapproved if it is found to be false, misleading, deceptive, or inaccurate in any material respect and, if previously distributed, the Commissioner shall require the distribution of amended material.

Section 7. Authority of Commissioner to Disapprove.

Any material required to be filed with and approved by the Commissioner shall be subject to disapproval if at any time it is found by him not to comply with the standards established in this regulation.

Article IV: Insurance Policy Requirements.

Policy Qualification. The Commissioner shall not approve any variable life insurance form filed pursuant to this regulation unless it conforms to the requirements of this Article.

Section 1. Filing of Variable Life Insurance Policies.

All variable life insurance policies, and all riders, endorsements, applications and other documents which are to be attached and made a part of the policy, and which relate to the variable nature of the policy, shall be filed with the Commissioner and approved by him prior to delivery or issuance for delivery in this state.

(a) The procedures and requirements for such filing and approval shall be, to the extent appropriate and not inconsistent with this regulation, the same as those otherwise applicable to other life insurance policies.

(b) The Commissioner may approve variable life insurance policies and related forms with provisions the Commissioner deems to be not less favorable to the policyholder and the beneficiary than those required by this regulation.

Section 2. Mandatory Policy Benefit and Design Requirements.

Variable life insurance policies delivered or issued for delivery in this state shall comply with the following minimum requirements.

(a) Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.

(b) For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy so long as premiums are duly paid [subject to the provisions of Section 4(b) of this Article];

(c) The policy shall reflect the investment experience of one or more separate accounts established and maintained by the insurer. The insurer must demonstrate that the reflection of investment experience in the variable life insurance policy is actuarially sound.

(d) Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

(e) Any changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

(f) The cash value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other non-forfeiture benefits, as described either in the policy or in a statement filed with the Commissioner of the state in which the policy is delivered, or issued for delivery, shall be in accordance with the actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other non-forfeiture benefits must be at least equal to the minimum values required by Chapter 63 of Title 38 of the 1976 Code (the Standard Nonforfeiture Law for Life Insurance) for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the Standard Nonforfeiture Law of this state. If the policy does not contain an assumed investment rate, this demonstration shall be based on the maximum interest rate permitted under the Standard Nonforfeiture Law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, but are not limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

(g) The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Commissioner.

Section 3. Mandatory Policy Provisions.

Every variable life insurance policy filed for approval in this state shall contain at least the following:

(a) The coverage page or pages corresponding to the cover page of each such policy shall contain:

(1) A prominent statement in either contrasting color or in boldface type that the amount or duration of death benefit may be variable or fixed under specified conditions;

(2) A prominent statement in either contrasting color or in boldface type that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;

(3) A statement describing any minimum death benefit required pursuant to Section 2(b) of this Article;

(4) The method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;

(5) A captioned provision that the policyholder may return the variable life insurance policy within 10 days of receipt of the policy by the policyholder, and receive a refund of premiums. Unless otherwise provided by state law, the policy may provide that the refund shall equal the total of all premium payments for the policy, or shall equal the sum of (A) the difference between the premiums paid including any policy fees or other charges and the amounts allocated to any separate accounts under the policy and (B) the value of the amounts allocated to any separate accounts under the policy, on the date the returned policy is received by the insurer or its agent.

(6) Such other items as are currently required for fixed benefit life insurance policies and which are not inconsistent with this regulation.

(b)(1) For scheduled premium policies, a provision for a grace period of not less than thirty-one days from the premium due date which shall provide that when the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.



(2) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the Report to Policyholders required by Section 3 of Article IX.

The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than 3 times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.

(c) For scheduled premium policies, a provision that the policy will be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

(1) All overdue premiums with interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy; or

(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding the policy loan interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy.

(d) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy;

(e) A provision designating the separate account to be used and stating that:

(1) The assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account.

(2) The assets of such separate account shall be valued as often as any policy benefits vary, but at least monthly.

(f) A provision specifying what documents constitute the entire insurance contract under state law;

(g) A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his behalf, shall be considered as representations and not warranties;

(h) An identification of the owner of the insurance contract;

(i) A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;

(j) A statement of any conditions or requirements concerning the assignment of the policy;

(k) A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

(l) A provision that the policy shall be incontestable by the insurer after two years from the date of issue, provided, however, that any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after two years from the date of issue of such increase;

(m) A provision stating that the investment policy of the separate account shall not be changed without the approval of the Commissioner of the state of domicile of the insurer, and that the approval process is on file with the Commissioner of this state;

(n) A provisions that payment of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred:

(1) For up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account, or

(2) Otherwise, for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impractical.

(o) If settlement options are provided, at least one such option shall be provided on a fixed basis only;

(p) A description of the basis for computing the cash value and the surrender value under the policy shall be included;

(q) Premiums or charges for incidental insurance benefits shall be stated separately;

(r) Any other policy provision required by this regulation;

(s) Such other items as are currently required for fixed benefit life insurance policies and are not inconsistent with this regulation.

(t) A provision for nonforfeiture insurance benefits. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available.

Section 4. Policy Loan Provisions.

Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state shall contain provisions which are not less favorable to the policyholder than the following:

(a) A provision for policy loans after the policy has been in force for three (3) full years which provides the following:

(1) At least 75% of the policy's cash surrender value may be borrowed.

(2) The amount borrowed shall bear interest at a rate not to exceed that permitted by state insurance law.

(3) Any indebtedness shall be deducted from the proceeds payable on death.

(4) Any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

(5) For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one days after the date of mailing of such notice. For flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following policy processing day exceed the amounts available under the policy to pay such charges, a report must be sent to the policyholder containing the information specified by Section 3 or Article IX.

(6) The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

(7) The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision.

(8) No policy loan provision is required if the policy is under the extended insurance nonforfeiture option.

(9) The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

(10) Amounts paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.

Section 5. Other Policy Provisions.

The following provision may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

(a) An exclusion for suicide within two (2) years of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may also provide an exclusion for suicide within two (2) years of any increase in death benefits which result from an application of the owner subsequent to the policy issue date;

(b) Incidental insurance benefits may be offered on a fixed or variable basis;

(c) Policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

(1) the amount of the dividend may be credited against premium payments;

(2) the amount of the dividend may be applied to provide amounts of additional fixed or variable benefit life insurance;

(3) the amount of the dividend may be deposited in the general account at a specified minimum rate of interest;

(4) the amount of the dividend may be applied to provide paid-up amounts of fixed benefit one-year term insurance;

(5) the amount of the dividend may be deposited as a variable deposit in a separate account.

(d) A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under Section 4 of this Article, except that a restriction may be imposed that no more than two consecutive premiums can be paid under this provision.

(e) A provision allowing the policyholder to make partial withdrawals;

(f) Any other policy provision approved by the Commissioner.

Article V: Reserve Liabilities for Variable Life Insurance.

(1) Reserve liabilities for variable life insurance policies shall be established under S. C. Code Section 38-9-180 (1976) (the Standard Valuation Law) in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

(2) For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, and shall be maintained in the general account of the insurer and shall not be less than the greater of the following minimum reserve:

(a) The aggregate total of the term costs, if any, covering a period of one full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate one-third depreciation in the current value of the assets in the separate account followed by a net investment return equal to the assumed investment rate; or

(b) The aggregate total of the "attained age level" reserved on each variable life insurance contract. The "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall equal the "residue", as described in Paragraph (1), of the prior year's "attained age level" reserve on the contract, with any such "residue", increased or decreased by a payment computed on an attained age basis as described in Paragraph (2) below.

(1) The "residue" of the prior year's "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the "excess", if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The "excess" referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.

(2) The payment referred to in Subsection 2(b) of this Article shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to (A) minus (B) minus (C), where (A) is the present value of the future guaranteed minimum death benefits, (B) is the present value of the future death benefits that would be payable in the absence of such guarantee, and (C) is any "residue", as described in Paragraph (1), of the prior year's "attained age level" reserve on such variable life insurance contract. If the contract is paid-up, the payment shall equal (A) minus (B) minus (C). The amounts of the future death benefits referred to in (B) shall be computed assuming a net investment return of the separate account which may differ from the assumed investment rate and/or the valuation interest but in no event may exceed the maximum interest rate permitted for the valuation of life contracts.

(c) The valuation interest rate and mortality table used in computing the two minimum reserves described in (a) and (b) above shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

(3) For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit shall be maintained in the general account of the insurer and shall not be less than the aggregate total of the term costs, if any, covering the period provided for in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate.

The valuation interest rate and mortality table used in computing this additional reserve, if any, shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

(4) Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable accidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account, in amounts determined in accordance with the actuarial procedures appropriate to such benefit.

Article VI: Separate Accounts.

The following requirements apply to the establishment and administration of variable life insurance separate accounts by any domestic insurer:

Section 1. Establishment and Administration of Separate Accounts.

Any domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to S. C. Code Section 38-67-10 (1976).

(a) If no law or other regulation provides for the custody of separate account assets and if such insurer is not the custodian of such separate account assets, all contracts for custody of such assets shall be in writing and the Commissioner shall have authority to review and approve of both the terms of any such contract and the proposed custodian prior to the transfer of custody.

(b) Such insurer shall not without prior written approval of the Commissioner employ in any material in connection with the handling of separate account assets any person who:

(1) within the last ten years has been convicted of any felony or a misdemeanor arising out of such person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of Sections 1341, 1342 or 1343 of Title 18, United States Code; or

(2) within the last ten years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or

(3) within the last ten years has been found by federal or state regulatory authorities to have violated or has acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.

(c) All persons with access to the cash, securities, or other assets of the separate account shall be under bond in such amounts as the Commissioner may in his discretion prescribe.

(d) The assets of such separate accounts shall be valued at least as often as variable benefits are determined but in any event at least monthly.

Section 2. Amounts in the Separate Account.

The insurer shall maintain in each separate account assets with a value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for such policies.

Section 3. Investments by the Separate Account.

(a) No sale, exchange, or other transfer of assets may be made by any insurer or any of its affiliates between any of its separate accounts or between any other investment account and one or more of its separate accounts unless:

(1) in case of transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made; and

(2) such transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the Commissioner in advance.

(b) The separate account shall have sufficient net investment income and readily marketable assets to meet anticipated withdrawals under policies funded by the account.

Section 4. Limitations on Ownership.

(a) A separate account shall not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after such purchase or acquisition the value of such investment, together with prior investments of such account in such security valued as required by these regulations, would exceed 10% of the value of the assets of the separate account. The Commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

(b) No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of such acquisition the insurer and its separate accounts in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer. The Commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of such securities.

(c) The percentage limitation specified in Subsection (a) of this Section shall not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the Investment Company Act of 1940 or other pools of investment assets if the investments and investment policies of such investment companies or asset pools comply substantially with the provisions of Section 3 of this Article and other applicable portions of this regulation.

Section 5. Valuation of Separate Account Assets.

Investments of the separate account shall be valued at their market value on the date of valuation, or at amortized cost if it approximates market value.

Section 6. Separate Account Investment Policy.

The investment policy of a separate account operated by a domestic insurer filed under Section 2(c) of Article II shall not be changed without first filing such change with the Commissioner.

(1) Any change filed pursuant to this Section shall be effective sixty days after the date it was filed with the Commissioner, unless the Commissioner notifies the insurer before the end of such sixty-day period of his disapproval of the proposed change. At any time the Commissioner may, after notice and public hearing, disapprove any change that has become effective pursuant to this Section.

(2) The Commissioner may disapprove the change if he determines that the change would be detrimental to the interests of the policyholders participating in such separate accounts.

Section 7. Charges Against Separate Account.

The insurer must disclose in writing, prior to or contemporaneously with delivery of the policy, all charges that may be made against the separate account, including, but not limited to, the following:

(1) taxes or reserves for taxes attributable to investment gains and income of the separate account;

(2) actual cost of reasonable brokerage fees and similar direct acquisition and sale costs incurred in the purchase or sale of separate account assets;

(3) actuarially determined costs of insurance (tabular costs) and the release of separate account liabilities;

(4) charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate account;

(5) a charge, at a rate specified in the policy, for mortality and expense guarantees;

(6) any amounts in excess of those required to be held in the separate accounts;

(7) charges for incidental insurance benefits.

Section 8. Standards of Conduct.

Every insurer seeking approval to enter into the variable life insurance business in this state shall adopt by formal action of its Board of Directors a written statement specifying the Standards of Conduct of the insurer, its officers, directors, employees, and affiliates with respect to the purchase or sale of investments of separate accounts. Such Standards of Conduct shall be binding on the insurer and those to whom it refers. A code or codes of ethics meeting the requirements of Section 17(j) under the Investment Company Act of 1940 and applicable rules and regulations thereunder shall satisfy the provisions of this Section.

Section 9. Conflicts of Interest.

Rules under any provision of the insurance laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body.

Section 10. Investment Advisory Services to a Separate Account.

An insurer shall not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to such insurer with respect to its separate accounts maintained for variable life insurance policies unless:

(1) the person providing such advice is registered as an investment adviser under the Investment Advice Act of 1940; or

(2) the person providing such advice is an investment manager under the Employee Retirement Income Security Act of 1974, with respect to the assets of each employee benefit plan allocated to the separate account; or

(3) the insurer has filed with the Commissioner and continues to file annually the following information and statements concerning the proposed advisor:

(a) the name and form of organization, state of organization, and its principal place of business;

(b) the names and addresses of its partners, officers, directors, and persons performing similar functions or, if such an investment advisory be an individual, of such individual;

(c) a written Standard of Conduct complying in substance with the requirements of Section B of this Article which has been adopted by the investment advisor and is applicable to the investment advisor, its officers, directors, and affiliates;

(d) a statement provided by the proposed advisor as to whether the advisor or any person associated therewith:

(i) has been convicted within ten years of any felony or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director of an insurance company, a banker, an insurance agent, a securities broker, or an investment advisor involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving the violation of Sections 1341, 1342, or 1343 of Title 18 of United States Code;

(ii) has been permanently or temporarily enjoined by an order, judgment or decree of any court of competent jurisdiction from acting as an investment advisor, underwriter, broker or dealer, or as an affiliated person or as an employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with any such activity;

(iii) has been found by federal or state regulatory authorities to have violated or have acknowledged violation of any provision of federal or state securities laws or state insurance laws or of any rule or regulation under any such laws; or

(iv) has been censured, denied an investment advisor registration, had a registration as an investment advisor revoked or suspended, or been barred or suspended from being associated with an investment advisor by order of federal or state regulatory authorities; and

(4) such investment advisory contract shall be in writing and provide that it may be terminated by the insurer without penalty to the insurer or the separate account upon no more than sixty days' written notice to the investment advisor.

The Commissioner may, after notice and opportunity for hearing, by order require such investment advisory contract to be terminated if he deems continued operation thereunder to be hazardous to the public or the insurer's policyholders.

Article VII: Information Furnished to Applicants.

An insurer delivering or issuing for delivery in this state any variable life insurance policies shall deliver to the applicant for such policy, and obtain a written acknowledgment of receipt from such applicant coincident with or prior to the execution of the application, the following information. The requirements of this Article shall be deemed to have been satisfied to the extent that a disclosure containing information required by this Article is delivered, either in the form of (1) a prospectus included in the requirements of the Securities Act of 1933 and which was declared effective by the Securities Exchange Commission; or (2) all information and reports required by the Employee Retirement Income Security Act of 1974 if the policies are exempted from the registration requirements of the Securities Act of 1933 pursuant to Section 3(a)(2) thereof.

(1) A summary explanation, in non-technical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation. Such explanation must include notices of the provision required by Article IV, Sections 3(a)(5) and 3(f).

(2) A statement of the investment policy of the separate account, including:

(a) a description of the investment objectives intended for the separate account and the principal types of investments intended to be made; and

(b) any restrictions or limitations on the manner in which the operations of the separate account are intended to be conducted.

(3) A statement of the net investment return of the separate account for each of the last ten years or such lesser period as the separate account has been in existence.

(4) A statement of the charges levied against the separate account during the previous year.

(5) A summary of the method to be used in valuing assets held by the separate account.

(6) A summary of the federal income tax aspects of the policy applicable to the insured, the policyholder, and the beneficiary.

(7) Illustrations of benefits payable under the variable life insurance contract. Such illustrations shall be prepared by the insurer and shall not include projections of past investment experience into the future or attempted predictions of future investments experience, provided that nothing contained herein prohibits use of hypothetical assumed rates of return to illustrate possible levels of benefits if it is made clear that such assumed rates are hypothetical only.

Article VIII: Applications.

The application for a variable life insurance policy shall contain:

(1) a prominent statement that the death benefit may be variable or fixed under specified conditions;

(2) a prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees);

(3) questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

Article IX: Reports to Policyholders.

Any insurer delivering or issuing for delivery in this state any variable life insurance policies shall mail to each variable life insurance policyholder at his or her last known address the following reports:

(1) Within thirty days after each anniversary of the policy, a statement or statements of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, any optional payments allowed pursuant to Section (4) of Article IV under the policy computed as of the policy anniversary date. Provided, however, that such statement may be furnished within thirty days after a specified date in each policy year so long as the information contained therein is computed as of a date not more than sixty days prior to the mailing of such notice. This statement shall state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and shall prominently identify any value described therein which may be recomputed prior to the next statement required by this Section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement shall be modified to so indicate. For flexible premium policies, the report must contain a reconciliation of the change since the previous report in cash value and cash surrender value, if different, because of payments made (less deductions for expense charges), withdrawals, investment experience, insurance charges and any other charges made against the cash value. In addition, the report must show the projected cash value and cash surrender value, if different, as of one year from the end of the period covered by the report assuming that: (i) planned periodic premiums, if any, are paid as scheduled; (ii) guaranteed costs of insurance are deducted; and (iii) the net return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not greater than zero. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

(2) Annually, a statement or statements including:

(a) a summary of the financial statement of the separate account based on the annual statement last filed with the Commissioner;

(b) the net investment return of the separate account for the last year and, for each year after the first, a comparison of the investment rate of the separate account during the last year with the investment rate during prior years, up to a total of not less than five years when available;

(c) a list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the Commissioner;

(d) any charges levied against the separate account during the previous year;

(e) a statement of any change, since the last report, in the investment objective and orientation of the separate account, in any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account or in the investment advisor of the separate account.

(3) For flexible premium policies, a report must be sent to the policyholder if the amounts available under the policy on any policy processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The report must indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of such amount.

Article X: Foreign Companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially similar to that provided by these regulations, the Commissioner to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with these regulations.

Article XI: Qualifications of Agents for the Sale of Variable Life Insurance.

(1) Qualification to Sell Variable Life Insurance.

(a) No person may sell or offer for sale in this state any variable life insurance policy unless such person is an agent and has filed with the Commissioner, in a form satisfactory to the Commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable life insurance.

(b) Any examination required by the Commissioner for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of this regulation, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the Commissioner deems appropriate.

(2) Reports of Disciplinary Actions. Any person qualified in this state under this Article to sell or offer to sell variable life insurance shall immediately report to the Commissioner:

(a) any suspension or revocation of his agent's license in any other state or territory of the United States;

(b) the imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable life insurance;

(c) any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

(3) Refusal to Qualify Agent to Sell Variable Life Insurance: Suspension, Revocation, or Non-renewal of Qualification. The Commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this Article to sell or offer to sell variable life insurance or impose monetary penalties upon any ground that would warrant similar disciplinary arising out of the agent's sale of other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable life insurance.

PART C--SEPARABILITY

If any provision of this Regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the Regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

PART D--EFFECTIVE DATE

This Regulation shall take effect on July 1, 1988.

HISTORY: Amended by State Register Volume 12, Issue No. 7, eff July 1, 1988.

69-12.1. Replacement of Life Insurance and Annuities.

Statutory Authority: 1976 Code Sections 1-23-10, 38-3-110, 38-57-60, 38-63-10, 38-63-20, 38-63-660, 38-65-10, 38-65-20, 38-69-10, 38-69-20, 38-69-330

Section 1. Purpose and Scope

A. The purpose of this regulation is:

(1) To regulate the activities of insurers and producers with respect to the replacement of existing life insurance and annuities.

(2) To protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions. It will:

(a) Assure that purchasers receive information with which a decision can be made in his or her own best interest;

(b) Reduce the opportunity for misrepresentation and incomplete disclosure; and

(c) Establish penalties for failure to comply with requirements of this regulation.

B. Unless otherwise specifically included, this regulation shall not apply to transactions involving:

(1) Credit life insurance;

(2) Group life insurance or group annuities where there is no direct solicitation of individuals by an insurance producer. Direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating or enrolling individuals or, when initiated by an individual member of the group, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual. Group life insurance or group annuity certificates marketed through direct response solicitation shall be subject to the provisions of Section 7;

(3) Group life insurance and annuities used to fund prearranged funeral contracts;

(4) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the director; or, when a term conversion privilege is exercised among corporate affiliates;

(5) Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company;

(6) (a) Policies or contracts used to fund (i) an employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA); (ii) a plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for purposes of ERISA, is established or maintained by an employer; (iii) a governmental or church plan defined in Section 414, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the Internal Revenue Code; or (iv) a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(b) Notwithstanding Subparagraph (a), this regulation shall apply to policies or contracts used to fund any plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after-tax basis, and where the insurer has been notified that plan participants may choose from among two (2) or more insurers and there is a direct solicitation of an individual employee by an insurance producer for the purchase of a contract or policy. As used in this subsection, direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating individuals about the plan or arrangement or enrolling individuals in the plan or arrangement or, when initiated by an individual employee, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual employee;

(7) Where new coverage is provided under a life insurance policy or contract and the cost is borne wholly by the insured's employer or by an association of which the insured is a member;

(8) Existing life insurance that is a non-convertible term life insurance policy that will expire in five (5) years or less and cannot be renewed;

(9) Immediate annuities that are purchased with proceeds from an existing contract. Immediate annuities purchased with proceeds from an existing policy are not exempted from the requirements of this regulation; or

(10) Structured settlements.

C. Registered contracts shall be exempt from the requirements of Sections 5.A.(2) and 6.B. with respect to the provision of illustrations or policy summaries; however, premium or contract contribution amounts and identification of the appropriate prospectus or offering circular shall be required instead.

Section 2. Definitions

A. "Direct-response solicitation" means a solicitation through a sponsoring or endorsing entity or individual solely through mails, telephone, the Internet or other mass communication media.

B. "Existing insurer" means the insurance company whose policy or contract is or will be changed or affected in a manner described within the definition of "replacement."

C. "Existing policy or contract" means an individual life insurance policy (policy) or annuity contract (contract) in force, including a policy under a binding or conditional receipt or a policy or contract that is within an unconditional refund period.

D. "Financed purchase" means the purchase of a new policy involving the actual or intended use of funds obtained by the withdrawal or surrender of, or by borrowing from values of an existing policy to pay all or part of any premium due on the new policy. For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same company within four (4) months before or thirteen (13) months after the effective date of the new policy, it will be deemed prima facie evidence of the policyholder's intent to finance the purchase of the new policy with existing policy values. This prima facie standard is not intended to increase or decrease the monitoring obligations contained in Section 4.A.(5) of this regulation.

E. "Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years as defined in Regulation 69-40.

F. "Policy summary," for the purposes of this regulation:

(1) For policies or contracts other than universal life policies, means a written statement regarding a policy or contract which shall contain to the extent applicable, but need not be limited to, the following information: current death benefit; annual contract premium; current cash surrender value; current dividend; application of current dividend; and amount of outstanding loan;

(2) For universal life policies, means a written statement that shall contain at least the following information: the beginning and end date of the current report period; the policy value at the end of the previous report period and at the end of the current report period; the total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders); the current death benefit at the end of the current report period on each life covered by the policy; the net cash surrender value of the policy as of the end of the current report period; and the amount of outstanding loans, if any, as of the end of the current report period.

G. "Producer," for the purpose of this regulation, shall be defined to include agents, brokers and producers.

H. "Replacing insurer" means the insurance company that issues or proposes to issue a new policy or contract that replaces an existing policy or contract or is a financed purchase.

I. "Registered contract" means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933.

J. "Replacement" means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be:

(1) Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated;

(2) Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

(3) Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

(4) Reissued with any reduction in cash value; or

(5) Used in a financed purchase.

K. "Sales material" means a sales illustration and any other written, printed or electronically presented information created, or completed or provided by the company or producer and used in the presentation to the policy or contract owner related to the policy or contract purchased.

Section 3. Duties of Producers

A. A producer who initiates an application shall submit to the insurer, with or as part of the application, a statement signed by both the applicant and the producer as to whether the applicant has existing policies or contracts. If the answer is "no," the producer's duties with respect to replacement are complete.

B. If the applicant answered "yes" to the question regarding existing coverage referred to in Subsection A, the producer shall present and read to the applicant, not later than at the time of taking the application, a notice regarding replacements in the form as described in Appendix A or other substantially similar form approved by the director. However, no approval shall be required when amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. The notice shall be signed by both the applicant and the producer attesting that the notice has been read aloud by the producer or that the applicant did not wish the notice to be read aloud (in which case the producer need not have read the notice aloud) and left with the applicant.

C. The notice shall list all life insurance policies or annuities proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and policy or contract number if available; and shall include a statement as to whether each policy or contract will be replaced or whether a policy will be used as a source of financing for the new policy or contract. If a policy or contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.

D. In connection with a replacement transaction the producer shall leave with the applicant at the time an application for a new policy or contract is completed the original or a copy of all sales material. With respect to electronically presented sales material, it shall be provided to the policy or contract owner in printed form no later than at the time of policy or contract delivery.

E. Except as provided in Section 5.C., in connection with a replacement transaction the producer shall submit to the insurer to which an application for a policy or contract is presented, a copy of each document required by this section, a statement identifying any preprinted or electronically presented company approved sales materials used, and copies of any individualized sales materials, including any illustrations related to the specific policy or contract purchased.

Section 4. Duties of Insurers that Use Producers

Each insurer shall:

A. Maintain a system of supervision and control to insure compliance with the requirements of this regulation that shall include at least the following:

(1) Inform its producers of the requirements of this regulation and incorporate the requirements of this regulation into all relevant producer training manuals prepared by the insurer;

(2) Provide to each producer a written statement of the company's position with respect to the acceptability of replacements providing guidance to its producer as to the appropriateness of these transactions;

(3) A system to review the appropriateness of each replacement transaction that the producer does not indicate is in accord with Paragraph (2) above;

(4) Procedures to confirm that the requirements of this regulation have been met; and

(5) Procedures to detect transactions that are replacements of existing policies or contracts by the existing insurer, but that have not been reported as such by the applicant or producer. Compliance with this regulation may include, but shall not be limited to, systematic customer surveys, interviews, confirmation letters, or programs of internal monitoring;

B. Have the capacity to monitor each producer's life insurance policy and annuity contract replacements for that insurer, and shall produce, upon request, and make such records available to the Insurance Department. The capacity to monitor shall include the ability to produce records for each producer's:

(1) Life replacements, including financed purchases, as a percentage of the producer's total annual sales for life insurance;

(2) Number of lapses of policies by the producer as a percentage of the producer's total annual sales for life insurance;

(3) Annuity contract replacements as a percentage of the producer's total annual annuity contract sales;

(4) Number of transactions that are unreported replacements of existing policies or contracts by the existing insurer detected by the company's monitoring system as required by Subsection A.(5) of this section; and

(5) Replacements, indexed by replacing producer and existing insurer;

C. Require with or as a part of each application for life insurance or an annuity a signed statement by both the applicant and the producer as to whether the applicant has existing policies or contracts;

D. Require with each application for life insurance or an annuity that indicates an existing policy or contract a completed notice regarding replacements as contained in Appendix A;

E. When the applicant has existing policies or contracts, each insurer shall be able to produce copies of any sales material required by Section 3.E., the basic illustration and any supplemental illustrations related to the specific policy or contract that is purchased, and the producer's and applicant's signed statements with respect to financing and replacement for at least five (5) years after the termination or expiration of the proposed policy or contract;

F. Ascertain that the sales material and illustrations required by Section 3.E. of this regulation meet the requirements of this regulation and are complete and accurate for the proposed policy or contract;

G. If an application does not meet the requirements of this regulation, notify the producer and applicant and fulfill the outstanding requirements; and

H. Maintains records in paper, photograph, microprocess, magnetic, mechanical or electronic media or by any process that accurately reproduces the actual document.

Section 5. Duties of Replacing Insurers that Use Producers

A. Where a replacement is involved in the transaction, the replacing insurer shall:

(1) Verify that the required forms are received and are in compliance with this regulation;

(2) Notify any other existing insurer that may be affected by the proposed replacement within five (5) business days of receipt of a completed application indicating replacement or when the replacement is identified if not indicated on the application, and mail a copy of the available illustration or policy summary for the proposed policy or available disclosure document for the proposed contract within five (5) business days of a request from an existing insurer;

(3) Be able to produce copies of the notification regarding replacement required in Section 3.B., indexed by producer, for at least five (5) years or until the next regular examination by the Insurance Department of a company's state of domicile, whichever is later; and

(4) Provide to the policy or contract owner notice of the right to return the policy or contract within thirty (30) days of the delivery of the contract and receive an unconditional full refund of all premiums or considerations paid on it, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such policy or contract; such notice may be included in Appendix A or C.

B. In transactions where the replacing insurer and the existing insurer are the same or subsidiaries or affiliates under common ownership or control, allow credit for the period of time that has elapsed under the replaced policy's or contract's incontestability and suicide period up to the face amount of the existing policy or contract. With regard to financed purchases, the credit may be limited to the amount the face amount of the existing policy is reduced by the use of existing policy values to fund the new policy or contract.

C. If an insurer prohibits the use of sales material other than that approved by the company, as an alternative to the requirements made of an insurer pursuant to Section 3.E., the insurer may:

(1) Require with each application a statement signed by the producer that:

(a) Represents that the producer used only company-approved sales material; and

(b) States that copies of all sales material were left with the applicant in accordance with Section 3.D.; and

(2) Within ten (10) days of the issuance of the policy or contract:

(a) Notify the applicant by sending a letter or by verbal communication with the applicant by a person whose duties are separate from the marketing area of the insurer, that the producer has represented that copies of all sales material have been left with the applicant in accordance with Section 3.D.;

(b) Provide the applicant with a toll free number to contact company personnel involved in the compliance function if such is not the case; and

(c) Stress the importance of retaining copies of the sales material for future reference; and

(3) Be able to produce a copy of the letter or other verification in the policy file for at least five (5) years after the termination or expiration of the policy or contract.

Section 6. Duties of the Existing Insurer

Where a replacement is involved in the transaction, the existing insurer shall:

A. Retain and be able to produce all replacement notifications received, indexed by replacing insurer, for at least five (5) years or until the conclusion of the next regular examination conducted by the Insurance Department of its state of domicile, whichever is later;

B. Send a letter to the policy or contract owner of the right to receive information regarding the existing policy or contract values including, if available, an in force illustration or policy summary if an in force illustration cannot be produced within five (5) business days of receipt of a notice that an existing policy or contract is being replaced. The information shall be provided within five (5) business days of receipt of the request from the policy or contract owner;

C. Upon receipt of a request to borrow, surrender or withdraw any policy values, send a notice, advising the policy owner that the release of policy values may affect the guaranteed elements, non-guaranteed elements, face amount or surrender value of the policy from which the values are released. The notice shall be sent separate from the check if the check is sent to anyone other than the policy owner. In the case of consecutive automatic premium loans, the insurer is only required to send the notice at the time of the first loan.

Section 7. Duties of Insurers with Respect to Direct Response Solicitations

A. In the case of an application that is initiated as a result of a direct response solicitation, the insurer shall require, with or as part of each completed application for a policy or contract, a statement asking whether the applicant, by applying for the proposed policy or contract, intends to replace, discontinue or change an existing policy or contract. If the applicant indicates a replacement or change is not intended or if the applicant fails to respond to the statement, the insurer shall send the applicant, with the policy or contract, a notice regarding replacement in Appendix B, or other substantially similar form approved by the director.

B. If the insurer has proposed the replacement or if the applicant indicates a replacement is intended and the insurer continues with the replacement, the insurer shall:

(1) Provide to applicants or prospective applicants with the policy or contract a notice, as described in Appendix C, or other substantially similar form approved by the director. In these instances the insurer may delete the references to the producer, including the producer's signature, and references not applicable to the product being sold or replaced, without having to obtain approval of the form from the director. The insurer's obligation to obtain the applicant's signature shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the notice referred to in this paragraph. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed notice referred to in this section; and

(2) Comply with the requirements of Section 5.A.(2), if the applicant furnishes the names of the existing insurers, and the requirements of Sections 5.A.(3), 5.A.(4) and 5.B.

Section 8. Violations and Penalties

A. Any failure to comply with this regulation shall be considered a violation of S.C. Code Ann. 38-57-10 et seq. Examples of violations include:

(1) Any deceptive or misleading information set forth in sales material;

(2) Failing to ask the applicant in completing the application the pertinent questions regarding the possibility of financing or replacement;

(3) The intentional incorrect recording of an answer;

(4) Advising an applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or

(5) Advising a policy or contract owner to write directly to the company in such a way as to attempt to obscure the identity of the replacing producer or company.

B. Policy and contract owners have the right to replace existing life insurance policies or annuity contracts after indicating in or as a part of applications for new coverage that replacement is not their intention; however, patterns of such action by policy or contract owners of the same producer shall be deemed prima facie evidence of the producer's knowledge that replacement was intended in connection with the identified transactions, and these patterns of action shall be deemed prima facie evidence of the producer's intent to violate this regulation.

C. Where it is determined that the requirements of this regulation have not been met the replacing insurer shall provide to the policy owner an in force illustration if available or policy summary for the replacement policy or available disclosure document for the replacement contract and the appropriate notice regarding replacements in Appendix A or C.

D. Violations of this regulation shall subject the violators to penalties that may include the revocation or suspension of a producer's or company's license and monetary fines. In addition, where the director has determined that the violations were material to the sale, the insurer may be required to make restitution, restore policy or contract values and pay interest at the legal rate on the amount refunded in cash.

Section 9. Severability

If any section or portion of a section of this regulation, or its applicability to any person or circumstances, is held invalid by a court, the remainder of this regulation, or the applicability of its provisions to other persons, shall not be affected.

Section 10. Effective Date

This regulation shall be effective ninety days after final publication in the State Register.

APPENDIX A

IMPORTANT NOTICE: REPLACEMENT OF LIFE INSURANCE OR ANNUITIES

This document must be signed by the applicant and the producer, if there is one, and a copy left with the applicant.

You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing policy or contract. If so, a replacement is occurring. Financed purchases are also considered replacements.

A replacement occurs when a new policy or contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing policy or contract, or an existing policy or contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase.

A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the policy values, including accumulated dividends, of an existing policy to pay all or part of any premium or payment due on the new policy. A financed purchase is a replacement.

You should carefully consider whether a replacement is in your best interests. You will pay acquisition costs and there may be surrender costs deducted from your policy or contract. You may be able to make changes to your existing policy or contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing policy and may reduce the amount paid upon the death of the insured.

We want you to understand the effects of replacements before you make your purchase decision and ask that you answer the following questions and consider the questions on the back of this form.

1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing policy or contract?

___YES ___ NO

2. Are you considering using funds from your existing policies or contracts to pay premiums due on the new policy or contract? ___YES ___ NO

If you answered "yes" to either of the above questions, list each existing policy or contract you are contemplating replacing (include the name of the insurer, the insured or annuitant, and the policy or contract number if available) and whether each policy or contract will be replaced or used as a source of financing:

INSURER CONTRACT OR #INSURED OR REPLACED (R) OR

NAME POLICY ANNUITANT FINANCING (F)

1.

2.

3.

Make sure you know the facts. Contact your existing company or its agent for information about the old policy or contract. If you request one, an in force illustration, policy summary or available disclosure documents must be sent to you by the existing insurer. Ask for and retain all sales material used by the agent in the sales presentation. Be sure that you are making an informed decision.

The existing policy or contract is being replaced because__________.

I declare that the responses herein are, to the best of my knowledge, accurate:

______________________________________ ____

Applicant's Signature and Printed Name Date

______________________________________ ____

Producer's Signature and Printed Name Date

I do not want this notice read aloud to me. ___(Applicants must initial only if they do not want the notice read aloud.)

A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract. One way to do this is to ask the company or agent that sold you your existing policy or contract to provide you with information concerning your existing policy or contract. This may include an illustration of how your existing policy or contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense:

PREMIUMS: Are they affordable?

Could they change?

You're older--are premiums higher for the proposed new policy?

How long will you have to pay premiums on the new policy? On

the old policy?

POLICY VALUES: New policies usually take longer to build cash values and to

pay dividends.

Acquisition costs for the old policy may have been paid; you

will incur costs for the new one.

What surrender charges do the policies have?

What expense and sales charges will you pay on the new policy?

Does the new policy provide more insurance coverage?

INSURABILITY: If your health has changed since you bought your old policy,

the new one could cost you more, or you could be turned down.

You may need a medical exam for a new policy.

Claims on most new policies for up to the first two years can

be denied based on inaccurate statements.

Suicide limitations may begin anew on the new coverage.

IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW POLICY:

How are premiums for both policies being paid?

How will the premiums on your existing policy be affected?

Will a loan be deducted from death benefits?

What values from the old policy are being used to pay premiums?

IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST SENSITIVE LIFE PRODUCT:

Will you pay surrender charges on your old contract?

What are the interest rate guarantees for the new contract?

Have you compared the contract charges or other policy

expenses?

OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:

What are the tax consequences of buying the new policy?

Is this a tax free exchange? (See your tax advisor.)

Is there a benefit from favorable grandfathered treatment of

the old policy under the federal tax code?

Will the existing insurer be willing to modify the old policy?

How does the quality and financial stability of the new company

compare with your existing company?

APPENDIX B

NOTICE REGARDING REPLACEMENT REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY?

Are you thinking about buying a new life insurance policy or annuity and discontinuing or changing an existing one? If you are, your decision could be a good one--or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed policy or contract's benefits.

Make sure you understand the facts. You should ask the company or agent that sold you your existing policy or contract to give you information about it.

Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.

APPENDIX C

IMPORTANT NOTICE: REPLACEMENT OF LIFE INSURANCE OR ANNUITIES

You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing policy or contract. If so, a replacement is occurring. Financed purchases are also considered replacements.

A replacement occurs when a new policy or contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing policy or contract, or an existing policy or contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase.

A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the policy values, including accumulated dividends, of an existing policy, to pay all or part of any premium or payment due on the new policy. A financed purchase is a replacement.

You should carefully consider whether a replacement is in your best interests. You will pay acquisition costs and there may be surrender costs deducted from your policy or contract. You may be able to make changes to your existing policy or contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing policy and may reduce the amount paid upon the death of the insured.

We want you to understand the effects of replacements and ask that you answer the following questions and consider the questions on the back of this form.

1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing policy or contract? ___YES ___ NO

2. Are you considering using funds from your existing policies or contracts to pay premiums due on the new policy or contract? ___YES ___ NO

Please list each existing policy or contract you are contemplating replacing (include the name of the insurer, the insured, and the policy or contract number if available) and whether each policy or contract will be replaced or used as a source of financing:

INSURER CONTRACT OR #INSURED OR REPLACED (R) OR

NAME POLICY ANNUITANT FINANCING (F)

1.

2.

3.

Make sure you know the facts. Contact your existing company or its agent for information about the old policy or contract. If you request one, an in force illustration, policy summary or available disclosure documents must be sent to you by the existing insurer. Ask for and retain all sales material used by the agent in the sales presentation. Be sure that you are making an informed decision.

I declare that the responses herein are, to the best of my knowledge, accurate:

______________________________________ ____

Applicant's Signature and Printed Name Date

A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract. One way to do this is to ask the company or agent that sold you your existing policy or contract to provide you with information concerning your existing policy or contract. This may include an illustration of how your existing policy or contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense:

PREMIUMS: Are they affordable?

Could they change?

You're older--are premiums higher for the proposed new policy?

How long will you have to pay premiums on the new policy? On

the old policy?

POLICY VALUES: New policies usually take longer to build cash values and to

pay dividends.

Acquisition costs for the old policy may have been paid; you

will incur costs for the new one.

What surrender charges do the policies have?

What expense and sales charges will you pay on the new policy?

Does the new policy provide more insurance coverage?

INSURABILITY: If your health has changed since you bought your old policy,

the new one could cost you more, or you could be turned down.

You may need a medical exam for a new policy.

Claims on most new policies for up to the first two years can

be denied based on inaccurate statements.

Suicide limitations may begin anew on the new coverage.

IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW POLICY:

How are premiums for both policies being paid?

How will the premiums on your existing policy be affected?

Will a loan be deducted from death benefits?

What values from the old policy are being used to pay premiums?

IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST SENSITIVE LIFE PRODUCT:

Will you pay surrender charges on your old contract?

What are the interest rate guarantees for the new contract?

Have you compared the contract charges or other policy

expenses?

OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:

What are the tax consequences of buying the new policy?

Is this a tax free exchange? (See your tax advisor.)

Is there a benefit from favorable grandfathered treatment of

the old policy under the federal tax code?

Will the existing insurer be willing to modify the old policy?

How does the quality and financial stability of the new company

compare with your existing company?

HISTORY: Amended by State Register Volume 33, Issue No. 6, eff June 26, 2009.

69-13.3. Uniform Class and Territory Plan--Motorcycles.

The purpose of this Order is to amend portions of Order O9-74 which promulgated a uniform class plan and territory plan for motorcycle risks.

For physical damage insurance purposes, the subgroups are discontinued and the class plan is amended to provide for a rate per $100.00 of the original cost new for all physical damage coverages.

Age Group F.O.B. List Price

Age Group 1 Original Price

Age Group 2, 3 85% Of Original F.O.B.

Age Group 4, 5 75% Of Original F.O.B.

Age Group 6 55% Of Original F.O.B.

Accordingly, the companies shall file, with this Department, premium rates for Class 01 and Class 02 as called for in Order O9-74 on the above bases for the following coverages:

(1) No Deductible Fire, Theft, and Combined Additional Coverage

(2) $50 Deductible Collision

(3) $100 Deductible Collision

(4) $250 Deductible Collision

(A broader range of deductibles may be filed in addition to the above).

This revised uniform class plan will become effective July 1, 1977. (Based on Insurance Commission designation O5-76.)

69-14. Insurance Holding Company Systems.

(Statutory Authority: 1976 Code Sections 38-3-110(2), 38-21-300, and 1-23-10 et seq.)

Section I. Forms--General Requirements.

A. Forms A, B, C, and D are intended to be guides in the preparation of the statements required by S. C. Code Sections 38-21-60, 38-21-70, 38-21-140, 38-21-150 and 38-21-250. They are not intended to be blank forms which are to be filled in. These statements filed shall contain the number and captions of all items, but the text of the items may be omitted provided the answers thereto are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

B. One hard copy and an electronic filing for each statement (Forms A, B, C, D) including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Director. A copy of Form C shall be filed in each state in which an insurer is authorized to do business, if the Director of that state has notified the insurer of its request in writing, in which case the insurer has ten days from receipt of the notice to file such form. At least one of the copies shall be manually signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement.

C. Statements should be prepared on paper 8 1/2 "' x 11"' (or 8 1/2 "' x 14"') in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of any statement, financial statements, or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value normally shown in foreign currency shall be converted into United States currency.

Section II. Forms--Incorporation by Reference, Summaries and Omissions.

A. Information required by any item of Form A, Form B or Form D may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B or Form D, provided such document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Director which were filed within three years need not be attached as exhibits to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear or confusing.

B. Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the Director which was filed within three years and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of such documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents a copy of which is filed.

Section III. Forms--Information Unknown or Unavailable and Extension of Time to Furnish.

A. Information required need be given only insofar as it is known or reasonably available to the person filing the statement. If any required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions:

1. The person filing shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof; and

2. The person filing shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

B. If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the Director a separate document:

1. identifying the information, document or report in question;

2. stating why the filing thereof at the time required is impractical; and

3. requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Director within sixty days after receipt thereof enters an order denying the request.

Section IV. Forms--Additional Information and Exhibits.

In addition to the information expressly required to be included in Form A, Form B, Form C and Form D, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matter to which they refer. Changes to Forms A, B, C or D shall include on the top of the cover page the phrase: "Change No. (insert number) to" and shall indicate the date of the change and not the date of the original filing.

Section V. Definitions.

A. "Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

B. "Foreign insurer" shall include an alien insurer except where clearly noted otherwise.

C. "Ultimate controlling person" means that person which is not controlled by any other person.

D. Unless the context otherwise requires, other terms found in these regulations and in South Carolina Code Section 38-21-10 are used as defined in Section 38-21-10. Other nomenclature or terminology is defined according to Title 38 of the South Carolina Code, or industry usage if not defined by Title 38 of the South Carolina Code.

Section VI. Subsidiaries of Domestic Insurers.

The authority to invest in subsidiaries under South Carolina Code Section 38-21-30 is in addition to any authority to invest in subsidiaries which may be contained in any other provision of Title 38 of the Code.

Section VII. Acquisition of Control--Statement Filing.

A person required to file a statement pursuant to South Carolina Code Sections 38-21-60 and 38-21-70 shall furnish the required information on Form A, hereby made a part of this regulation.

Section VIII. Amendments to Form A.

The applicant shall promptly advise the Director of any changes in the information so furnished on Form A arising subsequent to the date upon which such information was furnished but prior to the Director's disposition of the application.

Section IX. Acquisition of Section 38-21-60 Insurers.

A. If the person being acquired is deemed to be a "domestic insurer" solely because of the provisions of South Carolina Code Section 38-21-60, the name of the domestic insurer on the cover page should be indicated as follows: "ABC Insurance Company, a subsidiary of XYZ Holding Company".

B. Where a Section 38-21-60 insurer is being acquired, references to "the insurer" contained in Form A shall refer to both the domestic subsidiary insurer and the person being acquired.

Section X. Annual Registration of Insurers--Statement Filing.

An insurer required to file an annual registration statement pursuant to South Carolina Code Sections 38-21-130 and 38-21-140 shall furnish the required information on Form B, hereby made a part of these regulations.

Section XI. Summary of Registration--Statement Filing.

An insurer required to file an annual registration statement pursuant to Sections 38-21-130 and 38-21-140 is also required, under Section 38-21-150, to furnish information specified on Form C, hereby made a part of these regulations. An insurer shall file a copy of Form C in each state in which the insurer is authorized to do business, if requested by the regulatory authorities of that state.

Section XII. Alternative and Consolidated Registrations.

A. Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under Section 38-21-130. A registration statement may include information not required by law regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this State. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

1. the statement or report contains substantially similar information required to be furnished on Form B; and

2. the filing insurer is the principal insurance company in the insurance holding company system.

B. The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

C. Any authorized insurer may utilize the provisions of Sections 38-21-200 and 38-21-210 without obtaining prior approval of the Director. The Director, however, reserves the right to require individual filings if he deems such filings necessary in the interest of clarity, ease of administration or the public good.

Section XIII. Disclaimers of Affiliation and Termination of Registration.

A. A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the "subject") shall contain the following information:

1. the number of authorized, issued and outstanding voting securities of the subject;

2. with respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

3. all material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person;

4. a statement explaining why such person should not be considered to control the subject.

B. A request for termination of registration shall be deemed to have been granted unless the Director, within thirty days after he receives the request, notifies the registrant otherwise.

Section XIV. Transactions Subject to Prior Notice--Notice Filing.

An insurer required to give notice of a proposed transaction pursuant to South Carolina Code Section 38-21-250 shall furnish the required information on Form D, hereby made a part of these regulations.

Section XV. Extraordinary Dividends and Other Distributions.

A. Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

1. The amount of the proposed dividend;

2. The date established for payment of the dividend;

3. A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

4. A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

(a) The amounts, dates and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

(b) Surplus as regards policyholders (total capital and surplus) as shown in the insurer's most recent annual statement;

(c) If the insurer is a life insurer, the net gain from operations as shown in the insurer's most recent annual statement;

(d) If the insurer is not a life insurer, the net income less net realized capital gains or losses as shown in the insurer's most recent annual statement; and

(e) The dividends paid to stockholders excluding distributions of the insurer's own securities.

5. A balance sheet and statement of income for the period intervening from the last annual statement filed with the Director and the end of the month preceding the month in which the request for dividend approval is submitted; and

6. A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

B. Subject to South Carolina Code Section 38-21-270, each registered insurer shall report to the Director all dividends and other distributions to shareholders within five business days following the declaration thereof, and at least ten days prior to the payment thereof, including the same information required by South Carolina Code Section 38-21-260 and Subsections (A)(4) (a)-(e) of this Section.

Section XVI. Adequacy of Surplus.

The factors set forth in South Carolina Code Section 38-21-260 are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus no single factor is necessarily controlling. The Director, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Director will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the Director will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

Section XVII. Severability.

If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section XVIII. Effective Date.

This regulation shall become effective ninety days after final publication in the State Register.

FORM A

STATEMENT REGARDING THE ACQUISITION OF CON-

TROL OF OR MERGER WITH A DOMESTIC INSURER

_________________________________________________________

Name of Domestic Insurer

By

_________________________________________________________

Name of Acquiring Person (Applicant)

Filed with the Insurance Department of

(State of domicile of insurer being acquired)

Dated:__________, 20____

Name, Title, Address and Telephone Number of Individual to Whom Notices

and Correspondence Concerning This Statement Should be Addressed:

ITEM 1. INSURER AND METHOD OF ACQUISITION.

State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT.

(a) State the name and address of the applicant seeking to acquire control over the insurer.

(b) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.

(c) Furnish a chart or listing clearly presenting the identities of the inter-relationships among the applicant and all affiliates of the applicant. No affiliates need be identified if its total assets are equal to less than 1/2 of 1% of the total assets of the ultimate controlling person affiliated with the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.

ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT.

State the following with respect to (1) the applicant if (s)he is an individual or (2) all persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual.

(a) Name and business address;

(b) Present principal business activity, occupation or employment including position and office held and the name, principal business and address of any corporation or other organization in which such employment is carried on;

(c) Material occupations, positions, offices or employment during the last five years, giving the starting and ending dates of each and the name, principal business and address of any business corporation or other organization in which each such occupation, position, office or employment was carried on; if any such occupation, position, office or employment required licensing by or registration with any federal, state or municipal governmental agency, indicate such fact, the current status of such licensing or registration, and an explanation of any surrender, revocation, suspension or disciplinary proceedings in connection therewith;

(d) Whether or not such person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case.

ITEM 4. NATURE, SOURCE AND AMOUNT OF CONSIDERATION.

(a) Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto.

(b) Explain the criteria used in determining the nature and amount of such consideration.

(c) If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, he must specifically request that the identity be kept confidential.

ITEM 5. FUTURE PLANS OF INSURER.

Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate such insurer, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management.

ITEM 6. VOTING SECURITIES TO BE ACQUIRED.

State the number of shares of the insurer's voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at.

ITEM 7. OWNERSHIP OF VOTING SECURITIES.

State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.

ITEM 8. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDING WITH RESPECT TO VOTING SECURITIES OF THE INSURER.

Give a full description of any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the person with whom such contracts, arrangements or understandings have been entered into.

ITEM 9. RECENT PURCHASES OF VOTING SECURITIES.

Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in such description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any such shares so purchased are hypothecated.

ITEM 10. RECENT RECOMMENDATIONS TO PURCHASE.

Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.

ITEM 11. AGREEMENTS WITH BROKER-DEALERS.

Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

ITEM 12. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial statements and exhibits shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

(b) The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding five fiscal years (or for such lesser period as such applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of such person's last fiscal year, if such information is available. Such statements may be prepared on either an individual basis, or, unless the Director otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of such person filed with the insurance department of the person's domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or Regulation 69-14.

ITEM 13. SIGNATURE AND CERTIFICATION.

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Sections 38-21-60 and

38-21-70, _________ has caused this application to be duly signed on its

behalf in the City of _________ and State of _________ on the ____ day of

_________, 20____.

(SEAL)

Name of Applicant

BY

(Name) (Title)

Attest:

(Signature of Officer)

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attached

application dated _________, 20____, for and on behalf of _________ (Name

of Applicant); that (s)he is the _________ (Title of Officer) of such

company and that (s)he is authorized to execute and file such instrument.

Deponent further says that (s)he is familiar with such instrument and the

contents thereof, and that the facts therein set forth are true to the

best of his/her knowledge, information and belief.

(Signature)_______________________

(Type or print name beneath) _______________________

FORM B

INSURANCE HOLDING COMPANY SYSTEM ANNUAL

REGISTRATION STATEMENT

Filed with the Insurance Department of the

State of _________

By

__________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

Date: _________, 20____

Name, Title, Address and telephone number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

ITEM 1. IDENTITY AND CONTROL OF REGISTRANT.

Furnish the exact name of each insurer registering or being registered (hereinafter called "the Registrant"), the home office address and principal executive offices of each; the date on which each Registrant became part of the insurance holding company system; and the method(s) by which control of each Registrant was acquired and is maintained.

ITEM 2. ORGANIZATIONAL CHART.

Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. No affiliate need be shown if its total assets are equal to less than 1/2 of 1% of the total assets of the ultimate controlling person within the insurance holding company system unless it has assets valued at or exceeding (insert amount). The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.

ITEM 3. THE ULTIMATE CONTROLLING PERSON.

As to the ultimate controlling person in the insurance holding company system furnish the following information:

(a) Name.

(b) Home office address.

(c) Principal executive office address.

(d) The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.

(e) The principal business of the person.

(f) The name and address of any person who holds or owns 10% or more of any class of voting security, the class of such security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.

(g) If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced.

ITEM 4. BIOGRAPHICAL INFORMATION.

Furnish the following information for the directors and executive officers of the ultimate controlling person: the individual's name and address, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.

ITEM 5. TRANSACTIONS AND AGREEMENTS.

Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between the Registrant and its affiliates:

(1) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the Registrant or of the Registrant by its affiliates;

(2) purchases, sales or exchanges of assets;

(3) transactions not in the ordinary course of business;

(4) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the Registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the Registrant's business;

(5) all management agreements, service contracts and all cost-sharing arrangements;

(6) leases;

(7) reinsurance agreements;

(8) dividends and other distributions to shareholders;

(9) consolidated tax allocation agreements;

(10) any pledge of the Registrant's stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system; and

(11) contributions by the Registrant to the surplus of an affiliate.

No information need be disclosed if such information is not material for purposes of South Carolina Code Section 38-21-160.

Sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one-half of 1% or less of the Registrant's admitted assets as of the previous 31st day of December shall not be deemed material, unless the Director by order or regulation provides otherwise.

The description shall be in a manner as to permit the proper evaluation thereof by the Director, and shall include at least the following: the nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to such transaction, and relationship of the affiliated parties to the Registrant.

ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS.

A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which such litigation or proceeding is or was pending:

(a) Criminal prosecutions or administrative proceedings by any government agency or authority; and

(b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations.

ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.

ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

(b) The financial statements shall include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of the person's latest fiscal year.

If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Such financial statements may be prepared on either an individual basis, or unless the Director otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

Unless the Director otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of such insurer filed with the insurance department of the insurer's domiciliary state and in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person and any additional documents or papers required by Form B or Regulation 69-14.

ITEM 9. FORM C REQUIRED.

A Form C, Summary of Registration Statement, must be prepared and filed with this Form B.

ITEM 10. SIGNATURE AND CERTIFICATION.

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Sections 38-21-130 and

38-21-140, the Registrant has caused this annual registration statement to

be duly signed on its behalf in the City of _________ and State of

_________ on the ____ day of _________, 20____.

(SEAL)

Name of Registrant

BY

(Name) (Title)

Attest:

(Signature of Officer)

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attached

annual registration statement dated _________, 20____, for and on behalf

of _________ (Name of Company); that (s)he is the _________ (Title of

Officer) of such company and that (s)he is authorized to execute and file

such instrument. Deponent further says that (s)he is familiar with such

instrument and the contents thereof, and that the facts therein set forth

are true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

FORM C

SUMMARY OF REGISTRATION STATEMENT

Filed with the Insurance Department of the

State of _________

By

__________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

Date: _________, 20____

Name, Title, Address and Telephone number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the Director, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein.

Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of 10 percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

Changes occurring under Item 4 of Form B need only be included where: an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.

SIGNATURE AND CERTIFICATION

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Section 38-21-150, the Registrant

has caused this summary of registration statement to be duly signed on its

behalf in the City of _________ and State of _________ on the ____ day of

_________, 20____.

(SEAL)

Name of Registrant

BY

(Name) (Title)

Attest:

(Signature of Officer)

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has fully executed the attached

summary of registration statement dated _________, 20____, for and on behalf

of _________ (Name of Company); that (s)he is the _________ (Title of

Officer) of such company and that (s)he is authorized to execute and file

such instrument. Deponent further says that (s)he is familiar with such

instrument and the contents thereof, and that the facts therein set forth are

true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

FORM D PRIOR NOTICE OF A TRANSACTION

Filed with the Insurance Department of the State of _________

By

________________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

Date: _________, 20____.

Name, Title, Address and Telephone Number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

ITEM 1. IDENTITY OF PARTIES TO TRANSACTION.

Furnish the following information for each of the parties to the transaction:

(a) Name.

(b) Home office address.

(c) Principal executive office address.

(d) The organizational structure, i.e., corporation, partnership, individual, trust, etc.

(e) A description of the nature of the parties' business operations.

(f) Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties.

(g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.

ITEM 2. DESCRIPTION OF THE TRANSACTION.

Furnish the following information for each transaction for which notice is being given:

(a) A statement as to whether notice is being given under South Carolina Code Sections 38-21-250(2)(i), (ii), (iii), (iv) or (v).

(b) A statement of the nature of the transaction.

(c) The proposed effective date of the transaction.

ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES OR INVESTMENTS.

Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation of the basis for evaluation.

If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than, (a) in the case of non-life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, (b) in the case of life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December next preceding.

ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NON-AFFILIATE.

If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the loan or extension of credit is one which equals less than, in the case of nonlife insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, with respect to life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December next preceding.

ITEM 5. REINSURANCE.

If the transaction is a reinsurance agreement or modification thereto, as described by South Carolina Code Section 38-21-250(2)(iii), furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer's liabilities in connection with the reinsurance agreement or modification thereto is less than 5% of the insurer's surplus as regards policyholders, as of the 31st day of December next preceding.

ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS AND COST-SHARING ARRANGEMENTS.

For management and service agreements, furnish:

(a) a brief description of the managerial responsibilities, or services to be performed.

(b) a brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

For cost-sharing arrangements, furnish:

(a) a brief description of the purpose of the agreement.

(b) a description of the period of time during which the agreement is to be in effect.

(c) a brief description of each party's expenses or costs covered by the agreement.

(d) a brief description of the accounting basis to be used in calculating each party's costs under the agreement.

ITEM 7. ALL OTHER TRANSACTIONS DETERMINED BY THE DIRECTOR TO BE MATERIAL, INCLUDING, BUT NOT LIMITED TO, REAL OR PERSONAL PROPERTY LEASES.

For leases, furnish:

(a) a brief description of the purpose of the lease.

(b) a description of the period of time during which the lease agreement is to be in effect.

(c) the aggregate payments to be made during the term of the lease.

(d) copy of the lease agreement.

ITEM 8. SIGNATURE AND CERTIFICATION.

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Section 38-21-250,

_________ has caused this notice to be duly signed on its behalf in the City

of _________ and State of _________ on the ____ day of _________, 20____.

(SEAL)

Name of Applicant

BY

(Name) (Title)

Attest:

(Signature of Officer)

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has fully executed the attached

notice dated _________, 20____, for and on behalf of _________ (Name of

Applicant); and (s)he is the _________ (Title of Officer) of such company and

that (s)he is authorized to execute and file such instrument. Deponent

further says that (s)he is familiar with such instrument and the contents

thereof, and that the facts therein set forth are true to the best of his/her

knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

HISTORY: Amended by State Register Volume 13, Issue No. 4, eff April 28, 1989; State Register Volume 18, Issue No. 3, eff March 25, 1994, by Part XVIII, eff January 1, 1994; State Register Volume 34, Issue No. 3, eff March 26, 2010.

69-15. South Carolina Deposits Required of Insurers.

Under S. C. Code Section 38-9-80 (1976), every domestic, foreign or alien insurance company, transacting or desiring to transact business in South Carolina is required to make deposits with the director or his designee in accordance with standards promulgated by him. The director or his designee is empowered to prescribe the amounts required, within the limits set forth in the statute, and he is specifically authorized to subsequently increase or decrease the amount of deposit required of any particular insurer.

The amount which an insurer is required to deposit is related to its surplus as regards policyholders (capital and surplus for stock insurers or surplus for mutual, fraternal benefit societies and reciprocal insurers), as set forth in its most recent annual statement filed pursuant to S. C. Code Section 38-13-80 (1976). Such amount is to be determined in accordance with the following table:

Surplus as Regards Policyholders Market Value of Deposit

Under $1,000,000 $200,000

$1,000,000 or more but less than $3,000,000 $175,000

$3,000,000 or more but less than $5,000,000 $150,000

$5,000,000 or more $125,000

The director or his designee may subsequently increase or decrease the amount of deposit required of an insurer depending upon particular circumstances, such as the current financial condition of the insurer in relation to its previous financial condition, the type or amount of business written by the insurer, the method of operation of the insurer, etc. The insurer will be notified of the amount of deposit it is required to make.

HISTORY: Amended by State Register Volume 11, Issue No. 2, eff March 1, 1987; State Register Volume 26, Issue No. 6, Part 2, eff June 28, 2002.

69-16. Motor Vehicle Damage Appraisers; General Methods by Which Such Appraisers Shall Conduct Their Business; Suspension or Revocation of an Appraiser's License.

1. As used herein, the word "appraiser" means any person who, or any partnership, association, or corporation which, practices as a business the appraising of damages to motor vehicles insured under automobile physical damage policies or in respect to third party property damage liability claims and who or which is licensed by the Commissioner to act as an appraiser.

1.1 Employees of insurance companies who are licensed as adjusters, and other persons who are licensed as adjusters and who perform loss or claim adjustments in behalf of insurers, are not required to be licensed as appraisers if their activities as appraisers are in behalf of an insurer which directly and for its own account will perform the repairs itself or which will have the repairs effected directly by a repair shop as its agent for its own account and become responsible itself for such repairs and make payment directly to the repair shop for such repairs.

1.2 Employees of insurance companies who are licensed as adjusters, and other persons who are licensed as adjusters and who perform loss or claim adjustments in behalf of insurers, are required to be licensed as appraisers if their activities consist of making appraisals of damaged motor vehicles solely for purposes of arriving at an agreed price for repairing such motor vehicles under circumstances wherein the contract or agreement to repair the damaged motor vehicle is expected to be made between the repair shop and the owner and wherein the insurer assumes no direct responsibility for the adequacy of the repairs or payment therefor or other than inclusion of the repair shop as a joint payee on the settlement check or draft.

1.3 Before being issued a license, an applicant shall stand a written examination to determine that the applicant is qualified as an appraiser. Such examination shall be subject to, and administered in accordance with, the procedures set forth in Regulation 69-23(6)(f). Any examination fees which may be charged by an outside testing authority shall be in addition to, and not in lieu of, the annual license fee required by Code Section 56-13-20.

2. Every appraiser, while engaged in his duties as such appraiser, shall carry the license issued to him by the Commissioner and shall offer to display it to an owner whose motor vehicle is being inspected, to the repair shop representative involved, or to any authorized representative of the Commissioner.

3. An appraiser may agree on a price for repairing a damaged motor vehicle only with a repair shop.

4. The appraiser shall leave a legible signed copy of his appraisal with the repair shop selected to make the repairs, which appraisal shall contain the name of the owner of the motor vehicle, the name of the insurer ordering the appraisal and its claim number, if known, the number of the appraiser's license and the proper number of the motor vehicle inspected.

4.1. All damage to the motor vehicle which is considered by the appraiser to be unrelated or old damage and which is not included in the repair price shall be clearly indicated on the appraisal.

5. If the appraiser and the repair shop fail to agree on a price for repairs, the appraiser shall not obtain a competitive estimate from another repair shop unless the owner thereof or his authorized agent shall have actually inspected the vehicle. No such competitive estimate shall be obtained by the use of photographs, telephone calls, or in any manner whatsoever other than actual, personal inspection.

6. No appraiser shall request that repairs be made in a specified repair shop.

7. Every appraiser shall reinspect damaged motor vehicles when supplementary allowances are requested by repair shops.

8. Every appraiser shall:

(1) Conduct himself in such a manner as to inspire public confidence by fair and honorable dealing;

(2) Approach the appraisal of damaged motor vehicles without prejudice against, or favoritism toward, any party involved in order to make fair and impartial appraisals;

(3) Disregard any efforts on the part of others to influence his judgment in the interest of any of the parties involved;

(4) Prepare an independent, objective appraisal of damage.

8.1 No appraiser shall:

(1) Receive directly or indirectly any gratuity or consideration in connection with his appraisal services from any person except his employer or, if self-employed, his customer;

(2) Traffic in, or acquire for himself, his employer, or any relative of either, any salvage if such salvage is obtained in any way as a result of, or incident to, appraisal services rendered by him.

9. The Commissioner may suspend or revoke the license issued to an appraiser or refuse to renew such license upon his finding that any such appraiser has violated any law involving moral turpitude, or has violated, or failed to comply with, any law of this State relating to his duties or conduct as an appraiser or any provision of this Regulation.

HISTORY: Amended by State Register Volume 8, Issue No. 7, eff July 27, 1984.

69-17. Advertising of Accident and Health Insurance.

(Statutory Authority: 1976 Code Section 38-3-60(1))

Section 1. Purpose. The purpose of these rules is to assure truthful and adequate disclosure of all material and relevant information in the advertising of accident and sickness insurance. This purpose is intended to be accomplished by the establishment of, and adherence to, certain minimum standards and guidelines of conduct in the advertising of accident, health, and accident and health insurance in a manner which prevents unfair competition among insurers and is conducive to the accurate presentation and description to the insurance consumer of a policy of such insurance offered through various advertising media or through the mails.

Section 2. Applicability.

A. These rules shall apply to any accident, health, or accident and health insurance "advertisement," as that term is hereinafter defined, intended for presentation, distribution or dissemination in this State when such presentation, distribution or dissemination is made either directly or indirectly by or on behalf of an insurer, agent or broker as those terms are defined in the Insurance Code of this State, or these rules.

B. Every insurer shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the insurer whose policies are so advertised.

Section 3. Definitions.

A. An advertisement for the purpose of these rules shall include:

1. printed and published material, audio visual material, and descriptive literature of an insurer used in direct mail, newspapers, magazines, radio script, TV script, billboards and similar displays; and

2. descriptive literature and sales aids of all kinds issued by an insurer, agent or broker for presentation to members of the insurance buying public, including but not limited to circulars, leaflets, booklets, depictions, illustrations, and form letters; and

3. prepared sales talks, presentations and material for use by agents, brokers and solicitors.

B. "Policy" for the purpose of these rules shall include any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits or medical, surgical or hospital expense benefits, whether on an indemnity, reimbursement, service or prepaid basis, except when issued in connection with another kind of insurance other than life and except disability, waiver of premium and double indemnity benefits included in life insurance and annuity contracts.

C. "Insurer" for the purpose of these rules shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, and any other legal entity which is defined as an "insurer" in the Insurance Code of this State and is engaged in the advertisement of a policy as "policy" is herein defined.

D. "Exception" for the purpose of these rules shall mean any provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement of a risk not assumed under the policy.

E. "Reduction" for the purpose of these rules shall mean any provision which reduces the amount of the benefit; a risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction not been used.

F. "Limitation" for the purpose of these rules shall mean any provision which restricts coverage under the policy other than an exception or a reduction.

Section 4. Method of Disclosure of Required Information. All information required to be disclosed by these rules shall be set out conspicuously and in close conjunction with the statements to which such information relates or under appropriate captions of such prominence that it shall not be minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of the advertisement so as to be confusing or misleading.

Section 5. Form and Content of Advertisements.

A. The format and content of an advertisement of an accident or sickness insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the Commissioner of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

B. Advertisements shall be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, shall not be used. An advertisement is misleading if it omits any material information necessary to render it not misleading.

Section 6. Advertisements of Benefits Payable, Losses Covered or Premiums Payable.

A. Deceptive Words, Phrases or Illustrations Prohibited

1. No advertisement shall omit information or use words, phrases, statements, references or illustrations if the omission of such information or use of such words, phrases, statements, references or illustrations has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

2. No advertisement shall contain or use words or phrases such as, "all"; "full"; "complete"; "comprehensive"; "unlimited"; "up to"; "as high as"; "this policy will help fill some of the gaps that Medicare and your present insurance leave out"; "this policy will help to replace your income" (when used to express loss of time benefits); or similar words and phrases, in a manner which exaggerates any benefits beyond the terms of the coverage or otherwise renders the advertisement misleading or deceptive.

3. An advertisement shall not contain descriptions of a policy limitation, exception or reduction, worded in a positive manner to imply that it is a benefit, such as describing a waiting period as a "benefit builder," or stating "even pre-existing conditions are covered after two years"; nor shall such advertisement be so worded as to imply that provisions required by statute, such as, but not limited to, the ten-day inspection period provision or the two year incontestability provision, were voluntarily adopted by the insurer or differ from similar provisions in the policies of other insurers. Words and phrases used in an advertisement to describe such policy limitations, exceptions and reductions shall fairly and accurately describe the negative features of such limitations, exceptions and reductions of the policy offered.

4. No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall use words or phrases such as "tax free"; "extra cash"; "extra income"; "extra pay"; or substantially similar words or phrases because such words and phrases have the capacity, tendency or effect of misleading the public into believing that the policy advertised will, in some way, enable them to make a profit from being hospitalized.

5. No advertisement of a hospital or other similar facility confinement shall advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata basis relating to the number of days of confinement; except that a statement of the benefit payable on a daily basis may be followed immediately by a statement of no greater prominence setting forth the monthly or weekly benefit amounts. When the policy contains a limit on the number of days of coverage provided, such limit must appear in the advertisement.

6. No advertisement of a policy covering only one disease or a list of specified diseases shall imply coverage beyond the terms of the policy. Synonymous terms shall not be used to refer to any disease so as to imply broader coverage than is the fact.

7. An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, shall clearly and conspicuously in prominent type state the limited nature of the policy. The statement shall be worded in language identical to or substantially similar to the following: "THIS IS A LIMITED POLICY"; "THIS IS A CANCER ONLY POLICY"; "THIS IS AN AUTOMOBILE ACCIDENT ONLY POLICY".

8. An advertisement of a direct response insurance product shall not imply that because "no insurance agent will call and no commissions will be paid to agents" that it is "a low cost plan", or use other similar words or phrases because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product.

B. Exceptions, Reductions and Limitations

1. When an advertisement refers to either dollar amount, or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

2. When a policy contains a waiting, elimination, probationary or similar time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such loss, an advertisement which is subject to the requirements of the preceding paragraph shall disclose the existence of such periods.

3. An advertisement shall not use the words "only"; "just"; "merely"; "minimum" or similar words or phrases to describe the applicability of any exceptions and reductions, such as: "This policy is subject to the following minimum exceptions and reductions".

C. Pre-Existing Conditions

1. An advertisement which is subject to the requirements of Section 6B shall, in negative terms, disclose the extent to which any loss is not covered if the cause of such loss is traceable to a condition existing prior to the effective date of the policy. The use of the term "pre-existing condition" without an appropriate definition or description shall not be used.

2. When a policy does not cover losses resulting from pre-existing conditions, no advertisement of the policy shall state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder. This rule prohibits the use of the phrase "no medical examination required" and phrases of similar import, but does not prohibit explaining "automatic issue". If an insurer requires a medical examination for a specified policy, the advertisement shall disclose that a medical examination is required.

3. When an advertisement contains an application form to be completed by the applicant and returned by mail for a direct response insurance product, such application form shall contain a question or statement which reflects the pre-existing condition provisions of the policy immediately preceding the blank space for the applicant's signature. For example, such an application form shall contain a question (or statement) substantially as follows:

Do you understand that this policy will not pay benefits during the first ____ Year(s) after the issue date for a disease or physical condition which you now have or have had in the past?-- YES

Section 7. Necessity for Disclosing Policy Provisions Relating To Renewability, Cancellability and Termination. When an advertisement refers to either a dollar amount or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it 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.

Section 8. Testimonials or Endorsements by Third Parties.

A. Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules.

B. If the person making a testimonial, an endorsement or an appraisal has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, such fact shall be disclosed in the advertisement. If a person is compensated for making a testimonial, endorsement or appraisal, such fact shall be disclosed in the advertisement by language substantially as follows: "Paid Endorsement". This rule does not require disclosure of union "scale" wages required by union rules if the payment is actually for such "scale" for TV or radio performances. The payment of substantial amounts, directly or indirectly, for "travel and entertainment" for filming or recording of TV or radio advertisements remove the filming or recording from the category of an unsolicited testimonial and require disclosure of such compensation.

C. An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by any individual group of individuals, society, association or other organizations, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact shall be disclosed in the advertisement. If the entity making such endorsement or testimonial has any direct or indirect financial interest in the insurance by way of commission; retrospective plan rate or commission adjustment; profit sharing allowance; policy dividend; or any similar refund, return or participation of whatsoever nature, such fact shall be fully disclosed.

D. When a testimonial refers to benefits received under a policy, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

Section 9. Use of Statistics.

A. An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use irrelevant facts, and shall not be used unless it accurately reflects all of the relevant facts. Such an advertisement shall not imply that such statistics are derived from the policy advertised unless such is the fact, and when applicable to other policies or plans shall specifically so state.

B. An advertisement shall not represent or imply that claim settlements by the insurer are "liberal" or "generous", or use words of similar import, or that claim settlements are or will be beyond the actual terms of the contract. An unusual amount paid for a unique claim for the policy advertised is misleading and shall not be used.

C. The source of any statistics used in an advertisement shall be identified in such advertisement.

Section 10. Identification of Plan or Number of Policies.

A. When a choice of the amount of benefits is referred to, an advertisement shall disclose that the amount of benefits provided depends upon the plan selected and that the premium will vary with the amount of the benefits selected.

B. When an advertisement refers to various benefits which may be contained in two or more policies, other than group master policies, the advertisement shall disclose that such benefits are provided only through a combination of such policies.

Section 11. Disparaging Comparisons and Statements. An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of non-comparable policies of other insurers, and shall not disparage competitors, their policies, services or business methods, and shall not disparage or unfairly minimize competing methods of marketing insurance.

Section 12. Jurisdictional Licensing and Status of Insurer.

A. An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits.

B. An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government.

Section 13. Identity of Insurer.

A. The name of the actual insurer and the form number or numbers advertised shall be identified and made clear in all of its advertisements. An advertisement shall not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol or other device which without disclosing the name of the actual insurer would have the capacity and tendency to mislead or deceive as to the true identity of the insurer.

B. No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols or physical materials used by agencies of the Federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state or federal government.

Section 14. Group or Quasi-Group Implications. An advertisement of a particular policy shall not state or imply that prospective insureds become group or quasi-group members covered under a group policy and as such enjoy special rates or underwriting privileges, unless such is the fact.

Section 15. Introductory, Initial or Special Offers.

A.1. An advertisement of an individual policy shall not directly or by implication represent that a contract or combination of contracts is an introductory, initial or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement shall not contain phrases describing an enrollment period as "special", "limited", or similar words or phrases when the insurer uses such enrollment periods as the usual method of advertising accident and sickness insurance.

2. An enrollment period during which a particular insurance product may be purchased on an individual basis shall not be offered within this State unless there has been a lapse of not less than six months between the close of the immediately preceding enrollment period for the same product and the opening of the new enrollment period. The advertisement shall indicate the date by which the applicant must mail the application, which shall be not less than ten days and not more than forty days from the date that such enrollment period is advertised for the first time. This rule applies to all advertising media, i.e., mail, newspapers, radio, television, magazines and periodicals, by any one insurer. It is inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the Insurance Code for group, blanket or franchise insurance. The phrase "any one insurer" includes all the affiliated companies of a group of insurance companies under common management or control.

3. This rule prohibits any statement or implication to the effect that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy, unless such is the fact.

4. The phrase "a particular insurance product" in Paragraph (2) of this section means an insurance policy which provides substantially different benefits than those contained in any other policy. Different terms of renewability; an increase or decrease in the dollar amounts of benefits; an increase or decrease in any elimination period or waiting period from those available during an enrollment period for another policy shall not be sufficient to constitute the product being offered as a different product eligible for concurrent or overlapping enrollment periods.

B. An advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the initial reduced premium. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, the advertisement shall not display the amount of the reduced initial premium either more frequently or more prominently than the renewal premium, and both the initial reduced premium and the renewal premium must be stated in juxtaposition in each portion of the advertisement where the initial reduced premium appears.

C. Special awards, such as a "safe drivers' award" shall not be used in connection with advertisements of accident or accident and sickness insurance.

Section 16. Statements About an Insurer. An advertisement shall not contain statements which are untrue in fact, or by implication misleading, with respect to the assets, corporate structure, financial standing, age or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly indicates the purpose of the recommendation and the limitations of the scope and extent of the recommendation.

Section 17. Enforcement Procedures.

A. Advertising File. Each insurer shall maintain at its home or principal office a complete file containing every printed, published or prepared advertisement of its individual policies and typical printed, published or prepared advertisements of its blanket, franchise and group policies hereafter disseminated in this or any other state, whether or not licensed in such other state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to regular and periodical inspection by this Department. All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

B. Certificate of Compliance. Each insurer required to file an Annual Statement which is now or which hereafter becomes subject to the provisions of these rules must file with this Department, with its Annual Statement, a Certificate of Compliance executed by an authorized officer of the insurer wherein it is stated that, to the best of his knowledge, information and belief, the advertisements which were disseminated by the insurer during the preceding statement year complied or were made to comply in all respects with the provisions of these rules and the Insurance Laws of this State as implemented and interpreted by these rules.

Section 18. Severability Provision. If any Section or portion of a Section of these rules or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rules, or the applicability of such provision to other persons or circumstances, shall not be affected thereby.

Section 19. Filing for Prior Review. The Commissioner may, in his discretion, require the filing with this Department, for review prior to use, of all direct response material, or all or any of such material issued by certain insurers upon his finding that such insurers have been named in an excessive number of complaints made to the Department, or of all such material relating to a particular line or type of insurance, such as, but not limited to, accident policies, cancer policies, or Medicare Supplement policies. All such advertising material required to be filed by any such insurer or insurers shall be so filed with the Department not less than 30 days prior to the date the insurer desires to use the advertisement unless the Commissioner consents to a shorter time for the filing of such material prior to its use.

Section 20. Subsection A of Section 17 of this Regulation shall take effect immediately, and all other provisions of the Regulation shall take effect July 1, 1974.

69-18. Title Insurance.

Section 1. Purposes. The within Regulation is predicated upon recognition of the fact that, as presently constituted, the title insurance business is characterized by reverse competition, which is to say that competition among title insurers regularly takes the form of insurers vying with each other for the favor of mortgage lenders, attorneys, or others who control, or who may control, the placement of the title insurance with title insurers. Such reverse competition tends to increase title insurance premiums or to prevent lowering of such premiums in order that greater commissions or other allowances may be paid to agents or mortgage lenders for such business as a means of obtaining the placement of business controlled by the agent with the insurer paying the highest commissions. In addition, other inducements are made to mortgage lenders, attorneys, or others who control, or who may control, such business by title insurers as a means of securing the placement of such business with the insurers offering the inducements. The reciprocal of such inducements is that mortgage lenders or others have resorted to practices which constitute or border upon coercion, intimidation, or boycott in order to obtain or increase their participation in the title insurance premiums. Manifestly, reverse competition works to the detriment, rather than in favor of, the consumer who is called upon to pay the title insurance premiums, and this reverse competition operates to thwart normal economic forces which would otherwise tend to lower title insurance premiums.

(a) Inasmuch as acts of coercion, boycott, or intimidation are not saved by the McCarran-Ferguson Act from application of the Federal antitrust and Federal Trade Commission laws, even though such acts relate to the business of insurance, this State is in danger of being ousted of its regulatory authority over title insurance if prevalent practices and abuses are suffered by this State to continue.

(b) Title insurers which abstain from the payment of excessive commissions or the offering of such inducements either because they deem the same to be morally wrong, or because they fear Federal prosecution, cannot operate or expand their operations within this State because of the competitive disadvantage which they suffer through refusing to offer such inducements.

Section 2. Unlawful Rebates and Inducements. No title insurer or other person controlled by it shall pay or offer to pay, either directly or indirectly, any referral commission or fee or any part of the premiums for title insurance or any other consideration whatsoever as an inducement for or as compensation on any title insurance business in connection with which a title insurance policy is issued to any of the following:

(a) Any owner or prospective owner or lessee or prospective lessee of real property or any interest therein.

(b) Any obligee or prospective obligee of an obligation secured or to be secured either in whole or part by real property or any interest therein.

(c) Any person who is acting as or who is in the business of acting as agent, representative, attorney, or employee of any of the persons described in (a) or (b); provided, however, that this subdivision shall not be deemed to preclude payment by a title insurer of normal commission to an agent, representative or attorney of any of the persons described in the said subdivisions (a) or (b), but who is not the employee of any such person, except that if any such person entitled to receive and receiving commission hereunder stands in a fiduciary relation to any of the persons described in subdivisions (a) or (b), he must disclose in writing to such person the rate or amount of the commission to be received; further provided, that the commission received from the insurer may not be shared either directly or indirectly with any other person except a duly licensed agent who is not in the employment or under the control of any of the persons described in subdivisions (a) or (b) hereof.

(1) The rule is based, in part, upon recognition of the fact that the agent, representative or attorney of the purchaser or seller paying for the title insurance policy stands in a fiduciary or quasi-fiduciary relationship with such purchaser or seller and that the receipt by him of money or other economic benefit beyond that which such agent, representative or attorney is entitled to as normal commission for services rendered would be inconsistent with his fiduciary relationship in selecting the title insurance for the purchaser or seller. Given a fair disclosure of the rate or amount of such commission to such purchaser or seller, the payment of reasonable agents' commissions is not inappropriate provided there is no division of such commissions in a manner which constitutes a rebate or a benefit to the lender. It is reasonable to assume that when there is no possibility of an unearned and undisclosed material personal benefit or rebate to the said agent, representative or attorney of the purchaser or seller, he would either make no recommendation as to the title insurer or would recommend a listing of title insurers known to be competitive in terms of price or service in order to enhance his own business reputation and competitive position.

(i) In connection with any such disclosure in writing pursuant to paragraph (1) of this subsection, the agent, representative or attorney shall inform the purchaser or seller in writing of his right to choose the title insurer notwithstanding the recommendation of any such agent, representative, or attorney. Such writing shall also fairly and fully inform the purchaser of the limitations of the mortgagee-type title insurance policy as regards protection of the owner's separate interest in the property and shall inform him as respects the availability and cost of an owner's-type policy from the title insurer. If the particular title insurer represented by the said agent, representative or attorney does not provide owner's-type coverage, the written disclosure must state that many insurers provide both mortgagee-type policies and owner's-type policies.

(2) Any of the following activities by a title insurer will be deemed to constitute an unlawful rebate or inducement, but the listing of such activities is not to be construed as exhaustive of such unlawful activities and it may not be inferred that an omission from the listing constitutes a justification for engaging in a particular practice which has not been specifically listed. The term "such person" as used herein refers to any person described in subdivisions (a), (b), or (c) of Section 2:

(A) Charging either more or less than the scheduled rate for a policy of title insurance.

(B) Furnishing a preliminary title report, printed copies of covenants, conditions, and restrictions, or plats, maps, and like materials without charge to any such person. Any charge made for any such reports or materials must have a reasonable relation to the cost of production and the same shall be the same to all persons.

(C) Furnishing reports containing publicly recorded information, appraisals, estimates of income production potential, information kits or similar packages containing information about one or more parcels of real property helpful to any such person without making a charge that is commensurate with the actual cost of the work performed and the material furnished.

(D) Delaying the issuance of a policy beyond the close of escrow and crediting or deferring the charge therefor in order to qualify a later transaction for a lower rate.

(E) Providing, or offering to provide, either directly or indirectly a "compensating balance" or deposit in a lending institution either for the express or implied purpose of influencing the extension of credit by such lending institution to any such person or for the express or implied purpose of influencing the placement or channeling of title insurance business by such lending institution.

(F) Paying for, or offering to pay for, the fees or charges of an outside professional, such as an attorney, engineer, appraiser, or surveyor, whose services are required or useful by any such person to structure or complete a particular transaction.

(G) Paying for, or offering to pay for, the salary or any part of the salary of an employee of any such person, or paying for, or offering to pay for, the salary or any part of the salary of a relative of any such person.

(H) Paying, or offering to pay, any fee to any such person for making an inspection or appraisal of property whether such fee bears a reasonable relationship to the services performed or not.

(I) Furnishing or offering to furnish, paying for or offering to pay for, furniture, office supplies, telephones, equipment or automobiles to any such person, or paying for, or offering to pay for, any portion of the cost of renting, leasing, operating or maintaining any of the aforementioned items.

(J) Paying for, furnishing, or waiving, or offering to pay for, furnish, or waive, all or any part of the rent for space occupied by any such person.

(K) Renting, or offering to rent, space from any such person, regardless of the purpose, at a rent which is excessive when compared with rents for comparable space in the geographic area, or paying, or offering to pay, rent based in whole or in part on the volume of title insurance business generated by any such person.

(L) Paying for, or offering to pay for, entertainment, vacations, business trips, convention expenses, travel expenses, membership fees, registration fees, lodging or meals on behalf of any such person, directly or indirectly or supplying letters of credit, credit cards or any such benefits to any such person for any purpose whatsoever.

(M) Paying for or furnishing, or offering to pay for or furnish, any brochures, billboards, or advertisements appearing in newspapers, on the radio, or on television, or other advertising or promotional material published or distributed by or on behalf of any such person whether used in connection with the promotion, sale, or encumbrance of real property or not.

(N) Paying for or furnishing, or offering to pay for or furnish, any business form to any such person other than a form regularly used in the conduct of the title insurer's business and furnished solely for its convenience in the conduct of its normal business.

(O) Buying from or selling to, or exchanging with, or offering to buy from, sell to, or exchange with any such person, shares of stock in the title insurer or any business concern controlling or controlled by or affiliated with the title insurer except for purchases or exchanges made through a general public offering.

Section 3. Rates, Rating Plans, and Rating Organizations. On or before the one hundred twentieth day following the effective date of this Regulation, title insurers shall file, or cause to be filed in their behalf by a duly constituted and qualified rating organization, their rates for title insurance policies together with the rating plans and rating systems used by them in the making of rates; and such rating plans and rating systems shall be so structured as to produce rates which are adequate, not excessive and not unfairly discriminatory. Such rates whether made and filed by the insurer independently or in its behalf by a lawfully constituted rating organization shall be adequate, not excessive, and not unfairly discriminatory and shall be approved by the Chief Insurance Commissioner prior to their use.

69-20. Campus Life Insurance.

Complaints and abuses related to life insurance sold on or around the campuses of our universities and colleges have grown to intolerable proportions bringing into disrepute not only such campus life insurance but all life insurance. In particular, practices surrounding the making and acceptance of notes signed by the student-insured for the first-year premium with payment of such notes to be made out of the cash values of the policy at some future time has given rise to constant misunderstandings and has constituted a vehicle for fraudulent, deceptive, or misleading practices. In particular, failure to disclose adequately and clearly that lapse of the policy for any reason renders the note due and payable immediately has constituted a constant source of friction and complaint.

Accordingly, we propose to issue the following regulations relating to the sale and marketing of campus life insurance:

1. Purposes. The purpose of these regulations is to prohibit false, deceptive or misleading practices in respect to the marketing of campus life insurance and so to regulate the sale or attempted sale of campus life insurance as to prevent such practices in connection with the sale or attempted sale of such insurance.

2. Definition. "Campus Life Insurance" is hereby defined to mean any program of life insurance, including supplemental benefits, such as waiver of premium, accidental death, or like benefits, sold to university or college students under such circumstances that the premium, or any part thereof, for the first or any following year of coverage is deferred or is made through the execution of a promissory note or similar instrument.

3. Applicability of Premium Service Company Act or other laws. Nothing herein shall be deemed to supersede the Premium Service Company Act, nor any other law otherwise applicable, nor to suggest that the Premium Service Company Act, or other law, is not applicable to the financing of premiums for campus life insurance.

4. Registration and Approval. (1) No insurer conducting or proposing to conduct a campus life insurance program, and no agent, broker, or other person conducting or proposing to conduct such a program shall do so, or continue to do so, unless such insurer, agent, broker, or other person shall first file with the Chief Insurance Commissioner (Commissioner) notice of intent to conduct such program and receive from the Commissioner his approval. Such approval shall not be granted by the Commissioner unless the insurer, agent, broker, or other person has filed with him a copy of every promissory note or other security instrument, brochure, pamphlet, circular, flyer, leaflet or other advertising or sales piece together with a copy of every planned or prepared oral presentation to be made in connection with the sale or attempted sale of campus life insurance; nor shall the Commissioner grant such approval unless he finds all of such material to be complete, fair, unambiguous, and free from any tendency to mislead, deceive or confuse the student to whom it is to be addressed.

(2) No such insurer, agent, broker, or other person conducting or proposing to conduct a campus life insurance program on or about the campus of any university or college shall do so or continue to do so unless it or he shall first register with the president, dean, or other authorized official of such university or college and provide such official with evidence of the Commissioner's approval. Nothing herein shall be deemed to limit or impair the right of any authorized official of a university or college to impose other or further limitations in respect to sales on campus or to prohibit such sales in accordance with the rules of the particular institution.

(3) The Commissioner may, after due notice and public hearing, withdraw any such approval previously granted by him for any reason which would have justified his refusal to grant approval had the reason then existed or been known; and upon withdrawal of such prior approval, the Commissioner shall so advise the president, dean or other authorized official of every such university or college.

5. Limitations Upon Financing Agreements. No insurer and no agent, broker, or other person representing any insurer shall accept, transmit, or otherwise assist in the preparation or transmission of any promissory note or other instrument, agreement or document in connection with campus life insurance under which any holder, including the payee, may claim to be a holder in due course without notice, and no such holder acquiring any such note, instrument, agreement, or document in connection with the sale and purchase of campus life insurance shall be deemed a holder in due course without notice. Every assignment of such a note, instrument, agreement or document shall be with recourse against the assignor and shall make express reference to the fact that it is subject to this Regulation. It is the purpose of this Regulation to render any such note, instrument, document, or agreement accepted and transmitted in connection with the sale and purchase of campus life insurance subject to all defenses existing between the original parties and to imbue every such note, instrument, agreement or document taken in connection with, or related to, an application for life insurance completed or accepted in South Carolina covering a life then situate in South Carolina subject to the provisions of this Regulation and the public policy of this State.

6. Prohibited Practices. (1) No insurer, agent, broker, or other person representing any insurer shall sell, attempt to sell, or participate in any way in the sale or attempted sale of any policy or contract of campus life insurance unless it or he has first complied with all of the requirements of this Regulation.

(2) No insurer, agent, broker, or other person representing any insurer shall sell, attempt to sell or participate in any way in the sale or attempted sale of any policy or contract of campus life insurance unless the student making application for such insurance is at the time of such application actually a student who in the absence of course failure or withdrawal would be expected to complete his degree within 18 months, or a graduate student at the university or college. The confirmation of two or more occurrences by the Commissioner that the applicant for campus life insurance was not, at the time, such a student or graduate student shall constitute sufficient grounds for withdrawing any approval granted under Section 4 of this Regulation in respect to the insurer, agent, broker, or other person involved in such two or more occurrences.

(3) No insurer, agent, broker, or other person representing any insurer shall accept any application for campus life insurance unless the applicant for such insurance shall himself pay in cash or its equivalent not less than 10 percent, or $20, whichever is the lesser, of the first year's premium for such insurance; and no such insurer, agent, broker, or other person shall lend, extend credit for, or in any other manner whatsoever defer or forgive such payment. Any violation of this section shall be sufficient grounds for the withdrawal of any approval previously granted the affected insurer, agent, broker, or other person under Section 4 of this Regulation in addition to any other penalty which such insurer, agent, broker or other person may incur as a result of such violation. Any approval withdrawn by the Commissioner after due notice and hearing on account of the violation of this Section shall not be restored for a period of at least twenty-four months from the effective date of such withdrawal.

(4) No insurer, agent, broker, or other person transacting a campus life insurance business shall finally consummate any such contract or policy of campus life insurance unless it or he shall first deliver or cause to be delivered a disclosure statement, in form approved by the Commissioner, fully, fairly and unambiguously stating the terms of the policy or contract, including, but not limited to, any exclusions of, or limitations upon coverage, and fully, fairly, and unambiguously disclosing the terms, including, but not limited to, the effective rate of interest, in connection with any promissory note, instrument, agreement or other document related to the premium for such policy or contract. Without limitation upon the generality, such disclosure statement shall include a brief description of every supplemental benefit, if any, contained in the policy, the amount of premium for each such supplemental benefit and the time period over which such premium is to be paid in respect to any such benefit. The disclosure statement shall require the signature of the applicant and shall make provision for the absolute right of rejection of the policy or contract of campus life insurance within 10 days of the applicant's receipt of such disclosure statement and repayment to him of any amount paid by him in respect to any premium for such insurance. (a) If a disclosure statement is delivered in person by any agent, broker, or other person representing the insurer, no confirmation of the transaction through signature by the applicant shall be valid unless an interval of not less than three days shall separate the delivery of the disclosure statement and its redelivery to such agent, broker, or other person. Any violation of this provision shall be sufficient grounds for the withdrawal of any approval granted pursuant to Section 4 of this Regulation in respect to such agent, broker, or other person found by the Commissioner, upon due notice and hearing, to have participated in such violation.

7. Records and Inspections. Every insurer, agent, broker, or other person representing an insurer transacting a campus life insurance business shall maintain and keep for a period of not less than three years, records of such business including all sales and advertising material, copies of applications, promissory notes, instruments, agreements or other documents, disclosure statements and like relevant material in respect to each transaction and all such records shall be open to the Commissioner or his representative at all reasonable times. Such records need not be duplicatively and separately maintained by an insurer and its representative but it is the responsibility of the insurer to inform the Commissioner where such records are being maintained. In the event such records are maintained without this State, the Commissioner may upon his own or the complaint of another person inspect and examine such records in person or through his designated representative and the reasonable expenses of such inspection and examination shall be borne by the insurer or other person maintaining such records and such expenses shall be collected by the Commissioner for the general revenues of the State. Failure or refusal by any person having custody of such records to open them, upon demand, to inspection by the Commissioner or his designated representative shall be sufficient grounds for the withdrawal of any approval previously granted by the Commissioner pursuant to Section 4 of this Regulation upon the Commissioner's finding, after due notice and hearing, of such failure or refusal.

8. Effective Date. This Regulation shall become effective 120 days after its filing with the Secretary of State, except that its provisions shall become effective immediately and be controlling in respect to any forms, advertising or other material filed with the Commissioner for approval.

69-22. Health Maintenance Organizations.

Section I. Definitions.

Unless the context otherwise requires, the following definitions shall apply as the terms are used in both this regulation and Chapter 33 of Title 38 of the 1976 South Carolina Code, as amended (the Health Maintenance Organization Act of 1987):

A. "Basic health care services" means emergency care, inpatient hospital and physician care, and outpatient medical services. "Basic health care services" does not include dental services, mental health services, or services for alcohol or drug abuse, although a health maintenance organization may at its option elect to provide these services in its coverage.

B. "Contractholder" means a person or entity consisting of employees or eligible persons which has entered into a group contract with a health maintenance organization for the provision of specified health care services to its eligible employees or eligible persons.

C. "Commissioner" means the Chief Insurance Commissioner.

D. "Copayment" or "deductible" means the amount specified in the evidence of coverage that the enrollee shall pay directly to the provider for covered health care services, which may be stated in either specific dollar amounts or as a percentage of the provider's usual or customary charge.

E. "Department" means the Department of Health and Environmental Control.

F. "Eligible dependent" means any member of a subscriber's family who meets the eligibility requirements set forth in Subsection D of Section III of this regulation.

G. "Emergency care services" means:

1. Within the service area: covered health care services rendered by affiliated or non-affiliated providers under unforeseen conditions that require immediate medical attention. Emergency care services within the service area shall include covered health care services from non-affiliated providers only when delay in receiving care from the health maintenance organization could reasonably be expected to cause severe jeopardy to the enrollee's condition.

2. Outside the service area: medically necessary health care services that are immediately required because of unforeseen illness or injury while the enrollee is outside the geographical limits of the health maintenance organization's service area.

H. "Enrollee" or "member" means an individual who is enrolled in a health maintenance organization.

I. "Evidence of coverage" means any certificate, agreement or contract issued to an enrollee setting out the coverage to which he is entitled.

J. "Group contract" means a contract for health care services which by its terms limits eligibility to members of a specified group.

K. "Health care services" means any services included in the furnishing to any individual of medical or dental care or hospitalization, or incident to the furnishing of such care or hospitalization, as well as the furnishing to any person of any and all other services for the purposes of preventing, alleviating, curing, or healing human illness, injury or physical disability.

L. "Health maintenance organization" means any person that undertakes to provide or arrange for basic health care services to enrollees for a fixed prepaid premium.

M. "Health professional" means any professional engaged in the delivery of health care services who is licensed, and practicing within the scope of such a license, where such licensing is required by state law.

N. "Hospital" means a duly licensed institution which provides general and specialized inpatient medical care. The term "hospital" shall not include a convalescent facility, nursing home, or any institution or part thereof which is used principally as a convalescent facility, rest facility, nursing facility, or facility for the aged.

O. "Individual contract" or "nongroup contract" means a contract for health care services issued to and covering an individual or a family.

P. "Medical necessity" or "medically necessary" means appropriate and necessary services as determined by any provider affiliated with the health maintenance organization which are rendered to an enrollee for any condition requiring, according to generally accepted principles of good medical practice, the diagnosis or direct care and treatment of an illness or injury and are not provided only as a convenience.

Q. "Out-of-area services" means the health care services that a health maintenance organization covers when its enrollees are outside of the service area.

R. "Person" means any natural or artificial person including but not limited to individuals, partnerships, associations, trusts, or corporations.

S. "Physician" means a duly licensed doctor of medicine or osteopathy practicing within the scope of such a license.

T. "Primary care physician" means a physician who supervises, coordinates, and provides initial and basic care to members; initiates their referral for specialist care and maintains continuity of patient care.

U. "Provider" means any physician, dentist, hospital, pharmacist, or other person properly licensed, where required, to furnish health care services.

V. "Service area" means the geographical area as approved by the Commissioner within which the health maintenance organization provides or arranges for health care services that are available and accessible to enrollees.

W. "Skilled nursing facility" means a facility that is operated pursuant to law and primarily engaged in providing, in addition to room and board accommodations, skilled nursing care under the supervision of a duly licensed physician.

X. "Subscriber" means the individual whose employment or other status, except for family dependency, is the basis for eligibility for enrollment in the health maintenance organization and who is in fact enrolled in the health maintenance organization.

Y. "Supplemental health care services" means any health care services other than basic health care services.

Section II. License Requirements.

A. Health Maintenance Organizations.

1. No person may undertake to provide or arrange for any basic health care service for a fixed prepaid premium in this State without first obtaining a certificate of authority from the Commissioner to transact business as a health maintenance organization.

2. No health maintenance organization chartered, organized and existing under the laws of the State will be licensed by the Commissioner unless it meets all requirements of law and this regulation and it maintains its records, accounts, home office and principal place of business in this State.

3. No health maintenance organization chartered, organized and existing under the laws of another state will be licensed by the Commissioner unless it meets all requirements of law and this regulation and the Commissioner has determined that:

a. the applicant is registered as a foreign corporation to do business in this State;

b. the applicant is subject to regulation of its financial condition in its state of domicile, including regular financial examination not less frequently than once every three years; and

c. the applicant complies with such conditions as the Commissioner may prescribe with respect to the maintenance of books, records, accounts and facilities in this State.

B. Agents.

1. An "agent" means a person who is appointed or employed by a health maintenance organization and who engages in solicitation of membership in the health maintenance organization. The term "agent" does not include an employee of an employer, union or other contractholder to whom a master subscriber contract has been issued whose duties include enrolling members in the health maintenance organization on behalf of the employer, union or other contractholder.

2. No person may act as an agent on behalf of a health maintenance organization in this State unless he has been licensed by the Commissioner as an accident and health insurance agent for that health maintenance organization. No health maintenance organization may accept members solicited by, or otherwise transact business through, persons who are not licensed by the Commissioner as accident and health insurance agents for the health maintenance organization. Salaried employees of the health maintenance organization are exempt from licensing requirements.

Section III. Requirements for Contracts and Evidence of Coverage.

A. Each subscriber shall be entitled to a contract or evidence of coverage as approved by the Commissioner. A contract or evidence of coverage shall be delivered or issued for delivery to a subscriber or to the contractholder for delivery to the subscriber within a reasonable time after enrollment, but not more than thirty (30) days from the later of the effective date of coverage or the date on which the health maintenance organization is notified of enrollment.

B. Health Maintenance Organization Information.

1. The contract and evidence of coverage shall contain the name, address and telephone number of the health maintenance organization, and where and in what manner information is available as to how services may be obtained.

2. A toll-free or local phone number within the service area for calls, without charge to members, to the health maintenance organization's administrative office shall be made available and disseminated to enrollees to adequately provide telephone access for member services, problems or questions.

C. Entire Contract.

1. The contract shall contain a statement that the contract, all applications and any amendments thereto shall constitute the entire agreement between the parties.

2. No portion of the charter, bylaws or other document of the health maintenance organization shall be part of such a contract unless set forth in full in the contract or attached thereto.

D. Term of Coverage.

1. The contract shall contain the time and date or occurrence upon which coverage takes effect, including any applicable waiting periods, or describe how the time and date or occurrence upon which coverage takes effect is determined.

2. The contract shall contain the time and date or occurrence upon which coverage will terminate.

E. Eligibility Requirements.

1. The contract and evidence of coverage shall contain eligibility requirements indicating the conditions that must be met to enroll as a subscriber or eligible dependent, the limiting age for subscribers and eligible dependents including the effects of Medicare eligibility, and a clear statement regarding coverage of newborn children.

2. The definition of an eligible dependent shall as a minimum include:

a. the spouse of the subscriber;

b. an unmarried dependent child of the subscriber who has not reached age 19;

c. an unmarried dependent child of the subscriber age 19 or over, who is both incapable of self support because of intellectual disability, mental illness or physical incapacity which began before the child reached age 19, and chiefly dependent upon the subscriber for support and maintenance; or

d. an unmarried dependent child of the subscriber age 19 through 22 who is attending a recognized college or university, trade or secondary school on a full-time basis.

3. The definition of a dependent child shall as a minimum include children who are:

a. related to the subscriber as either a natural child, a legally adopted child, a stepchild, a foster child, or a child under legal guardianship; or

b. any other child residing in the subscriber's household and who qualifies as a dependent of the subscriber or the subscriber's spouse under the United States Internal Revenue Code and federal tax regulations.

4. All contracts and evidences of coverage shall provide coverage for a newly-born child of the subscriber from the moment of birth. Medically diagnosed congenital defects and birth abnormalities shall be treated the same as any other illness or injury for which coverage is provided. The contract and evidence of coverage may require that notification of birth of a newborn child and payment of any required premium must be furnished to the health maintenance organization within thirty-one (31) days after the date of birth in order for such coverage to have become effective and to continue beyond such thirty-one (31) day period.

F. Benefits and Services within the Service Area. The contract and evidence of coverage shall contain a specific description of benefits and services available within the service area.

G. Emergency Care Services. The contract and evidence of coverage shall contain a specific description of benefits and services available for emergencies twenty-four (24) hours a day, seven (7) days a week, including disclosure of any restrictions on emergency care services. No contract or evidence of coverage shall limit the coverage of emergency services within the service area to affiliated providers only.

H. Out-of-Area Benefits and Services. The contract and evidence of coverage shall contain a specific description of benefits and services available out of the service area.

I. Copayments, Deductibles, Limitations and Exclusions. The contract and evidence of coverage shall contain a description of any copayments, deductibles, limitations or exclusions on the services, kind of services, benefits, or kind of benefits to be provided, including any copayments, deductibles, limitations or exclusions due to preexisting conditions, waiting periods or an enrollee's refusal of treatment.

J. Cancellation or Termination. The contract and evidence of coverage shall contain the conditions upon which cancellation or termination may be effected by the health maintenance organization or the subscriber.

K. Renewal. The contract and evidence of coverage shall contain the conditions for, and any restrictions upon, the subscriber's right to renewal.

L. Reinstatement. The contract and evidence of coverage shall contain the conditions for, and any restrictions upon, the subscriber's right to reinstatement.

M. Grace Period.

1. The contract and evidence of coverage shall provide for a grace period of not less than thirty-one (31) days for the payment of any premium except the first, during which coverage shall remain in effect if payment is made during the grace period.

2. During the grace period, the health maintenance organization shall remain liable for providing the services and benefits contracted for, the contractholder shall remain liable for the payment of the premium for the time coverage was in effect during the grace period, and the subscriber shall remain liable for any copayments or deductibles owed.

N. Claims. The contract and evidence of coverage shall contain procedures for filing claims that include:

1. any required notice to the health maintenance organization;

2. if any claim forms are required, how, when and where to obtain and submit them;

3. any requirements for filing proper proofs of loss;

4. any time limit on payment of claims;

5. notice of any requirement for resolving disputed claims including arbitration; and

6. a statement of restrictions, if any, on assignment of sums payable to the enrollee by the health maintenance organization.

O. Complaint System and Arbitration. The contract and evidence of coverage shall contain a description of the health maintenance organization's method for resolving enrollee complaints, incorporating procedures to be followed by the enrollee in the event any dispute arises under the contract, including any requirements for arbitration.

P. Conversion of Coverage.

1. The contract and evidence of coverage shall contain a conversion provision which provides that each enrollee has the right to convert coverage to an individual health maintenance organization contract or to a policy of health insurance issued by a licensed insurer on a form previously approved by the Chief Insurance Commissioner in the following circumstances:

a. upon termination of eligibility for coverage under a group or individual contract; or

b. upon termination of the group contract.

2. To obtain the conversion contract, an enrollee shall submit a written application and the applicable premium payment within the time period and in the manner prescribed by Section 38-71-770. The enrollee shall be entitled to the same right of continuation of coverage as provided therein.

3. A conversion contract shall not be required to be made available if:

a. the enrollee's termination of coverage occurred for any of the reasons listed in Subparagraphs 1.a.(1), (2), or (3) of Subsection B of Section IV of this regulation;

b. the enrollee is covered by or is eligible for benefits under Medicare, Title XVIII of the United States Social Security Act;

c. the enrollee is covered by or is eligible for similar hospital, medical or surgical benefits under state or federal law;

d. the enrollee is covered by or is eligible for similar hospital, medical or surgical benefits under any arrangement of coverage for individuals in a group;

e. the enrollee is covered for similar benefits by an individual policy or contract; or

f. the enrollee has not been continuously covered during the three-month period immediately preceding that person's termination of coverage.

4. As a minimum, the conversion contract shall provide basic health care services if conversion is to a health maintenance organization contract or shall provide benefits meeting the minimum requirements of Section 38-71-770, if conversion is to a policy of health insurance.

5. Coverage shall be provided without requiring evidence of insurability and shall not impose any preexisting condition limitations or exclusions as described in Subsection A of Section IV other than those remaining unexpired under the contract from which conversion is exercised. Any probationary or waiting period set forth in the conversion contract shall be deemed to commence on the effective date of the enrollee's coverage under the prior contract.

Q. Group Contract Discontinuance and Replacement. The provision of S. C. Code Section 38-71-760 governing discontinuance and replacement of coverage are applicable to group health maintenance organization contracts.

R. Coordination of Benefits.

1. The contract and evidence of coverage may contain a provision for coordination of benefits that shall be consistent with that applicable to other health insurers and health maintenance organizations in South Carolina.

2. Any provisions or rules for coordination of benefits established by a health maintenance organization shall not relieve a health maintenance organization of its duty to provide or arrange for a covered health care service to any enrollee because the enrollee is entitled to coverage under any other contract, policy or plan, including coverage provided under government programs.

S. Right to Examine Contract.

1. An individual contract shall contain a provision stating that a person who has entered into an individual contract with a health maintenance organization shall be permitted to return the contract within ten (10) days of receiving it and to receive a refund of the premium paid if the person is not satisfied with the contract for any reason.

2. If the contract is returned to the health maintenance organization or to the agent through whom it was purchased, it is considered void from the beginning.

3. However, if services are rendered or claims are paid for such person by the health maintenance organization during the ten-day examination period, the person shall not be permitted to return the contract and receive a refund of the premium paid.

T. Subrogation/Injuries Caused by Third Parties. Any provisions concerning subrogation for injuries caused by third parties shall conform to the requirements of S. C. Code Section 38-71-190 (1976), as amended.

U. Conformity with State Law. Any contract and evidence of coverage that contains any provision not in conformity with the Health Maintenance Organization Act of 1987 shall not be rendered invalid but shall be construed and applied as if it were in full compliance with this regulation and the Health Maintenance Organization Act of 1987.

Section IV. Prohibited Practices.

A. Preexisting Conditions.

1. A health maintenance organization contract may contain a provision limiting coverage for preexisting conditions.

2. The preexisting conditions must be covered no later than twelve months without medical care, treatment, or supplies ending after the effective date of the coverage or twelve months after the effective date of the coverage, whichever occurs first.

3. Preexisting conditions are defined as "those conditions for which medical advice or treatment was received or recommended no more than twelve months prior to the effective date of a person's coverage".

B. Termination of Coverage.

1. Cancellation.

a. No health maintenance organization shall cancel coverage of services provided an enrollee under an individual or group health maintenance organization contract except for one or more of the following reasons:

(1) failure to pay the amounts due under the contract;

(2) fraud or material misrepresentation in enrollment or in the use of services or facilities;

(3) material violation of the terms of the contract;

(4) failure to meet the eligibility requirements under a group contract, provided that a conversion option is offered.

b. However, coverage shall not be cancelled, terminated or nonrenewed on the basis of the status of the enrollee's health nor on the fact that the enrollee has exercised his rights under the health maintenance organization's complaint system by registering a complaint against the health maintenance organization.

3. Nonrenewal.

a. Group Contracts. No health maintenance organization shall nonrenew a group health maintenance organization contract except on the anniversary date of the contract.

b. Individual Contracts. No health maintenance organization shall nonrenew coverage of services provided an enrollee under an individual health maintenance organization contract unless it has received prior approval from the Commissioner, upon such terms as he deems just, to nonrenew all individual health maintenance organization contracts in this State.

4. No health maintenance organization shall cancel, terminate or nonrenew an enrollee's coverage for services provided under a health maintenance organization contract without giving the enrollee or contractholder written notice of termination which shall be effective at least thirty-one (31) days from the date of mailing or, if not mailed, from the date of delivery and which shall include the reason for termination. For termination due to nonpayment of premium, the grace period as required in Subsection M of Section III of this regulation shall apply. No written notice of termination shall be required to be given for termination due to nonpayment of premium.

5. No health maintenance organization that provides in the contract and evidence of coverage, that coverage of a dependent child shall terminate upon attainment of the limiting age for dependent children shall terminate the coverage of such child if the child is and continues to be both:

a. incapable of self support because of intellectual disability, mental illness or physical incapacity, and

b. chiefly dependent upon the subscriber for support and maintenance.

6. Proof of such incapacity and dependency shall be furnished to the health maintenance organization by the subscriber within thirty-one (31) days of the child's attainment of the limiting age and subsequently as reasonably required by the health maintenance organization, but not more frequently than annually after the two-year period following the child's attainment of the limiting age.

C. Unfair Discrimination.

1. No health maintenance organization shall unfairly discriminate against any enrollee or applicant for enrollment on the basis of the age, sex, race, color, creed, national origin, ancestry, religion, marital status or lawful occupation of an enrollee, or because of the frequency of utilization of services by an enrollee.

2. However, nothing shall prohibit a health maintenance organization from setting rates or establishing a schedule of charges in accordance with relevant actuarial data.

3. No health maintenance organization shall expel or refuse to re-enroll any enrollee nor refuse to enroll individual members of a group on the basis of the health status or health care needs of the individual enrollee or member.

Section V. Services.

A. Access to Care.

1. A health maintenance organization shall establish and maintain adequate arrangements to provide the health services contracted for by its subscribers including:

a. reasonable proximity to the business or personal residences of the enrollees so as not to result in unreasonable barriers to accessibility;

b. reasonable hours of operation and after-hours services;

c. emergency care services available and accessible within the service area twenty-four (24) hours a day, seven (7) days a week; and

d. sufficient providers and personnel, including health professionals, administrators and support staff, to assure that all services contracted for will be accessible to enrollees on an appropriate basis without delays detrimental to the health of enrollees.

2. A health maintenance organization utilizing primary care physicians shall make primary care physician services available to each enrollee and shall provide accessibility to medically necessary specialists through staffing, contracting or referral. Such a health maintenance organization shall provide for continuity of care for enrollees referred to specialists.

3. A health maintenance organization shall have written procedures governing the availability of frequently utilized services contracted for by enrollees, including at least the following:

a. well-patient examinations and immunizations;

b. emergency telephone consultation on a twenty-four (24) hours per day, seven (7) days per week basis;

c. treatment of emergencies;

d. treatment of minor illness; and

e. treatment of chronic illnesses.

B. Basic Health Care Services. A health maintenance organization shall provide, or arrange for the provision of, as a minimum, basic health care services which shall include the following:

1. Emergency care services, as defined in Section 1 of this regulation.

2. Inpatient hospital services, meaning medically necessary hospital services including, but not limited to, room and board; general nursing care; special diets when medically necessary; use of operating room and related facilities; use of intensive care units and services; x-ray, laboratory and other diagnostic tests; drugs, medications, biologicals, anesthesia and oxygen services; special nursing when medically necessary; physical therapy, radiation therapy and inhalation therapy; administration of whole blood and blood plasma; and short-term rehabilitation services.

3. Inpatient physician care services, meaning medically necessary health care services performed, prescribed, or supervised by physicians or other health professionals including diagnostic, therapeutic, medical, surgical, preventive, referral and consultative health care services.

4. Outpatient medical services, meaning preventive and medically necessary health care services provided in a physician's office, a non-hospital-based health care facility, or at a hospital. Outpatient medical services shall include but are not limited to diagnostic services; treatment services; laboratory services; x-ray services; referral services; and physical therapy, radiation therapy and inhalation therapy. Outpatient services shall also include preventive health services which shall include, at least a broad range of voluntary family planning counseling services, well-child care from birth, periodic health evaluations for adults, screening to determine the need for vision and hearing correction, and pediatric and adult immunizations in accordance with accepted medical practice.

C. Out-of-Area Services and Benefits.

1. Copayments or deductibles for out-of-area services shall be shown in the contract and evidence of coverage.

2. When an enrollee is traveling or temporarily out of a health maintenance organization's service area, a health maintenance organization shall provide benefits for reimbursement for emergency care services subject to the following condition:

a. the condition could not reasonably have been foreseen;

b. the enrollee could not reasonably arrange to return to the service area to receive treatment from the health maintenance organization's provider;

c. the travel must be for some purpose other than the receipt of medical treatments; and

d. the health maintenance organization is notified by telephone within twenty-four (24) hours of the commencement of such care unless it is shown that it was not reasonably possible to communicate with the health maintenance organization in such time limits.

3. Services received by an enrollee outside of the health maintenance organization's service area will be covered only so long as it is unreasonable to return the enrollee to the service area.

D. Supplemental Health Care Services.

1. In addition to the basic health care services required to be provided in Subsection B of this Section, a health maintenance organization may offer to its enrollee any supplemental health care services it chooses to provide.

2. Limitations as to time and cost may vary from those applicable to basic health care services.

Section VI. Other Requirements.

A. Description of Providers.

1. A health maintenance organization shall provide its subscribers with a list of the names and locations of all of its providers no later than the time of enrollment or the time the contract and evidence of coverage are issued and upon request thereafter. If a provider is no longer affiliated with a health maintenance organization, the health maintenance organization shall provide notice of such change to its affected subscribers and to the Department in a timely manner. Subject to the approval of the Commissioner, a health maintenance organization may provide its subscribers with a list of providers or provider groups for a segment of the service area. However, a list of all providers shall be made available to subscribers upon request.

2. Any list of providers shall contain a notice regarding the availability of the listed providers. Such notice shall be in not less than twelve point type and be placed in a prominent place on the list of providers. The notice shall contain the following language: Enrolling in [name of HMO] does not guarantee services by a particular provider on this list. If you wish to be sure of receiving care from specific providers listed, you should contact the health maintenance organization to be sure that the particular provider is accepting additional patients for [name of HMO]. Even if a particular provider is participating in [name of HMO] on the date you enroll, there is no guarantee that the provider will continue to participate during the entire term of your enrollment in [name of HMO].

B. Description of the Service Area.

1. A health maintenance organization shall provide its subscribers with a description of its service area no later than the time of enrollment or the time the contract and evidence of coverage is issued and upon request thereafter.

2. If the description of the service area is changed, the health maintenance organization shall provide at such time a new description of the service area to its affected subscribers and to the Department.

C. Copayments and Deductibles.

1. A health maintenance organization may require copayments or deductibles of enrollees as a condition for the receipt of specific health care services.

2. Copayments or deductibles for basic health care services shall be shown in the contract and evidence of coverage.

D. Complaint System.

1. A complaint system shall be established and maintained by a health maintenance organization to provide reasonable procedures for the prompt and effective resolution of written complaints.

2. The complaint system shall provide for written acknowledgement of complaints and complaints to be resolved or to have a final determination of the complaint by the health maintenance organization complaint system within a reasonable period of time, but not more than ninety (90) days from the date the complaint is registered. This period may be extended in the event of a delay in obtaining the documents or records necessary for the resolution of the complaint, or by the mutual written agreement of the health maintenance organization and the enrollee.

3. Pending the resolution of a written complaint filed by a subscriber or enrollee, coverage may not be terminated for any reason which is the subject of the written complaint, except where the health maintenance organization has, in good faith, made a reasonable effort to resolve the written complaint through its complaint system and coverage is being terminated as provided for in Subsection B of Section IV.

4. If enrollee complaints and grievances may be resolved through a specified arbitration agreement, the enrollee shall be advised in writing of his rights and duties under the agreement at the time the complaint is registered. Any such agreement must be accompanied by a statement setting forth in writing the terms and conditions of binding arbitration. Any health maintenance organization that makes such binding arbitration a condition of enrollment must fully disclose this requirement to its enrollees in the contract and evidence of coverage.

Section VII. Severability.

If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section VIII. Effective Date.

A. This regulation shall become effective ninety (90) days after final publication in the State Register.

B. All health maintenance organization contracts issued or renewed after this date must comply with its provisions.

HISTORY: Amended by State Register Volume 14, effective 90 days after publication in State Register, published April 27, 1990; State Register Volume 26, Issue No. 6, Part 2, eff June 28, 2002.

CODE COMMISSIONER'S NOTE

Pursuant to 2011 Act No. 47, Section 14(B), the Code Commissioner substituted "intellectual disability" for "mental retardation" and "person with intellectual disability" or "persons with intellectual disability" for "mentally retarded".

69-23. Adjuster, Public Adjuster, Appraiser, Broker, Bondsmen, Runner, Producer and Agency Licenses.

Section I. Purpose

The purpose of this regulation is to specify requirements related to licenses issued by the Department.

Section II. Licenses required for each agency

A. Each agency, as defined in Section 38-1-20(26) of the 1976 Code, as amended, shall make application for licensure to the director or his designee on the Uniform Business Entity Application and declare under penalty of refusal, suspension or revocation of the license that the statements made in the application are true, correct, and complete to the best of the applicant's knowledge and belief. This applies to each corporation, association, partnership, limited liability company, limited liability partnership, or other business entity in which more than one person has a financial interest or which operates under a corporate or trade name. The requirement for an agency license does not apply to any agency owned by, and operated under the name of, an individual licensed producer, so long as no other person, firm or entity has any interest in, or affiliation with, the business of the individual producer or his agency.

B. No such agency shall be licensed under a name which is likely to lead a person of average intelligence to believe that the agency is an insurer, an agency of any government, or a club, fraternity, association or social or military organization, or which is otherwise deceptive or misleading. Foreign corporations, limited partnerships and any other entities are required by law to be registered with the South Carolina Secretary of State's Office.

C. The agency is required to submit the application to the Department of Insurance and to pay the required fee; however, each insurer is required to notify all its agencies of their responsibility to file an agency application and to pay the required fee. Only one agency license is required for each agency regardless of the number of insurers it represents or the number of locations. At any time that an agency has no stockholder, officer, director, member, employee or associate possessing a current, active individual producer's license, the agency license shall be deemed terminated.

Section III. Citizenship requirements for Producers, Adjusters, Public Adjusters, Appraisers, Brokers, Bondsmen, and Runners

A. Producers. Only natural persons may be licensed and appointed as producers to represent an insurance company. The applicant shall be a citizen of the United States or provide documentation that the applicant is a properly registered alien residing in the United States.

B. Adjusters, Public Adjusters, Appraisers, Brokers, Bondsmen and Runners. The applicant shall be a citizen of the United States or provide documentation that the applicant is a properly registered alien residing in the United States.

Section IV. Appointments

After becoming licensed, producers must be appointed by an insurer licensed in the State for the kinds of insurance for which the applicant is licensed and seeks to transact business. Every such appointing insurer is accountable for the accuracy and veracity of the certification of the applicant's reputation and trustworthiness. Information obtained from commercial reporting sources concerning the reputation of an applicant must be retained by the appointing insurer for at least five (5) years and shall be made available to the Department of Insurance upon request made by the Department.

Section V. Successful Completion of Examination

A. Producers. An applicant for licensure as a resident producer shall stand a written examination.

B. Adjusters. So as to assure himself that applicants for an adjuster's license under Code Section 38-47-10 have sufficient knowledge of the insurance business, the Director will require those applicants to stand a written examination.

(1) An adjuster applicant holding a designation as Chartered Property and Casualty Underwriter (CPCU) or Chartered Life Underwriter (CLU) relevant to the kinds of insurance for which he seeks authority shall not be required to stand a written examination prior to being issued a license.

(2) Nonresident applicants for an adjuster's license who are licensed in their home state or any other state requiring a licensing examination shall not be required to stand a written examination prior to being issued a license.

(3) If an applicant not currently licensed was previously licensed in respect to the kinds of insurance for which he seeks a license within the immediately preceding ninety days, and such license was not suspended, canceled or revoked, the Director may waive the requirement of a written examination.

C. Public Adjusters, Appraisers, Bondsmen, Runners and Brokers shall take written examinations as provided for by statute.

D. Applicants scoring at least seventy (70) points on the examination will be issued a certificate to signify successful completion of the examination, which certificate shall be valid for twelve months only. Upon submission of such certificate to the Department of Insurance, and upon the applicant's meeting all requirements to become licensed, the appropriate license will be issued.

E. Applicants scoring less than seventy (70) points shall be deemed to have failed the examination. An applicant may take each examination six (6) times during any twelve month period, upon complying with all applicable registration, fee and test procedure requirements.

Section VI. Absence of criminal record

A. Producers. An insurance company is required to investigate the "character and record" of a person whom the company wishes to appoint as its producer, and to vouch for the trustworthiness and qualifications of such person to act as an appointed producer for the insurer. In determining whether an individual is eligible to be licensed as an insurance producer, the Director must, among other things, consider whether the individual has been convicted of, or pleaded guilty or nolo contendere to, a crime involving moral turpitude. Every applicant for a producer's license must provide a copy of his criminal history record to the Director when applying for a license. The Director must also consider whether the individual has had an insurance producer license, or its equivalent, denied, suspended, or revoked in this state or another state, province, district, or territory.

B. Adjusters, Public Adjusters, Appraisers, Bondsmen, Runners and Brokers. The Director must be satisfied that a person applying for a license is of good moral character, has not violated any of the insurance laws of this State or any other state, and is a fit and proper person for a license. So as to permit the Director to make such a determination, every applicant for a license must provide a copy of his criminal history record to the Director when applying for a license. The Director must also consider whether the individual has had a license, or its equivalent, denied, suspended, or revoked in this state or another state, province, district, or territory.

Section VII. Special requirements for variable contracts licensing

In order to be licensed to sell either variable life insurance or variable annuities, an applicant must meet the following requirements:

(1) The applicant must furnish evidence that he has passed a securities examination administered by the National Association of Securities Dealers (NASD), the Securities and Exchange Commission (SEC) or the Securities Commissioner of South Carolina;

(2) The applicant must furnish evidence that he has passed a variable contracts examination. The variable contracts examination may be waived if the applicant furnishes evidence that he has passed the NASD Series 6 or Series 7 examination or any other examination which in the opinion of the Director sufficiently tests the applicant's knowledge of variable contracts.

HISTORY: Amended by State Register Volume 8, Issue No. 6, eff June 22, 1984; State Register Volume 12, Issue No. 7, eff July 1, 1988; State Register Volume 34, Issue No. 6, eff June 25, 2010.

69-24. Workmen's Compensation--Dividends to Policyholders.

Section 1. Background and Purpose. It has come to the attention of the South Carolina Insurance Commission that some Workmen's Compensation insurers and agents may be using unfairly discriminatory and other misleading practices in connection with policyholder dividend plans. In order to aid the South Carolina Insurance Commission in its efforts to prevent such practices and enforce the insurance laws of this state pertaining to such unlawful practices, the following regulation is deemed necessary.

Section 2. Rules for Filing of Dividend Plans. Each insurer which intends to issue Workmen's Compensation policies on a participating basis in South Carolina shall file with the Chief Insurance Commissioner of South Carolina any dividend plan or plans already implemented or intended to be implemented by such insurer including any amendments thereto. Each such insurer shall also attach to every workmen's compensation policy an endorsement thereto reading as follows:

The insured shall participate in the earnings of the company, only in accordance with law and with a plan applicable to this policy which has been filed with the Chief Insurance Commissioner of South Carolina, provided the insured has complied with all the terms of this policy with respect to the payment of premium.

Neither dividends nor any factor in their calculation may be guaranteed. By purchasing this policy, the insured obtains no contractual right to a dividend. Dividends are declared in the sole discretion of the governing body of the insurer, in accordance with law. Any representations to the contrary are false.

In lieu of an endorsement, the same or substantially similar wording may be incorporated as condition 18 of the standard Workmen's Compensation policy.

Section 3. Compliance with Insurance Laws and Regulations. Any dividend plan or plans filed pursuant to this regulation may provide for a reasonable classification of risks for purposes of determining dividends, but may not provide for rebates of premium or unfair discrimination in favor of individuals between insureds of the same class and hazard, as described in Section 38-55-50. Specifically, any dividend plan which provides for higher rates of dividend and lower rates of commission, to risks with other characteristics affecting losses and expenses remaining the same, shall be deemed to be in violation of Section 38-55-50. Any dividend plan which provides that dividends may not be paid under a policy unless the policy is renewed in the same company shall be deemed to be in violation of Section 38-57-130.

This regulation in no way modifies or extends any of the sections dealing with unfair trade practices, Sections 38-57-20, et seq., and violations shall be treated pursuant to the procedures set forth in Sections 38-57-200 through 38-57-320 of the South Carolina Code of Laws of 1976, as amended.

Section 4. Effective Date. This regulation shall take effect 120 days after it is filed with the Secretary of State except that insurers may immediately upon the filing of the Regulation with the Secretary of State submit such dividend plans to the Chief Insurance Commissioner in accordance with this Regulation. (Based on Insurance Commission designation R11-76.)

69-25. Prohibition Against Decreases in Income Benefits From Group Disability Policies Due to Increases in Social Security Benefits.

Section 1. Purpose. The purpose of this Regulation is to prohibit insurers from including an offset of increased social security benefits in group disability income policies. While there may be justification from a rate standpoint for permitting integration of disability income benefits and social security benefits in determining the initial disability income payment to a disabled person, there is no justification for offsetting increases in social security benefits that occur after the disability commences. When Congress increases social security benefits to disabled persons it is to provide the disabled persons with additional income regardless of any other income or insurance benefits payable to such persons. Accordingly, to permit such an offset would nullify the purpose of the social security legislation and would result in an inequity which is contrary to the expectations of the disabled insured.

Section 2. Applicability. This Regulation shall apply to all group disability income policies delivered or issued for delivery in this State after the effective date hereof; and to existing group policies on the renewal anniversary date.

Section 3. Prohibition. No group disability income policy which integrates benefits with social security benefits shall provide that the amount of any disability benefit actually being paid to the disabled person shall be reduced by changes in the level of social security benefits resulting either from changes in the social security law or due to cost of living adjustments which become effective after the first day for which disability benefits become payable.

Section 4. Effective Date. This Regulation shall take effect 120 days after it has been filed with the Secretary of State.

69-27. Guaranty Act--Applicability.

Section 1. Purpose. The purpose of this regulation is to require that brokers fully and fairly disclose to all policyholders of insurers not licensed to do business in this State that the provisions of the South Carolina Insurance Guaranty Association Act, (Sections 38-31-30 et seq., Code of Laws of South Carolina, 1976, as amended) which protect policyholders in the event of a property and casualty company insolvency, do not apply to an unauthorized, unlicensed carrier.

Section 2. Requirement. Consistent with the above stated purpose, on or after the effective date of this regulation, no broker shall place or renew any insurance with any insurer not licensed in this State unless he shall write or stamp upon the face of each policy or evidence of renewal of an insurer not licensed in this State the words "The S. C. Guaranty Act does not apply to this policy."

Section 3. Alternative. Inasmuch as Section 38-45-110, South Carolina Code of Laws, similarly requires that the words "This Company Not Licensed to do business in this State" to be written or stamped upon the face of each policy of an insurer not licensed in this State, the two requirements may be filled conjunctively. To Wit: In fulfilling the requirements of Section 38-45-110 and this Regulation, the broker may write or stamp upon the face of each policy or evidence of renewal of an insurer not licensed in this State the words "This Company is Not Licensed to do Business in this State, and the S. C. Guaranty Act does Not Apply to This Policy." (Provisions based on Insurance Commission designation R11-76.)

69-29. Suitability in Annuity Transactions.

Section I. Purpose

A. The purpose of this regulation is to require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transactions involving annuity products so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately addressed.

B. Nothing herein shall be construed to create or imply a private cause of action for a violation of this regulation.

Section II. Scope

This regulation shall apply to any recommendation to purchase, exchange or replace an annuity made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase, exchange or replacement recommended.

Section III. Exemptions

Unless otherwise specifically included, this regulation shall not apply to transactions involving:

A. Direct response solicitations where there is no recommendation based on information collected from the consumer pursuant to this regulation;

B. Contracts used to fund:

(1) An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA);

(2) A plan described by sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the Internal Revenue Code (IRC), as amended, if established or maintained by an employer;

(3) A government or church plan defined in section 414 of the IRC, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section 457 of the IRC;

(4) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(5) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or

(6) Formal prepaid funeral contracts.

Section IV. Definitions

As used in this regulation, unless the context otherwise requires:

A. "Annuity" means each contract or agreement to make periodic payments, whether in fixed or variable dollar amounts, or both, at specified intervals that is an insurance product under State law that is individually solicited, whether the product is classified as an individual or group annuity.

B. "Continuing education credit hour or "credit hour" means one continuing education credit as defined in S.C. Code of Regulations 69-50.

C. "Continuing education approved sponsor" or "CE Approved Sponsor" means an individual or entity that is approved to offer continuing education courses pursuant to S.C. Code of Regulations 69-50.

D. "FINRA" means the Financial Industry Regulatory Authority or a succeeding agency.

E. "Insurer" means a company required to be licensed under the laws of this State to provide insurance products, including annuities and as further defined in S.C. Code Section 38-1-20(33).

F. "Insurance producer" or "producer" means a person required to be licensed pursuant to S.C. Code Section 38-43-10 et seq. to sell, solicit or negotiate insurance, including annuities.

G. "Recommendation" means advice provided by an insurance producer, or an insurer where no producer is involved, to an individual consumer that results in a purchase, exchange or replacement of an annuity in accordance with that advice.

H. "Replacement" means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer involved, that by reason of the transaction, an existing policy or contract has been or is to be:

(1) Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated;

(2) Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

(3) Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

(4) Reissued with any reduction in cash value; or

(5) Used in a financed purchase.

I. "Suitability information" means information that is reasonably appropriate to determine the suitability of a recommendation, including the following:

(1) Age;

(2) Annual income;

(3) Financial situation and needs, including the financial resources used for the funding of the annuity;

(4) Financial experience;

(5) Financial objectives;

(6) Intended use of the annuity;

(7) Financial time horizon;

(8) Existing assets, including investment and life insurance holdings;

(9) Liquidity needs;

(10) Liquid net worth;

(11) Risk tolerance; and

(12) Tax status.

Section V. Duties of Insurers and of Insurance Producers

A. In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments and other insurance products and as to his or her financial situation and needs, including the consumer's suitability information, and that there is a reasonable basis to believe all of the following:

(1) The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components and market risk. The requirements of this section supplement and do not replace the disclosure requirements of South Carolina Code of Regulations 69-39.

(2) The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization or death or living benefit;

(3) The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable (and in the case of an exchange or replacement, the transaction as a whole is suitable) for the particular consumer based on his or her suitability information; and

(4) In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration whether:

(a) The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living or other contractual benefits), or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements;

(b) The consumer would benefit from product enhancements and improvements; and

(c) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months.

B. Prior to the execution of a purchase, exchange or replacement of an annuity resulting from a recommendation, an insurance producer, or an insurer where no producer is involved, shall make reasonable efforts to obtain the consumer's suitability information.

C. Except as permitted under subsection D of this section, an insurer shall not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer's suitability information.

D.(1) Except as provided under paragraph (2) of this subsection, neither an insurance producer, nor an insurer, shall have any obligation to a consumer under subsection A or C of this section related to any annuity transaction if:

(a) No recommendation is made;

(b) A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;

(c) A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended; or

(d) A consumer decides to enter into an annuity transaction that is not based on a recommendation of the insurer or the insurance producer.

(2) An insurer's issuance of an annuity subject to paragraph (1) shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.

E. An insurance producer or, where no insurance producer is involved, the responsible insurer representative, shall at the time of sale:

(1) Make a record of any recommendation subject to this regulation;

(2) Obtain a customer signed statement documenting a customer's refusal to provide suitability information, if any; and

(3) Obtain a customer signed statement acknowledging that an annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the insurance producer's or insurer's recommendation.

F.(1) An insurer shall establish a supervision system that is reasonably designed to achieve the insurer's and its insurance producers' compliance with this regulation, including, but not limited to, the following:

(a) The insurer shall maintain reasonable procedures to inform its producers of the requirements of this regulation and shall incorporate the requirements of this regulation into relevant insurance producer training manuals;

(b) The insurer shall establish standards for insurance producer product training and shall maintain reasonable procedures to require its producers to comply with the requirements of this regulation;

(c) The insurer shall provide product-specific training and training materials which explain all material features of its annuity products to its insurance producers;

(d) The insurer shall maintain procedures for review of each recommendation prior to issuance of an annuity that are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. Such review procedures may apply a screening system for the purpose of identifying selected transactions for additional review and may be accomplished electronically or through other means including, but not limited to, physical review. Such an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

(e) The insurer shall maintain reasonable procedures to detect recommendations that are not suitable. This may include, but is not limited to, confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters and programs of internal monitoring. An insurer may comply with this subparagraph by applying sampling procedures or by confirming suitability information after issuance or delivery of the annuity; and

(f) The insurer shall annually provide a report to senior management, including to the senior manager responsible for audit functions, which details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.

(2)(a) Nothing in this subsection restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under paragraph (1). An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to Section VII of this regulation regardless of whether the insurer contracts for performance of a function and regardless of the insurer's compliance with subparagraph (b) of this paragraph.



(b) An insurer's supervision system under paragraph (1) shall include supervision of contractual performance under this paragraph. This includes, but is not limited to, the following:

(i) Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and

(ii) Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.

(3) An insurer is not required to include in its system of supervision an insurance producer's recommendations to consumers of products other than the annuities offered by the insurer.

G. An insurance producer shall not dissuade, or attempt to dissuade, a consumer from:

(1) Truthfully responding to an insurer's request for confirmation of suitability information;

(2) Filing a complaint; or

(3) Cooperating with the investigation of a complaint.

H.(1) Sales made in compliance with FINRA requirements pertaining to suitability and supervision of annuity transactions shall satisfy the requirements under this regulation. This subsection applies to FINRA broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision is similar to those applied to variable annuity sales. However, nothing in this subsection shall limit the director's ability to enforce (including investigate) the provisions of this regulation.

(2) For paragraph (1) to apply, an insurer shall:

(a) Monitor the FINRA member broker-dealer using information collected in the normal course of an insurer's business; and

(b) Provide to the FINRA member broker-dealer information and reports that are reasonably appropriate to assist the FINRA member broker-dealer to maintain its supervision system.

Section VI. Insurance Producer Training

A. An insurance producer shall not sell, solicit, or negotiate an annuity product unless the producer:

(1) is authorized as an insurance producer for life insurance products;

(2) has adequate knowledge of the product to recommend the annuity;

(3) has completed a one-time training course as set forth in subsection B of this section; and

(4) is in compliance with the insurer's standards for product training.

A producer may rely on insurer-provided product-specific training standards and materials to comply with the insurer's standards for product training.

B.(1)(a) An insurance producer who engages in the sale of annuity products shall complete a one-time four (4) hour training course.

(b) Insurance producers who hold a life insurance line of authority on the effective date of this regulation and who desire to sell annuities shall complete the requirements of this subsection within six (6) months after the effective date of this regulation. Individuals who obtain a life insurance line of authority on or after the effective date of this regulation may not engage in the sale of annuities until the annuity training course required under this subsection has been completed.

(2) The minimum length of the training required under this subsection shall be sufficient to qualify for at least four (4) CE credit hours, but may be longer.

(3) The training required under this subsection shall include at a minimum information on the following topics:

(a) The types of annuities and various classifications of annuities;

(b) Identification of the parties to an annuity;

(c) How fixed, variable and indexed annuity contract provisions affect consumers;

(d) The application of income taxation of qualified and non-qualified annuities;

(e) The primary uses of annuities; and

(f) Regulatory requirements relating to sales practices, replacement and disclosure requirements.

Additional topics may be offered in conjunction with and in addition to the required outline.

(4) Providers of courses intended to comply with this subsection shall cover all topics listed in the prescribed outline and shall not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer's products.

(5) A provider of an annuity training course intended to comply with this subsection shall register as a CE Approved Sponsor in this State and comply with the rules and guidelines applicable to insurance producer continuing education courses as set forth in S.C. Code of Regulations 69-50

(6) Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with S.C. Code Section 38-43-106 and S.C. Code of Regulations 69-50.

(7) Providers of annuity training shall comply with the reporting requirements and shall issue certificates of completion in accordance with S.C. Code of Regulations 69-50.

(8) The satisfaction of the training requirements of another State that are substantially similar to the provisions of this subsection shall be deemed to satisfy the training requirements of this subsection in this State.

(9) An insurer shall verify that a producer has completed the annuity training course required under this subsection before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy its responsibility under this subsection by obtaining certificates of completion of the training course or obtaining reports provided by NAIC-sponsored database systems or vendors or from a reasonably reliable commercial database vendor that has a reporting arrangement with CE Approved Sponsors.

Section VII. Compliance, Penalties

A. An insurer is responsible for compliance with this regulation. If a violation occurs, either because of the action or inaction of the insurer or its insurance producer, the director may order:

(1) An insurer to take reasonably appropriate corrective action for any consumer harmed by the insurer's, or by its insurance producer's, violation of this regulation;

(2) A general agency, independent agency or the insurance producer to take reasonably appropriate corrective action for any consumer harmed by the violation of this regulation; and

(3) Appropriate penalties and sanctions pursuant to S.C. Code Section 38-2-10.

B. Any applicable penalty under S.C. Code Section 38-2-10 for a violation of this regulation may be reduced or eliminated if the director determines that corrective action for the consumer was taken promptly after a violation was discovered or the violation was not part of a pattern or practice.

Section VIII. Recordkeeping

A. Insurers, general agents, independent agencies and insurance producers shall maintain or be able to make available to the records of the information collected from the consumer and other information used in making the recommendations that were the basis for insurance transactions for five (5) years after the insurance transaction is completed by the insurer. An insurer is permitted, but shall not be required, to maintain documentation on behalf of an insurance producer.

B. Records required to be maintained by this regulation may be maintained in paper, photographic, micro-process, magnetic, mechanical or electronic media or by any process that accurately reproduces the actual document.

Section IX. Effective Date

This regulation shall become effective six (6) months following final publication in the State Register and shall apply to contracts sold on or after the effective date of this regulation.

HISTORY: Added by State Register Volume 35, Issue No. 3, eff March 25, 2011.

69-30. Life Insurance Disclosure Regulation.

This regulation requires that all persons selling or soliciting the sale of life insurance furnish to prospective purchasers certain basic information to enable these purchasers to accurately determine their insurance needs and to make comparisons of available policies.

A. Authority. This regulation is adopted and promulgated by the Director of the South Carolina Department of Insurance pursuant to Sections 38-3-60, 38-63-10, 38-65-10, 38-69-10, and Chapter 57 of the 1976 Code of Laws of South Carolina, as amended.

B. Purpose.

(1) The purpose of this regulation is to require insurers to deliver to purchasers of life insurance information that will improve the buyer's ability to select the most appropriate plan of life insurance for the buyer's needs and improve the buyer's understanding of the basic features of the policy that has been purchased or is under consideration.

(2) This regulation does not prohibit the use of additional material that is not a violation of this regulation or any other South Carolina statute or regulation.

C. Scope.

(1) Except for the exemptions specified in Section C(2), this regulation shall apply to any solicitation, negotiation or procurement of life insurance occurring within this state. Section E(2) shall apply only to an existing nonexempt policy held by a policyowner residing in this state. This regulation shall apply to any issuer of life insurance contracts including fraternal benefit societies.

(2) This regulation shall not apply to:

(a) Individual and group annuity contracts;

(b) Credit life insurance;

(c) Group life insurance (except for disclosures relating to preneed funeral contracts or prearrangements; these disclosure requirements shall extend to the issuance or delivery of certificates as well as to the master policy);

(d) Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the federal Employee Retirement Income Security Act of 1974 (ERISA) 29 U.S.C. Section 1001 et seq. as amended; or

(e) Variable life insurance under which the amount or duration of the life insurance varies according to the investment experience of a separate account.

D. Definitions. For the purposes of this regulation, the following definitions shall apply:

(1) "Buyer's Guide" means the current Life Insurance Buyer's Guide adopted by the National Association of Insurance Commissioners (NAIC) or language approved by the Director of the Department of Insurance.

(2) "Current scale of nonguaranteed elements" means a formula or other mechanism that produces values for an illustration as if there is no change in the basis of those values after the time of illustration.

(3) "Generic Name" means a short title that is descriptive of the premium and benefit patterns of a policy or a rider.

(4) "Nonguaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in its calculation.

(5) "Policy data" means a display or schedule of numerical values, both guaranteed and nonguaranteed for each policy year or a series of designated policy years of the following information: illustrated annual, other periodic, and terminal dividends; premiums; death benefits; cash surrender values and endowment benefits.

(6) "Policy Summary" means a written statement describing the elements of the policy including but not limited to:

(a) A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION;

(b) The name and address of the insurance producer, or, if no producer is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the Policy Summary;

(c) The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written;

(d) The Generic Name of the basic policy and each rider;

(e) The following amounts, where applicable, for the first five (5) policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including at least one age from sixty (60) through sixty-five (65) and policy maturity:

1. The annual premium for the basic policy;

2. The annual premium for each optional rider;

3. The amount payable upon death, at the beginning of the policy year regardless of the cause of death other than suicide, or other specifically enumerated exclusions, that is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately;

4. The total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider; and

5. Any endowment amounts payable under the policy which are not included under guaranteed cash surrender values above;

(f) The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears. If the policy loan interest rate is adjustable, the Policy Summary shall also indicate that the annual percentage rate will be determined by the company in accordance with the provisions of the policy and the applicable law; and

(g) The date on which the Policy Summary is prepared.

(7) "Preneed funeral contract" means a contract, which has for its purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property, merchandise, services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, but does not mean the furnishing of a cemetery lot, crypt, niche, mausoleum, grave marker or monument.

E. Duties of Insurers.

(1) Requirements Applicable Generally

(a) The insurer shall provide a Buyer's Guide prior to accepting the applicant's initial premium or premium deposit. However, if the policy for which application is made contains an unconditional refund provision of at least ten (10) days the Buyer's Guide may be delivered with the policy or prior to the delivery of the policy.

(b) The insurer shall provide a Policy Summary to prospective purchasers where the insurer has identified the policy form as one that will not be marketed with an illustration. The Policy Summary shall show guarantees only. It shall consist of a separate document with all required information set out in a manner that does not minimize or render any portion of the summary obscure. Any amounts of the policy that remain level for two (2) or more years may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. Amounts in Section D(6)(e) shall be listed in total, not on a per thousand or per unit basis. If more than one insured is covered under one policy or rider, death benefits shall be displayed separately for each insured or for each class of insureds if death benefits do not differ within the class. Zero amounts shall be displayed as a blank space. Delivery of the Policy Summary shall be consistent with the time for delivery of the Buyer's Guide as specified in Paragraph (a).

(c) Upon request, the insurer shall provide to any prospective purchaser a Buyer's Guide within a reasonable time, but no more than thirty (30) days from the request.

(2) Requirements Applicable to Existing Policies

(a) Upon request by the policyowner, the insurer shall furnish either policy data or an in force illustration as follows:

1. For policies issued prior to January 1, 2010, the insurer shall furnish policy data, or, at its option, an in force illustration meeting the requirements of Regulation 69-40 then in effect.

2. For policies issued after January 1, 2010, that were declared not to be used with an illustration, the insurer shall furnish policy data, limited to guaranteed values, if it has chosen not to furnish an in force illustration meeting the requirements of Regulation 69-40.

3. If the policy was issued after January 1, 2010 and declared to be used with an illustration, an in force illustration shall be provided.

4. Unless otherwise requested, the policy data shall be provided for twenty (20) consecutive years beginning with the previous policy anniversary. The statement of policy data shall include nonguaranteed elements according to the current scale, the amount of outstanding policy loans, and the current policy loan interest rate. Policy values shown shall be based on the current application of nonguaranteed elements in effect at the time of the request. The insurer may charge a reasonable fee that must be disclosed to the policyowner at the time the request is made.

(b) If a life insurance company changes its method of determining scales of non-guaranteed elements on existing policies, it shall, no later than when the first payment is made on the new basis, advise each affected policy owner residing in this state of this change and of its implication on affected policies. This requirement shall not apply to policies for which the amount payable upon death under the basic policy as of the date when advice would otherwise be required does not exceed $5,000.

(c) If the insurer makes a material revision in the terms and conditions under which it will limit its right to change any nonguaranteed factor, it shall, no later than the first policy anniversary following the revision, advise each affected policy owner residing in this state.

F. Preneed Funeral Contracts or Prearrangements.

(1) The following information shall be adequately disclosed at the time an application is made, prior to accepting the applicant's initial premium or deposit for a preneed funeral contract or prearrangement that is funded or to be funded by a life insurance policy:

(a) The fact that a life insurance policy is involved or being used to fund a prearrangement;

(b) The nature of the relationship among the soliciting agent or agents, the provider of the funeral or cemetery merchandise or services, the administrator and any other person;

(c) The relationship of the life insurance policy to the funding of the prearrangement and the nature and existence of any guarantees relating to the prearrangement;

(d) The impact on the prearrangement:

1. Of any changes in the life insurance policy including but not limited to, changes in the assignment, beneficiary designation or use of the proceeds;

2. Of any penalties to be incurred by the policyholder as a result of failure to make premium payments;

3. Of any penalties to be incurred or monies to be received as a result of cancellation or surrender of the life insurance policy;

(e) A list of the merchandise and services which are applied or contracted for in the prearrangement and all relevant information concerning the price of the funeral services, including an indication that the purchase price is either guaranteed at the time of purchase or to be determined at the time of need;

(f) All relevant information concerning what occurs and whether any entitlements or obligations arise if there is a difference between the proceeds of the life insurance policy and the amount actually needed to fund the prearrangement; and

(g) Any penalties or restrictions, including but not limited to geographic restrictions or the inability of the provider to perform, on the delivery of merchandise, services or the prearrangement guarantee.

G. General Rules.

(1) Each insurer shall maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use pursuant to this regulation. The file shall contain one copy of each authorized form for a period of three (3) years following the date of its last authorized use unless otherwise provided by this regulation.

(2) An insurance producer shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that he or she is acting as a life insurance agent and inform the prospective purchaser of the full name of the insurance company which he is representing to the buyer. In sales situations in which a producer is not involved, the insurer shall identify its full name.

(3) Terms such as financial planner, investment advisor, financial consultant, or financial counseling shall not be used in such a way as to imply that the insurance producer is generally engaged in an advisory business in which compensation is unrelated to sales unless such is actually the case. This provision is not intended to preclude persons who hold some form of formal recognized financial planning or consultant designation from using this designation even when they are only selling insurance. This provision also is not intended to preclude persons who are members of a recognized trade or professional association having such terms as part of its name from citing membership, providing that a person citing membership, if authorized only to sell insurance products, shall disclose that fact. This provision does not permit persons to charge an additional fee for services that are customarily associated with the solicitation, negotiation or servicing of policies.

(4) Any reference to nonguaranteed elements shall include a statement that the item is not guaranteed and is based on the company's current scale of nonguaranteed elements (use appropriate special term such as "current dividend" or "current rate" scale.) If a nonguaranteed element would be reduced by the existence of a policy loan, a statement to that effect shall be included in any reference to nonguaranteed elements. A presentation or depiction of a policy issued after January 1, 2010 that includes nonguaranteed elements over a period of years shall be governed by Regulation 69-40.

H. Failure to Comply.

Failure of an insurer to provide or deliver a Buyer's Guide, an in-force illustration, a Policy Summary or policy data as provided in Section E. shall constitute an omission which misrepresents the benefits, advantages, conditions or terms of an insurance policy in violation of South Carolina Code Ann. Section 38-57-10 et seq.

I. Effective Date.

This rule shall become effective January 1, 2010.

HISTORY: Added by State Register Volume 2, effective June 25, 1978. Amended by State Register Volume 15, Issue No. 3, eff March 22, 1991; State Register Volume 34, Issue No. 3, eff March 26, 2010.

69-31. Practice and Procedure for Hearings Before the Chief Insurance Commissioner under the State Administrative Procedures Act, Act No. 176 of 1977.

Notes

A. Scope of rules: The rules of procedure in this regulation govern the practice for hearings, decisions, and administrative review conducted by the Chief Insurance Commissioner of South Carolina pursuant to statutory authority.

B. Records to be public: All pleadings, correspondence, exhibits, transcripts of testimony, exceptions, briefs, decisions, and other documents filed in the docket in any proceeding may be inspected and copied in the office of the Department Hearing Clerk. Inquiries may be made at or to the office of the Department Hearing Clerk, South Carolina Department of Insurance, 2711 Middleburg Drive, P. O. Box 4067, Columbia, South Carolina, 29240.

C. Use of gender and number: As used in this regulation, words importing the singular number may extend and be applied to several persons or things, and vice versa. Words importing the masculine gender may be applied to females or organizations.

D. Suspension of rules: Upon notice to all parties, the presiding officer or the Chief Insurance Commissioner, with respect to matters pending before them, may modify or waive any rule in this regulation upon determination that no party will be unduly prejudiced and that the ends of justice will thereby be served.

E. Appearance: A party may appear in person or by counsel. Counsel for a party must be members in good standing of the South Carolina Bar or associated with a member in good standing of the South Carolina Bar.

F. Authority for representation: Any individual acting in a representative capacity in any proceeding may be required to show his authority to act in such capacity.

G. Exclusion from hearing for misconduct: Disrespectful, disorderly, or contumacious language or contemptuous conduct, refusal to comply with directions, or use of dilatory tactics by any person at any hearing shall constitute grounds for immediate exclusion of such person from the hearing by the presiding officer or by the Chief Insurance Commissioner.

H. Parties; South Carolina Department of Insurance deemed a party:

(1) The term "party" means each person or agency named in a notice of opportunity for hearing and petition or admitted as a party, or properly seeking and entitled as a matter of right to be admitted as a party.

(2) The term "person" means any individual, partnership, corporation, association, governmental subdivision, or public or private organization of any character other than an agency.

(3) The South Carolina Department of Insurance shall be deemed a party to all proceedings.

I. Amici curiae:

(1) Any interested person or organization may file a petition to participate in a proceeding as an amicus curiae. Such petition shall be filed prior to the prehearing conference, or, if none is held, before the commencement of the hearing, unless the petitioner shows good cause for filing the petition later. The presiding officer may grant the petition if he finds that the petitioner has a legitimate interest in the proceedings, that such participation will not unduly delay the outcome, and may contribute materially to the proper disposition thereof. An amicus curiae is not a party and may not introduce evidence at a hearing; nor may an amicus curiae examine or cross-examine a witness.

(2) An amicus curiae may submit a statement of position to the presiding officer prior to the commencement of the hearing, and shall serve a copy on each party. The amicus curiae may submit a brief on each occasion a decision is to be made or a prior decision is subject to review. An amicus curiae brief shall be filed and served on each party within the time limits applicable to the party whose position the amicus curiae supports; or if he does not deem himself to support the position of any party, within the longest time limit applicable to any party at that particular stage of the proceedings.

(3) After all parties have completed their initial examination of a witness, any amicus curiae may request the presiding officer to propound specific questions to the witness. The presiding officer, may, in his discretion, grant any such request if he believes that the proposed additional testimony may assist materially in explaining factual matters at issue between the parties and will not expand the issues.

J. Complainants not parties: A person submitting a complaint to the Department, regarding any matter within the jurisdiction of the Department, is not a party to a proceeding governed by this regulation, but may petition, after proceedings are initiated, to become a amicus curiae.

K. Form of documents to be filed: Documents to be filed under this rule shall be dated, the original signed in ink, shall show the docket description and title of the proceeding, and show the title, if any, and address of the person signing the document. Copies need not be signed but the name of the person signing the original shall be reproduced on all copies. Documents shall be legible and shall be eight and one-half inches wide and eleven inches long.

L. Signature of documents: The signature of a party, authorized officer, employee or attorney constitutes a certificate that he has read the document, that to the best of his knowledge, information, and belief there is good ground to support it, and that it is not interposed for delay. If a document is not signed or is signed with intent to defeat the purpose of this section, it may be stricken as sham and false and the proceeding may proceed as though the document had not been filed. Similar action may be taken if scandalous or indecent matter is inserted in a document.

M. Filing and service: All written notices by a Department official, and all written motions, requests, petitions, memoranda, pleadings, exceptions, briefs, decisions, and correspondence to a Department official from a party, or vice versa, relating to a proceeding after its commencement shall be filed and served on all parties. Parties shall submit the original and one copy of documents for filing. Filings shall be made with the Department Hearing Clerk at the address stated in the notice of hearing or notice of opportunity for hearing, during regular business hours. Regular business hours are every Monday through Friday (legal holidays in the State of South Carolina excepted) from 8:30 a.m. to 5:00 p.m., eastern standard or daylight-saving time, whichever is effective in the State of South Carolina at the time. Originals only of exhibits and transcripts or testimony need be filed. Requirements for service on amicus curiae are set forth in BBB below.

N. Service--how made: Service shall be made by personal delivery of one copy to each person to be served or by depositing the document or documents in the United States mail, postage prepaid, addressed to the last known place of business or residence of such person, certified with return receipt requested. If a party or amicus curiae has appeared by attorney, service upon such attorney shall be deemed service upon the party or amicus. Documents served by mail should be mailed in sufficient time to reach the addressee by the date on which the original is due to be filed.

O. Date of Service: The date of service shall be the day on which the matter is deposited in the United States mail or is delivered in person, except that the date of service of the initial notice of hearing or opportunity for hearing shall be the date of its delivery, or of its attempted delivery, if delivery is refused.

P. Certificate of service: The original of every document filed and required to be served upon parties to a proceeding shall be endorsed with a certificate of service signed by the party making service or by his attorney or representative, stating that such service has been made, the date of service, and the manner of service, whether by mail or personal delivery.

Q. Computation: In computing any period of time under this rule or in an order issued hereunder, the time begins with the day following the act, event, or default, and includes the last day of the period, unless the last day is a Saturday, Sunday, or legal holiday observed in the State of South Carolina, in which event it includes the next following business day. If the period of time prescribed or allowed is less than seven days, intermediate Saturdays, Sundays, and legal holidays shall be excluded from the computation of time.

R. Extension of time or postponement: Requests for extension of time must be served on all parties and must set forth the reasons for the application. Applications may be granted upon a showing of good cause by the applicant. After designation of a presiding officer and until issuance of his decision, such requests must be addressed to the presiding officer. Answers or responses to such requests are permitted, if made promptly.

S. Reduction of time to file documents: Upon good cause shown, the presiding officer or the Chief Insurance Commissioner may reduce any time limit prescribed by this regulation, except as provided by law.

T. Notice of hearing or opportunity for hearing: Proceedings are commenced by service of a notice of opportunity for hearing and petition upon a party, pursuant to N above of this regulation.

U. Answer to notice: A respondent or respondents shall file an answer to the petition within ten days after service thereof. Answers shall admit or deny specifically and in detail each allegation of the petition, unless the respondent party is without knowledge, in which case his answer should so state, and the statement will be deemed a denial. Allegations of fact in the petition not denied or controverted by answer shall be deemed admitted. Matters alleged as affirmative defenses shall be separately stated and numbered. Failure of a respondent to file an answer within the ten-day period following service of the petition may be deemed an admission of all matters of fact recited in the petition.

V. Amendment of notice or answer: The General Counsel may amend the petition once as a matter of course before an answer thereto is served, and each respondent may amend his answer once as a matter of course not later than ten days before the date fixed for hearing but in no event later than ten days from the date of service or his original answer. Otherwise, a petition or answer may be amended only by leave of the presiding officer. A respondent shall file his answer to an amended petition within the time remaining for filing the answer to the original petition or within ten days after service of the amended petition, whichever period may be the longer, unless the presiding officer otherwise orders.

W. Request for hearing: If neither a petition nor notice of opportunity for a hearing fix a date for hearing, a respondent, either in his answer or in a separate document, may request a hearing. Failure of a respondent to request a hearing shall be deemed a waiver of the right to a hearing and to constitute his consent to the making of a decision on the basis of such information as is available to the Department.

X. Consolidation: The Chief Insurance Commissioner may provide for proceedings in the Department to be joined or consolidated for hearing with proceedings in other State departments or agencies, by agreement with such other departments or agencies. All parties to any proceeding consolidated subsequent to service of a notice of opportunity for hearing and petition shall be promptly served with notice of such consolidation.

Y. Motions and petitions: Motions and petitions shall state the relief sought, the authority relied upon, and the facts alleged. If made before or after a hearing, these matters shall be in writing. If made at a hearing, they may be stated orally; provided, however, the presiding officer may require that they be reduced to writing and filed and served on all parties in the same manner as a formal motion. Motions, petitions, answers and replies shall be addressed to the presiding officer, if the case is pending before him. A repetitious motion or petition will not be entertained.

Z. Responses to motions and petitions: Within five days after a written motion or petition is served, or such other period as the Chief Insurance Commissioner or the presiding officer may fix, any party may file a response thereto. An immediate oral response may be made to an oral motion.

AA. Disposition of motions and petitions: The presiding officer or the Chief Insurance Commissioner may not sustain or grant a written motion or petition prior to expiration of the time for filing responses thereto, but may overrule or deny such motion or petition without awaiting response: Provided, however, that pre-hearing conferences, hearings and decisions need not be delayed pending disposition of motions or petitions. Oral motions and petitions may be ruled on immediately. Motions and petitions submitted to the presiding officer or the Chief Insurance Commissioner which are not disposed of in separate rulings or in their respective decisions or report will be deemed denied. Oral arguments shall not be held on written motions or petitions unless the presiding officer or the Chief Insurance Commissioner in his discretion, expressly so orders.

BB. Who Presides: The Chief Insurance Commissioner or a presiding officer designated and assigned by the Chief Insurance Commissioner shall preside over the taking of evidence in any hearing to which these rules of procedure apply.

CC. Designation of presiding officer: Designation by the Chief Insurance Commissioner of a presiding officer shall be in writing, and shall be signed by the Chief Insurance Commissioner or by his designee. The document signed by the Chief Insurance Commissioner or his designee, designating a presiding officer, shall specify whether the presiding officer is to hold a hearing and make a report or to certify the entire record, including his findings of fact, conclusions, recommendations and proposal for decision to the Chief Insurance Commissioner as required by these regulations, and may also fix the time and place of hearing. A copy of such order, designating an individual as a presiding officer, shall be served on all parties. After service of an order designating a presiding officer, and until such officer makes his report, all motions and petitions shall be submitted to him. In the case of the death, illness, disqualification or unavailability of the designated presiding officer, another presiding officer may be designated by the Chief Insurance Commissioner, or by his designee, to take his place.

DD. Authority of presiding officer: The presiding officer shall have the duty to conduct a fair hearing, to take all necessary action to avoid delay, and to maintain order. He shall also have all powers necessary to these ends, including, but not limited to, the authority to:

(1) Arrange and issue notice of the date, time, and place of hearings, or, upon due notice to the parties, to change the date, time, and place of hearings previously set;

(2) Hold conferences to settle, simplify, or fix the issues in a proceeding, or to consider other matters that may aid in the expeditious disposition of the proceeding;

(3) Require parties and amici curiae to state their position with respect to the various issues in the proceeding;

(4) Administer oaths and affirmations;

(5) Rule on motions, and other procedural matters pending before him;

(6) Regulate the course of the hearing and conduct of counsel at the hearing;

(7) Examine witnesses and direct witnesses to testify;

(8) Receive, rule on, exclude or limit evidence and testimony;

(9) Fix the time for filing motions, petitions, briefs, or other matters pending before him;

(10) Issue findings of fact and of law, conclusions, recommendations and proposed decisions; and

(11) Take any action authorized by this rule of procedure or in conformity with the provisions of Article II of Act 176 of 1977 (Administrative Procedures) and the insurance laws of South Carolina.

EE. Statement of position and briefs: The presiding officer may require parties and amici curiae to file written statements of position prior to the beginning of a hearing. The presiding officer may also require the parties to submit briefs.

FF. Evidentiary purpose:

(1) Hearings shall be held for the purpose of receiving factual evidence and expert opinion testimony related to the issues in the proceeding. Arguments will not be received in evidence; rather they should be presented in statements, memoranda, or briefs, as determined by the presiding officer. Brief opening statements, as to a party's position and what he intends to prove, may be made at hearings.

(2) Hearings for the reception of evidence will be held only in cases where issues of fact must be resolved or when required by law. In any case where it appears from a respondent's answer to the petition, from his failure to timely answer, or from his admissions or stipulations in the record, that there are no matters of material fact in dispute, the presiding officer may enter an order so finding, vacating the hearing date if one has been set, and fixing the time for filing briefs under WW below. Thereafter, the proceedings shall continue to a conclusion in accordance with WW through BBB below. The presiding officer may allow an interlocutory appeal to the Insurance Commissioner from such an order in accordance with TT below.

GG. Testimony: Testimony shall be given orally under oath or affirmation by witnesses at the hearing; but the presiding officer may, in his discretion, require or permit direct testimony of any witness to be prepared in writing and served on all parties in advance of the hearing. Such testimony may be adopted by the witness at the hearing, and filed as part of the record thereof. Unless authorized by the presiding officer, witnesses will not be permitted to read prepared testimony into the record. Except as provided in II and JJ below, witnesses shall be available at the hearing for cross-examination.

HH. Exhibits: Proposed exhibits shall be exchanged and marked for identification at a pre-hearing conference, or otherwise prior to the hearing if the presiding officer so requires. Proposed exhibits not so exchanged and marked may be denied admission as evidence. The authenticity of all proposed exhibits exchanged prior to a hearing will be deemed admitted unless written objection thereto is filed prior to the hearing or unless good cause is shown at the hearing for failure to file such written objection.

II. Affidavits: An affidavit is admissible in evidence subject to the following qualifications. Unless the presiding officer fixes other time periods, affidavits shall be filed and served on the parties not later than ten days prior to the hearing; and not less than five days prior to hearing a party may file and serve written objection to any affidavit on the ground that he believes it necessary to test the truth of assertions therein at the hearing. In such event, the assertions objected to will not be received in evidence unless the affiant is made available for cross-examination at the hearing, or the presiding officer determines that cross-examination is not necessary for the full and true disclosure of facts referred to in such assertions. Notwithstanding any objection, however, affidavits may be considered in the case of any respondent who waives a hearing.

JJ. Depositions: Upon such terms as may be just, for the convenience of the parties or of the Department, the presiding officer may authorize or direct the testimony of any witness to be taken by deposition.

KK. Admissions as to facts and documents: Not later than fifteen days prior to the scheduled date of the hearing except for good cause shown, or prior to such earlier date as the presiding officer may order, any party may serve upon an opposing party a written request for the admission of the genuineness and authenticity of any relevant documents described in and exhibited with the request, or for the admission of the truth of any relevant matters of fact stated in the request. Each of the matters of which an admission is requested shall be deemed admitted, unless within a period designated in the request (not less than ten days after service thereof, or within such further time as the presiding officer or the Chief Insurance Commissioner if no presiding officer has yet been designated may allow upon motion and notice) the party to whom the request is directed serves upon the requesting party a sworn statement either denying specifically the matters of which an admission is requested or setting forth in detail the reasons why he cannot truthfully either admit or deny such matters. Copies of any request for admission and answers thereto shall be served on all parties. Any admission made by a party to such request is only for the purposes of the pending proceeding, or any proceeding or action instituted for the enforcement of any order entered therein, and shall not constitute an admission by him for any other purpose or be used against him in any other proceeding or action.

LL. Evidence: Irrelevant, immaterial, unreliable, and unduly repetitious evidence will be excluded.

MM. Cross-examination: A witness may be cross-examined on any matter material to the proceeding without regard to the scope of his direct examination. Objections to testimony of a witness on direct examination need not be reserved and failure to reserve an objection, on cross-examination of a witness, shall not be deemed to be a waiver of any objection made during the witness's direct examination.

NN. Unsponsored written material: Letters expressing views or urging action and other unsponsored written material regarding matters in issue in a hearing will be placed in the correspondence section of the docket of the proceeding, but shall not be deemed to be part of the evidence or record in the hearing.

OO. Objections: Objections to evidence shall be timely and briefly state the ground relied upon.

PP. Exceptions to rulings of presiding officer unnecessary: Exceptions to rulings of the presiding officer are unnecessary. It is sufficient that a party, at the time the ruling of the presiding officer is sought, makes known the action which he desires the presiding officer to take, or his objection to an action taken and his grounds therefor.

QQ. Official notice: If official notice is taken or is to be taken of a material fact not appearing in the evidence of record, any party, on timely request, shall be afforded an opportunity to show the contrary.

RR. Public document items: If there is offered, in whole or in part, a public document, such as an official report, decision, opinion, or published scientific or economic statistical data issued by the executive department of the State of South Carolina or its subdivisions, legislative agencies or committees, administrative agencies of the Federal Government (including Government-owned corporations), or a similar document issued by the State of South Carolina or its agencies, and such document, or part thereof, has been shown by the offeror to be reasonably available to the public, such document need not be produced or marked for identification, but may be offered for official notice, as a public document item by specifying the document and relevant part thereof.

SS. Offer of proof: An offer of proof made in connection with an objection taken to any ruling of the presiding officer rejecting or excluding proffered oral testimony shall consist of a statement of the substance of the evidence which counsel contends would be presented by such testimony; and, if the excluded evidence consists of evidence in documentary or written form or of reference to documents or records, a copy of such evidence shall be marked for identification and shall accompany the record as the offer of proof.

TT. Interlocutory Appeals: Rulings of the presiding officer may not be appealed to the Chief Insurance Commissioner prior to the consideration of the entire proceeding except with the consent of the presiding officer and where he certifies on the record or in writing that the allowance of an interlocutory appeal is clearly necessary to prevent exceptional delay, expense, or prejudice to any party, or substantial detriment to the public interest. If such an appeal is allowed, any party may file a brief with the Chief Insurance Commissioner within such period as the presiding officer directs. No oral argument will be heard unless the Chief Insurance Commissioner directs otherwise.

UU. Official transcript: The Department will designate the official reporter for all hearings. The official transcripts of testimony taken, together with any exhibits, briefs, or memoranda of law filed therewith shall be filed with the Department Hearing Clerk. Transcripts of testimony in hearings may be obtained from the official reporter by the parties at rates not to exceed the maximum rates fixed by rules of the Supreme Court of the State of South Carolina for transcripts furnished by official court reporters in the courts of this State. Upon notice to all parties, the presiding officer may authorize and direct corrections to the transcript which involve matters of substance.

VV. Record for decision:

(1) The record, in a contested case, shall include:

(a) All pleadings, motions, intermediate rulings and depositions;

(b) Evidence received or considered;

(c) A statement of matters officially noted;

(d) Questions and offers of proof, objections and rulings thereon;

(e) Proposed findings and exceptions;

(f) Any decision, opinion or report by the officer presiding at the hearing; and

(g) The transcript, if any, of any oral proceedings, or any part thereof, transcribed upon request of any party or by direction of the presiding officer or the Chief Insurance Commissioner.

WW. Posthearing briefs; proposed findings and conclusions:

(1) The presiding officer shall fix the time for filing posthearing briefs, which may contain proposed findings of fact, conclusions of law, recommendations, and, if permitted, reply briefs.

(2) Briefs should include a summary of the evidence relied upon together with reference to exhibit numbers and pages of the transcript, if any, with citations of the authorities relied upon.

(3) Oral proceedings, or any part thereof, shall be transcribed on request of any party or by direction of the presiding officer or the Chief Insurance Commissioner.

XX. Decisions following hearing: Upon expiration of the time allowed for submission of posthearing briefs, the presiding officer shall make a report and certify the entire record, including his findings of fact, conclusions of law, recommendations and proposal for decision to the Chief Insurance Commissioner. Findings of fact shall be based exclusively on the evidence and on matters officially noticed. A copy of the presiding officer's report, findings, conclusions, recommendations and proposal for decision shall be served upon all parties, and amici, if any.

YY. Exceptions and briefs to presiding officer's report: Within ten days after the mailing of the presiding officer's report, any party may file exceptions to the report, findings of fact, conclusions of law and recommendations and proposal for decision, with the Chief Insurance Commissioner. Briefs of the parties, and amici, if any, shall be filed within thirty days after mailing of exceptions.

ZZ. Review by Chief Insurance Commissioner: Upon the filing of such exceptions, the Chief Insurance Commissioner shall review the record and report of the presiding officer and shall issue a written order. The order or decision of the Chief Insurance Commissioner shall become a "final decision" within the meaning of Section 8, Article II of Act 176 of 1977 upon the mailing of such order or decision. All final decisions shall be served on all parties, and amici, if any.

AAA. Oral argument to the Chief Insurance Commissioner:

(1) If any party desires to argue a case orally, he shall make such request in writing. The Insurance Commissioner may grant or deny such requests in his discretion. If granted, notice of oral argument shall be served on all parties. The notice will set forth the order of presentation, the amount of time allotted, and the time and place for argument. The names of persons who will argue must be filed with the Department Hearing Clerk not later than five days before the date set for oral arguments.

(2) The purpose of oral arguments is to emphasize and clarify the written argument in the briefs. Reading at length from a brief or other texts is not favored. Participants should confine their arguments to points of controlling importance and to points upon which exceptions have been filed. Consolidations of appearances at oral arguments by parties taking the same side will permit the parties' interests to be presented more effectively in the time allotted.

(3) Pamphlets, charts, and other written material may be presented at oral arguments only if such material is limited to facts already in the record and is served on all parties and filed with the Department Hearing Clerk at least five days before the argument.

BBB. Service on amici curiae: All briefs, exceptions, memoranda, requests, orders, and decisions required to be served upon the parties shall be served upon amici curiae at the same times and in the manner required for service on parties. Any written statement of position and trial briefs required of parties under EE above shall be served on amici.

CCC. Conduct: Parties and their representatives are expected to conduct themselves with honor and dignity and observe judicial standards of practice and ethics in all proceedings. They should not indulge in offensive personalities, unseemly wrangling, or intemperate accusations or characterizations. A representative of any party shall observe the traditional responsibilities of lawyers as officers of the court and use his best efforts to restrain his client from improprieties in connection with a proceeding.

DDD. Improper conduct: It is improper for any interested person to attempt to sway the judgment of the Insurance Commissioner with respect to any proceeding by undertaking to bring pressure or influence to bear upon any officer having a responsibility for a decision in the proceeding, or his decisional staff. It is improper for any interested person or persons or any members of the Department's staff or the presiding officer to give statements to communications media, by paid advertisement or otherwise, designed or intended to influence the judgment of any officer having a responsibility for a decision in the proceeding, or his decisional staff. It is improper for any person to solicit communications from or to any such officer, or his decisional staff, other than proper communications by parties or amici curiae.

EEE. Ex parte communications: Article II, Section 6 of Act 176 of 1977 governs ex parte communications in contested cases. A request for expeditious treatment of a matter pending before the presiding officer or the Chief Insurance Commissioner is deemed a communication on the merits, and is proper only after notice thereof is given to all parties. A request for information which merely inquires about the status of a proceeding without reference to the factual or legal issues is not deemed an ex parte communication, although such requests should be directed to the Department Hearing Clerk. Communications with respect to minor procedural matters or inquiries or emergency requests for extensions of time are not deemed ex parte communications.

FFF. Definitions:

(1) "Department" means the South Carolina Department of Insurance.

(2) "Notice" means notice of an opportunity for hearing.

(3) "Party" means a respondent and the South Carolina Department of Insurance.

(4) "Respondent" means the person or agency named in and upon whom a notice of opportunity for hearing and petition are served.

(5) "Commissioner" or "Chief Insurance Commissioner" means the Chief Insurance Commissioner of the State of South Carolina.

69-32. Unfair Discrimination on the Basis of Blindness or Partial Blindness.

This regulation prohibits unfair discrimination against the blind or partially blind in regard to rates or coverage by insurers.

A. The following are hereby identified as acts or practices which constitute unfair discrimination between individuals of the same class:

(1) Refusing to insure,

(2) or refusing to continue to insure,

(3) or limiting the amount, extent or kind of coverage available to an individual.

(4) or charging an individual a different rate from the same coverage solely because of blindness or partial blindness.

HISTORY: Amended by State Register Volume 10, Issue No. 3, eff March 28, 1986.

69-33. Dates for Payment of License Fees/Appointment Fees for Adjusters, Agencies, Bail Bondsmen/Runners, Brokers, Motor Vehicle Physical Damage Appraisers, Premium Service Companies, Producer Appointments, Producers, Public Adjusters, Rental Car Companies, Service Contract Providers, Third Party Administrators and Utilization Review Agents.

Section I. Purpose

The purpose of this regulation is to establish dates for the time and manner of payment of license and appointment fees.

Section II. Scope

This regulation applies to all Adjusters, Agencies, Bail Bondsmen/Runners, Brokers, Motor Vehicle Physical Damage Appraisers, Premium Service Companies, Producer Appointments, Producers, Public Adjusters, Rental Car Companies, Service Contract Providers, Third Party Administrators and Utilization Review Agents. Except for Producers, individuals and entities are not required to renew their initial license if the license was issued within one hundred eighty (180) days of the first deadline for renewal.

Section III. Dates for Payment of License and Appointment Fees

The deadline for payment of license and appointment fees is the last day of the renewal period. Unless otherwise provided by applicable law, the dates for payment of license and appointment fees will be as follows:

A. Annual License Renewals

Third Party Administrators February 1 - March 1

Bail Bondsmen/Runners June 1 - June 30

Service Contract Providers September 1 - September 30

B. Biennial License Renewals

(1) Even-numbered year renewals

Agencies January 1 - January 31

Premium Service Companies February 1 - March 1

Brokers May 1 - May 31

Utilization Review Agents June 1 - June 30

Producer Appointments September 1 - September 30

Public Adjusters October 1 - October 30

Rental Car Companies December 1 - December 31

(2) Odd-numbered year renewals

Adjusters August 1 - August 31

Motor Vehicle Physical Damage Appraisers October 1 - October 31

C. Producer License Renewal

All licensed producers must renew their license and pay the license renewal fee by the last day of the individual's month of birth. An individual born in an odd-numbered year shall comply every odd-numbered year. An individual born in an even-numbered year shall comply every even-numbered year.

Section IV. Effect of Failure to Pay Fees by Deadline

If fees are not paid by the last day of the applicable renewal period designated above, the license and/or appointment(s) will lapse or cancel as specified by statute. Any other license contingent upon having a particular license will also lapse or cancel.

Section V. Reinstatement

A. Except as otherwise provided by applicable statute, any license(s) (other than producer licenses) so lapsed or canceled may be reinstated upon the individual's or entity's compliance with each of the following:

(1) compliance with the applicable licensing or other license qualification statute;

(2) payment of the applicable fees; and

(3) payment of a penalty fee in the amount of four (4) times the license renewal fee or $250, whichever is greater.

B. Producer license reinstatement. A producer may reinstate a lapsed license by:

(1) complying with all licensing requirements, including continuing insurance education, within six (6) months of the individual's compliance deadline;

(2) payment of the applicable fees; and

(3) payment of a reinstatement fee of up to $250.

C. Reinstatement of Appointments. An insurer may reinstate appointments that have been canceled subject to each of the following:

(1) the producer(s) complying with all licensing requirements;

(2) payment by the insurer of the regular biennial appointment fee(s); and

(3) payment of a $250 penalty fee per appointment.

Section VI. Effective Date: This regulation shall become effective upon final publication in the State Register and implementation will begin for each type of license on the established date following.

HISTORY: Amended by State Register Volume 15, Issue No. 5, eff May 24, 1991; State Register Volume 34, Issue No. 5, eff May 28, 2010.

69-34. Individual Accident and Health Insurance Minimum Standards.

(Statutory Authority: 1976 Code Sections 1-23-10 et seq., 38-3-110(2), 38-71-530, 38-71-540, 38-71-550)

A. Table of Contents: B Purpose

C..... Applicability and Scope

D..... Effective Date

E..... Policy Definitions

F..... Prohibited Policy Provisions

G..... Accident and Health Minimum Standards for

Benefits

H..... Required Disclosure Provisions

I..... Severability

B. Purpose: The purpose of this regulation is to implement Section 38-71-510, et seq., so as to provide reasonable standardization and simplification of terms and coverages of individual accident and health insurance policies and individual subscriber contracts of hospital, medical and dental service corporations in order to facilitate public understanding and comparison and to eliminate provisions contained in individual accident and health insurance policies and individual subscriber contracts of hospital, medical, and dental service corporations which may be misleading or confusing in connection either with the purchase of such coverages or with the settlement of claims and to provide for full disclosure in the sale of such coverages.

C. Applicability and Scope: This Regulation shall apply to all individual accident and health insurance policies and individual subscriber contracts of hospital and medical and dental service corporations delivered or issued for delivery in this State, except that it shall not apply to individual policies or contracts issued pursuant to a conversion privilege under a policy or contract of group or individual insurance when such group or individual policy or contract includes provisions which are inconsistent with this Regulation, nor shall it apply to Medicare Supplement policies issued in accordance with Regulation 69-46. The requirements contained in this Regulation shall be in addition to any other applicable regulations promulgated by the Commissioner.

D. Effective Date: This Regulation shall become effective July 13, 1981.

E. Policy Definitions: Except as provided hereafter, no individual accident or health insurance policy or hospital, medical, or dental service corporation subscriber contract delivered or issued for delivery to any person in this state shall contain definitions respecting the matters set forth below unless such definitions comply with the requirements of this section.

(1) "One period of confinement" means consecutive days of in-hospital service received as an in-patient, or successive confinements when discharge from and re-admission for the same or related causes to the hospital occurs within a period of time not more than the greater of 90 days or three times the maximum number of days of in-hospital coverage provided by the policy to a maximum of 180 days.

(2) "Hospital" may be defined in relation to its status, facilities and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals.

(a) The definition of the term "hospital" shall not be more restrictive than one requiring that the hospital:

1. be an institution operated pursuant to law; and

2. be primarily and continuously engaged in providing or operating, either on its premises or in facilities available to the hospital on a prearranged basis and under the supervision of a staff of duly licensed physicians, medical, diagnostic and major surgical facilities for the medical care and treatment of sick or injured persons on an in-patient basis for which a charge is made; and

3. provide 24 hour nursing service by or under the supervision of registered graduate professional nurses (R.N.'s).

(b) The definition of the term "hospital" may state that such term shall not be inclusive of:

1. convalescent homes, convalescent, rest, or nursing facilities; or

2. facilities primarily affording custodial, educational or rehabilitory care; or

3. facilities for the aged, drug addicts or alcoholics; or

4. any military or veterans hospital or soldiers home or any hospital contracted for or operated by any national government or agency thereof for the treatment of members or ex-members of the armed forces, except for services rendered where a legal liability exists for charges made to the individual for such services.

(3) "Convalescent Nursing Home," "Extended Care Facility," or "Skilled Nursing Facility" shall be defined in relation to its status, facilities, and available services.

(a) A definition of such home or facility shall not be more restrictive than one requiring that it:

1. be operated pursuant to law;

2. be approved for payment of Medicare benefits or be qualified to receive such approval, if so requested;

3. be primarily engaged in providing, in addition to room and board accommodations, skilled nursing care under the supervision of a duly licensed physician;

4. provide continuous 24 hours a day nursing service by or under the supervision of a registered graduate professional nurse (R.N.); and

5. maintain a daily medical record of each patient.

(b) The definition of such home or facility may provide that such term shall not be inclusive of:

1. any home, facility or part thereof used primarily for rest;

2. a home or facility for the aged or for the care of drug addicts or alcoholics; or

3. a home or facility primarily used for the care and treatment of mental diseases, or disorders, or custodial or educational care.

(4) "Accident," "Accidental Injury," "Accidental Means;" shall be defined to employ "result" language and shall not include words which establish an accidental means test or use words such as "external, violent, visible wounds" or similar words of description or characterization.

The definition shall not be more restrictive than the following: Injury or injuries, for which benefits are provided, means accidental bodily injury sustained by the insured person which is the direct cause of the loss, independent of disease or bodily infirmity or any other cause and which occurs while the insurance is in force.

Such definition may provide that injuries shall not include injuries for which benefits are provided under workmen's compensation, employer's liability or similar laws, motor vehicle no-fault plans, unless prohibited by law, or injuries occurring while the insured person is engaged in any activity pertaining to any trade, business, employment, or occupation for wage or profit.

(5) Except as provided in F(1), "Sickness" shall not be defined to be more restrictive than the following: Sickness means sickness or disease of an insured person which first manifests itself after the effective date of insurance and while the insurance is in force. A definition of sickness may provide for a probationary period which will not exceed thirty (30) days from the effective date of the coverage of the insured person. The definition may be further modified to exclude sickness or disease for which benefits are provided under any workman's compensation, occupational disease, employer's liability or similar law.

(6) "Pre-existing condition" shall not be defined to be more restrictive than (a) or (b) as stated below. (a) shall apply where the insurer uses an application form designed to elicit the complete health history of a prospective insured and, on the basis of the answers on that application, underwrites in accordance with the insurer's established standards. (b) shall apply where the insurer elects to use a simplified application, with or without a question as to the applicant's health at the time of application, or elects not to use any application.

(a) A condition misrepresented or not revealed in the application and for which symptoms existed prior to the effective date of coverage that would cause an ordinarily prudent person to seek diagnosis, care or treatment or for which medical advice or treatment was recommended by or received from a physician.

(b) A condition for which symptoms existed which would cause an ordinarily prudent person to seek diagnosis, care or treatment within a one (1) year period preceding the effective date of the coverage of the insured person or a condition for which medical advice or treatment was recommended by a physician or received from a physician within a five (5) year period preceding the effective date of the coverage of the insured person.

(7) "Physician" may be defined by including words such as "duly qualified physician" or "duly licensed physician." However, the use of such terms may not exclude payment or reimbursement otherwise provided by the policy which is performed by a duly licensed podiatrist, chiropractor or oral surgeon when he is acting within his legal scope of practice.

(8) "Nurse" may be defined so that the description of nurse is restricted to a type of nurse, such as registered graduate professional nurse (R.N.), a licensed practical nurse (L.P.N.), or a licensed vocational nurse (L.V.N.). If the words "nurse," "trained nurse" or "registered nurse" are used without specific instruction, then the use of such terms requires the insurer to recognize the services of any individual who qualifies under such terminology in accordance with the applicable statutes or administrative rules of the licensing or registry board of the state.

(9) Total Disability:

(a) "Total Disability" shall not be defined more restrictively than the inability of the insured to engage in his own occupation during the first year of disability or for the length of the benefit period if less than one year. After the first year of disability, total disability may be defined as the complete inability of the insured to engage in any employment or occupation for which the insured is qualified by reason of education, training or experience. The definition of such word may allow the insurer to require reasonable conditions that the insured not be in fact engaged in any occupation for wage or profit.

(b) Total disability may be defined in relation to the inability of the person to perform duties but may not be based solely upon an individual's inability to: (a) Perform "any occupation whatsoever," "any occupational duty," or "any and every duty of his occupation," or (b) Engage in any training or rehabilitation program.

(c) An insurer may specify the requirement of the complete inability of the person to perform all of the substantial and material duties of his regular occupation or words of similar import. An insurer may require care by a physician (other than the insured or a member of the insured's immediate family).

(10) "Partial Disability" shall be defined in relation to the individual's inability to perform one or more but not all of the "major," "important," or "essential" duties of employment or occupation or may be related to a "percentage" of time worked or to a "specified number of hours" or to "compensation." Where a policy provides total disability benefits and partial disability benefits, only one elimination period may be required.

(11) "Residual Disability" shall be defined in relation to the individual's reduction in earnings and may be related either to the inability to perform some part of the "major," "important," or "essential duties" of employment or occupation, or to the inability to perform all usual business duties for as long as is usually required. A policy which provides for residual disability benefits may require a qualification period, during which the insured must be continuously totally disabled before residual disability benefits are payable. The qualification period for residual benefits may be longer than the elimination period for total disability. In lieu of the term "residual disability," the insurer may use "proportionate disability" or other term of similar import which in the opinion of the Commissioner adequately and fairly describes the benefit.

(12) "Medicare" shall be defined in any hospital, surgical or medical expense policy which relates its coverage to eligibility for Medicare or Medicare benefits. Medicare may be substantially defined as "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended," or "Title I, Part I of Public Laws 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act," as then constituted and any later amendments or substitutes thereof" or words of similar import.

(13) "Mental or Nervous Disorders" shall not be defined more restrictively than a definition including neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder of any kind.

F. Prohibited Policy Provisions and Practices.

(1) No policy shall contain provisions establishing a probationary or waiting period during which no coverage is provided under the policy subject to the further exception that a policy may specify a probationary or waiting period not to exceed six (6) months for specified diseases or conditions and losses resulting therefrom for hernia, disorder of reproduction organs, varicose veins, adenoids, appendix, tonsils, hemorrhoids and piles. However, the permissible six (6) months exception shall not be applicable where such specified diseases or conditions are treated on an emergency basis and if there is no previous medical history of the condition which predates the policy. Accident policies shall not contain probationary or waiting periods.

(2) No policy or rider for additional coverage may be issued as a dividend unless an equivalent cash payment or reduction in premium is offered to the policyholder as an alternative to such dividend policy or rider. No such dividend policy or rider shall be issued for an initial term of less than 6 months. This provision shall not be so construed as to prevent an insurer from voluntarily endorsing a policy so as to increase all future benefits without an increase in premium.

The initial renewal subsequent to the issuance of any policy or rider as a dividend shall clearly disclose that the policyholder is renewing the coverage that was provided as a dividend for the previous term and that such renewal is optional with the policyholder.

(3) A policy which is non-cancellable or guaranteed renewable may contain a "return of premium" or "cash value" benefit so long as: (1) such return of premium or cash value benefit is not reduced by an amount greater than the aggregate of any claims paid under the policy; and (2) the insurer demonstrates that the reserve basis for such policies is adequate. No other policy shall provide a return of premium or cash value benefit, except return of unearned premium upon termination or suspension of coverage, retroactive waiver of premium paid during disability, payment of dividends on participating policies, or experience rating refunds.

(4) Notwithstanding the permissible definition of hospital in Section E(2)(b)4., a hospital confinement indemnity policy shall not exclude coverage merely because of confinement in any government related hospital.

(5) A policy issued to a person eligible for Medicare by reason of age may not have limitations or exclusions more restrictive than those of Medicare for any type of coverage under such policies.

(6) No policy shall limit or exclude coverage by type of illness, accident, treatment, or medical condition more stringent than the following:

(a) Pre-existing conditions or diseases, except for congenital anomalies of a covered dependent child;

(b) mental or emotional disorders, alcoholism and drug addiction;

(c) normal pregnancy and childbirth except for Disability Income policies defined in section G(6) of this regulation;

(d) illness, accident, treatment or medical condition arising out of:

1. war or act of war (whether declared or undeclared); participation in a felony, riot or insurrection; service in the armed forces or units auxiliary thereto,

2. suicide, sane or insane, attempted suicide or intentionally self-inflicted injury,

3. aviation,

4. with respect to short-term nonrenewable policies, interscholastic sports;

(e) cosmetic surgery, except that "cosmetic surgery" shall not include reconstructive surgery when such service is incidental to or follows surgery resulting from trauma, infection or other diseases of the involved part, and reconstructive surgery because of congenital disease or anomaly of a covered dependent child which has resulted in a functional defect;

(f) foot care in connection with corns, calluses, flat feet, fallen arches, weak feet, chronic foot strain, or symptomatic complaints of the feet;

(g) care in connection with the detection and correction by manual or mechanical means of structural imbalance, distortion, or subluxation in the human body for purposes of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of, or in the vertebral column;

(h) treatment provided in a government hospital (except a hospital confinement policy); benefits provided under Medicare or other governmental program (except Medicaid), any state or federal workmen's compensation, employers liability or occupational disease law, any motor vehicle no-fault law; services rendered by employees of hospitals, laboratories or other institutions; services performed by a member of the covered person's immediate family; and services for which no charge is normally made in the absence of insurance;

(i) dental care or treatment

(j) eye glasses, hearing aids and examination for the prescription or fitting thereof;

(k) rest cures, custodial care, transportation and routine physical examinations;

(l) territorial limitations.

(7) Other provisions of this regulation shall not impair or limit the use of waivers to exclude, limit or reduce coverage or benefits for specifically named or described pre-existing diseases, physical condition or extra hazardous activity. Where waivers are required as a condition of insurance, renewal or reinstatement, signed acceptance by the insured is required unless on initial issuance the full text of the waiver is contained either on the first page or specification page of the policy or unless notice of the waiver appears on the first page or specification page.

(8) Policy provisions precluded in this section shall not be construed as a limitation on the authority of the Commissioner to disapprove other policy provisions in accordance with Section 38-71-530(b) which, in the opinion of the Commissioner, are unjust, unfair, misleading, or unfairly discriminatory to the policyholder, beneficiary, or any person insured under the policy.

(9) No policy shall include a provision which gives the insurer an unconditional right of non-renewal.

(10) No policy shall exclude coverage for a loss due to a pre-existing condition for a period greater than 12 months following policy issue where the application for such insurance does not seek disclosure of prior illness, disease or physical conditions or prior medical care and treatment and such pre-existing condition is not specifically excluded by the terms of the policy.

G. Accident and Health Minimum Standards for Benefits.

The following minimum standards for benefits are prescribed for the categories of coverage noted in the following subsections. No individual policy of accident and health insurance or non-profit hospital, medical or dental service corporation contract shall be delivered or issued for delivery in this state which does not meet the required minimum standards for the specified categories unless the Commissioner finds that such policies or contracts serve a valid economic and social purpose and are approvable as Limited Benefit Health Insurance and the Outline of Coverage complies with the appropriate outline in section H(11) of this Regulation. Each such policy shall contain the words "LIMITED BENEFITS" or "LIMITED OR SUPPLEMENTAL BENEFITS" prominently displayed on the first page of the policy in boldface type or contrasting color.

Nothing in this section shall preclude the issuance of any policy or contract combining two or more categories of coverage set forth in Section 38-71-540(a).

(1) General Rules

(a) A "noncancellable," "guaranteed renewable," or "noncancellable and guaranteed renewable" policy shall not provide for termination of coverage of the spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than nonpayment of premium. The policy shall provide that in the event of the insured's death the spouse of the insured, if covered under the policy, shall have the right to continue coverage previously afforded by the policy and exercise any rights previously vested in the insured.

(b) "Guaranteed renewable insurance" means all individual insurance which grants an insured the right to continue the policy in force by the timely payment of premiums until at least age 65 or to eligibility for Medicare during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force, except that the insurer may make changes in premium rates by classes except that the Commissioner may disapprove such increase in rates if he determines that the benefits provided in such policies are unreasonable in relation to the premium to be charged after the increase.

(c) "Noncancellable insurance" or "noncancellable and guaranteed renewable insurance" means all individual insurance which gives the insured the right to continue the insurance in force by the timely payment of premiums set forth in the policy until at least age 65 or to eligibility for Medicare during which period the insurer has no right to make unilaterally any change in any provision of the policy while it is in force.

(d) "Nonrenewable for stated reasons only" or "Conditionally Renewable" means all individual insurance which limits the insurer's right of nonrenewal to reasons stated in the policy. The following are acceptable reasons, except that reasons 2 and 3 shall not be included in the same policy:

1. overinsurance in accordance with insurer's standards on file with the Commissioner;

2. discontinuance of all policies in the same class;

3. discontinuance of all policies issued on the same form in this State;

4. change of the insured's occupation to an occupation classified as more hazardous than the original occupation.

5. any other factor which would qualify as a valid and generally accepted insurance underwriting basis.

(e) In a policy covering both husband and wife the age of the younger spouse must be used as the basis for meeting the age and durational requirements of the definitions of "noncancellable" or "guaranteed renewable." However, this requirement shall not prevent termination of coverage of the older spouse upon attainment of the stated age limit (e.g., age 65) so long as the policy may be continued in force as to the younger spouse to the age or for the durational period as specified in said definition.

(f) When accidental death and dismemberment coverage is part of the insurance coverage offered under the contract, the insured shall have the option to include all insureds under such coverage and not just the principal insured.

(g) If a policy contains a status type military service exclusion or a provision which suspends coverage during military service, the policy shall provide, upon receipt of written request, for refund of premiums as applicable to such persons on a pro rata basis.

(h) In the event the insurer cancels, or refuses to renew, policies providing pregnancy benefits, the policy shall provide for an extension of benefits as to pregnancy commencing while the policy is in force and for which benefits would have been payable had the policy remained in force.

(i) Policies providing convalescent or extended care benefits following hospitalization shall not condition such benefits upon admission to the convalescent or extended care facility within a period of less than fourteen (14) days after discharge from the hospital.

(j) Family coverage shall continue for any dependent child who is incapable of self sustaining employment due to intellectual disability or physical handicap on the date that such child's coverage would otherwise terminate under the policy due to the attainment of a specified age limit for children and is chiefly dependent on the insured for support and maintenance. The policy may require that within 31 days of such date the company receive due proof of such incapacity in order for the insured to elect to continue the policy in force with respect to such child, or that a separate converted policy be issued at the option of the insured or policyholder.

(k) Any policy providing medical expense coverage for the recipient in a transplant operation shall also provide reimbursement of any medical expenses of a live donor to the extent that benefits remain and are available under the recipient's policy, after benefits for the recipient's own expenses have been paid.

(l) A policy may contain a provision relating to recurrent disabilities; provided however, that no such provision shall specify that a recurrent disability be separated by a period greater than six (6) months.

(m) Accidental death and dismemberment benefits shall be payable if the loss occurs within ninety (90) days from the date of the accident, irrespective of total disability. Disability income benefits due to accident, if provided, shall not require the loss to commence less than thirty (30) days after the date of accident, nor shall any policy which the insurer cancels or refuses to renew require that it be in force at the time disability commences if the accident occurred while the policy was in force.

(n) Specific dismemberment benefits shall not be in lieu of other benefits unless the specific benefit equals or exceeds the other benefits.

(o) A company may not refuse to refund unearned premiums during a term for which premiums are paid. It may, however, base the amount of refund on a mode of premium payment more frequent than that of the term paid.

(p) Any accident-only policy providing benefits which vary according to the type of accidental cause shall prominently set forth in the outline of coverage the circumstances under which benefits are payable which are lesser than the maximum amount payable under the policy.

(q) Termination of the policy shall be without prejudice to losses incurred for "one period of confinement", as defined, or to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period the policy was in force may be predicated upon the continuous disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits.

(2) Basic Hospital Expense Coverage: "Basic Hospital Expense Coverage" is a policy of accident and health insurance which provides coverage for a period of not less than thirty-one (31) days during any continuous hospital confinement for each person insured under the policy, for expense incurred for necessary treatment and services rendered as a result of accident or sickness for at least the following:

(a) daily hospital room and board in an amount not less than the lesser of 80% of the charges for semi-private room accommodations or $30.00 per day;

(b) miscellaneous hospital services for expenses incurred for the charges made by the hospital for services and supplies which are customarily rendered by the hospital and provided for use only during any one period of confinement in an amount not less than the lesser of (i) 80% of the charges incurred up to at least $1,000.00 or (ii) ten times the daily hospital room and board benefits;

(c) hospital outpatient services consisting of hospital services on the day surgery is performed, hospital services rendered within 72 hours after accidental injury, in an amount not less than $50, and X-ray and laboratory tests to the extent that benefits for such services would have been provided if rendered to an in-patient of the hospital in an amount not less than $100; and

(d) benefits provided under (a) and (b) of (2) above, may be provided subject to a combined deductible amount not in excess of $100.00.

(3) Basic Medical-Surgical Expense Coverage: "Basic Medical-Surgical Expense Coverage" is a policy of accident and health insurance which provides coverage for each person insured under the policy for the expenses incurred for the necessary services rendered by a physician for treatment of an injury or sickness for at least the following:

(a) Surgical Services:

1. in amounts not less than those provided on a fee schedule based on the relative values contained in the state of New York certified surgical fee schedule, or the 1964 California Relative Value Schedule or other acceptable relative value scale or surgical procedures, up to a maximum of at least $500.00 for any one procedure; or

2. not less than 80% of the reasonable charges.

(b) Anesthesia services, consisting of administration of necessary general anesthesia and related procedures in connection with covered surgical service rendered by a physician other than the surgeon or the assistant surgeon performing the surgical services:

1. in an amount not less than 80% of the reasonable charges; or

2. 15% of the surgical service benefit.

(c) In-hospital medical services, consisting of physician services rendered to a person who is a bed patient in a hospital for treatment of sickness or injury other than that for which surgical care is required, in an amount not less than 80% of the reasonable charges; or $5.00 per day for not less than twenty-one (21) days during one period of confinement.

(4) Hospital Confinement Indemnity Coverage: "Hospital Confinement Indemnity Coverage" is a policy of accident and health insurance which provides daily benefits for hospital confinement on an indemnity basis in an amount not less than $30.00 per day and not less than thirty-one (31) days during any one period of confinement for each person insured under the policy.

(5) Major Medical Expense Coverage: "Major Medical Expense Coverage" is an accident and health insurance policy which provides hospital, medical and surgical expense coverage, to an aggregate maximum of not less than $20,000.00; copayment by the covered person not to exceed 25% of covered charges; a deductible stated on a per person, per family, per illness, per benefit period, or per year basis, or a combination of such bases not to exceed 5% of the aggregate maximum limit under the policy, unless the policy is written to complement underlying hospital and medical insurance in which case such deductible may be increased to the amount of the benefits provided by such underlying insurance, for each covered person for at least:

(a) Daily hospital room and board expenses, prior to application of the copayment percentage, for not less than $70.00 daily (or in lieu thereof the average daily cost of semiprivate room rate in the area where the insured resides) for a period of not less than 31 days during continuous hospital confinement;

(b) miscellaneous hospital services, prior to application of the copayment percentage, for an aggregate maximum of not less than $1,500 or 15 times the daily room and board rate if specified in dollar amounts;

(c) surgical services, prior to application of copayment percentage to a maximum of not less than $600 for the most severe operation with the amounts provided for other operations reasonably related to such maximum amount;

(d) anesthesia services prior to application of the copayment percentage, for a maximum of not less than 15 percent of the covered surgical fees or, alternatively, if the surgical schedule is based on relative values, not less than the amount provided therein for anesthesia services at the same unit value as used for the surgical schedule;

(e) in-hospital medical services, prior to application of the copayment percentage, as defined in subdivision (3)(c) of G.

(f) out-of-hospital care prior to application of the copayment percentage, consisting of physicians' services rendered on an ambulatory basis where coverage is not provided elsewhere in the policy for diagnosis and treatment of sickness or injury, and diagnostic X-ray, laboratory services, radiation therapy, and hemodialysis ordered by a physician; and

(g) not fewer than three of the following additional benefits, prior to application of the copayment percentage, for an aggregate maximum of such covered charges of not less than $1,000:

1. In-hospital private duty graduate registered nurse services.

2. Convalescent nursing home care.

3. Diagnosis and treatment by a radiologist or physiotherapist.

4. Rental of special medical equipment, as defined by the insurer in the policy.

5. Artificial limbs or eyes, casts, splints, trusses or braces.

6. Treatment for functional nervous disorders, and mental and emotional disorders.

7. Out-of-hospital prescription drugs and medications.

(6) Disability Income Protection Coverage--This section does not apply to those policies providing business buyout coverage.

"Disability Income Protection Coverage" is a policy which provides for periodic payments, weekly or monthly, for a specified period during the continuance of disability resulting from either sickness or injury or a combination thereof which:

(a) Provides that periodic payments which are payable at ages after 62 and reduced solely on the basis of age are at least 50% of amounts payable immediately prior to 62.

(b) Contains an elimination period no greater than:

1. Ninety (90) days in the case of a coverage providing a benefit of one (1) year or less;

2. One hundred and eighty (180) days in the case of coverage providing a benefit of more than one year but not greater than two (2) years; or

3. Three hundred sixty five (365) days in all other cases during the continuance of disability resulting from sickness or injury.

(c) Has a maximum period of time for which it is payable during disability of at least six (6) months except in the case of a policy covering disability arising out of pregnancy, childbirth, or miscarriage in which case the period for such disability may be one (1) month. No reduction in benefits shall be put into effect because of an increase in Social Security or similar benefits during a benefit period.

(7) Accident Only Coverage: "Accident Only Coverage" is a policy of accident insurance which provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by accident. Accidental death and double dismemberment amounts under such a policy shall be at least $1,000.00 and a single dismemberment amount shall be at least $500.00.

(8) Specified Disease and Specified Accident Coverage

(a) "Specified disease coverage" pays benefits for the diagnosis and/or treatment of a specifically named disease or diseases. Any such policy must meet the following general rules of subsection 1. In addition, policies providing coverage on an expense-incurred basis must meet the standards of subsection 2, while policies providing coverage on an indemnity basis must meet the standards of subsection 3.

1. General Rules.

The following rules shall apply to specified-disease coverages in addition to all other rules imposed by this regulation; in cases of conflict between the following and other rules, the following ones shall govern:

(i) Policies covering a single specified disease or combination of specified diseases may not be sold or offered for sale other than as specified-disease coverage under this section.

(ii) Any policy issued pursuant to this section which conditions payment upon pathological diagnosis of a covered disease, shall also provide that if such a pathological diagnosis is medically inappropriate, a clinical diagnosis will be accepted in lieu thereof.

(iii) Notwithstanding any other provision of this regulation, specified-disease policies shall provide benefits to any covered person not only for the specified disease(s) but also for any other condition(s) or disease(s), directly caused or aggravated by the specified disease(s) or the treatment of the specified disease(s).

(iv) Policies containing specified disease coverage shall be at least Guaranteed Renewable.

(v) No policy issued pursuant to this section shall contain a waiting or probationary period greater than thirty (30) days.

(vi) Payments may be conditioned upon a covered person's receiving medically necessary care, given in a medically appropriate location, under a medically accepted course of diagnosis or treatment.

(vii) Except for the uniform provision regarding other insurance with this insurer, benefits for specified disease coverage shall be paid regardless of other coverage.

(viii) After the effective date of the coverage (or applicable waiting period, if any) benefits shall begin with the first day of care or confinement if such care or confinement is for a covered disease even though the diagnosis is made at some later date. The retroactive application of such coverage may not be less than forty-five (45) days prior to such diagnosis.

2. Expense-Incurred Policies.

(i) Coverage must be provided for each person insured under the policy for a specifically named disease (or diseases) with a deductible amount not in excess of $250.00 and an overall aggregate benefit limit of no less than $10,000 and a benefit period of not less than two (2) years for at least the following incurred expenses with no unreasonable inside limits:

(A) Hospital room and board and any other hospital furnished medical services or supplies;

(B) Treatment by a legally qualified physician or surgeon;

(C) Private duty services of a registered nurse (R.N.);

(D) X-ray, radium and other therapy procedures used in diagnosis and treatment;

(E) Professional ambulance for local service to or from a local hospital;

(F) Blood transfusions, including expense incurred for blood donors;

(G) Drugs and medicines prescribed by a physician;

(H) The rental of an iron lung or similar mechanical apparatus;

(I) Braces, crutches and wheel chairs as are deemed necessary by the attending physician for the treatment of the disease;

(J) Emergency transportation if in the opinion of the attending physician it is necessary to transport the insured to another locality for treatment of the disease.

(ii) The policy may include coverage of any other expenses necessarily incurred in the treatment of the disease.

3. Indemnity Policies.

Coverage must be provided for each person insured under the policy for a specifically named disease (or diseases) with no deductible amount, and an overall aggregate benefit limit of not less than $25,000 payable at a daily rate not expected to produce a claim payment less than that which would be produced by a policy paying $50 a day while confined in a hospital with a benefit period of 500 days.

(b) "Specified Accident Coverage" is an accident insurance policy which provides coverage for a specifically identified kind of accident (or accidents) for each person insured under the policy for accidental death or accidental death and dismemberment, combined with a benefit amount not less than $1,000.00 for accidental death, $1,000.00 for double dismemberment and $500.00 for single dismemberment.

(9) Limited Benefit Health Insurance Coverage: "Limited Benefit Health Insurance Coverage" is any policy or contract, other than a policy or contract covering only a specified disease or diseases, which provides benefits that are less than the minimum standards for benefits required under G(2), (3), (4), (5), (6), (7), and (8). A policy covering a single specified disease or combination of diseases shall meet the requirements of Section G(8) and shall not be offered for sale as a "Limited Coverage." Limited benefit policies or contracts may be delivered or issued for delivery in this state only if the outline of coverage required by Section H(11) of this Regulation is completed and delivered as required by Section H(2) of this Regulation.

H. Required Disclosure Provisions.

(1) General Rules

(a) Each individual policy of accident and health insurance or hospital, medical or dental service corporation subscriber contract shall include a renewal, continuation, or nonrenewal provision. The language or specifications of such provision must be consistent with the type of contract to be issued. Such provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state the duration of renewability and the duration of the term of coverage for which the policy is issued and for which it may be renewed.

(b) Except for riders or endorsements by which the insurer effectuates a request made in writing by the policyholder or exercises a specifically reserved right under the policy, all riders or endorsements added to a policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the policyholder. After date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, unless the increased benefits or coverage is required by law.

(c) Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, such additional premium charge shall be clearly set forth separately in the policy or on the rider.

(d) A policy which provides for the payment of benefits based on standards described as "usual and customary," "reasonable and customary," or words of similar import shall include a definition of such terms and an explanation of such terms in its accompanying outline of coverage.

(e) If a policy contains any limitations with respect to pre-existing conditions such limitations must appear as a separate paragraph of the policy and be labeled as "Pre-existing Condition Limitations."

(f) Each accident only policy or a policy providing benefits for a specified disease only shall contain an appropriate prominent statement on the first page of the policy in boldface type or in contrasting color similar to the following, whichever is appropriate:

1. This is an accident only policy which does not pay benefits for a loss from sickness.

2. This is a specified disease policy which only provides benefits for a loss due to ______. It does not provide benefits for any other sickness or condition.

(g) All policies, except trip or travel ticket policies and as otherwise provided in this paragraph, shall have a notice prominently printed on the first page of the policy or attached thereto stating in substance that the policyholder shall have the right to return the policy within ten (10) days of its delivery and to have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason. With respect to policies issued pursuant to a direct response solicitation, the policy shall have a notice prominently printed on the first page of the policy or attached thereto stating in substance that the policyholder shall have the right to return the policy within thirty (30) days of its delivery and to have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason.

(h) If age is to be used as a determining factor for reducing the maximum aggregate benefits made available in the policy as originally issued, such fact must be prominently set forth in the outline of coverage.

(i) If a policy contains a conversion privilege, it shall comply, in substance, with the following: the caption of the provision shall be "Conversion Privilege," or words of similar import. The provision shall indicate the persons eligible for conversion, the circumstances applicable to the conversion privilege, including any limitations on the conversion, and the person by whom the conversion privilege may be exercised. The provision shall specify the benefits to be provided on conversion or may state that the converted coverage will be as provided on a policy form then being used by the insurer for that purpose.

(j) Insurers issuing policies which provide hospital or medical expense coverage on either an expense incurred or indemnity basis to person(s) eligible for Medicare by reason of age, shall provide to the policyholder a medicare supplement buyer's guide in a form approved by the Commissioner. Delivery of the buyer's guide shall be made whether or not the policy qualifies as a medicare supplement coverage under Regulation 69-46. Except in the case of direct response insurers, delivery of the buyer's guide shall be made at the time of application, and acknowledgment of receipt or certification of delivery of the buyer's guide shall be provided to the insurer. Direct response insurers shall deliver the buyer's guide upon prior request but not later than at the time the policy is delivered. (NOTE: The NAIC Model Buyer's Guide is acceptable. Any substantially equivalent Buyer's Guide which has been approved by the Insurance Department of any other state may be used upon prior approval by the Commissioner.)

(k) Outlines of coverage delivered in connection with policies defined in this Regulation as Hospital Confinement Indemnity (G(4)), Specified Disease (G(8)), or Limited Benefit Health Insurance Coverages (G(9)) to persons eligible for Medicare by reason of age shall contain, in addition to the requirements of subsections H(6), H(10), and H(11), the following language which shall be printed on or attached to the first page of the outline of coverage:

This policy IS NOT A MEDICARE SUPPLEMENT policy. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide furnished by the company.

(2) Outline of Coverage Requirements for Individual Coverages: No individual accident and health insurance policy or non-profit hospital, medical or dental service corporation subscriber contract subject to this regulation shall be delivered or issued for delivery in this State unless an appropriate outline of coverage, as prescribed in Section H(3) through (11) is completed as to such policy or contract, and the outline is either: (a) delivered with the policy; or (b) delivered to the applicant at the time application is made and acknowledgment of receipt or certification of delivery of such outline of coverage is provided to the insurer.

(a) for policies offered for sale as Medicare Supplement Coverage the outline is delivered to the applicant at the time application is made and, except for the direct response policy, acknowledgment of receipt or certification of delivery of such outline of coverage is provided to the insurer; and

(b) for all other policies, the outline is either:

1. delivered with the policy; or

2. delivered to the applicant at the time application is made and acknowledgment of receipt or certification of delivery of such outline of coverage is provided to the insurer.

If an outline of coverage was delivered at the time of application and the policy or contract is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the policy or contract must accompany the policy or contract when it is delivered and contain the following statement, in no less than twelve (12) point type, immediately above the company name: "NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued."

The appropriate outline of coverage for policies or contracts providing hospital coverage which only meets the standards of section G(2) shall be that statement contained in section H(3). The appropriate outline of coverage for policies providing coverage which meets the standards of both sections G(2) and (3) shall be the statement contained in section H(5). The appropriate outline of coverage for policies providing coverage which meets the standards of both sections G(2) and (5) or sections G(3) and (5) or sections G(2), (3), and (5) shall be the statement contained in section H(7).

An appropriate outline of coverage will be filed with each policy submitted for approval. In any case where the prescribed outline of coverage is inappropriate for the coverage provided by the policy or contract, an alternate outline of coverage shall be submitted to the Commissioner for prior approval.

(3) Basic Hospital Expense Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(2) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

BASIC HOSPITAL EXPENSE COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Basic Hospital Expense Coverage--Policies of this category are designed to provide, to persons insured, coverage for hospital expenses incurred as a result of a covered accident or sickness. Coverage is provided for daily hospital room and board, miscellaneous hospital services, and hospital out-patient services, subject to any limitations, deductibles and copayment requirements set forth in the policy. Coverage is not provided for physicians or surgeons fees or unlimited hospital expenses.

(c) (A brief specific description of the benefits, including dollar amounts and number of days duration where applicable, contained in this policy, in the following order:

1. daily hospital room and board;

2. miscellaneous hospital services;

3. hospital out-patient services; and

4. other benefits, if any.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provision applicable to the benefits described.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(4) Basic Medical-Surgical Expense Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(3) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

BASIC MEDICAL-SURGICAL EXPENSE COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control your policy. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Basic Medical-Surgical Expense Coverage--Policies of this category are designed to provide, to persons insured, coverage for medical-surgical expenses incurred as a result of a covered accident or sickness. Coverage is provided for surgical services, anesthesia services, and in-hospital medical services, subject to any limitations, deductibles and copayment requirements set forth in the policy. Coverage is not provided for hospital expenses in unlimited medical-surgical expenses.

(c) (A brief specific description of the benefits, including dollar amounts and number of days duration where applicable, contained in this policy, in the following order:

1. surgical services;

2. anesthesia services;

3. in-hospital medical services; and

4. other benefits, if any.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provisions applicable to the benefits described.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (3) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(5) Basic Hospital and Medical Surgical Expense Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(2) and (3) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed.

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

BASIC HOSPITAL AND MEDICAL SURGICAL

EXPENSE COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOU POLICY CAREFULLY!

(b) Basic Hospital and Medical Surgical Expense Coverage--Policies of this category are designed to provide, to persons insured, coverage for hospital and medical-surgical expenses incurred as a result of a covered accident or sickness. Coverage is provided for daily hospital room and board, miscellaneous hospital services, hospital out-patient services, surgical services, anesthesia services, and in-hospital medical services, subject to any limitations, deductibles and copayment requirements set forth in the policy. Coverage is not provided for unlimited hospital or medical-surgical expenses.

(c) A brief specific description of the benefits, including dollar amounts and number of days duration where applicable, contained in this policy, in the following order:

1. daily hospital room and board;

2. miscellaneous hospital services;

3. hospital out-patient services;

4. surgical services;

5. anesthesia services;

6. in-hospital medical services; and

7. other benefits, if any.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provision applicable to the benefits described.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(6) Hospital Confinement Indemnity Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(4) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS LOCAL TELEPHONE NUMBER: ______ (if available) ______

HOSPITAL CONFINEMENT INDEMNITY COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Hospital Confinement Indemnity Coverage--Policies of this category are designed to provide, to persons insured, coverage in the form of a fixed daily benefit during periods of hospitalization resulting from a covered accident or sickness, subject to any limitations set forth in the policy. Such policies do not provide any benefits other than the fixed daily indemnity for hospital confinement and any additional benefit described below.

(c) (A brief specific description of the benefits contained in this policy, in the following order:

1. daily benefit payable during hospital confinement; and

2. duration of benefit described in (a).)

(Note: The above description of benefits shall be stated clearly and concisely.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(f) (Any benefits provided in addition to the daily hospital benefit.)

(7) Major Medical Expense Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of Section G(5) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER ______ (if available) ______

MAJOR MEDICAL EXPENSE COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Major Medical Expense Coverage--Policies of this category are designed to provide, to persons insured, coverage for major hospital, medical, and surgical expenses incurred as a result of a covered accident or sickness. Coverage is provided for daily hospital room and board, miscellaneous hospital services, surgical services, anesthesia services, in-hospital medical services, and out-of-hospital care, subject to any deductibles, copayment provisions, or other limitations which may be set forth in the policy. Basic hospital or basic medical insurance coverage is not provided.

(c) (A brief specific description of the benefits, including dollar amount, contained in this policy, in the following order:

1. daily hospital room and board;

2. miscellaneous hospital services;

3. surgical services;

4. anesthesia services;

5. in-hospital medical services;

6. out-of-hospital care;

7. maximum dollar amount for covered charges; and

8. other benefits, if any.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provision applicable to the benefits described.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(8) Disability Income Protection Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(6) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

DISABILITY INCOME PROTECTION COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Disability Income Protection Coverage--Policies of this category are designed to provide, to persons insured, coverage for disabilities resulting from a covered accident or sickness, subject to any limitations set forth in the policy. Coverage is not provided for basic hospital, basic medical-surgical, or major medical expenses.

(c) (A brief specific description of the benefits contained in this policy).

(Note: The above description of benefits shall be stated clearly and concisely.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(9) Accident Only Coverage (Outline of Coverage): An outline of coverage in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(7) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS LOCAL TELEPHONE NUMBER: ______ (if available) ______

ACCIDENT ONLY COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) Accident Only Coverage--Policies of this category are designed to provide, to persons insured, coverage for certain losses resulting from a covered accident ONLY, subject to any limitations contained in the policy. Coverage is not provided for basic hospital, basic medical-surgical, or major medical expenses due to sickness.

(c) (A brief specific description of the benefits contained in this policy.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provision applicable to the benefits described. Proper disclosure of benefits which vary according to accidental cause shall be made in accordance with subsection (1)(o) of section G of this Regulation.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(10) Specified Disease or Specified Accident Coverage (Outline of Coverage): An outline of coverage in the form prescribed below, shall be issued in connection with policies meeting the standards of section G(8) of this Regulation. The coverage shall be identified by the appropriate bracketed title. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

(SPECIFIED DISEASE) (SPECIFIED ACCIDENT) COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

(b) (Specified Disease) (Specified Accident) Coverage--Policies of this category are designed to provide, to persons insured, restricted coverage paying benefits ONLY when certain losses occur as a result of (Specified diseases) or (specified accidents). Coverage is not provided for basic hospital, basic medical-surgical, or major medical expenses.

(c) (A brief specific description of the benefits, including dollar amounts, contained in this policy.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provisions applicable to the benefits described. Proper disclosure of benefits which vary according to accidental cause shall be made in accordance with subsections (1)(o) of section G of this Regulation.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(11) Limited Benefit Health Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies which do not meet the minimum standards of section G(2), (3), (4), (5), (6), (7), and (8) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS LOCAL TELEPHONE NUMBER: ______ (if available) ______ LIMITED BENEFIT HEALTH COVERAGE Policy Form Number ______ OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore important that you READ YOUR POLICY CAREFULLY!

(b) Limited Benefit Health Coverage--Policies of this category are designed to provide, to persons insured, limited or supplemental coverage.

(c) (A brief specific description of the benefits, including dollar amounts, contained in this policy.)

(Note: The above description of benefits shall be stated clearly and concisely, and shall include a description of any deductible or copayment provisions applicable to the benefits described. Proper disclosure of benefits which vary according to accidental cause shall be made in accordance with subsection (1)(o) of section G of this Regulation.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

(12) Limited Benefit Health Coverage (Outline of Coverage): An outline of coverage, in the form prescribed below, shall be issued in connection with policies which do not meet the minimum standards of section G(2), (3), (4), (5), (6), (7), and (8) of this Regulation. The items included in the outline of coverage must appear in the sequence prescribed:

COMPANY NAME AND ADDRESS

LOCAL TELEPHONE NUMBER: ______ (if available) ______

LIMITED BENEFIT HEALTH COVERAGE

Policy Form Number ______

OUTLINE OF COVERAGE

(a) Read Your Policy Carefully--This outline of coverage provides a very brief description of the important features of your policy. This is not the insurance contract and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligations of both you and your insurance company. It is, therefore important that you READ YOUR POLICY CAREFULLY!

(b) Limited Benefit Health Coverage--Policies of this category are designed to provide, to persons insured, limited or supplemental coverage.

(c) (A brief specific description of the benefits, including dollar amounts, contained in this policy.)

(Note: The above description of benefits shall be stated clearly a description of any deductible or copayment provisions applicable to the benefits described. Proper disclosure of benefits which vary according to accidental cause shall be made in accordance with subsection (1)(o) of section G of this Regulation.)

(d) (A description of any policy provisions which exclude, eliminate, restrict, reduce, limit, delay, or in any other manner operate to qualify payment of the benefits described in (c) above.)

(e) (A description of policy provisions respecting renewability or continuation of coverage, including age restrictions or any reservation of right to change premiums.)

I. Severability: Each provision of this Regulation is deemed to be severable and the determination that any provision is invalid for any reason shall not invalidate the remaining provisions of the Regulation.

HISTORY: Amended by State Register Volume 13, Issue No. 4, eff April 28, 1989.

69-34.1. Accident and Health Insurance Solicitation.

A. Table of Contents: B Purpose

C Applicability and Scope

D Definitions

E Unfair and Deceptive Acts

F Duplication of Insurance

G Record Maintenance, Licensee Accountability

and General Requirements

H Severability

I Effective Date

B. Purpose: The purpose of this regulation is to eliminate unfair and deceptive practices in the promotion, solicitation and sale of individual accident and health insurance policies to persons who are qualified for Medicare by reason of age and to persons who have a current Medicaid eligibility card.

C. Applicability and Scope: This Regulation shall apply only to promotions, solicitations, offers or sales of individual accident and health insurance policies to persons who are qualified for Medicare by reason of age or to persons who have a current Medicaid eligibility card. This Regulation shall not apply to conversion policies issued pursuant to a contractual conversion privilege, or to credit health insurance. This Regulation shall be in addition to any other applicable regulations previously adopted.

D. Definitions: As used in this Regulation, the following terms shall have the meanings indicated:

(1) "Agent" means any person licensed by the South Carolina Department of Insurance as an agent to sell accident and health insurance.

(2) "Duplication of insurance" means a transaction wherein new accident and health insurance is to be purchased and it is known or should be known to the licensee or the insurer, in the case of a direct response solicitation, that the new insurance will provide some of the benefits or coverages which the proposed insured already has under existing accident and health insurance.

(3) "Over-insurance" means "duplication" of insurance to such extent that the combination of the existing insurance and the proposed insurance would substantially exceed any loss reasonably expected to be incurred.

(4) "Licensee" means any person licensed as an agent, broker, or solicitor pursuant to South Carolina law.

(5) "Policy" means the entire contract between the insurer and the insured, including, but not limited to, the policy, certificate, riders, endorsements, amendments and the application which are required to be filed pursuant to Section 38-71-310.

(6) "Sales materials" means any and all promotional materials, policy applications, replacement forms, duplication forms, outline of coverage forms, or any other forms or informational material used in connection with the promotion, solicitation, or sale of accident and health insurance.

E. Unfair and Deceptive Acts:

(1) No person shall engage in any unfair, deceptive, misleading, or unreasonably confusing practice in the promotion, solicitation or sale of individual accident and health insurance.

(2) The following acts and practices shall be deemed prima facie evidence of a violation of this Regulation:

(a) Any act tending to induce an applicant or other person to over-insure;

(b) Encouraging an applicant to omit pertinent underwriting information from an application for accident and health insurance;

(c) Any act tending to induce a prospective insured to sign a blank or incomplete application or form;

(d) Failure to disclose upon initial contact with a prospective applicant the licensee's affiliation with an insurance company;

(e) Any representations, expressed or implied, unless the licensee has been specifically authorized in writing by the organization, that the licensee is affiliated with or authorized by any civic, social, or other non-governmental organization;

(f) Any representation, expressed or implied, that the licensee is affiliated with or authorized by any governmental agency or that he has access to any information from any such agency that is not generally available to the public;

(g) Making any false or misleading statements as to the length of time an insurance product may or may not be available;

(h) The sale of any policy that has not been submitted to and approved by the Commissioner;

(i) The sale of Medicare supplement insurance to any person not eligible for Medicare;

(j) The sale of any accident and health insurance to any person without asking if the person has a current Medicaid eligibility card;

(k) The sale of any accident and health insurance to any person who indicates he has a current Medicaid eligibility card;

(l) Falsely answering any question or signing any certification in an application or in any other form required to be completed by the licensee;

(m) Failure to report, within seven business days, the full amount of any premium or partial premium collected from an applicant;

(n) Failure to deliver, within seven business days, any policy sent to him for delivery to an applicant;

(o) The taking of an application without inquiring and recording the reply as to whether the proposed insurance will duplicate any insurance then in force;

(p) Making any inquiry in such manner as to invite a response contrary to fact; or

(q) The taking of an application for duplicate insurance without a full disclosure of the effect that each policy will have on the other with respect to the amount payable in the event of a claim covered by both policies.

F. Duplication of Insurance:

(1) All applications involved in the sale of individual accident and health insurance shall include a question designed to elicit information regarding the existence of any accident and health insurance on any proposed insured and shall obtain a statement, dated and signed by the applicant, indicating whether any accident and health insurance is presently in force, the type and amount of the insurance, the names of the companies which issued the insurance and, where possible, the policy number.

(2) No individual accident and health insurance which duplicates coverage shall be issued to an applicant unless a signed and dated "Duplication of Insurance Form" is submitted with the application.

(3) The "Duplication of Insurance Form" shall comply with the following form and be separate and apart from all other forms:

I understand that the insurance I am applying for will duplicate coverage I already have. Even so, I still believe I need this new insurance

(Witness) (Signature of Applicant)

(Date)

(4) In the case of direct response insurance, the following statement, separate and apart from all other statements, shall be mailed to the insured with the new policy:

"This policy duplicates coverage you already have."

(5) A copy of the "Duplication of Insurance Form" shall be retained by the insurer.

G. Record Maintenance, Licensee Accountability, and General Requirements:

(1) Any and all materials used in connection with the promotion, solicitation, or sale of individual accident and health insurance shall be maintained on file by the insurer for a period of three years following the date of its last authorized use.

(2) No licensee or insurer shall use any sales and promotional material not issued or approved by and on file with the insurer.

(3) Copies of all sales and promotional material shown to the applicant shall be left by the licensee with any person who purchases accident and health insurance from the licensee. If an audio-visual presentation is made, a copy of the script left with the applicant will be deemed to satisfy this requirement.

(4) Insurers shall maintain records relating to agents involved in the sale of accident and health insurance so as to permit retrieval of the following information in a reasonable period of time:

(a) Number, type, and nature of consumer complaints, on each agent including those received over the telephone;

(b) Number, type, and nature of forms and applications completed with improper or inaccurate underwriting information;

(c) Number, type, and nature of all policies which lapse within five years of issue showing total period of coverage; and

(d) All policy applications rejected showing the reason for rejection.

H. Severability: Each provision of this Regulation is deemed to be severable and the determination that any provision is invalid for any reason shall not invalidate the remaining provisions of the Regulation.

I. Effective Date: This Regulation shall become effective six months after adoption by the General Assembly and final publication in the State Register.

69-34.2. Replacement of Accident and Health Insurance.

A. Table of Contents: B..... Purpose

C..... Applicability and Scope

D..... Definitions

E..... Replacement

F..... Replace After Indication of No Replacement

G..... Severability

H..... Effective Date

B. Purpose: The purpose of this regulation is to eliminate unfair and deceptive practices in the replacement of individual accident and health insurance policies that insure persons who are eligible for Medicare by reason of age and to persons who have a current medicaid eligibility card. medicaid eligibility card.

C. Applicability and Scope: This Regulation shall apply only to solicitations and sale of individual accident and health insurance policies to persons who are eligible for Medicare by reason of age or to persons who have a current medicaid eligibility card. This Regulation shall not apply to credit health insurance. This Regulation shall be in addition to any other applicable regulations previously adopted.

D. Definitions: As used in this Regulation, the following terms shall have the meanings indicated:

(1) "Agent" means any person licensed by the South Carolina Department of Insurance as an agent to sell accident and health insurance.

(2) "Licensee" means any person licensed as an agent, broker, or solicitor pursuant to South Carolina law.

(3) "Policy" means the entire contract between the insurer and the insured, including, but not limited to, the policy, certificate, riders, endorsements, amendments and the application which are required to be filed pursuant to Section 38-71-310.

(4) "Replacement" means a transaction wherein individual accident and health insurance is to be purchased and it is known or should be known to the licensee or the insurer, in the case of a direct response solicitation, that previously existing accident and health insurance has been, or will be, lapsed, cancelled or otherwise terminated as a result.

(5) "Sales materials" means any and all promotional materials, policy applications, replacement forms, duplication forms, outline of coverage forms, or any other forms or informational material used in connection with the promotion, solicitation, or sale of accident and health insurance.

E. Replacement:

(1) All applications involved in the sale of individual accident and health insurance shall include a question designed to elicit information regarding the existence of any accident and health insurance on any proposed insured and inquire as to whether any such insurance will be replaced by the insurance to be issued.

(2) Upon determining that a sale will involve replacement, a licensee or insurer other than a direct response insurer shall at the time of the application furnish the applicant with the notice described in (3) below. One copy of such notice shall be delivered to the applicant and an additional copy signed by the applicant shall be submitted with the application and retained by the insurer.

In addition, the licensee shall furnish the applicant with a complete comparison in writing of the benefits afforded by the new policy and the policy to be replaced. Such comparison shall include but not be limited to the benefits contained in the two policies, the renewability provisions of the two policies, and the respective definitions of pre-existing illnesses or diseases.

A direct response insurer shall, upon issuance of the policy, deliver to the applicant the notice described in (4) below. The comparison statement and the notice will not be required if the insurance to be replaced is accident only or a single premium nonrenewable policy.

(3) The notice required by (2) above for a licensee or insurer other than a direct response insurer shall be as follows:

NOTICE TO APPLICANT REGARDING REPLACEMENT

OF ACCIDENT AND HEALTH INSURANCE

According to (your application) (information you have furnished), you intend to lapse or otherwise terminate existing accident and health insurance and replace it with a policy issued by (insert Company Name) Insurance Company. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy. In particular, study the comparison statement which your agent is required to furnish you upon taking your application.

(1) Health conditions which you may presently have, (pre-existing conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.

(2) You may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interests to make sure you understand all the relevant factors involved in replacing your present coverage.

(3) If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical/health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims. After the application has been completed and before you sign it, re-read it carefully to be certain that all information has been properly recorded.

The above "Notice to Applicant" was delivered to me on:

_______________________

(Date)

_______________________

(Applicant's Signature)

(4) The notice required by (3) above for a direct response insurer shall be as follows:

NOTICE TO APPLICANT REGARDING REPLACEMENT

OF ACCIDENT AND HEALTH INSURANCE

According to (your application) (information you have furnished) you intend to lapse or otherwise terminate existing accident and health insurance and replace it with the policy delivered herewith issued by (insert Company Name) Insurance Company. Your new policy provides 10 days within which you may decide without cost whether you desire to keep the policy. For your own information and protection you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

(1) Health conditions which you may presently have, (pre-existing conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.

(2) You may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interests to make sure you understand all the relevant factors involved in replacing your present coverage.

(3) (To be included only if the application is attached to the policy.) If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. You should carefully check the application and write the company immediately if any information is not correct, or if any past medical history has been left out of the application before letting your other policy lapse.

______________

(Company Name)

F. Replacement After Indication of No Replacement.

Policyholders have the right to replace existing accident and health insurance after indicating in or as a part of applications for new insurance that such is not their intention; however, patterns of such action by policyholders on the same agent shall be evidence of the agent's knowledge that replacement was intended in connection with such transactions and indicate that the agent intended to violate the statute.

G. Severability: Each provision of this Regulation is deemed to be severable and the determination that any provision is invalid for any reason shall not invalidate the remaining provisions of the Regulation.

H. Effective Date: This Regulation shall become effective six months after adoption by the General Assembly and final publication in the State Register.

69-36. Procedure for Permitting Same Minimum Nonforfeiture Standards for Men and Women Under 1980 CSO and CET Mortality Tables.

(Statutory Authority: 1976 Code Sections 38-3-110, 38-63-600(8)(f))

Section 1. Purpose.

The purpose of this regulation is to permit individual life insurance policies to provide the same cash surrender values and paid-up nonforfeiture benefits to both men and women. No change in minimum valuation standards is implied by this regulation.

Section 2. Definitions.

A. As used in this regulation, "1980 CSO Table, with or without Ten-Year Select Morality Factors" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Standard Ordinary Mortality Table, with or without Ten-Year Select Mortality Factors.

B. As used in this regulation, "1980 CSO Table (M), with or without Ten-Year Select Mortality Factors" means that mortality table consisting of the rates of mortality for male lives from the 1980 CSO Table, with or without Ten-Year Select Mortality Factors.

C. As used in this regulation, "1980 CSO Table (F), with or without Ten-Year Select Mortality Factors" means that mortality table consisting of the rates of mortality for female lives from the 1980 CSO Table, with or without Ten-Year Select Mortality Factors.

D. As used in this regulation, "1980 CET Table" means that mortality table consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Extended Term Insurance Table.

E. As used in this regulation, "1980 CET Table (M)" means that mortality table consisting of the rates of mortality for male lives from the 1980 CET Table.

F. As used in this regulation, "1980 CET Table (F)" means that mortality table consisting of the rates of mortality for female lives from the 1980 CET Table.

G. As used in this regulation, "1980 CSO and 1980 CET Smoker and Nonsmoker Mortality Tables" means the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the 1980 CSO and 1980 CET Mortality Tables by the Society of Actuaries Task Force on Smoker/Nonsmoker Mortality and adopted by the National Association of Insurance Commissioners in December, 1983.

Section 3. Options.

For any policy of insurance on the life of either a male or female insured delivered or issued for delivery in this state after the operative date of Section 38-63-600(11) for that policy form,

(i) a mortality table which is a blend of the 1980 CSO Table (M) and the 1980 CSO Table (F) with or without Ten-Year Select Mortality Factors may at the option of the company be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and

(ii) a mortality table which is of the same blend as used in (i) but applied to form a blend of the 1980 CET Table (M) and the 1980 CET Table (F) may at the option of the company be substituted for the 1980 CET Table

for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Section 3A. Alternate Rule.

In determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits for any policy of insurance on the life of either a male or female insured on a form of insurance with separate rates for smokers and nonsmokers delivered or issued for delivery in this state after the operative date of Section 38-63-600(11) for that policy form, in addition to the mortality tables that may be used according to Section 3,

(i) a mortality table which is a blend of the male and female rates of mortality according to the 1980 CSO Smoker Mortality Table, in the case of lives classified as smokers, or the 1980 CSO Nonsmoker Mortality Table, in the case of lives classified as nonsmokers, with or without ten-year Select Mortality Factors, may at the option of the company be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and

(ii) a mortality table which is of the same blend as used in (i) but applied to form a blend of the male and female rates of mortality according to the corresponding 1980 CET Smoker Mortality Table or 1980 CET Nonsmoker Mortality Table may at the option of the company be substituted for the 1980 CET Table.

Section 4. Unfair Discrimination.

It shall not be a violation of any provision of Chapter 57 of Title 38 of the 1976 Code for an insurer to issue the same kind of policy of life insurance on both a sex distinct and sex neutral basis.

Section 5. Separability.

If any provision of this regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section 6. Effective Date.

The effective date of this regulation is August 1, 1983.

HISTORY: Amended by State Register Volume 9, Issue No. 6, eff June 24, 1988.

CODE COMMISSIONER'S NOTE

Pursuant to 2011 Act No. 47, Section 14(B), the Code Commissioner substituted "intellectual disability" for "mental retardation" and "person with intellectual disability" or "persons with intellectual disability" for "mentally retarded".

69-37. Annuity Mortality Tables For Use In Determining Reserve Liabilities For Annuities.

Table of Contents

Section 1. Authority

Section 2. Purpose

Section 3. Definitions

Section 4. Individual Annuity or Pure Endowment Contracts

Section 5. Group Annuity or Pure Endowment Contracts

Section 6. Application of the 1994 GAR Table

Section 7. Separability

Section 1. Authority

This regulation is promulgated by the Director of Insurance pursuant to Section 38-9-180 of the South Carolina Code.

Section 2. Purpose

The purpose of this regulation is to recognize the following mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts: the 1983 Table "a," the 1983 Group Annuity Mortality (1983 GAM) Table, the Annuity 2000 Mortality Table, and the 1994 Group Annuity Reserving (1994 GAR) Table.

Section 3. Definitions

A. As used in this regulation "1983 Table 'a"' means that mortality table developed by the Society of Actuaries Committee to Recommend a New Mortality Basis for Individual Annuity Valuation and adopted as a recognized mortality table for annuities in June 1982 by the National Association of Insurance Commissioners.

B. As used in this regulation "1983 GAM Table" means that mortality table developed by the Society of Actuaries Committee on Annuities and adopted as a recognized mortality table for annuities in December 1983 by the National Association of Insurance Commissioners.

C. As used in this regulation "1994 GAR Table" means that mortality table developed by the Society of Actuaries Group Annuity Valuation Table Task Force. The 1994 GAR Table is included in the report on pages 865-919 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

D. As used in this regulation "Annuity 2000 Mortality Table" means that mortality table developed by the Society of Actuaries Committee on Life Insurance Research. The Annuity 2000 Table is included in the report on pages 211-249 of Volume XLVII of the Transactions of the Society of Actuaries (1995).

Section 4. Individual Annuity or Pure Endowment Contracts

A. Except as provided in Subsections B and C of this section, the 1983 Table "a" is recognized and approved as an individual annuity mortality table for valuation and, at the option of the company, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1979.

B. Except as provided in Subsection C of this section, either the 1983 Table "a" or the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1986.

C. Except as provided in Subsection D of this section, the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 2001.

D. The 1983 Table "a" without projection is to be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after January 1, 2001, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from:

(1) Settlements of various forms of claims pertaining to court settlements or out of court settlements from tort actions;

(2) Settlements involving similar actions such as workers' compensation claims; or

(3) Settlements of long term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.

Section 5. Group Annuity or Pure Endowment Contracts

A. Except as provided in Subsections B and C of this section, the 1983 GAM Table, the 1983 Table "a" and the 1994 GAR Table are recognized and approved as group annuity mortality tables for valuation and, at the option of the company, any one of these tables may be used for purposes of valuation for an annuity or pure endowment purchased on or after January 1, 1979 under a group annuity or pure endowment contract.

B. Except as provided in Subsection C of this section, either the 1983 GAM Table or the 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1986 under a group annuity or pure endowment contract.

C. The 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 2001 under a group annuity or pure endowment contract.

Section 6. Application of the 1994 GAR Table

In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows:

qx1994+n = qx1994 (l - AAx)n

where the qx1994 and AAxs are as specified in the 1994 GAR Table.

Section 7. Separability

If any provision of this regulation or its application to any person or circumstances is for any reason held to be invalid, the remainder of the regulation and the application of its provisions to other persons or circumstances shall not be affected.

HISTORY: Amended by State Register Volume 25, Issue No. 4, eff April 27, 2001.

69-38. Regulation Permitting Smoker/Nonsmoker Mortality Tables for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits.

(Statutory Authority: 1976 Code Sections 38-3-110, 38-9-180, 38-63-600(8)(f))

Section 1. Purpose.

The purpose of this regulation is to permit the use of mortality tables that reflect differences in mortality between smokers and nonsmokers in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits for plans of insurance with separate premium rates for smokers and nonsmokers.

Section 2. Definitions.

A. As used in this regulation, "1980 CSO Table, with or without Ten-Year Select Mortality Factors" means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Standard Ordinary Mortality Table, with or without Ten-Year Select Mortality Factors. The same select factors will be used for both smokers and nonsmokers tables.

B. As used in this regulation, "1980 CET Table" means that mortality table consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Nonforfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Extended Term Insurance Table.

C. As used in this regulation, "1958 CSO Table" means that mortality table developed by the Society of Actuaries Special Committee on New Mortality Tables, incorporated in the NAIC Model Standard Nonforfeiture Law for Life Insurance, and referred to in that model as the Commissioners 1958 Standard Ordinary Mortality Table.

D. As used in this regulation, "1958 CET Table" means that mortality table developed by the Society of Actuaries Special Committee on New Mortality Tables, incorporated in the NAIC Model Standard Nonforfeiture Law for Life Insurance, and referred to in the model as the Commissioners 1958 Extended Term Insurance Table.

E. As used in this regulation, the phrase "smoker and nonsmoker mortality tables" refers to the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the tables defined in A through D of this section which were developed by the Society of Actuaries Task Force on Smoker/Nonsmoker Mortality and the California Insurance Department staff and recommended by the NAIC Technical Staff Actuarial Group.

F. As used in this regulation, the phrase "composite mortality tables" refers to the mortality tables defined in A through D of this section as they were originally published with rates of mortality that do not distinguish between smokers and nonsmokers.

Section 3. Alternate Tables.

A. For any policy of insurance delivered or issued for delivery in this State after the operative date of Section 37-63-600 for that policy form and before January 1, 1989, at the option of the company and subject to the conditions stated in Section 4 of this regulation,

(i) the 1958 CSO Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and

(ii) the 1958 CET Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CET Table

for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Provided that for any category of insurance issued on female lives with minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits determined using the 1958 CSO or 1958 CET Smoker and Nonsmoker Mortality Tables, such minimum values may be calculated according to an age not more than six years younger than the actual age of the insured.

Provided further that the substitution of the 1958 CSO or 1958 CET Smoker and Nonsmoker Mortality Tables is available only if made for each policy of insurance on a policy form delivered or issued for delivery on or after the operative date for that policy form and before a date not later than January 1, 1989.

B. For any policy of insurance delivered or issued for delivery in this State after the operative date of Section 38-63-600 for that policy form, at the option of the company and subject to the conditions stated in Section 4 of this regulation,

(i) the 1980 CSO Smoker and Nonsmoker Mortality Tables, with or without Ten-Year Select Mortality Factors, may be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and

(ii) the 1980 CET Smoker and Nonsmoker Mortality Tables may be substituted for the 1980 CET Table

for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Section 4. Conditions.

For each plan of insurance with separate rates for smokers and nonsmokers as insurer may:

(i) use composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits,

(ii) use smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by Section 38-9-180 and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits, or

(iii) use smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Section 5. Separability.

If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section 6. Effective Date.

This regulation is effective on the date of its approval and is applicable to all business issued on January 1 and afterward of the year of approval.

69-39. Annuity Disclosure Regulation.

Section 1. Purpose

A. The purpose of this regulation is to provide standards for the disclosure of certain minimum information about annuity contracts to protect consumers and foster consumer education. The regulation specifies the minimum information which must be disclosed and the method for disclosing it in connection with the sale of annuity contracts. The goal of this regulation is to ensure that purchasers of annuity contracts understand certain basic features of annuity contracts.

B. The regulation does not prohibit the use of additional material which is not in violation of this regulation or any other South Carolina statute or regulation.

Section 2. Scope

This regulation applies to all group and individual annuity contracts and certificates except:

A. Registered or non-registered variable annuities or other registered products;

B. Immediate and deferred annuities that contain no non-guaranteed elements;

C. (1) Annuities used to fund:

(a) An employee pension plan which is covered by the Employee Retirement Income Security Act (ERISA);

(b) A plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for purposes of ERISA, is established or maintained by an employer;

(c) A governmental or church plan defined in Section 414 of the Internal Revenue Code or a deferred compensation plan of a state or local government or a tax exempt organization under Section 457 of the Internal Revenue Code; or

(d) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(2) Notwithstanding Paragraph (1), the regulation shall apply to annuities used to fund a plan or arrangement that is funded solely by contributions an employee elects to make whether on a pre-tax or aftertax basis, and where the insurance company has been notified that plan participants may choose from among two (2) or more fixed annuity providers and there is a direct solicitation of an individual employee by a producer for the purchase of an annuity contract. As used in this subsection, direct solicitation shall not include any meeting held by a producer solely for the purpose of educating or enrolling employees in the plan or arrangement;

D. Structured settlement annuities;

E. Charitable gift annuities; and

F. Funding agreements.

Section 3. Definitions

For the purposes of this regulation:

A. "Buyer's Guide" means the current Buyer's Guide to Fixed Deferred Annuities, including any appendices thereto, adopted by the National Association of Insurance Commissioners (NAIC) or language approved by the Director of the Department of Insurance.

B. "Charitable gift annuity" means a transfer of cash or other property by a donor to a charitable organization in return for an annuity payable over one or two lives, under which the actuarial value of the annuity is less than the value of the cash or other property transferred and the difference in value constitutes a charitable deduction for federal tax purposes, but does not include a charitable remainder trust or a charitable lead trust or other similar arrangement where the charitable organization does not issue an annuity and incur a financial obligation to guarantee annuity payments.

C. "Contract owner" means the owner named in the annuity contract or certificate holder in the case of a group annuity contract.

D. "Determinable elements" means elements that are derived from processes or methods that are guaranteed at issue and not subject to company discretion, but where the values or amounts cannot be determined until some point after issue. These elements include the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these. These elements may be described as guaranteed but not determined at issue. An element is considered determinable if it was calculated from underlying determinable elements only, or from both determinable and guaranteed elements.

E. "Funding agreement" means an agreement for an insurer to accept and accumulate funds and to make one or more payments at future dates in amounts that are not based on mortality or morbidity contingencies.

F. "Generic name" means a short title descriptive of the annuity contract being applied for or illustrated such as "single premium deferred annuity."

G. "Guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are guaranteed and determined at issue. An element is considered guaranteed if all of the underlying elements that go into its calculation are guaranteed.

H. "Non-guaranteed elements" means the premiums, credited interest rates (including any bonus), benefits, values, non-interest based credits, charges or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying non-guaranteed elements are used in its calculation.

I. "Structured settlement annuity" means a "qualified funding asset" as defined in Section 130(d) of the Internal Revenue Code or an annuity that would be a qualified funding asset under Section 130(d) of the Internal Revenue Code but for the fact that it is not owned by an assignee under a qualified assignment.

Section 4. Standards for the Disclosure Document and Buyer's Guide

A.(1) Where the application for an annuity contract is taken in a face-to-face meeting, the applicant shall at or before the time of application be given both the disclosure document described in Subsection B and a copy of the Buyer's Guide.

(2) Where the application for an annuity contract is taken by means other than in a face-to-face meeting, the applicant shall be sent both the disclosure document and the Buyer's Guide no later than five (5) business days after the completed application is received by the insurer.

(a) With respect to an application received as a result of a direct solicitation through the mail:

(i) Providing a Buyer's Guide in a mailing inviting prospective applicants to apply for an annuity contract shall be deemed to satisfy the requirement that the Buyer's Guide be provided no later than five (5) business days after receipt of the application.

(ii) Providing a disclosure document in a mailing inviting a prospective applicant to apply for an annuity contract shall be deemed to satisfy the requirement that the disclosure document be provided no later than five (5) business days after receipt of the application.

(b) With respect to an application received via the Internet:

(i) Taking reasonable steps to make the Buyer's Guide available for viewing and printing on the insurer's website shall be deemed to satisfy the requirement that the Buyer's Guide be provided no later than five (5) business days after receipt of the application.

(ii) Taking reasonable steps to make the disclosure document available for viewing and printing on the insurer's website shall be deemed to satisfy the requirement that the disclosure document be provided no later than five (5) business days after receipt of the application.

(c) A solicitation for an annuity contract provided in other than a face-to-face meeting shall include a statement that the proposed applicant may contact the Department for a free Buyer's Guide. In lieu of the foregoing statement, an insurer may include a statement that the prospective applicant may contact the insurer for a free Buyer's Guide.

(3) Where the Buyer's Guide and disclosure document are not provided at or before the time of application, a free look period of no less than fifteen (15) days shall be provided for the applicant to return the annuity contract without penalty. This free look period shall run concurrently with any other free look period provided under state law or regulation.

B. At a minimum, the following information shall be included in the disclosure document required to be provided under this regulation:

(1) The generic name of the contract, the company product name, if different, and form number, and the fact that it is an annuity.

(2) The insurer's name and address.

(3) A description of the contract and its benefits, emphasizing its long-term nature, including the following where appropriate:

(a) The guaranteed, non-guaranteed and determinable elements of the contract, and their limitations, if any, and an explanation of how they operate;

(b) An explanation of the initial crediting rate, specifying any bonus or introductory portion, the duration of the rate and the fact that rates may change from time to time and are not guaranteed;

(c) Periodic income options both on a guaranteed and non-guaranteed basis;

(d) Any value reductions caused by withdrawals from or surrender of the contract;

(e) How values in the contract can be accessed;

(f) The death benefit, if available and how it will be calculated;

(g) A summary of the federal tax status of the contract and any penalties applicable on withdrawal of values from the contract; and

(h) The impact of any rider, such as a long-term care rider.

(4) The specific dollar amount or percentage charges and fees with an explanation of how they apply.

(5) Information about the current guaranteed rate for new contracts that contains a clear notice that the rate is subject to change.

C. Insurers shall define terms used in the disclosure statement in language that facilitates the understanding by a typical person within the segment of the public to which the disclosure statement is directed.

Section 5. Report to Contract Owners

For annuities in the payout period with changes in non-guaranteed elements and for the accumulation period of a deferred annuity, the insurer shall provide each contract owner with a report, at least annually, on the status of the contract that contains at least the following information:

A. The beginning and end date of the current report period;

B. The accumulation and cash surrender value, if any, at the end of the previous report period and at the end of the current report period;

C. The total amounts, if any, that have been credited, charged to the contract value or paid during the current report period; and

D. The amount of outstanding loans, if any, as of the end of the current report period.

Section 6. Penalties

In addition to any other penalties provided by the laws of this state, an insurer or producer that violates a requirement of this regulation shall be guilty of a violation of South Carolina Code Ann. Section 38-57-10 et seq.

Section 7. Severability

If any section or portion of a section of this regulation, or its applicability to any person or circumstances, is held invalid by a court, the remainder of this regulation, or the applicability of its provisions to other persons, shall not be affected.

Section 8. Effective Date

This regulation shall become effective six months following final publication in the State Register and shall apply to contracts sold on or after the effective date.

HISTORY: Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

69-40. Life Insurance Policy Illustration Rules.

Section 1. Purpose

The purpose of this regulation is to provide rules for life insurance policy illustrations that will protect consumers and foster consumer education. The regulation provides illustration formats, prescribes standards to be followed when illustrations are used, and specifies the disclosures that are required in connection with illustrations. The goals of this regulation are to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable. Insurers will, as far as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

Section 2. Applicability and Scope

This regulation applies to all group and individual life insurance policies and certificates except:

A. Variable life insurance;

B. Individual and group annuity contracts;

C. Credit life insurance; or

D. Life insurance policies with no illustrated death benefits on any individual exceeding $10,000.

Section 3. Definitions

For the purposes of this regulation:

A. "Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

B. "Contract premium" means the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

C. "Currently payable scale" means a scale of non-guaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next ninety-five (95) days.

D. "Disciplined current scale" means a scale of non-guaranteed elements constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Further guidance in determining the disciplined current scale as contained in standards established by the Actuarial Standards Board may be relied upon if the standards:

(1) Are consistent with all provisions of this regulation;

(2) Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred;

(3) Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and

(4) Do not permit assumed expenses to be less than minimum assumed expenses.

E. "Generic name" means a short title descriptive of the policy being illustrated such as "whole life," "term life" or "flexible premium adjustable life."

F. "Guaranteed elements" and "non-guaranteed elements"

(1) "Guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue.

(2) "Non-guaranteed elements" means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

G. "Illustrated scale" means a scale of non-guaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

(1) The disciplined current scale; or

(2) The currently payable scale.

H. "Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and that is one of the three (3) types defined below:

(1) "Basic illustration" means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.

(2) "Supplemental illustration" means an illustration furnished in addition to a basic illustration that meets the applicable requirements of this regulation, and that may be presented in a format differing from the basic illustration, but may only depict a scale of non-guaranteed elements that is permitted in a basic illustration.

(3) "In force illustration" means an illustration furnished at any time after the policy that it depicts has been in force for one year or more.

I. "Illustration actuary" means an actuary meeting the requirements of Section 10 who certifies to illustrations based on the standard of practice promulgated by the Actuarial Standards Board.

J. "Lapse-supported illustration" means an illustration of a policy form failing the test of self-supporting as defined in this regulation, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five (5) years and 100 percent policy persistency thereafter.

K.(1) "Minimum assumed expenses" means the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

(a) Fully allocated expenses;

(b) Marginal expenses; and

(c) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the NAIC or the Director.

(2) Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.

L. "Non-term group life" means a group policy or individual policies of non-term life insurance issued to insure members of an employer group or other permitted group where:

(1) Every plan of coverage was selected by the employer or other group representative;

(2) Some portion of the premium is paid by the group or through payroll deduction; and

(3) Group underwriting or simplified underwriting is used.

M. "Policy owner" means the owner named in the policy or the certificate holder in the case of a group policy.

N. "Premium outlay" means the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket.

O. "Self-supporting illustration" means an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies (or upon policy expiration if sooner), the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value will include cash surrender values and any other illustrated benefit amounts available at the policy owner's election.

Section 4. Policies to Be Illustrated

A. Each insurer marketing policies to which this regulation is applicable shall notify the Director whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on the effective date of this regulation, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after the effective date of this regulation, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the Director.

B. Except in the case of replacement, if the insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first policy anniversary is prohibited.

C. If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this regulation is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

D. Potential enrollees of non-term group life subject to this regulation shall be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation shall not be considered an illustration for purposes of this regulation, but all information provided shall be consistent with the illustrated scale. A basic illustration shall be provided at delivery of the policy or certificate to enrollees for non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer shall make a basic illustration available to any non-term group life enrollee who requests it.

Section 5. General Rules and Prohibitions

A. An illustration used in the sale of a life insurance policy shall satisfy the applicable requirements of this regulation, be clearly labeled "life insurance illustration" and contain the following basic information:

(1) Name of insurer;

(2) Name and business address of agent or insurer's authorized representative, if any;

(3) Name, age and sex of proposed insured, except where a composite illustration is permitted under this regulation;

(4) Underwriting or rating classification upon which the illustration is based;

(5) Generic name of policy, the company product name, if different, and form number;

(6) Initial death benefit; and

(7) Dividend option election or application of non-guaranteed elements, if applicable.

B. When using an illustration in the sale of a life insurance policy, an insurer or its agents or other authorized representatives shall not:

(1) Represent the policy as anything other than a life insurance policy;

(2) Use or describe non-guaranteed elements in a manner that is misleading or has the capacity or tendency to mislead;

(3) State or imply that the payment or amount of non-guaranteed elements is guaranteed;

(4) Use an illustration that does not comply with the requirements of this regulation;

(5) Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated;

(6) Provide an applicant with an incomplete illustration;

(7) Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact;

(8) Use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums;

(9) Except for policies that can never develop nonforfeiture values, use an illustration that is "lapse-supported"; or

(10) Use an illustration that is not "self-supporting."

C. If an interest rate used to determine the illustrated non-guaranteed elements is shown, it shall not be greater than the earned interest rate underlying the disciplined current scale.

Section 6. Standards for Basic Illustrations

A. Format. A basic illustration shall conform with the following requirements:

(1) The illustration shall be labeled with the date on which it was prepared.

(2) Each page, including any explanatory notes or pages, shall be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration shall be labeled "page 4 of 7 pages").

(3) The assumed dates of payment receipt and benefit pay-out within a policy year shall be clearly identified.

(4) If the age of the proposed insured is shown as a component of the tabular detail, it shall be issue age plus the numbers of years the policy is assumed to have been in force.

(5) The assumed payments on which the illustrated benefits and values are based shall be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments shall be identified as premium outlay.

(6) Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium shall be shown and clearly labeled guaranteed.

(7) If the illustration shows any non-guaranteed elements, they cannot be based on a scale more favorable to the policy owner than the insurer's illustrated scale at any duration. These elements shall be clearly labeled non-guaranteed.

(8) The guaranteed elements, if any, shall be shown before corresponding non-guaranteed elements and shall be specifically referred to on any page of an illustration that shows or describes only the non-guaranteed elements (e.g., "see page one for guaranteed elements.")

(9) The account or accumulation value of a policy, if shown, shall be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender.

(10) The value available upon surrender shall be identified by the name this value is given in the policy being illustrated and shall be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans and policy loan interest, as applicable.

(11) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form.

(12) Any illustration of non-guaranteed elements shall be accompanied by a statement indicating that:

(a) The benefits and values are not guaranteed;

(b) The assumptions on which they are based are subject to change by the insurer; and

(c) Actual results may be more or less favorable.

(13) If the illustration shows that the premium payer may have the option to allow policy charges to be paid using non-guaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure shall be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display shall not be left blank or show zero unless accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up.

(14) If the applicant plans to use dividends or policy values, guaranteed or non-guaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values.

B. Narrative Summary. A basic illustration shall include the following:

(1) A brief description of the policy being illustrated, including a statement that it is a life insurance policy;

(2) A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration shall show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code;

(3) A brief description of any policy features, riders or options, guaranteed or non-guaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy;

(4) Identification and a brief definition of column headings and key terms used in the illustration; and

(5) A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."

C. Numeric Summary.

(1) Following the narrative summary, a basic illustration shall include a numeric summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values shall be based on the contract premium. This summary shall be shown for at least policy years five (5), ten (10) and twenty (20) and at age 70, if applicable, on the three bases shown below. For multiple life policies the summary shall show policy years five (5), ten (10), twenty (20) and thirty (30).

(a) Policy guarantees;

(b) Insurer's illustrated scale;

(c) Insurer's illustrated scale used but with the non-guaranteed elements reduced as follows:

(i) Dividends at fifty percent (50%) of the dividends contained in the illustrated scale used;

(ii) Non-guaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used; and

(iii) All non-guaranteed charges, including but not limited to, term insurance charges, mortality and expense charges, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.

(2) In addition, if coverage would cease prior to policy maturity or age 100, the year in which coverage ceases shall be identified for each of the three (3) bases.

D. Statements. Statements substantially similar to the following shall be included on the same page as the numeric summary and signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this regulation.

(1) A statement to be signed and dated by the applicant or policy owner reading as follows: "I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."

(2) A statement to be signed and dated by the insurance agent or other authorized representative of the insurer reading as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."

E. Tabular Detail.

(1) A basic illustration shall include the following for at least each policy year from one (1) to ten (10) and for every fifth policy year thereafter ending at age 100, policy maturity or final expiration; and except for term insurance beyond the 20th year, for any year in which the premium outlay and contract premium, if applicable, is to change:

(a) The premium outlay and mode the applicant plans to pay and the contract premium, as applicable;

(b) The corresponding guaranteed death benefit, as provided in the policy; and

(c) The corresponding guaranteed value available upon surrender, as provided in the policy.

(2) For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender shall correspond to the contract premium.

(3) Non-guaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer's current practice is to pay terminal dividends. If any non-guaranteed elements are shown they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a non-guaranteed benefit or value is shown, a zero shall be displayed in the guaranteed column.

Section 7. Standards for Supplemental Illustrations

A. A supplemental illustration may be provided so long as:

(1) It is appended to, accompanied by or preceded by a basic illustration that complies with this regulation;

(2) The non-guaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration;

(3) It contains the same statement required of a basic illustration that non-guaranteed elements are not guaranteed; and

(4) For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration. For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration shall be equal to the premium outlay shown in the basic illustration.

B. The supplemental illustration shall include a notice referring to the basic illustration for guaranteed elements and other important information.

Section 8. Delivery of Illustration and Record Retention

A.(1) If a basic illustration is used by an insurance agent or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this regulation, shall be submitted to the insurer at the time of policy application. A copy also shall be provided to the applicant.

(2) If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued shall be sent with the policy. The revised illustration shall conform to the requirements of this regulation, shall be labeled "Revised Illustration" and shall be signed and dated by the applicant or policy owner and agent or other authorized representative of the insurer no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

B.(1) If no illustration is used by an insurance agent or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the agent or representative shall certify to that effect in writing on a form provided by the insurer. On the same form the applicant shall acknowledge that no illustration conforming to the policy applied for was provided and shall further acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form shall be submitted to the insurer at the time of policy application.

(2) If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed no later than the time the policy is delivered. A copy shall be provided to the insurer and the policy owner.

C. If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it shall include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer's obligation under this subsection shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.

D. A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, shall be retained by the insurer until three (3) years after the policy is no longer in force. A copy need not be retained if no policy is issued.

Section 9. Annual Report; Notice to Policy Owners

A. In the case of a policy designated as one for which illustrations will be used, the insurer shall provide each policy owner with an annual report on the status of the policy that shall contain at least the following information:

(1) For universal life policies, the report shall include the following:

(a) The beginning and end date of the current report period;

(b) The policy value at the end of the previous report period and at the end of the current report period;

(c) The total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders);

(d) The current death benefit at the end of the current report period on each life covered by the policy;

(e) The net cash surrender value of the policy as of the end of the current report period;

(f) The amount of outstanding loans, if any, as of the end of the current report period; and

(g) For fixed premium policies:

If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments, the policy's net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect shall be included in the report; or

(h) For flexible premium policies:

If, assuming guaranteed interest, mortality and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

(2) For all other policies, where applicable:

(a) Current death benefit;

(b) Annual contract premium;

(c) Current cash surrender value;

(d) Current dividend;

(e) Application of current dividend; and

(f) Amount of outstanding loan.

(3) Insurers writing life insurance policies that do not build nonforfeiture values shall only be required to provide an annual report with respect to these policies for those years when a change has been made to nonguaranteed policy elements by the insurer.

B. If the annual report does not include an in force illustration, it shall contain the following notice displayed prominently: "IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department." The insurer may vary the sequential order of the methods for obtaining an in force illustration.

C. Upon the request of the policy owner, the insurer shall furnish an in force illustration of current and future benefits and values based on the insurer's present illustrated scale. This illustration shall comply with the requirements of Sections 5A, 5B, 6A and 6E. No signature or other acknowledgment of receipt of this illustration shall be required.

D. If an adverse change in non-guaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report shall contain a notice of that fact and the nature of the change prominently displayed.

Section 10. Annual Certifications

A. The board of directors of each insurer shall appoint one or more illustration actuaries.

B. The illustration actuary shall certify that the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of Practice for Compliance with the NAIC Model Regulation on Life Insurance Illustrations promulgated by the Actuarial Standards Board, and that the illustrated scales used in insurer-authorized illustrations meet the requirements of this regulation.

C. The illustration actuary shall:

(1) Be a member in good standing of the American Academy of Actuaries;

(2) Be familiar with the standard of practice regarding life insurance policy illustrations;

(3) Not have been found by the Director, following appropriate notice and hearing to have:

(a) Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as an illustration actuary;

(b) Been found guilty of fraudulent or dishonest practices;

(c) Demonstrated his or her incompetence, lack of cooperation, or untrustworthiness to act as an illustration actuary; or

(d) Resigned or been removed as an illustration actuary within the past five (5) years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards;

(4) Not fail to notify the Director of any action taken by a Director of another state similar to that under Paragraph (3) above;

(5) Disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five (5) years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in force policies are not consistent with the nonguaranteed elements actually being paid, charged or credited to the same or similar forms, this must be disclosed in the annual certification; and

(6) Disclose in the annual certification the method used to allocate overhead expenses for all illustrations:

(a) Fully allocated expenses;

(b) Marginal expenses; or

(c) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the NAIC or the Director.

D.(1) The illustration actuary shall file a certification with the board and with the Director:

(a) Annually for all policy forms for which illustrations are used; and

(b) Before a new policy form is illustrated.

(2) If an error in a previous certification is discovered, the illustration actuary shall notify the board of directors of the insurer and the Director promptly.

E. If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the Director promptly of his or her inability to certify.

F. A responsible officer of the insurer, other than the illustration actuary, shall certify annually:

(1) That the illustration formats meet the requirements of this regulation and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary; and

(2) That the company has provided its agents with information about the expense allocation method used by the company in its illustrations and disclosed as required in Subsection C(6) of this section.

G. The annual certifications shall be provided to the Director each year by a date determined by the insurer.

H. If an insurer changes the illustration actuary responsible for all or a portion of the company's policy forms, the insurer shall notify the Director of that fact promptly and disclose the reason for the change.

Section 11. Penalties

In addition to any other penalties provided by the laws of this state, an insurer or agent that violates a requirement of this regulation shall be guilty of a violation of South Carolina Code Ann. Section 38-2-10 et seq., and shall be subject to administrative penalties as set forth in South Carolina Code Ann. Section 38-2-10.

Section 12. Separability

If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid by any court of law, the remainder of the regulation and its application to other persons or circumstances shall not be affected.

Section 13. Effective Date

This regulation shall become effective July 1, 1997, and shall apply to policies sold on or after the effective date. This regulation shall apply to non-term group certificates issued on or after the anniversary date immediately following the effective date.

HISTORY: Added by State Register Volume 21, Issue No. 6, Part 2, eff July 1, 1997.

69-40.1. Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities.

Section 1. Purpose

The purpose of this regulation is to set forth standards to protect consumers from misleading and fraudulent marketing practices with respect to the use of senior-specific certifications and professional designations in the solicitation, sale or purchase of, or advice made in connection with, a life insurance or annuity product.

Section 2. Scope

This regulation shall apply to any solicitation, sale or purchase of, or advice made in connection with, a life insurance or annuity product by an insurance producer.

Section 3. Definition

For purposes of this regulation, "insurance producer" means a person required to be licensed under the laws of this State to sell, solicit or negotiate insurance, including annuities.

Section 4. Prohibited Uses of Senior-Specific Certifications and Professional Designations

A.(1) It is an unfair and deceptive act or practice in the business of insurance within the meaning of Chapter 57 of the 1976 Code of Laws of South Carolina, as amended, for an insurance producer to use a senior-specific certification or professional designation that indicates or implies in such a way as to mislead a purchaser or prospective purchaser that the insurance producer has special certification or training in advising or servicing seniors in connection with the solicitation, sale or purchase of a life insurance or annuity product or in the provision of advice as to the value of or the advisability of purchasing or selling a life insurance or annuity product, either directly or indirectly through publications or writings, or by issuing or promulgating analyses or reports related to a life insurance or annuity product.

(2) The prohibited use of senior-specific certifications or professional designations includes, but is not limited to, the following:

(a) Use of a certification or professional designation by an insurance producer who has not actually earned or is otherwise ineligible to use such certification or designation;

(b) Use of a nonexistent or self-conferred certification or professional designation;

(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the insurance producer using the certification or designation does not have; and

(d) Use of a certification or professional designation that was obtained from a certifying or designating organization that:

(i) Is primarily engaged in the business of instruction in sales or marketing;

(ii) Does not have reasonable standards or procedures for assuring the competency of its certificants or designees;

(iii) Does not have reasonable standards or procedures for monitoring and disciplining its certificants or designees for improper or unethical conduct; or

(iv) Does not have reasonable continuing education requirements for its certificants or designees in order to maintain the certificate or designation.

B. There is a rebuttable presumption that a certifying or designating organization is not disqualified solely for purposes of subsection A(2)(d) when the certification or designation issued from the organization does not primarily apply to sales or marketing and when the organization or the certification or designation in question has been accredited by:

(1) The American National Standards Institute (ANSI);

(2) The National Commission for Certifying Agencies; or

(3) Any organization that is on the U.S. Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes."

C. In determining whether a combination of words or an acronym standing for a combination of words constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing seniors, factors to be considered shall include:

(1) Use of one or more words such as "senior," "retirement," "elder," or like words combined with one or more words such as "certified," "registered," "chartered," "advisor," "specialist," "consultant," "planner," or like words, in the name of the certification or professional designation; and

(2) The manner in which those words are combined.

D.(1) For purposes of this regulation, a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency is not a certification or professional designation, unless it is used in a manner that would confuse or mislead a reasonable consumer, when the job title:

(a) Indicates seniority or standing within the organization; or

(b) Specifies an individual's area of specialization within the organization.

(2) For purposes of this subsection, financial services regulatory agency includes, but is not limited to, an agency that regulates insurers, insurance producers, broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.

Section 5. Effective Date

This regulation shall become effective upon final publication in the State Register.

HISTORY: Added by State Register Volume 34, Issue No. 5, eff May 28, 2010.

69-41. Prepaid Dental Service.

(Statutory Authority: 1976 Code Sections 38-3-110, 38-1-20(1), 1-23-10)

A. Introduction.

In Act No. 40 of 1979, the South Carolina General Assembly amended S. C. Code Section 38-5-20(b)(1976) [recodified as Section 38-1-20(1)], so as to add "prepaid dental service" to the definition of "accident and health insurance." The effect of this amendment was to require any person or entity which offers, sells, delivers or issues for delivery prepaid dental service contracts in this State to be licensed as an insurance company to transact an accident and health insurance business. The Act further amended S. C. Code Section 38-57-190(2) (1976), so as to permit the granting of preferences or distinctions to particular groups under prepaid dental service plans.

Unfortunately, the Act did not define the phrase "prepaid dental service." Over the years, it has become increasingly clear that a definition of what constitutes "prepaid dental service" must be established. Under the broadest reading of the phrase, even the most informal retainer-type of arrangement between an individual dentist and an individual patient could be deemed to be "prepaid dental service," if there was any payment of fees prior to the rendering of dental services. In such a case, the individual dentist would be required to be licensed as an accident and health insurance company and subjected to the full range of regulatory and tax laws applicable to insurance companies. The Chief Insurance Commissioner simply does not believe that this was the result intended by the General Assembly.

One of the primary purposes of the insurance regulatory laws is the assurance of the solvency and soundness of insurance companies. To the extent that a person or entity contractually promises to arrange for the provision of, or reimbursement for, dental services to be performed by another person who is a licensed dentist, and further collects money from the public in consideration of such promises, the solvency concerns of the insurance regulatory laws are implicated. Under this scenario, the person collecting the money and making the promises (i.e., the promisor) is not the same person who is performing the dental services. In order for the promisor to fulfill his contractual obligations, it is imperative that he at all times have sufficient funds available to compensate dentists performing the services and/or reimburse contractholders for dental expenses they incur. The assurance that those funds will be available to fulfill contractual obligations goes to the very heart of solvency regulation under the insurance laws.

By contrast, where the promisor is the dentist performing the services, the solvency concerns expressed above are not present. So long as the dentist has the requisite knowledge, skill and competence to practice dentistry, as well as a valid license to do so, the dentist can fulfill his contractual obligations to his contractholder/patient, regardless of what his financial condition is. Consequently, the State does not have the same interest in solvency protection that it does in the circumstances previously described.

It is therefore the purpose of this regulation to define the phrase "prepaid dental service" as used in Section 38-1-20(1), so as to clearly identify those plans and their sponsors which are subject to licensing and regulation by the Chief Insurance Commissioner.

B. "Prepaid dental service" defined.

(1) Definition.

"Prepaid dental service" means a contract, plan or agreement whereby one undertakes, in consideration of a specified payment, to provide for the rendering of, or reimbursement for, dental services during a specified interval of time, where such dental services are performed by a person duly licensed to practice dentistry in the jurisdiction in which such services are performed. "Prepaid dental service" specifically includes subscriber contracts issued by dental service associations and dental service corporations as contemplated in Subarticle 3, Article 3, Chapter 71 of Title 38 of the 1976 Code and Insurance Department Regulation 69-34.

(2) Exemption.

The phrase "prepaid dental service" does not include a direct contractual agreement between an individual licensed dentist and an individual patient, under which the individual dentist is personally obligated to perform the dental services specified in the agreement. To qualify for the exemption under the paragraph, the agreement cannot exist between the patient and some third party, such as a marketing firm, a service corporation, or even the dentist's own professional association (P.A.). Instead, the agreement must be exclusively between the individual licensed dentist and the patient, such that the dentist is at all times contractually bound under the agreement to personally provide the promised dental services directly to the patient.

In addition, the phrase "prepaid dental service" shall not include dental benefits provided by a health maintenance organization licensed and regulated under Chapter 33 of Title 38 of the 1976 Code, nor does it include dental benefits provided by a multiple employer self-insured health plan licensed and regulated under Chapter 41 of Title 38 of the 1976 Code.

C. License required.

Every person, firm or entity which offers, sells, delivers or issues for delivery in this State prepaid dental service contracts, as defined in paragraph B above, shall be deemed to be transacting an accident and health insurance business under S. C. Code Section 38-1-20(1), shall be deemed to be an insurance company under S. C. Code Section 38-1-20(4)(1976), and must be licensed and regulated by the Chief Insurance Commissioner as an insurance company in accordance with S. C. Code Sections 38-5-10 and 38-25-110 (1976). All South Carolina insurance laws and regulations applicable to accident and health insurance companies and accident and health insurance policies shall be fully applicable to prepaid dental service plans and to persons, firms or entities offering, selling, delivering or issuing for delivery such plans in this State.

69-42. Multiple Employer Self-Insured Health Plans.

(Statutory Authority: 1976 Code Sections 38-3-110, 38-41-100, 38-41-110, 1-23-10 et. seq. (1976), as amended)

A. Establishment, Maintenance and Control by Employers.

In Public Law 97-473, Congress amended the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sections 1001 et. seq. (ERISA), so as to provide that multiple employer welfare arrangements that are not fully insured are subject to state insurance laws to the extent that such laws are not inconsistent with specific provisions of ERISA. In response to the passage of P.L. 97-473, the South Carolina General Assembly adopted Act No. 137 of 1985, codified as S.C. Code Sections 38-41-10 through 38-41-110 (1976), as amended, (hereinafter "the Act"), to provide a statutory framework by which uninsured or partially insured multiple employer welfare arrangements could be regulated.

Act No. 137 was passed for the benefit and convenience of two or more employers who jointly decide to pool their resources to provide health benefits for their employees. As expressed in Sections 38-41-10 and 38-41-60(a), it was the clear intent of the General Assembly that a multiple employer self-insured health plan be created and maintained by and for the benefit of participating employers and operated under their exclusive management and control. The Act was not intended to permit third party administrators or other entrepreneurial promoters to establish a trust or plan and then proceed to solicit employers as participants. Instead, the impetus for the creation of the plan must come from the employers themselves, and the employers must at all times exercise absolute control over the management and conduct of the plan's business and affairs.

This is not to say that a plan, once established, cannot contract with a third party to provide management or administrative services to the plan. However, any such management or administration agreement must be filed with the Chief Insurance Commissioner at the time that the plan makes application for a license. See, S.C. Code Sections 38-41-30 through 38-41-50 (1976), as amended. The Commissioner will not license any multiple employer self-insured health plan if it appears that it has not been established and maintained by and for the benefit of participating employers, or that such employers, through their duly elected trustees, exercise anything less than total and absolute control over the plan's business and affairs.

B. Quarterly Reports Required.

Under S. C. Code Section 38-41-60(d) (1976), as amended, a multiple employer self-insured health plan is required to file an annual report on its condition and affairs with the Commissioner. Under S.C. Code Section 38-41-80 (1976), as amended, a plan is further required to furnish information concerning its business and affairs to the Commissioner or his representatives on demand.

So as to enable the Commissioner to timely monitor the financial condition of multiple employer self-insured health plans, each plan shall, under Section 38-41-80, be required to file quarterly reports on its condition and affairs on forms prescribed by the Commissioner. Such reports shall be filed with the Commissioner not later than forty-five (45) days after the close of the calendar quarters ending on March 31, June 30 and September 30. Since the annual report required in Section 38-41-80(d) will reflect a plan's condition and affairs at December 31, no separate quarterly report for the quarter ending December 31 shall be required.

C. Hold Harmless Agreements.

Under S. C. Code Sections 38-41-100, 38-41-110 (1976), as amended, the Commissioner is authorized to promulgate regulations to ensure the safe and efficient operation of multiple employer self-insured health plans. One of the most effective ways of doing so is to give the participating employers who, through their elected trustees, establish, maintain and control the plan a direct and ongoing stake or interest in the plan's continued safe and efficient operation.

Therefore, to promote continued safe and efficient operation, a multiple employer self-insured health plan shall require each employer, as a condition of participation in the plan, to execute an agreement by which the employer agrees to personally pay all claims for benefits covered under the plan which are incurred by his or its covered employees and their covered dependents, but which the plan has failed to pay. Such agreements shall be made on forms prescribed by the Commissioner and shall extend to all unpaid claims for benefits incurred by the employer's employees and their dependents during the time such employees and dependents were covered under the plan.

A clear and legible copy of each agreement executed by participating employers shall be filed with the Commissioner by the plan as part of its application for a license. No license will be issued unless copies of such agreements are filed. With respect to an employer who joins the plan after a license has been issued, the plan shall file a copy of the agreement executed by the employer within ten (10) days after the employer joins the plan.

Neither failure of an employer to execute an agreement, nor failure of the plan to require such execution, shall excuse the employer from liability for unpaid claims incurred by covered employees and dependents. An employer shall be deemed to have notice of the requirements of this section, and upon joining the plan, the employer shall be deemed to have agreed to liability for unpaid claims of his covered employees and their dependents in the same manner as if an agreement had been executed.

D. Stop-Loss Coverage Requirements.

The Act requires a multiple employer self-insured health plan to obtain individual and aggregate excess stop-loss coverage from a licensed insurance company. Such coverage must be noncancellable for a minimum term of two years, and it must be submitted for approval by the Commissioner. See, S.C. Code Sections 38-41-30, 38-41-40, 38-41-50 (1976), as amended.

Under Sections 38-41-30, 38-41-40, 38-41-50, plan participants are required to fund benefits up to the point at which the excess stop-loss insurer assumes one hundred percent of the liability to pay benefits. In reviewing an excess stop-loss agreement for approval, the Commissioner will closely scrutinize the agreement to determine whether the levels of individual and aggregate risk retained by the plan are such as will put the plan in an unsound condition or will render its proceedings hazardous to the public or to persons covered under the plan. See, S.C. Code Sections 38-41-100, 38-41-110 (1976), as amended. In making his determination, the Commissioner will consider all relevant factors including, but not limited to, reserving practices, adequacy of employer/employee contributions, benefits provided under the plan, administrative and other expenses, and management. If the Commissioner is of the opinion that the excess stop-loss agreement will put the plan in an unsound condition, will render the plan's proceedings hazardous to the public or persons covered under the plan, or is otherwise not in compliance with the law, the Commissioner will disapprove the agreement.

HISTORY: Amended by State Register Volume 11, Issue No. 5, eff May 22, 1987.

69-43. Group Health Insurance Coordination of Benefits.

Section 1. Authority.

This regulation is promulgated under S. C. Code Sections 38-3-110(2) and 38-71-720 (1976), as amended.

Section 2. Purpose and Applicability.

A. The purpose of this regulation is to:

(1) Permit, but not require, plans to include a coordination of benefits (COB) provision;

(2) Establish an order in which plans pay their claims;

(3) Provide the authority for the orderly transfer of information needed to pay claims promptly;

(4) Reduce duplication of benefits by permitting a reduction of the benefits paid by a plan when the plan, pursuant to rules established by this regulation, does not have to pay its benefits first;

(5) Reduce claims payment delays; and

(6) Make all contracts that contain a COB provision consistent with this regulation.

Section 3. Definitions.

The following words and terms, when used in this regulation, shall have the following meanings unless the context clearly indicates otherwise:

A. Allowable Expenses

(1) "Allowable Expense" means the necessary, reasonable and customary item of expense for health care when the item of expense is covered at least in part under any of the plans involved, except where a statute requires a different definition.

(2) Notwithstanding the above definition, items of expense under coverages such as dental care, vision care, prescription drug or hearing aid programs may be excluded from the definition of Allowable Expense. A plan which provides benefits only for any such items of expense may limit its definition of Allowable Expenses to like items of expense.

(3) When a plan provides benefits in the form of service, the reasonable cash value of each service will be considered as both an Allowable Expense and a benefit paid.

(4) The difference between the cost of a private hospital room and the cost of a semi-private hospital room is not considered an Allowable Expense under the above definition unless the patient's stay in a private hospital room is medically necessary in terms of generally accepted medical practice.

(5) When COB is restricted in its use to specific coverage in a contract (for example, major medical or dental), the definition of "Allowable Expense" must include the corresponding expenses or services to which COB applies.

(6) When benefits are reduced under a Primary Plan because a covered person does not comply with the plan provisions, the amount of such reduction will not be considered an Allowable Expense. Examples of such provisions are those related to second surgical opinions, precertification of admissions or services, and preferred provider arrangements.

(a) Only benefit reductions based upon provisions similar in purpose to those described above and which are contained in the Primary Plan may be excluded from Allowable Expenses.

(b) This provision shall not be used by a Secondary Plan to refuse to pay benefits because an HMO member has elected to have health care services provided by a non-HMO provider and the HMO, pursuant to its contract, is not obligated to pay for providing those services.

NOTE: This Paragraph (6) is not intended to allow a Secondary Plan to exclude expenses that are applied towards the satisfaction of the deductible, copayments or coinsurance amounts required by the Primary Plan, except for the benefit reductions expressly described in this paragraph.

B. Claim

A request that benefits of a plan be provided or paid is a claim. The benefits claimed may be in the form of:

(1) Services (including supplies);

(2) Payment for all or a portion of the expenses incurred;

(3) A combination of (1) and (2) above; or

(4) An indemnification.

C. Claim Determination Period

This is the period of time, which must not be less than twelve consecutive months, over which Allowable Expenses are compared with total benefits payable in the absence of COB, to determine whether overinsurance exists and how much each plan will pay or provide.

(1) The Claim Determination Period is usually a calendar year, but a plan may use some other period of time that fits the coverage of the group contract. A person may be covered by a plan during a portion of a Claim Determination Period if that person's coverage starts or ends during the Claim Determination Period.

(2) As each claim is submitted, each plan is to determine its liability and pay or provide benefits based upon Allowable Expenses incurred to that point in the Claim Determination Period. But that determination is subject to adjustment as later Allowable Expenses are incurred in the same Claim Determination Period.

D. Coordination of Benefits

This is a provision establishing an order in which plans pay their claims.

E. Hospital Indemnity Benefits

These are benefits not related to expenses incurred. The term does not include reimbursement-type benefits even if they are designed or administered to give the insured the right to elect indemnity-type benefits at the time of claim.

F. Plan

"Plan" means a form of coverage with which coordination is allowed. The definition of plan in the group contract must state the types of coverage which will be considered in applying the COB provision of that contract. The right to include a type of coverage is limited by the rest of this definition.

(1) The definition shown in the Model COB Provision, attached to this regulation as Appendix A, is an example of what may be used. Any definition that satisfies this subsection may be used.

(2) This regulation uses the term "plan." However, a group contract may, instead, use "program" or some other term.

(3) Plan may include:

(a) Group insurance and group subscriber contracts;

(b) Uninsured arrangements of group coverage;

(c) Group coverage through HMOs and other prepayment, group practice and individual practice plans;

(d) The amount by which group hospital indemnity benefits exceed $100 per day;

(e) The medical benefits coverage in group and individual automobile "no fault" and traditional automobile "fault" type contracts; and

(f) Medicare or other governmental benefits, except as provided in (4)(h) below and except as mandated by federal law. That part of the definition of plan may be limited to the hospital, medical and surgical benefits of the governmental program.

(4) Plan shall not include:

(a) Individual or family insurance contracts;

(b) Individual or family subscriber contracts;

(c) Individual or family coverage through Health Maintenance Organizations (HMOs);

(d) Individual or family coverage under other prepayment, group practice and individual practice plans;

(e) Group hospital indemnity benefits of $100.00 per day or less;

(f) Blanket insurance contracts;

(g) Franchise insurance contracts; and

(h) A State plan under Medicaid, and shall not include a law or plan when, by law, its benefits are in excess of those of any private insurance plan or other non-governmental plan.

G. Primary Plan

A Primary Plan is a plan whose benefits for a person's health care coverage must be determined without taking the existence of any other plan into consideration. A plan is a Primary Plan if either of the following conditions is true:

(1) The plan either has no order of benefit determination rules, or it has rules which differ from those permitted by this regulation. There may be more than one Primary Plan; or

(2) All plans which cover the person use the order of benefit determination rules required by this regulation, and under those rules the plan determines its benefits first.

H. Secondary Plan

A Secondary Plan is a plan which is not a Primary Plan. If a person is covered by more than one Secondary Plan, the order of benefit determination rules of this regulation decide the order in which their benefits are determined in relation to each other.The benefits of each Secondary Plan may take into consideration the benefits of the Primary Plan or plans and the benefits of any other plan which, under the rules of this regulation, has its benefits determined before those of that Secondary Plan.

I. This Plan

In a COB provision, this term refers to the part of the group contract providing the health care benefits to which the COB provision applies and which may be reduced because of the benefits of other plans. Any other part of the group contract providing health care benefits is separate from This Plan. A group contract may apply one COB provision to certain of its benefits (such as dental benefits), coordinating only with like benefits, and may apply other separate COB provisions to coordinate other benefits.

Section 4. Model COB Contract Provision.

A. General

Appendix A contains a model COB provision for use in group contracts. That use is subject to the provisions of B and C below and to the provisions of Section 5.

B. Flexibility

A group contract's COB provision does not have to use the words and format shown at Appendix A. Changes may be made to fit the language and style of the rest of the group contract or to reflect the difference among plans which provide services, which pay benefits for expenses incurred, and which indemnify. No other substantive changes are allowed.

C. Prohibited Coordination and Benefit Design

(1) A group contract may not reduce benefits on the basis that:

(a) Another plan exists;

(b) A person is or could have been covered under another plan, except with respect to Part B of Medicare; or

(c) A person has elected an option under another plan providing a lower level of benefits than another option which could have been elected.

(2) No contract may contain a provision that its benefits are "excess" or "always secondary" to any plan as defined in this regulation, except in accord with the rules permitted by this regulation.

Section 5. Rules for Coordination of Benefits; Order of Benefits.

A. General

The general order of benefits is as follows:

(1) The Primary Plan must pay or provide its benefits as if the Secondary Plan or Plans did not exist. A Plan that does not include a coordination of benefits provision may not take the benefits of another Plan as defined in Section 3 Definitions into account when it determines its benefits. There is one exception: a contract holder's coverage that is designed to supplement a part of a basic package of benefits may provide that the supplementary coverage shall be excess to any other parts of the plan provided by the contract holder.

(2) A Secondary Plan may take the benefits of another plan into account only when, under these rules, it is Secondary to that other plan.

(3) The benefits of the plan which covers the person as an employee, member or subscriber (that is, other than as a dependent) are determined before those of the plan which covers the person as a dependent.

B. Dependent Child/Parents Not Separated or Divorced

The rules for the order of benefits for a dependent child when the parents are not separated or divorced are as follows:

(1) The benefits of the plan of the parent whose birthday falls earlier in a year are determined before those of the plan of the parent whose birthday falls later in that year;

(2) If both parents have the same birthday, the benefits of the plan which covered the parent longer are determined before those of the plan which covered the other parent for a shorter period of time;

(3) The word "birthday" refers only to month and day in a calendar year, not the year in which the person was born;

(4) If the other plan does not have the rule described in B(1), (2) and (3) above, but instead has a rule based upon the gender of the parent; and if, as a result, the plans do not agree on the order of benefits, the rule based upon the gender of the parent will determine the order of benefits.

C. Dependent Child/Separated or Divorced Parents

If two or more plans cover a person as a dependent child of divorced or separated parents, benefits for the child are determined in this order:

(1) First, the plan of the parent with custody of the child;

(2) Then, the plan of the spouse of the parent with the custody of the child; and

(3) Finally, the plan of the parent not having custody of the child.

(4) If the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child, and the entity obligated to pay or provide the benefits of the plan of that parent has actual knowledge of those terms, the benefits of that plan are determined first. The plan of the other parent shall be the Secondary Plan. This paragraph does not apply with respect to any Claim Determination Period or plan year during which any benefits are actually paid or provided before the entity has that actual knowledge.

(5) If the specific terms of a court decree state that the parents shall share joint custody, without stating that one of the parents is responsible for the health care expenses of the child, the plans covering the child shall follow the order of benefit determination rules outlined in Section 5B, Dependent Child/Parents Not Separated or Divorced.

D. Active/Inactive Employee

The benefits of a plan which covers a person as an employee who is neither laid off nor retired (or as that employee's dependent) are determined before those of a plan which covers that person as a laid off or retired employee (or as that employee's dependent). If the other plan does not have this rule; and if, as a result, the plans do not agree on the order of benefits, this rule is ignored.

E. Longer/Shorter Length of Coverage

If none of the above rules determines the order of benefits, the benefits of the plan which covered an employee, member o subscriber longer are determined before those of the plan which covered that person for the shorter term.

(1) To determine the length of time a person has been covered under a plan, two plans shall be treated as one if the claimant was eligible under the second within 24 hours after the first ended.

(2) The start of a new plan does not include:

(a) A change in the amount or scope of a plan's benefits;

(b) A change in the entity which pays, provides or administers the plan's benefits; or

(c) A change from one type of plan to another (such as, from a single employer plan to that of a multiple employer plan).

(3) The claimant's length of time covered under a plan is measured from the claimant's first date of coverage under that plan. If that date is not readily available, the date the claimant first became a member of the group shall be used as the date from which to determine the length of time the claimant's coverage under the present plan has been in force.

Section 6. Procedure to be followed by Secondary Plan Total Allowable Expenses.

A. When it is determined, pursuant to Section 5, that this Plan is a Secondary Plan, it may reduce its benefits so that the total benefits paid or provided by all plans during a Claim Determination Period are not more than total Allowable Expenses. The amount by which the Secondary Plan's benefits have been reduced shall be used by the Secondary Plan to pay Allowable Expenses, not otherwise paid, which were incurred during the Claim Determination Period by the person for whom the claim is made. As each claim is submitted, the Secondary Plan determines its obligation to pay for Allowable Expenses based on all claims which were submitted up to that point in time during the Claim Determination Period.

B. The benefits of the Secondary Plan will be reduced when the sum of the benefits that would be payable for the Allowable Expenses under the Secondary Plan in the absence of this COB provision and the benefits that would be payable for the Allowable Expenses under the other Plans, in the absence of provisions with a purpose like that of this COB provision, whether or not claim is made, exceeds those Allowable Expenses in a Claim Determination Period. In that case, the benefits of the Secondary Plan will be reduced so that they and the benefits payable under the other plans do not total more than those Allowable Expenses.

(1) When the benefits of this Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of this Plan.

(2) Paragraph B(1) above may be omitted if the plan provides only one benefit, or may be altered to suit the coverage provided.

Section 7. Miscellaneous Provisions.

A. Reasonable Cash Values of Services

A Secondary Plan which provides benefits in the form of services may recover the reasonable cash value of providing the services from the Primary Plan, to the extent that benefits for the services are covered by the Primary Plan and have not already been paid or provided by the Primary Plan. Nothing in this provision shall be interpreted to require a plan to reimburse a covered person in cash for the value of services provided by a plan which provides benefits in the form of services.

B. Excess and Other Nonconforming Provisions

(1) Some plans have order of benefit determination rules not consistent with this regulation which declare that the plan's coverage is "excess" to all others, or "always secondary." This occurs because certain plans may not be subject to insurance regulation, or because some group contracts have not yet been conformed with this regulation pursuant to Section 2.

(2) A plan with order of benefit determination rules which comply with this regulation (Complying Plan) may coordinate its benefits with a plan which is "excess" or "always secondary" or which uses order of benefit determination rules which are inconsistent with those contained in this regulation (Noncomplying Plan) on the following basis:

(a) If the Complying Plan is the Primary Plan, it shall pay or provide its benefits on a primary basis;

(b) If the Complying Plan is the Secondary Plan, it shall, nevertheless, pay or provide its benefits first, but the amount of the benefits payable shall be determined as if the Complying Plan were the Secondary Plan. In such a situation, such payment shall be the limit of the Complying Plan's liability; and

(c) If the Noncomplying Plan does not provide the information needed by the Complying Plan to determine its benefits within a reasonable time after it is requested to do so, the Complying Plan shall assume that the benefits of the Noncomplying Plan are identical to its own, and shall pay its benefits accordingly. However, the Complying Plan must adjust any payments it makes based on such assumption whenever information becomes available as to the actual benefits of the Noncomplying Plan.

(3) If the Noncomplying Plan reduces its benefits so that the employee, subscriber, or member receives less in benefits than he or she would have received had the Complying Plan paid or provided its benefits as the Secondary Plan and the Noncomplying Plan paid or provided its benefits as the Primary Plan, and governing State law allows the right of subrogation set forth below, then the Complying Plan shall advance to or on behalf of the employee, subscriber or member an amount equal to such difference.

However, in no event shall the Complying Plan advance more than the Complying Plan would have paid had it been the Primary Plan less any amount it previously paid. In consideration of such advance, the Complying Plan shall be subrogated to all rights of the employee, subscriber or member against the Noncomplying Plan. Such advance by the Complying Plan shall also be without prejudice to any claim it may have against the Noncomplying Plan in the absence of such subrogation.

C. Allowable Expense. A term such as "usual and customary," "usual and prevailing," or "reasonable and customary," may be substituted for the term "necessary, reasonable and customary." Terms such as "medical care" or "dental care" may be substituted for "health care" to describe the coverages to which the COB provisions apply.

D. Subrogation. The COB concept clearly differs from that of subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.

Section 8. Effective Date; Existing Contracts.

A. This regulation is applicable to every group contract which provides health care benefits and which is issued on or after the effective date of this regulation, which shall be ninety (90) days after final publication in the State Register.

B. A group contract which provides health care benefits and was issued before the effective date of this regulation shall be brought into compliance with this regulation by the later of:

(1) The next anniversary date or renewal date of the group contract; or

(2) The expiration of any applicable collectively bargained contract pursuant to which it was written.

APPENDIX A. MODEL COB PROVISIONS

COORDINATION OF THE GROUP CONTRACT'S BENEFITS WITH OTHER BENEFITS

I. APPLICABILITY

A. This Coordination of Benefits ("COB") provision applies to This Plan when an employee or the employee's covered dependent has health care coverage under more than one Plan. "Plan" and "This Plan" are defined below.

B. If this COB provision applies, the order of benefit determination rules should be looked at first. Those rules determine whether the benefits of This Plan are determined before or after those of another plan. The benefits of This Plan:

(1) Shall not be reduced when, under the order of benefit determination rules, This Plan determines its benefits before another plan; but

(2) May be reduced when, under the order of benefits determination rules, another plan determines its benefits first. The above reduction is described in Section IV "Effect on the Benefits of This Plan."

II. DEFINITIONS

A. "Plan" is any of these which provides benefits or services for, or because of, medical or dental care or treatment:

(1) Group insurance coverage, whether insured or uninsured. This includes prepayment, group practice or individual practice coverage.

(2) Coverage under a governmental plan, or coverage required or provided by law. This does not include a state plan under Medicaid (Title XIX, Grants to States for Medical Assistance Programs, of the United States Social Security Act, as amended from time to time).

Each contract or other arrangement for coverage under (1) or (2) is a separate plan. Also, if an arrangement has two parts and COB rules apply only to one of the two, each of the parts is a separate plan.

B. "This Plan" is the part of the group contract that provides benefits for health care expenses.

C. "Primary Plan/Secondary Plan": The order of benefit determination rules state whether This Plan is a Primary Plan or Secondary Plan as to another plan covering the person.

When This Plan is a Primary Plan, its benefits are determined before those of the other plan and without considering the other plan's benefits.

When This Plan is a Secondary Plan, its benefits are determined after those of the other plan and may be reduced because of the other plan's benefits.

When there are more than two plans covering the person, This Plan may be a Primary Plan as to one or more other plans, and may be a Secondary Plan as to a different plan or plans.

D. "Allowable Expense" means a necessary, reasonable and customary item of expense for health care, when the item of expense is covered at least in part by one or more plans covering the person for whom the claim is made.

The difference between the cost of a private hospital room and the cost of a semi-private hospital room is not considered an Allowable Expense under the above definition unless the patient's stay in a private hospital room is medically necessary either in terms of generally accepted medical practice, or as specifically defined in the plan.

When a plan provides benefits in the form of services, the reasonable cash value of each service rendered will be considered both an Allowable Expense and a benefit paid.

NOTE: When benefits are reduced under a Primary Plan because a covered person does not comply with the plan provisions, the amount of such reduction will not be considered an Allowable Expense. Examples of such provisions are those related to second surgical opinions, precertification of admissions or services, and preferred provider arrangements.

E. "Claim Determination Period" means a calendar year. However, it does not include any part of a year during which a person has no coverage under This Plan, or any part of a year before the date this COB provision or a similar provision takes effect.

III. ORDER OF BENEFIT DETERMINATION RULES

A. General. When there is a basis for a claim under This Plan and another plan, This Plan is a Secondary Plan which has its benefits determined after those of the other plan, unless:

(1) The other plan has rules coordinating its benefits with those of This Plan; and

(2) Both those rules and This Plan's rules, in Subsection B below, require that This Plan's benefits be determined before those of the other plan.

B. Rules. This Plan determines its order of benefits using the first of the following rules which applies:

(1) Non-Dependent/Dependent. The benefits of the plan which covers the person as an employee, member or subscriber (that is, other than as a dependent) are determined before those of the plan which covers the person as a dependent.

(2) Dependent Child/Parents Not Separated or Divorced. Except as stated in Paragraph (B)(3) below, when This Plan and another plan cover the same child as a dependent of different persons, called "parents":

(a) The benefits of the plan of the parent whose birthday falls earlier in a year are determined before those of the plan of the parent whose birthday falls later in that year; but

(b) If both parents have the same birthday, the benefits of the plan which covered a parent longer are determined before those of the plan which covered the other parent for a shorter period of time.

However, if the other plan does not have the rule described in (a) immediately above, but instead has a rule based upon the gender of the parent, and if, as a result, the plans do not agree on the order of benefits, the rule in the other plan will determine the order of benefits.

(3) Dependent Child/Separated or Divorced Parents. If two or more plans cover a person as a dependent child of divorced or separated parents, benefits for the child are determined in this order:

(a) First, the plan of the parent with custody of the child;

(b) Then, the plan of the spouse of the parent with the custody of the child; and

(c) Finally, the plan of the parent not having custody of the child.

However, if the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child, and the entity obligated to pay or provide the benefits of the plan of that parent has actual knowledge of those terms, the benefits of that plan are determined first. The plan of the other parent shall be the Secondary Plan. This paragraph does not apply with respect to any Claim Determination Period or Plan year during which any benefits are actually paid or provided before the entity has that actual knowledge.

(4) Joint Custody. If the specific terms of a court decree state that the parents shall share joint custody, without stating that one of the parents is responsible for the health care expenses of the child, the plans covering the child shall follow the order of benefit determination rules outlined in Paragraph III B(2).

(5) Active/Inactive Employee. The benefits of a plan which covers a person as an employee who is neither laid off nor retired (or as that employee's dependent) are determined before those of a plan which covers that person as a laid off or retired employee (or as that employee's dependent). If the other plan does not have this rule, and if, as a result, the plans do not agree on the order of benefits, this Rule (5) is ignored.

(6) Longer/Shorter Length of Coverage. If none of the above rules determines the order of benefits, the benefits of the plan which covered an employee, member or subscriber longer are determined before those of the Plan which covered that person for the shorter term.

IV. EFFECT ON THE BENEFITS OF THIS PLAN

A. When This Section Applies. This Section IV applies when, in accordance with Section III "Order of Benefit Determination Rules," This Plan is a Secondary Plan as to one or more other plans. In that event the benefits of This Plan may be reduced under this section. Such other plan or plans are referred to as "the other plans" in B immediately below.

B. Reduction in this Plan's Benefits. The benefits of This Plan will be reduced when the sum of:

(1) The benefits that would be payable for the Allowable Expense under This Plan in the absence of this COB provision; and

(2) The benefits that would be payable for the Allowable Expenses under the other plans, in the absence of provisions with a purpose like that of this COB provision, whether or not claim is made, exceeds those Allowable Expenses in a Claim Determination Period. In that case, the benefits of This Plan will be reduced so that they and the benefits payable under the other plans do not total more than those Allowable Expenses.

When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan.

V. RIGHT TO RECEIVE AND RELEASE NEEDED INFORMATION.

Certain facts are needed to apply these COB rules. [Insurer] has the right to decide which facts it needs. It may get needed facts from or give them to any other organization or person. [Insurer] need not tell, or get the consent of, any person to do this. Each person claiming benefits under This Plan must give [Insurer] any facts it needs to pay the claim.

VI. FACILITY OF PAYMENT

A payment made under another plan may include an amount which should have been paid under This Plan. If it does, [Insurer] may pay that amount to the organization which made that payment. That amount will then be treated as though it were a benefit paid under This Plan. [Insurer] will not have to pay that amount again. The term "payment made" includes providing benefits in the form of services, in which case "payment made" means reasonable cash value of the benefits provided in the form of services.

VII. RIGHT OF RECOVERY

If the amount of the payments made by [Insurer] is more than it should have paid under this COB provision, it may recover the excess from one or more of:

A. The persons it has paid or for whom it has paid;

B. Insurance companies; or

C. Other organizations.

The "amount of the payments made" includes the reasonable cash value of any benefits provided in the form of services.

HISTORY: Added by State Register Volume 14, Issue No. 2, eff February 23, 1990.

69-44. LONG TERM CARE INSURANCE.

Section 1. Purpose

The purpose of this regulation is to implement S.C. Code Section 38-72-10 et seq., to promote the public interest, to promote the availability of long term care insurance coverage, to protect applicants for long term care insurance, as defined, from unfair or deceptive sales or enrollment practices, to facilitate public understanding and comparison of long term care insurance coverages, and to facilitate flexibility and innovation in the development of long term care insurance.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 2. Authority

This regulation is issued pursuant to the authority vested in the Director under S.C. Code Sections 38-72-60 and 38-72-70.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 3. Applicability and Scope

Except as otherwise specifically provided, this regulation applies to all long term care insurance policies, including qualified long term care contracts and life insurance policies that accelerate benefits for long term care delivered or issued for delivery in this state on or after the effective date by insurers; fraternal benefit societies; nonprofit health, hospital and medical service corporations; prepaid health plans; health maintenance organizations and all similar organizations. Certain provisions of this regulation apply only to qualified long term care insurance contracts as noted. Additionally, this regulation is intended to apply to policies having indemnity benefits that are triggered by activities of daily living and sold as disability income insurance, if:

1. The benefits of the disability income policy are dependent upon or vary in amount based on the receipt of long term care services;

2. The disability income policy is advertised, marketed or offered as insurance for long term care services; or

3. Benefits under the policy may commence after the policyholder has reached Social Security's normal retirement age unless benefits are designed to replace lost income or pay for specific expenses other than long term care services.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 4. Definitions

For the purpose of this regulation, the following definitions apply.

A. "Applicant" means:

(1) In the case of an individual long term care insurance policy, the person who seeks to contract for benefits; and

(2) In the case of a group long term care insurance policy, the proposed certificate holder.

B. "Certificate" means, for the purpose of this regulation, any certificate issued under a group long term care insurance policy, which policy has been delivered or issued for delivery in this state.

C. "Director" means the person who is appointed by the Governor upon the advice and consent of the Senate and who is responsible for the operation and management of the Department of Insurance, including all of its divisions. The director may appoint or designate the person or persons who shall serve at the pleasure of the director to carry out the objectives or duties of the department as provided by law. Furthermore, the director may bestow upon his designee or deputy director any duty or function required of him by law in managing or supervising the insurance department.

D.(1) "Exceptional increase" means only those increases filed by an insurer as exceptional for which the Director determines the need for the premium rate increase is justified:

(a) Due to changes in laws or regulations applicable to long term care coverage in this state; or

(b) Due to increased and unexpected utilization that affects the majority of insurers of similar products.

(2) Except as provided in Section 20 of this Regulation, exceptional increases are subject to the same requirements as other premium rate schedule increases.

(3) The Director may request a review by an independent actuary or a professional actuarial body of the basis for a request that an increase be considered an exceptional increase.

(4) The Director, in determining that the necessary basis for an exceptional increase exists, shall also determine any potential offsets to higher claims costs.

E. "Group long term care insurance" means a long term care insurance policy which is delivered or issued for delivery in this State and issued to:

(1) one or more employers or labor organizations, or to a trust or to the trustees of a fund established by one or more employers or labor organizations or a combination thereof, for employees or former employees or a combination thereof, or for members or former members or a combination thereof of the labor organizations; or

(2) any professional, trade, or occupational association for its members or former or retired members or combination thereof if such association:

(a) is composed of individuals all of whom are or were actively engaged in the same profession, trade, or occupation; and

(b) has been maintained in good faith for purposes other than obtaining insurance; or

(3) an association or to a trust or to the trustee of a fund established, created, or maintained for the benefit of members of one or more associations. Prior to advertising, marketing, or offering the policy within this State, the association or the insurer of the association shall file evidence with the department that the association has at the outset a minimum of one hundred persons and has been organized and maintained in good faith for purposes other than that of obtaining insurance, has been in active existence for at least one year, and has a constitution and bylaws which provide that the association holds regular meetings not less than annually to further the purposes of its members, except for credit unions, the association collects dues or solicits contributions from members, and the members have voting privileges and representation on the governing board and committees. Ninety days after the filing, the association is considered to have satisfied the organizational requirements unless the director or his designee makes a finding that the association does not satisfy those organizational requirements;

(4) a group other than as described in items (E)(1), (E)(2), and (E)(3), subject to a finding by the director or his designee that the issuance of the group policy is not contrary to the best interest of the public, the issuance of the group policy would result in economies of acquisition or administration, and the benefits are reasonable in relation to the premiums charged.

F. "Incidental," as used in Section 20(J) of this Regulation, means that the value of the long term care benefits provided is less than ten percent (10%) of the total value of the benefits provided over the life of the policy. These values shall be measured as of the date of issue.

G . "Long-term care insurance" means an insurance policy or a rider advertised, marketed, offered, or designed to provide coverage for not less than twelve consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital. The term includes group and individual annuities and life insurance policies or riders that provide directly or that supplement long term care insurance. It also includes a policy or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. The term also includes qualified long term care contracts. Long term care insurance may be issued by insurers, fraternal benefit societies, nonprofit health, hospital, and medical service corporations, prepaid health plans, health maintenance organizations, or a similar organization to the extent they otherwise are authorized to issue life or health insurance. Long term care insurance does not include an insurance policy offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, this term does not include life insurance policies that accelerate the death benefit specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention, or permanent institutional confinement, and that provide the option of a lump-sum payment for those benefits and where neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long term care. Notwithstanding another provision of this regulation, a product advertised, marketed, or offered as long term care insurance is subject to the provisions of this regulation.

H. "Partnership policies or Partnership program" means those long term care insurance policies that meet the requirements of the Federal Long Term Care Partnership Program as authorized under the Deficit Reduction Act of 2005, Section 6021.

I. "Policy" means any policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in this State by an insurer, fraternal benefit society, nonprofit health, hospital, or medical service corporation, prepaid health plan, health maintenance organization, or any similar organization.

J. "Qualified actuary" means a member in good standing of the American Academy of Actuaries.

K.(1) "Qualified long term care insurance contract" or "federally tax-qualified long term care insurance contract" means an individual or a group insurance contract that meets the requirements of Section 7702B(b) of the Internal Revenue Code of 1986, as amended, as follows:

(a) the only insurance protection provided under the contract is coverage of qualified long term care services. A contract does not fail to satisfy the requirements of this item by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate;

(b) the contract does not pay or reimburse expenses incurred for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act, as amended, or would be so reimbursable but for the application of a deductible or coinsurance amount. The requirements of this sub item do not apply to expenses that are reimbursable under Title XVIII of the Social Security Act only as a secondary payor. A contract does not fail to satisfy the requirements of this subitem by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which payments relate;

(c) the contract is guaranteed renewable, within the meaning of Section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as amended;

(d) the contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed except as provided in subsubitem (e);

(e) all refunds of premiums, and all policyholder dividends or similar amounts, under the contract are to be applied as a reduction in future premiums or to increase future benefits, except that a refund if death occurs of the insured or a complete surrender or cancellation of the contract cannot exceed the aggregate premiums paid under the contract; and

(f) the contract meets the consumer protection provisions provided in Section 7702B(g) of the Internal Revenue Code of 1986, as amended.

(2) "Qualified long term care insurance contract" or "federally tax-qualified long term care insurance contract" also means the portion of a life insurance contract that provides long term care insurance coverage by rider or as part of the contract and that satisfies the requirements of Section 7702B(b) and (e) of the Internal Revenue Code of 1986, as amended.

L. "Similar policy forms" means all of the long term care insurance policies and certificates issued by an insurer in the same long term care benefit classification as the policy form being considered. Certificates of groups that meet the definition in Section 4E(1) of this Regulation are not considered similar to certificates or policies otherwise issued as long term care insurance, but are similar to other comparable certificates with the same long term care benefit classifications. For purposes of determining similar policy forms, long term care benefit classifications are defined as follows: institutional long term care benefits only, non-institutional long term care benefits only, or comprehensive long term care benefits.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 5. Policy Definitions.

No long term care insurance policy delivered or issued for delivery in this state shall use the terms set forth below, unless the terms are defined in the policy and the definitions satisfy the following requirements:

A. "Activities of daily living" means at least bathing, continence, dressing, eating, toileting and transferring.

B. "Acute condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain his or her health status.

C. "Adult day care" means a program for six (6) or more individuals, of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or other disabled adults who can benefit from care in a group setting outside the home.

D. "Bathing" means washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub or shower.

E. "Cognitive impairment" means a deficiency in a person's short or long term memory, orientation as to person, place and time, deductive or abstract reasoning, or judgment as it relates to safety awareness.

F. "Continence" means the ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag).

G. "Dressing" means putting on and taking off all items of clothing and any necessary braces, fasteners or artificial limbs.

H. "Eating" means feeding oneself by getting food into the body from a receptacle (such as a plate, cup or table) or by a feeding tube or intravenously.

I. "Hands-on assistance" means physical assistance (minimal, moderate or maximal) without which the individual would not be able to perform the activity of daily living.

J. "Home health care services" means medical and nonmedical services, provided to ill, disabled or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living and respite care services.

K. "Medicare" means "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended," or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof," or words of similar import.

L "Mental or nervous disorder" shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

M. "Personal care" means the provision of hands-on services to assist an individual with activities of daily living.

N. "Skilled nursing care," "personal care," "home care," "specialized care," "assisted living care" and other services shall be defined in relation to the level of skill required, the nature of the care and the setting in which care must be delivered.

O. "Toileting" means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.

P. "Transferring" means moving into or out of a bed, chair or wheelchair.

Q. All providers of services, including but not limited to "skilled nursing facility," "extended care facility," "convalescent nursing home," "personal care facility," "specialized care providers," "assisted living facility," and "home care agency" shall be defined in relation to the services and facilities required to be available and the licensure, certification, registration or degree status of those providing or supervising the services. When the definition requires that the provider be appropriately licensed, certified or registered, it shall also state what requirements a provider must meet in lieu of licensure, certification or registration when the state in which the service is to be furnished does not require a provider of these services to be licensed, certified or registered, or when the state licenses, certifies or registers the provider of services under another name.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 6. Policy Practices and Provisions

A. Renewability. The terms "guaranteed renewable" and "noncancellable" shall not be used in any individual long term care insurance policy without further explanatory language in accordance with the disclosure requirements of Section 9 of this Regulation.

(1) A policy issued to an individual shall not contain renewal provisions other than "guaranteed renewable" or "noncancellable."

(2) The term "guaranteed renewable" may be used only when the insured has the right to continue the long term care insurance in force by the timely payment of premiums and when the insurer has no unilateral right to make any change in any provision of the policy or rider while the insurance is in force, and cannot decline to renew, except that rates may be revised by the insurer on a class basis.

(3) The term "noncancellable" may be used only when the insured has the right to continue the long term care insurance in force by the timely payment of premiums during which period the insurer has no right to unilaterally make any change in any provision of the insurance or in the premium rate.

(4) The term "level premium" may only be used when the insurer does not have the right to change the premium.

(5) In addition to the other requirements of this Subsection, a qualified long term care insurance contract shall be guaranteed renewable, within the meaning of Section 7702B (b)(1)(C) of the Internal Revenue Code of 1986, as amended.

B. Limitations and Exclusions. A policy may not be delivered or issued for delivery in this state as long term care insurance if the policy limits or excludes coverage by type of illness, treatment, medical condition or accident, except as follows:

(1) Preexisting conditions or diseases;

(2) Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of Alzheimer's Disease;

(3) Alcoholism and drug addiction;

(4) Illness, treatment or medical condition arising out of:

(a) War or act of war (whether declared or undeclared);

(b) Participation in a felony, riot or insurrection;

(c) Service in the armed forces or units auxiliary thereto;

(d) Suicide (sane or insane), attempted suicide or intentionally self-inflicted injury; or

(e) Aviation (this exclusion applies only to non-fare-paying passengers);

(5) Treatment provided in a government facility (unless otherwise required by law), services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered person's immediate family and services for which no charge is normally made in the absence of insurance;

(6) Expenses for services or items available or paid under another long term care insurance or health insurance policy;

(7) In the case of a qualified long term care insurance contract, expenses for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount;

(8) This Subsection is not intended to prohibit exclusions and limitations by type of provider. However, no long term care issuer may deny a claim because services are provided in a state other than the state of policy issue under the following conditions:

(a) When the state other than the state of policy issue does not have the provider licensing, certification or registration required in the policy, but where the provider satisfies the policy requirements outlined for providers in lieu of licensure, certification or registration; or

(b) When the state other than the state of policy issue licenses, certifies or registers the provider under another name. For purposes of this Subsection, "state of policy issue" means the state in which the individual policy or certificate was originally issued.

(9) This Subsection is not intended to prohibit territorial limitations.

C. Extension of Benefits. Termination of long term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the long term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the long term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

D. Continuation or Conversion.

(1) Group long term care insurance issued in this state on or after the effective date of this Section shall provide covered individuals with a basis for continuation or conversion of coverage.

(2) For the purposes of this Section, "a basis for continuation of coverage" means a policy provision that maintains coverage under the existing group policy when the coverage would otherwise terminate and which is subject only to the continued timely payment of premium when due. Group policies that restrict provision of benefits and services to, or contain incentives to use certain providers or facilities may provide continuation benefits that are substantially equivalent to the benefits of the existing group policy. The Director shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

(3) For the purposes of this Section, "a basis for conversion of coverage" means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy (and any group policy which it replaced), for at least six months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy he or she is covered, without evidence of insurability.

(4) For the purposes of this Section, "converted policy" means an individual policy of long term care insurance providing benefits identical to or benefits determined by the Director to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made. Where the group policy from which conversion is made restricts provision of benefits and services to, or contains incentives to use certain providers or facilities, the Director, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

(5) Written application for the converted policy shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than thirty-one (31) days after termination of coverage under the group policy. The converted policy shall be issued effective on the day following the termination of coverage under the group policy, and shall be renewable annually.

(6) Unless the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy from which conversion is made. Where the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy replaced.

(7) Continuation of coverage or issuance of a converted policy shall be mandatory, except where:

(a) Termination of group coverage resulted from an individual's failure to make any required payment of premium or contribution when due; or

(b) The terminating coverage is replaced not later than thirty-one (31) days after termination, by group coverage effective on the day following the termination of coverage:

(i) Providing benefits identical to or benefits determined by the Director to be substantially equivalent to or in excess of those provided by the terminating coverage; and

(ii) The premium for which is calculated in a manner consistent with the requirements of Paragraph (6) of this Section.

(8) Notwithstanding any other provision of this Section, a converted policy issued to an individual who at the time of conversion is covered by another long term care insurance policy that provides benefits on the basis of incurred expenses, may contain a provision that results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than 100 percent of incurred expenses. The provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.

(9) The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual's coverage under the group policy remained in force and effect.

(10) Notwithstanding any other provision of this Section, an insured individual whose eligibility for group long term care coverage is based upon his or her relationship to another person shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.

(11) For the purposes of this Section a "managed-care plan" is a health care or assisted living arrangement designed to coordinate patient care or control costs through utilization review, case management or use of specific provider networks.

E. Discontinuance and Replacement.

If a group long term care policy is replaced by another group long term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

(1) Shall not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced; and

(2) Shall not vary or otherwise depend on the individual's health or disability status, claim experience or use of long term care services.

F. (1) The premium charged to an insured shall not increase due to either:

(a) The increasing age of the insured at ages beyond sixty-five (65); or

(b) The duration the insured has been covered under the policy.

(2) The purchase of additional coverage shall not be considered a premium rate increase, but for purposes of the calculation required under Section 26 of this Regulation, the portion of the premium attributable to the additional coverage shall be added to and considered part of the initial annual premium.

(3) A reduction in benefits shall not be considered a premium change, but for purpose of the calculation required under Section 26 of this Regulation, the initial annual premium shall be based on the reduced benefits.

G. Electronic Enrollment for Group Policies.

(1) In the case of a group defined in Section 4E(1) of this Regulation, any requirement that a signature of an insured be obtained by an agent or insurer shall be deemed satisfied if:

(a) The consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer. A verification of enrollment information shall be provided to the enrollee;

(b) The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure the accuracy, retention and prompt retrieval of records; and

(c) The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure that the confidentiality of individually identifiable information and "privileged information" pursuant to Sections 501, 505(b), and 507 of the Gramm-Leach-Bliley Act, codified at 15 U.S.C. 6801, 6805(b) and 6807 and Regulation 69-58.

(2) The insurer shall make available, upon request of the Director, records that will demonstrate the insurer's ability to confirm enrollment and coverage amounts.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 7. Unintentional Lapse

Each insurer offering long term care insurance shall, as a protection against unintentional lapse, comply with the following:

A. (1) Notice before lapse or termination. No individual long term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice." The insurer shall notify the insured of the right to change this written designation, no less often than once every two (2) years.

(2) When the policyholder or certificate holder pays premium for a long term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in Subsection A(1) of this Section need not be met until sixty (60) days after the policyholder or certificate holder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

(3) Lapse or termination for nonpayment of premium. No individual long term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty (30) days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to Subsection A(1) of this Section, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first class United States mail, postage prepaid; and notice may not be given until thirty (30) days after a premium is due and unpaid. Notice shall be deemed to have been given as of five (5) days after the date of mailing.

B. Reinstatement. In addition to the requirement in Subsection A of this Section, a long term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five (5) months after termination and shall allow for the collection of past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 8. Required Disclosure Provisions

A. Renewability. Individual long term care insurance policies shall contain a renewability provision.

(1) The provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state that the coverage is guaranteed renewable or noncancellable. This provision shall not apply to policies that do not contain a renewability provision, and under which the right to nonrenew is reserved solely to the policyholder.

(2) A long term care insurance policy or certificate, other than one where the insurer does not have the right to change the premium, shall include a statement that premium rates may change.

B. Riders and Endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long term care insurance policy, all riders or endorsements added to an individual long term care insurance policy after date of issue or at reinstatement or renewal that reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy, rider or endorsement.

C. Payment of Benefits. A long term care insurance policy that provides for the payment of benefits based on standards described as "usual and customary," "reasonable and customary" or words of similar import shall include a definition of these terms and an explanation of the terms in its accompanying outline of coverage.

D. Limitations. If a long term care insurance policy or certificate contains any limitations with respect to preexisting conditions, the limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled as "Preexisting Condition Limitations."

E. Other Limitations or Conditions on Eligibility for Benefits. A long term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in S.C. Code Section 38-72-60(D)(2) shall set forth a description of the limitations or conditions, including any required number of days of confinement, in a separate paragraph of the policy or certificate and shall label such paragraph "Limitations or Conditions on Eligibility for Benefits."

F. Disclosure of Tax Consequences. With regard to life insurance policies that provide an accelerated benefit for long term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. This Subsection shall not apply to qualified long term care insurance contracts.

G. Benefit Triggers. Activities of daily living and cognitive impairment shall be used to measure an insured's need for long term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled "Eligibility for the Payment of Benefits." Any additional benefit triggers shall also be explained in this Section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified.

H. A qualified long term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in Section 31(E)(3) of this Regulation that the policy is intended to be a qualified long term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

I. A nonqualified long term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in Section 31(E)(3) of this Regulation that the policy is not intended to be a qualified long term care insurance contract.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 9. Required Disclosure of Rating Practices to Consumers

A. This Section shall apply as follows:

(1) Except as provided in Paragraph (2) of this Subsection, this Section applies to any long term care policy or certificate issued in this state on or after 6 months from the effective date of this Regulation.

(2) For certificates issued on or after the effective date of this amended regulation under a group long term care insurance policy as defined in Section 4E(1) of this Regulation which policy was in force at the time this amended regulation became effective, the provisions of this Section shall apply on the policy anniversary following one year from the effective date of this Regulation.

B. Other than policies for which no applicable premium rate or rate schedule increases can be made, insurers shall provide all of the information listed in this Subsection to the applicant at the time of application or enrollment, unless the method of application does not allow for delivery at that time. In such a case, an insurer shall provide all of the information listed in this Section to the applicant no later than at the time of delivery of the policy or certificate.

(1) A statement that the policy may be subject to rate increases in the future;

(2) An explanation of potential future premium rate revisions, and the policyholder's or certificate holder's option in the event of a premium rate revision;

(3) The premium rate or rate schedules applicable to the applicant that will be in effect until a request is made for an increase;

(4) A general explanation for applying premium rate or rate schedule adjustments that shall include:

(a) A description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.); and

(b) The right to a revised premium rate or rate schedule as provided in Paragraph (3) if the premium rate or rate schedule is changed;

(5) (a)Information regarding each premium rate increase on this policy form or similar policy forms over the past ten (10) years for this state or any other state that, at a minimum, identifies:

(i) The policy forms for which premium rates have been increased;

(ii) The calendar years when the form was available for purchase; and

(iii) The amount or percent of each increase. The percentage may be expressed as a percentage of the premium rate prior to the increase, and may also be expressed as minimum and maximum percentages if the rate increase is variable by rating characteristics.

(b) The insurer may, in a fair manner, provide additional explanatory information related to the rate increases.

(c) An insurer shall have the right to exclude from the disclosure premium rate increases that only apply to blocks of business acquired from other nonaffiliated insurers or the long term care policies acquired from other nonaffiliated insurers when those increases occurred prior to the acquisition.

(d) If an acquiring insurer files for a rate increase on a long term care policy form acquired from nonaffiliated insurers or a block of policy forms acquired from nonaffiliated insurers on or before the later of the effective date of this Section or the end of a twenty-four-month period following the acquisition of the block or policies, the acquiring insurer may exclude that rate increase from the disclosure. However, the nonaffiliated selling company shall include the disclosure of that rate increase in accordance with Subparagraph (a) of this paragraph.

(e) If the acquiring insurer in Subparagraph (d) above files for a subsequent rate increase, even within the twenty-four-month period, on the same policy form acquired from nonaffiliated insurers or block of policy forms acquired from nonaffiliated insurers referenced in Subparagraph (d), the acquiring insurer shall make all disclosures required by Paragraph (5), including disclosure of the earlier rate increase referenced in Subparagraph (d).

C. An applicant shall sign an acknowledgement at the time of application, unless the method of application does not allow for signature at that time, that the insurer made the disclosure required under Subsection B(1) and (5). If due to the method of application the applicant cannot sign an acknowledgement at the time of application, the applicant shall sign no later than at the time of delivery of the policy or certificate.

D. An insurer shall use the forms in Appendices B and F to comply with the requirements of Subsections B and C of this Section.

E. An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least forty-five (45) days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by Subsection B when the rate increase is implemented.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 10. Initial Filing Requirements

A. This Section applies to any long term care policy issued in this state on or after six months from the effective date of this Regulation.

B. An insurer shall provide the information listed in this Subsection to the Director thirty (30) days prior to making a long term care insurance form available for sale.

(1) A copy of the disclosure documents required in Section 9 of this Regulation; and

(2) An actuarial certification consisting of at least the following:

(a) A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

(b) A statement that the policy design and coverage provided have been reviewed and taken into consideration;

(c) A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration;

(d) A complete description of the basis for contract reserves that are anticipated to be held under the form, to include:

(i) Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held;

(ii) A statement that the assumptions used for reserves contain reasonable margins for adverse experience;

(iii) A statement that the net valuation premium for renewal years does not increase (except for attained-age rating where permitted); and

(iv) A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations where this does not occur;

(I) An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship;

(II) If the gross premiums for certain age groups appear to be inconsistent with this requirement, the Director may request a demonstration under Subsection C based on a standard age distribution; and

(e)(i) A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or

(ii) A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences.

C. (1) The Director may request an actuarial demonstration that benefits are reasonable in relation to premiums. The actuarial demonstration shall include either premium and claim experience on similar policy forms, adjusted for any premium or benefit differences, relevant and credible data from other studies, or both.

(2) In the event the Director asks for additional information under this provision, the period in Subsection B of this Section does not include the period during which the insurer is preparing the requested information.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 11. Prohibition Against Post-Claims Underwriting

A. All applications for long term care insurance policies or certificates except those that are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the health condition of the applicant.

B. (1)If an application for long term care insurance contains a question that asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.

(2) If the medications listed in the application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.

C. Except for policies or certificates which are guaranteed issue:

(1) The following language shall be set out conspicuously and in close conjunction with the applicant's signature block on an application for a long term care insurance policy or certificate:

Caution: If your answers on this application are incorrect or untrue, the [company] has the right to deny benefits or rescind your policy.

(2) The following language, or language substantially similar to the following, shall be set out conspicuously on the long term care insurance policy or certificate at the time of delivery:

Caution: The issuance of this long term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

(3) Prior to issuance of a long term care policy or certificate to an applicant age eighty (80) or older, the insurer shall obtain one of the following:

(a) A report of a physical examination;

(b) An assessment of functional capacity;

(c) An attending physician's statement; or

(d) Copies of medical records.

D. A copy of the completed application or enrollment form (whichever is applicable) shall be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.

E. Every insurer or other entity selling or issuing long term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those that the insured voluntarily effectuated and shall annually furnish this information to the insurance Director in the format prescribed by the National Association of Insurance Commissioners in Appendix A.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 12. Minimum Standards for Home Health and Community Care Benefits in Long Term Care Insurance Policies

A. A long term care insurance policy or certificate shall not, if it provides benefits for home health care or community care services, limit or exclude benefits:

(1) By requiring that the insured or claimant would need care in a skilled nursing facility if home health care services were not provided;

(2) By requiring that the insured or claimant first or simultaneously receive nursing or therapeutic services, or both, in a home, community or institutional setting before home health care services are covered;

(3) By limiting eligible services to services provided by registered nurses or licensed practical nurses;

(4) By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of his or her licensure or certification;

(5) By excluding coverage for personal care services provided by a home health aide;

(6) By requiring that the provision of home health care services be at a level of certification or licensure greater than that required by the eligible service;

(7) By requiring that the insured or claimant have an acute condition before home health care services are covered;

(8) By limiting benefits to services provided by Medicare-certified agencies or providers; or

(9) By excluding coverage for adult day care services.

B. A long term care insurance policy or certificate, if it provides for home health or community care services, shall provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year's coverage available for nursing home benefits under the policy or certificate, at the time covered home health or community care services are being received. This requirement shall not apply to policies or certificates issued to residents of continuing care retirement communities.

C. Home health care coverage may be applied to the nonhome health care benefits provided in the policy or certificate when determining maximum coverage under the terms of the policy or certificate.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 13. Requirement to Offer Inflation Protection

A. No insurer may offer a long term care insurance policy unless the insurer also offers to the policyholder in addition to any other inflation protection the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long term care services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:

(1) Increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent (5%);

(2) Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit shall be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent (5%) for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made;

(3) Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.

B. Where the policy is issued to a group, the required offer in Subsection A above shall be made to the group policyholder; except, if the policy is issued to a group as defined in Section 4E(4) of this Regulation to a continuing care retirement community, the offering shall be made to each proposed certificate holder.

C. The offer in Subsection A in this Section above shall not be required of life insurance policies or riders containing accelerated long term care benefits.

D. (1)Insurers shall include the following information in or with the outline of coverage:

(a) A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a policy that does not increase benefits. The graphic comparison shall show benefit levels over at least a twenty (20) year period.

(b) Any expected premium increases or additional premiums to pay for automatic or optional benefit increases.

(2) An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure.

E. Inflation protection benefit increases under a policy which contains these benefits shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.

F. An offer of inflation protection that provides for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. The offer shall disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant.

G. (1) Inflation protection as provided in Subsection A(1) of this Section shall be included in a long term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this Subsection. The rejection may be either in the application or on a separate form.

(2) The rejection shall be considered a part of the application and shall state: I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans______, and I reject inflation protection.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 14. Requirements for Application Forms and Replacement Coverage

A. Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long term care insurance policy or certificate in force or whether a long term care policy or certificate is intended to replace any other accident and sickness or long term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent, except where the coverage is sold without an agent, containing the questions may be used. With regard to a replacement policy issued to a group as defined in Section 4E(1) of this Regulation, the following questions may be modified only to the extent necessary to elicit information about health or long term care insurance policies other than the group policy being replaced, provided that the certificate holder has been notified of the replacement.

(1) Do you have another long term care insurance policy or certificate in force (including health care service contract, health maintenance organization contract)?

(2) Did you have another long term care insurance policy or certificate in force during the last twelve (12) months?

(a) If so, with which company?

(b) If that policy lapsed, when did it lapse?

(3) Are you covered by Medicaid?

(4) Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

B. Agents shall list any other health insurance policies they have sold to the applicant.

(1) List policies sold that are still in force.

(2) List policies sold in the past five (5) years that are no longer in force.

C. Solicitations Other than Direct Response. Upon determining that a sale will involve replacement, an insurer; other than an insurer using direct response solicitation methods, or its agent; shall furnish the applicant, prior to issuance or delivery of the individual long term care insurance policy, a notice regarding replacement of accident and sickness or long term care coverage. One copy of the notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE

[Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long term care insurance and replace it with an individual long term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long term care coverage is a wise decision.

______________________________________________________

(Signature of Agent, Broker or Other Representative)

[Typed Name and Address of Agent or Broker]

The above "Notice to Applicant" was delivered to me on:

_________________________________________________________

(Applicant's Signature)

STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:

(Use additional sheets, as necessary.)

I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention:

1. Health conditions that you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3. If you are replacing existing long term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4. If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before your sign it, reread it carefully to be certain that all information has been properly recorded.

D. Direct Response Solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness or long term care coverage to the applicant upon issuance of the policy. The required notice shall be provided in the following manner:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE

[Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long term care insurance and replace it with the long term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.

You should review this new coverage carefully, comparing it with all accident and sickness or long term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long term care coverage is a wise decision.

1. Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. Your insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3. If you are replacing existing long term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.

4. [To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical history has been left out of the application.

E. Where replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the insurer, name of the insured and policy number or address including zip code. Notice shall be made within five (5) working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.

F. Life Insurance policies that accelerate benefits for long term care shall comply with this Section if the policy being replaced is a long term care insurance policy. If the policy being replaced is a life insurance policy, the insurer shall comply with the replacement requirements of Regulation 69-12.1. If a life insurance policy that accelerates benefits for long term care is replaced by another such policy, the replacing insurer shall comply with the long term care replacement requirements.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 15. Reporting Requirements

A. Every insurer shall maintain records for each agent of that agent's amount of replacement sales as a percent of the agent's total annual sales and the amount of lapses of long term care insurance policies sold by the agent as a percent of the agent's total annual sales.

B. Every insurer shall report annually by June 30 the ten percent (10%) of its agents with the greatest percentages of lapses and replacements as measured by Subsection A above. (Appendix G)

C. Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely agent activities regarding the sale of long term care insurance.

D. Every insurer shall report annually by June 30 the number of lapsed policies as a percent of its total annual sales and as a percent of its total number of policies in force as of the end of the preceding calendar year. (Appendix G)

E. Every insurer shall report annually by June 30 the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year. (Appendix G)

F. Every insurer shall report annually by June 30, for qualified long term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied. (Appendix E).

G. For purposes of this Section:

(1) "Policy" means only long term care insurance;

(2) Subject to Paragraph (3) in this Subsection, "claim" means a request for payment of benefits under an in force policy regardless of whether the benefit claimed is covered under the policy or any terms or conditions of the policy have been met;

(3) "Denied" means the insurer refuses to pay a claim for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition; and

(4) "Report" means on a statewide basis.

H. Reports required under this Section shall be filed with the Director.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 16. Licensing

A producer is not authorized to sell, solicit or negotiate with respect to long term care insurance except as authorized by S.C. Code Section 38-43-10 et seq.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 17. Powers of Director

The Director may, upon written request, waive or grant an exemption to a specific provision or provisions of this regulation with respect to a specific long term care insurance policy or certificate upon a finding that:

A. The modification or suspension would be in the best interest of the insureds;

B. The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and

C. (1) The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long term care; or

(2) The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonably related to the special needs or nature of such a community; or

(3) The modification or suspension is necessary to permit long term care insurance to be sold as part of, or in conjunction with, another insurance product.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 18. Reserve Standards

A. When long term care benefits are provided through the acceleration of benefits under group or individual life policies or riders to such policies, policy reserves for the benefits shall be determined in accordance with S.C. Code Section 38-9-180. Claim reserves shall also be established in the case when the policy or rider is in claim status. Reserves for policies and riders subject to this Subsection should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates. Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial. The calculations may take into account the reduction in life insurance benefits due to the payment of long term care benefits. However, in no event shall the reserves for the long term care benefit and the life insurance benefit be less than the reserves for the life insurance benefit assuming no long term care benefit. In the development and calculation of reserves for policies and riders subject to this Subsection, due regard shall be given to the applicable policy provisions, marketing methods, administrative procedures and all other considerations which have an impact on projected claim costs, including, but not limited to, the following:

(1) Definition of insured events;

(2) Covered long term care facilities;

(3) Existence of home convalescence care coverage;

(4) Definition of facilities;

(5) Existence or absence of barriers to eligibility;

(6) Premium waiver provision;

(7) Renewability;

(8) Ability to raise premiums;

(9) Marketing method;

(10) Underwriting procedures;

(11) Claims adjustment procedures;

(12) Waiting period;

(13) Maximum benefit;

(14) Availability of eligible facilities;

(15) Margins in claim costs;

(16) Optional nature of benefit;

(17) Delay in eligibility for benefit;

(18) Inflation protection provisions; and

(19) Guaranteed insurability option.

Any applicable valuation morbidity table shall be certified as appropriate as a statutory valuation table by a member of the American Academy of Actuaries.

B. When long term care benefits are provided other than as in Subsection A above, reserves shall be determined in accordance with Regulation 69-7.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 19. Loss Ratio

A. This Section shall apply to all long term care insurance policies or certificates except those covered under Sections 10 and 20.

B. Benefits under long term care insurance policies shall be deemed reasonable in relation to premiums provided the expected loss ratio is at least sixty percent (60%), calculated in a manner which provides for adequate reserving of the long term care insurance risk. In evaluating the expected loss ratio, due consideration shall be given to all relevant factors, including:

(1) Statistical credibility of incurred claims experience and earned premiums;

(2) The period for which rates are computed to provide coverage;

(3) Experienced and projected trends;

(4) Concentration of experience within early policy duration;

(5) Expected claim fluctuation;

(6) Experience refunds, adjustments or dividends;

(7) Renewability features;

(8) All appropriate expense factors;

(9) Interest;

(10) Experimental nature of the coverage;

(11) Policy reserves;

(12) Mix of business by risk classification; and

(13) Product features such as long elimination periods, high deductibles and high maximum limits.

C. Subsection B shall not apply to life insurance policies that accelerate benefits for long term care. A life insurance policy that funds long term care benefits entirely by accelerating the death benefit is considered to provide reasonable benefits in relation to premiums paid, if the policy complies with all of the following provisions:

(1) The interest credited internally to determine cash value accumulations, including long term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long term care set forth in the policy;

(2) The portion of the policy that provides life insurance benefits meets the nonforfeiture requirements of S.C. Code Section 38-63-510 et seq.;

(3) The policy meets the disclosure requirements contained in S.C. Code Section 38-72-10 et seq.;

(4) Any policy illustration that meets the applicable requirements of Regulation 69-40; and

(5) An actuarial memorandum is filed with the insurance department that includes:

(a) A description of the basis on which the long term care rates were determined;

(b) A description of the basis for the reserves;

(c) A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

(d) A description and a table of each actuarial assumption used. For expenses, an insurer must include percent of premium dollars per policy and dollars per unit of benefits, if any;

(e) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

(f) The estimated average annual premium per policy and the average issue age;

(g) A statement as to whether underwriting is performed at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and

(h) A description of the effect of the long term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying life insurance policy, both for active lives and those in long term care claim status.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 20. Premium Rate Schedule Increases

A. This Section shall apply as follows:

(1) Except as provided in Paragraph (2), this Section applies to any long term care policy or certificate issued in this state on or after July 1, 2010.

(2) For certificates issued on or after the effective date of this amended regulation under a group long term care insurance policy as defined in Section 4E(1) of this Regulation, which policy was in force at the time this amended regulation became effective, the provisions of this Section shall apply on the policy anniversary following January 1, 2011.

B. An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the Director at least thirty (30) days prior to the notice to the policyholders and shall include:

(1) Information required under Section 9 of this Regulation;

(2) Certification by a qualified actuary that:

(a) If the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated;

(b) The premium rate filing is in compliance with the provisions of this Section;

(3) An actuarial memorandum justifying the rate schedule change request that includes:

(a) Lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase; and the method and assumptions used in determining the projected values, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale;

(i) Annual values for the five (5) years preceding and the three (3) years following the valuation date shall be provided separately;

(ii) The projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase;

(iii) The projections shall demonstrate compliance with Subsection C; and

(iv) For exceptional increases,

(I) The projected experience should be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and

(II) In the event the Director determines as provided in Section 4A(4) of this Regulation that offsets may exist, the insurer shall use appropriate net projected experience;

(b) Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse;

(c) Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the company have been relied on by the actuary;

(d) A statement that policy design, underwriting and claims adjudication practices have been taken into consideration; and

(e) In the event that it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, the insurer will need to file composite rates reflecting projections of new certificates;

(4) A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the Director; and

(5) Sufficient information for review and approval of the premium rate schedule increase by the Director.

C. All premium rate schedule increases shall be determined in accordance with the following requirements:

(1) Exceptional increases shall provide that seventy percent (70%) of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits;

(2) Premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:

(a) The accumulated value of the initial earned premium times fifty-eight percent (58%);

(b) Eighty-five percent (85%) of the accumulated value of prior premium rate schedule increases on an earned basis;

(c) The present value of future projected initial earned premiums times fifty-eight percent (58%); and

(d) Eighty-five percent (85%) of the present value of future projected premiums not in Subparagraph (c) on an earned basis;

(3) In the event that a policy form has both exceptional and other increases, the values in Paragraph (2)(b) and (d) will also include seventy percent (70%) for exceptional rate increase amounts; and

(4) All present and accumulated values used to determine rate increases shall use the maximum valuation interest rate for contract reserves as specified in Regulation 69-7. The actuary shall disclose as part of the actuarial memorandum the use of any appropriate averages.

D. For each rate increase that is implemented, the insurer shall file for review and approval by the Director updated projections, as defined in Subsection B(3)(a), annually for the next three (3) years and include a comparison of actual results to projected values. The Director may extend the period to greater than three (3) years if actual results are not consistent with projected values from prior projections. For group insurance policies that meet the conditions in Subsection K, the projections required by this Subsection shall be provided to the policyholder in lieu of filing with the Director.

E. If any premium rate in the revised premium rate schedule is greater than 200 percent of the comparable rate in the initial premium schedule, lifetime projections, as defined in Subsection B(3)(a), shall be filed for review and approval by the Director every five (5) years following the end of the required period in Subsection D. For group insurance policies that meet the conditions in Subsection K, the projections required by this Subsection shall be provided to the policyholder in lieu of filing with the Director.

F.(1) If the Director has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in Subsection C, the Director may require the insurer to implement any of the following:

(a) Premium rate schedule adjustments; or

(b) Other measures to reduce the difference between the projected and actual experience.

(2) In determining whether the actual experience adequately matches the projected experience, consideration should be given to Subsection B(3)(e), if applicable.

G. If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file:

(1) A plan, subject to Director approval, for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect; otherwise the Director may impose the condition in Subsection H of this Section; and

(2) The original anticipated lifetime loss ratio, and the premium rate schedule increase that would have been calculated according to Subsection C had the greater of the original anticipated lifetime loss ratio or fifty-eight percent (58%) been used in the calculations described in Subsection C(2)(a) and (c).

H.(1) For a rate increase filing that meets the following criteria, the Director shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the twelve (12) months following each increase to determine if significant adverse lapsation has occurred or is anticipated:

(a) The rate increase is not the first rate increase requested for the specific policy form or forms;

(b) The rate increase is not an exceptional increase; and

(c) The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.

(2) In the event significant adverse lapsation has occurred, is anticipated in the filing or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the Director may determine that a rate spiral exists. Following the determination that a rate spiral exists, the Director may require the insurer to offer, without underwriting, to all in force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates.

(a) The offer shall:

(i) Be subject to the approval of the Director;

(ii) Be based on actuarially sound principles, but not be based on attained age; and

(iii) Provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.

(b) The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:

(i) The maximum rate increase determined based on the combined experience; and

(ii) The maximum rate increase determined based only on the experience of the insureds originally issued the form plus ten percent (10%).

I. If the Director determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long term care insurance, the Director may, in addition to the provisions of Subsection H of this Section, prohibit the insurer from either of the following:

(1) Filing and marketing comparable coverage for a period of up to five (5) years; or

(2) Offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases.

J. Subsections A through I shall not apply to policies for which the long term care benefits provided by the policy are incidental, as defined in Section 4B, if the policy complies with all of the following provisions:

(1) The interest credited internally to determine cash value accumulations, including long term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long term care set forth in the policy;

(2) The portion of the policy that provides insurance benefits other than long term care coverage meets the nonforfeiture requirements as applicable in any of the following:

(a) S.C. Code Section 38-63-510 et seq.;

(b) S.C. Code Section 38-69-210 et seq.; and

(c) Regulation 69-12;

(3) The policy meets the disclosure requirements of S.C. Code Section 38-72-60;

(4) An actuarial memorandum is filed with the insurance department that includes:

(a) A description of the basis on which the long term care rates were determined;

(b) A description of the basis for the reserves;

(c) A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

(d) A description and a table of each actuarial assumption used. For expenses, an insurer must include percent of premium dollars per policy and dollars per unit of benefits, if any;

(e) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

(f) The estimated average annual premium per policy and the average issue age;

(g) A statement as to whether underwriting is performed at the time of application. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and

(h) A description of the effect of the long term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying insurance policy, both for active lives and those in long term care claim status.

K. Subsections F and H shall not apply to group insurance policies as defined in Section 4E(1) of this Regulation where:

(1) The policies insure 250 or more persons and the policyholder has 5,000 or more eligible employees of a single employer; or

(2) The policyholder, and not the certificate holders, pays a material portion of the premium, which shall not be less than twenty percent (20%) of the total premium for the group in the calendar year prior to the year a rate increase is filed.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 21. Filing Requirement

Prior to an insurer or similar organization offering group long term care insurance to a resident of this state pursuant to S.C. Code Section 38-72-50, it shall file with the Director evidence that the group policy or certificate thereunder has been approved by a state having statutory or regulatory long term care insurance requirements substantially similar to those adopted in this state.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 22. Filing Requirements for Advertising

A. Every insurer, health care service plan or other entity providing long term care insurance or benefits in this state shall file a copy of any long term care insurance advertisement intended for use in this state whether through written, radio or television medium to the Director of Insurance of this state for review and approval by the Director to the extent it may be required under state law. In addition, all advertisements shall be retained by the insurer, health care service plan or other entity for at least three (3) years from the date the advertisement was first used.

B. The Director may exempt from these requirements any advertising form or material when, in the Director's opinion, this requirement may not be reasonably applied.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 23. Standards for Marketing

A. Every insurer, health care service plan or other entity marketing long term care insurance coverage in this state, directly or through its producers, shall:

(1) Establish marketing procedures and agent training requirements to assure that:

(a) Any marketing activities, including any comparison of policies, by its agents or other producers will be fair and accurate; and

(b) Excessive insurance is not sold or issued.

(2) Display prominently by type, stamp or other appropriate means, on the first page of the outline of coverage and policy the following: "Notice to buyer: This policy may not cover all of the costs associated with long term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

(3) Provide copies of the disclosure forms required in Section 9C (Appendices B and F) to the applicant.

(4) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long term care insurance already has accident and sickness or long term care insurance and the types and amounts of any such insurance, except that in the case of qualified long term care insurance contracts, an inquiry into whether a prospective applicant or enrollee for long term care insurance has accident and sickness insurance is not required.

(5) Every insurer or entity marketing long term care insurance shall establish auditable procedures for verifying compliance with this Subsection A.

(6) If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program approved by the Director, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificate holder that the program is available and the name, address and telephone number of the program.

(7) For long term care health insurance policies and certificates, use the terms "noncancellable" or "level premium" only when the policy or certificate conforms to Section 6 A(3) of this Regulation.

(8) Provide an explanation of contingent benefit upon lapse provided for in Section 28D(3), and, if applicable, the additional contingent benefit upon lapse provided to policies with fixed or limited premium paying periods in Section 28D(4).

B. In addition to the practices prohibited in Chapter 57 of Title 38, S.C. Code of Laws, the following acts and practices are prohibited:

(1) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert any insurance policy or to take out a policy of insurance with another insurer.

(2) High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

(3) Cold lead advertising. Making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

(4) Misrepresentation. Misrepresenting a material fact in selling or offering to sell a long term care insurance policy.

C.(1) With respect to the obligations set forth in this Subsection, the primary responsibility of an association, as defined in Section 4E(2) of this Regulation, when endorsing or selling long term care insurance shall be to educate its members concerning long term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long term care insurance policies or certificates endorsed or sold by such associations to ensure that members of such associations receive a balanced and complete explanation of the features in the policies or certificates that are being endorsed or sold.

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

(a) The policy and certificate;

(b) A corresponding outline of coverage; and

(c) All advertisements requested by the insurance department.

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

(a) The specific nature and amount of the compensation arrangements (including all fees, commissions, administrative fees and other forms of financial support) that the association receives from endorsement or sale of the policy or certificate to its members; and

(b) A brief description of the process under which the policies and the insurer issuing the policies were selected.

(4) If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose that fact to its members.

(5) The board of directors of associations selling or endorsing long term care insurance policies or certificates shall review and approve the insurance policies as well as the compensation arrangements made with the insurer.

(6) The association shall also:

(a) At the time of the association's decision to endorse, engage the services of a person with expertise in long term care insurance not affiliated with the insurer to conduct an examination of the policies, including its benefits, features, and rates and update the examination thereafter in the event of material change;

(b) Actively monitor the marketing efforts of the insurer and its agents; and

(c) Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding the policies or certificates.

(d) Subparagraphs (a) through (c) shall not apply to qualified long term care insurance contracts.

(7) No group long term care insurance policy or certificate may be issued to an association unless the insurer files with the state insurance department the information required in this Subsection.

(8) The insurer shall not issue a long term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this Subsection.

(9) Failure to comply with the filing and certification requirements of this Section constitutes an unfair trade practice in violation of in Chapter 57 of Title 38, S.C. Code of Laws.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 24. Suitability

A. This Section shall not apply to life insurance policies that accelerate benefits for long term care.

B. Every insurer, health care service plan or other entity marketing long term care insurance (the "issuer") shall:

(1) Develop and use suitability standards to determine whether the purchase or replacement of long term care insurance is appropriate for the needs of the applicant;

(2) Train its agents in the use of its suitability standards; and

(3) Maintain a copy of its suitability standards and make them available for inspection upon request by the Director.

C.(1) To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the following into consideration:

(a) The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;

(b) The applicant's goals or needs with respect to long term care and the advantages and disadvantages of insurance to meet these goals or needs; and

(c) The values, benefits and costs of the applicant's existing insurance, if any, when compared to the values, benefits and costs of the recommended purchase or replacement.

(2) The issuer, and where an agent is involved, the agent shall make reasonable efforts to obtain the information set out in Paragraph (1) above. The efforts shall include presentation to the applicant, at or prior to application, the "Long Term Care Insurance Personal Worksheet." The personal worksheet used by the issuer shall contain, at a minimum, the information in the format contained in Appendix B, in not less than twelve (12) point type. The issuer may request the applicant to provide additional information to comply with its suitability standards. A copy of the issuer's personal worksheet shall be filed with the Director.

(3) A completed personal worksheet shall be returned to the issuer prior to the issuer's consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group long term care insurance to employees and their spouses.

(4) The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet in Appendix B is prohibited.

D. The issuer shall use the suitability standards it has developed pursuant to this Section in determining whether issuing long term care insurance coverage to an applicant is appropriate.

E. Agents shall use the suitability standards developed by the issuer in marketing long term care insurance.

F. At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled "Things You Should Know Before You Buy Long Term Care Insurance" shall be provided. The form shall be in the format contained in Appendix C, in not less than twelve (12) point type.

G. If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter similar to Appendix D. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant's intent. Either the applicant's returned letter or a record of the alternative method of verification shall be made part of the applicant's file.

H. The issuer shall report annually to the Director the total number of applications received from residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 25. Prohibition Against Preexisting Conditions and Probationary Periods in Replacement Policies or Certificates

If a long term care insurance policy or certificate replaces another long term care policy or certificate, the replacing insurer shall waive any time periods applicable to preexisting conditions and probationary periods in the new long term care policy for similar benefits to the extent that similar exclusions have been satisfied under the original policy.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 26. Availability of New Services or Providers

A. An insurer shall notify policyholders of the availability of a new long term policy series that provides coverage for new long term care services or providers material in nature and not previously available through the insurer to the general public. The notice shall be provided within twelve (12) months of the date that the new policy series is made available for sale in this state.

B. Notwithstanding Subsection A above, notification is not required for any policy issued prior to the effective date of this Regulation or to any policyholder or certificate holder who is currently eligible for benefits, within an elimination period or on a claim, or who previously had been in claim status, or who would not be eligible to apply for coverage due to issue age limitations under the new policy. The insurer may require that policyholders meet all eligibility requirements, including underwriting and payment of the required premium to add such new services or providers.

C. The insurer shall make the new coverage available in one of the following ways:

(1) By adding a rider to the existing policy and charging a separate premium for the new rider based on the insured's attained age;

(2) By exchanging the existing policy or certificate for one with an issue age based on the present age of the insured and recognizing past insured status by granting premium credits toward the premiums for the new policy or certificate. The premium credits shall be based on premiums paid or reserves held for the prior policy or certificate;

(3) By exchanging the existing policy or certificate for a new policy or certificate in which consideration for past insured status shall be recognized by setting the premium for the new policy or certificate at the issue age of the policy or certificate being exchanged. The cost for the new policy or certificate may recognize the difference in reserves between the new policy or certificate and the original policy or certificate; or

(4) By an alternative program developed by the insurer that meets the intent of this Section if the program is filed with and approved by the Director.

D. An insurer is not required to notify policyholders of a new proprietary policy series created and filed for use in a limited distribution channel. For purposes of this Subsection, "limited distribution channel" means through a discrete entity, such as a financial institution or brokerage, for which specialized products are available that are not available for sale to the general public. Policyholders that purchased such a new proprietary policy shall be notified when a new long term care policy series that provides coverage for new long term care services or providers material in nature is made available to that limited distribution channel.

E. Policies issued pursuant to this Section shall be considered exchanges and not replacements. These exchanges shall not be subject to Sections 14 and 24, and the reporting requirements of Section 15A through Section 15E of this Regulation.

F. Where the policy is offered through an employer, labor organization, professional, trade or occupational association, the required notification in Subsection A above shall be made to the offering entity. However, if the policy is issued to a group as defined in Section 4E(4) of this Regulation, the notification shall be made to each certificate holder.

G. Nothing in this Section shall prohibit an insurer from offering any policy, rider, certificate or coverage change to any policyholder or certificate holder. However, upon request any policyholder may apply for currently available coverage that includes the new services or providers. The insurer may require that policyholders meet all eligibility requirements, including underwriting and payment of the required premium to add such new services or providers.

H. This Section does not apply to life insurance policies or riders containing accelerated long term care benefits.

I. This Section shall become effective on January 1, 2010.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 27. Right to Reduce Coverage and Lower Premiums

A.(1) Every long term care insurance policy and certificate shall include a provision that allows the policyholder or certificate holder to reduce coverage and lower the policy or certificate premium in at least one of the following ways:

(a) Reducing the maximum benefit; or

(b) Reducing the daily, weekly or monthly benefit amount.

(2) The insurer may also offer other reduction options that are consistent with the policy or certificate design or the carrier's administrative processes.

B. The provision required in Section 27(A)(1) of this Regulation shall include a description of the ways in which coverage may be reduced and the process for requesting and implementing a reduction in coverage.

C. The age to determine the premium for the reduced coverage shall be based on the age used to determine the premiums for the coverage currently in force.

D. The insurer may limit any reduction in coverage to plans or options available for that policy form and to those for which benefits will be available after consideration of claims paid or payable.

E. If a policy or certificate is about to lapse, the insurer shall provide a written reminder to the policyholder or certificate holder of his or her right to reduce coverage and premiums in the notice required by Section 7A(3) of this Regulation.

F. This Section does not apply to life insurance policies or riders containing accelerated long term care benefits.

G. The requirements of this Section shall apply to any long term care policy issued in this state on or after January 1, 2011.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 28. Nonforfeiture Benefit Requirement

A. This Section does not apply to life insurance policies or riders containing accelerated long term care benefits.

B. To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of S.C. Code Section 38-72-67:

(1) A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in Subsection E; and

(2) The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the prospective policyholder.

C. If the offer required to be made under S.C. Code Section 38-72-67 is rejected, the insurer shall provide the contingent benefit upon lapse described in this Section. Even if this offer is accepted for a policy with a fixed or limited premium payment period, the contingent benefit on lapse in Subsection D(4) of this Regulation shall still apply.

D.(1) After rejection of the offer required under S.C. Code Section 38-72-67 for individual and group policies without nonforfeiture benefits issued after the effective date of this Section, the insurer shall provide a contingent benefit upon lapse.

(2) In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

(3) A contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase

Issue Age Percent Increase Over Initial Premium

29 and under 200%

30-34 190%

35-39 170%

40-44 150%

45-49 130%

50-54 110%

55-59 90%

60 70%

61 66%

62 62%

63 58%

64 54%

65 50%

66 48%

67 46%

68 44%

69 42%

70 40%

71 38%

72 36%

73 34%

74 32%

75 30%

76 28%

77 26%

78 24%

79 22%

80 20%

81 19%

82 18%

83 17%

84 16%

85 15%

86 14%

87 13%

88 12%

89 11%

90 and over 10%

(4) A contingent benefit on lapse shall also be triggered for policies with a fixed or limited premium paying period every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, the policy or certificate lapses within 120 days of the due date of the premium so increased, and the ratio in Paragraph (6)(b) is forty percent (40%) or more. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase

Issue Age Percent Increase Over Initial Premium

Under 65 50%

65-80 30%

Over 80 10%

This provision shall be in addition to the contingent benefit provided by Paragraph (3) above and where both are triggered, the benefit provided shall be at the option of the insured.

(5) On or before the effective date of a substantial premium increase as defined in Subsection D (3) above, the insurer shall:

(a) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

(b) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of Subsection E. This option may be elected at any time during the 120-day period referenced in Subsection D(3); and

(c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in Subsection D(3) shall be deemed to be the election of the offer to convert in Subparagraph (b) above unless the automatic option in Subsection (6)(c) applies.

(6) On or before the effective date of a substantial premium increase as defined in Subsection D(3) above, the insurer shall:

(a) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

(b) Offer to convert the coverage to a paid-up status where the amount payable for each benefit is ninety percent (90%) of the amount payable in effect immediately prior to lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period. This option may be elected at any time during the 120-day period referenced in Subsection D(4); and

(c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in Subsection D(4) shall be deemed to be the election of the offer to convert in Subsection 28 (D) 6 (b) above if the ratio is forty percent (40%) or more.

E. Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with Subsection D(3), but not Subsection D(4), are described in this Subsection:

(1) For purposes of this Subsection, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least one percent per year prior to age fifty (50), and at least three percent (3%) per year beyond age fifty (50).

(2) For purposes of this Subsection, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in Paragraph (3).

(3) The standard nonforfeiture credit will be equal to 100% of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty (30) times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of Subsection F.

(4)(a) The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first three (3) years as well as thereafter.

(b) Notwithstanding Subparagraph (a), for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(i) The end of the tenth year following the policy or certificate issue date; or

(ii) The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

(5) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

F All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

G. There shall be no difference in the minimum nonforfeiture benefits as required under this Section for group and individual policies.

H. The requirements set forth in this Section shall become effective twelve (12) months after adoption of this provision and shall apply as follows:

(1) Except as provided in Paragraphs (2) and (3) below, the provisions of this Section apply to any long term care policy issued in this state on or after the effective date of this amended regulation.

(2) For certificates issued on or after the effective date of this Section, under a group long term care insurance policy as defined in Section 4E(1) of this Regulation, which policy was in force at the time this amended regulation became effective, the provisions of this Section shall not apply.

(3) The last sentence in Subsection C and Subsections D(4) and D(6) shall apply to any long term care insurance policy or certificate issued in this state after July 1, 2010, except new certificates on a group policy as defined in Section 4E(1)of this Regulation after January 1, 2011.

I. Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of Section 19 or Section 20, whichever is applicable, treating the policy as a whole.

J. To determine whether contingent nonforfeiture upon lapse provisions are triggered under Subsection D(3) or D(4), a replacing insurer that purchased or otherwise assumed a block or blocks of long term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

K. A nonforfeiture benefit for qualified long term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

(1) The nonforfeiture provision shall be appropriately captioned;

(2) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts approved by the Director for the same contract form; and

(3) The nonforfeiture provision shall provide at least one of the following:

(a) Reduced paid-up insurance;

(b) Extended term insurance;

(c) Shortened benefit period; or

(d) Other similar offerings approved by the Director.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 29. Standards for Benefit Triggers

A. A long term care insurance policy shall condition the payment of benefits on a determination of the insured's ability to perform activities of daily living and on cognitive impairment. Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three (3) of the activities of daily living or the presence of cognitive impairment.

B.(1) Activities of daily living shall include at least the following as defined in Section 5 and in the policy:

(a) Bathing;

(b) Continence;

(c) Dressing;

(d) Eating;

(e) Toileting; and

(f) Transferring;

(2) Insurers may use activities of daily living to trigger covered benefits in addition to those contained in Paragraph (1) as long as they are defined in the policy.

C. An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however the provisions shall not restrict, and are not in lieu of, the requirements contained in Subsections A and B.

D. For purposes of this Section the determination of a deficiency shall not be more restrictive than:

(1) Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or

(2) If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.

E. Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses or social workers.

F. Long-term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations.

G. The requirements set forth in this Section shall be effective 12 months after the effective date of this Regulation, and shall apply as follows:

(1) Except as provided in Paragraph (2), the provisions of this Section apply to a long term care policy issued in this state on or after the effective date of the amended regulation.

(2) For certificates issued on or after the effective date of this Section, under a group long term care insurance policy as defined in Section 4E(1) of this Regulation that was in force at the time this amended regulation became effective, the provisions of this Section shall not apply.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 30. Additional Standards for Benefit Triggers for Qualified Long Term Care Insurance Contracts

A. For purposes of this Section the following definitions apply:

(1) "Qualified long term care services" means services that meet the requirements of Section 7702(c)(1) of the Internal Revenue Code of 1986, as amended, as follows: necessary diagnostic, preventive, therapeutic, curative, treatment, mitigation and rehabilitative services, and maintenance or personal care services which are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

(2)(a) "Chronically ill individual" has the meaning prescribed for this term by Section 7702B(c)(2) of the Internal Revenue Code of 1986, as amended. Under this provision, a chronically ill individual means any individual who has been certified by a licensed health care practitioner as:



(i) Being unable to perform (without substantial assistance from another individual) at least two (2) activities of daily living for a period of at least ninety (90) days due to a loss of functional capacity; or

(ii) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

(b) The term "chronically ill individual" shall not include an individual otherwise meeting these requirements unless within the preceding twelve-month period a licensed health care practitioner has certified that the individual meets these requirements.

(3) "Licensed health care practitioner" means a physician, as defined in Section 1861(r)(1) of the Social Security Act, a registered professional nurse, licensed social worker or other individual who meets requirements prescribed by the Secretary of the Treasury.

(4) "Maintenance or personal care services" means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).

B. A qualified long term care insurance contract shall pay only for qualified long term care services received by a chronically ill individual provided pursuant to a plan of care prescribed by a licensed health care practitioner.

C. A qualified long term care insurance contract shall condition the payment of benefits on a determination of the insured's inability to perform activities of daily living for an expected period of at least ninety (90) days due to a loss of functional capacity or to severe cognitive impairment.

D. Certifications regarding activities of daily living and cognitive impairment required pursuant to Subsection C shall be performed by the following licensed or certified professionals: physicians, registered professional nurses, licensed social workers, or other individuals who meet requirements prescribed by the Secretary of the Treasury.

E. Certifications required pursuant to Subsection C may be performed by a licensed health care professional at the direction of the carrier as is reasonably necessary with respect to a specific claim, except that when a licensed health care practitioner has certified that an insured is unable to perform activities of daily living for an expected period of at least ninety (90) days due to a loss of functional capacity and the insured is in claim status, the certification may not be rescinded and additional certifications may not be performed until after the expiration of the ninety-day (90) period.

F. Qualified long term care insurance contracts shall include a clear description of the process for appealing and resolving disputes with respect to benefit determinations.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 31. Standard Format Outline of Coverage

This Section of the regulation implements, interprets and makes specific, the provisions of S.C. Code Section 38-72-60 in prescribing a standard format and the content of an outline of coverage.

A. The outline of coverage shall be a free-standing document, using no smaller than ten-point type.

B. The outline of coverage shall contain no material of an advertising nature.

C. Text that is capitalized or underscored in the standard format outline of coverage may be emphasized by other means that provide prominence equivalent to the capitalization or underscoring.

D. Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

E. Format for outline of coverage:

COMPANY NAME

ADDRESS - CITY & STATE

TELEPHONE NUMBER

LONG-TERM CARE INSURANCE

OUTLINE OF COVERAGE

[Policy Number or Group Master Policy and Certificate Number]

[Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.]

Caution: The issuance of this long term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address]

1. This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).

2. PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company. Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!

3. FEDERAL TAX CONSEQUENCES.

This [POLICY] [CERTIFICATE] is intended to be a federally tax-qualified long term care insurance contract under Section 7702B (b) of the Internal Revenue Code of 1986, as amended.

OR

Federal Tax Implications of this [POLICY] [CERTIFICATE]. This [POLICY] [CERTIFICATE] is not intended to be a federally tax-qualified long term care insurance contract under Section 7702B (b) of the Internal Revenue Code of 1986 as amended. Benefits received under the [POLICY] [CERTIFICATE] may be taxable as income.

4.TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE CONTINUED IN FORCE OR DISCONTINUED.

(a) [For long term care health insurance policies or certificates describe one of the following permissible policy renewability provisions:]

(1) Policies and certificates that are guaranteed renewable shall contain the following statement: RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE. This means you have the right, subject to the terms of your policy, [certificate] to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.

(2) Policies and certificates that are noncancellable shall contain the following statement: RENEWABILITY: THIS POLICY [CERTIFICATE] IS NONCANCELLABLE. This means that you have the right, subject to the terms of your policy, to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own and cannot change the premium you currently pay. However, if your policy contains an inflation protection feature where you choose to increase your benefits, [Company Name] may increase your premium at that time for those additional benefits.

(b) [For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy;]

(c) [Describe waiver of premium provisions or state that there are not such provisions.]

5. TERMS UNDER WHICH THE COMPANY MAY CHANGE PREMIUMS.

[In bold type larger than the maximum type required to be used for the other provisions of the outline of coverage, state whether or not the company has a right to change the premium, and if a right exists, describe clearly and concisely each circumstance under which the premium may change.]

6. TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND PREMIUM REFUNDED.

(a) [Provide a brief description of the right to return-"free look" provision of the policy.]

(b) [Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]

7. THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide available from the insurance company.

(a) [For agents] Neither [insert company name] nor its agents represent Medicare, the federal government or any state government.

(b) [For direct response] [insert company name] is not representing Medicare, the federal government or any state government.

8. LONG-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community or in the home. This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]

9. BENEFITS PROVIDED BY THIS POLICY.

(a) [Covered services, related deductibles, waiting periods, elimination periods and benefit maximums.]

(b) [Institutional benefits, by skill level.]

(c) [Non-institutional benefits, by skill level.]

(d) Eligibility for Payment of Benefits

[Activities of daily living and cognitive impairment shall be used to measure an insured's need for long term care and must be defined and described as part of the outline of coverage.]

[Any additional benefit triggers must also be explained. If these triggers differ for different benefits, explanation of the triggers should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified.]

10. LIMITATIONS AND EXCLUSIONS.

[Describe:

(a) Preexisting conditions;

(b) Non-eligible facilities and provider;

(c) Non-eligible levels of care (e.g., unlicensed providers, care or treatment provided by a family member, etc.);

(d) Exclusions and exceptions;

(e) Limitations.]

[This Section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in Number 6 above.]

THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR LONG-TERM CARE NEEDS.

11. RELATIONSHIP OF COST OF CARE AND BENEFITS. Because the costs of long term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:

(a) That the benefit level will not increase over time;

(b) Any automatic benefit adjustment provisions;

(c) Whether the insured will be guaranteed the option to buy additional benefits and the basis upon which benefits will be increased over time if not by a specified amount or percentage;

(d) If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations;

(e) And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated.]

12. ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS.

[State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]

13. PREMIUM.

(a) [State the total annual premium for the policy;

(b) If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]

14. ADDITIONAL FEATURES.

(a) [Indicate if medical underwriting is used;

(b) Describe other important features.]

15. CONTACT THE STATE SENIOR HEALTH INSURANCE ASSISTANCE PROGRAM IF YOU HAVE GENERAL QUESTIONS REGARDING LONG-TERM CARE INSURANCE. CONTACT THE INSURANCE COMPANY IF YOU HAVE SPECIFIC QUESTIONS REGARDING YOUR LONG-TERM CARE INSURANCE POLICY OR CERTIFICATE.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 32. Requirement to Deliver Shopper's Guide

A. A long term care insurance shopper's guide in the format developed by the National Association of Insurance Commissioners, or a guide developed or approved by the Director, shall be provided to all prospective applicants of a long term care insurance policy or certificate.

(1) In the case of agent solicitations, an agent must deliver the shopper's guide prior to the presentation of an application or enrollment form.

(2) In the case of direct response solicitations, the shopper's guide must be presented in conjunction with any application or enrollment form.

B. Life insurance policies or riders containing accelerated long term care benefits are not required to furnish the above-referenced guide, but shall furnish the policy summary required under S.C. Code Section 38-72-60.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 33. Penalties

In addition to any other penalties provided by the laws of this state any insurer and any agent found to have violated any requirement of this state relating to the regulation of long term care insurance or the marketing of such insurance shall be subject to a fine of up to three (3) times the amount of any commissions paid for each policy involved in the violation or up to $10,000, whichever is greater.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

Section 34. Effective Date

This regulation shall become effective upon publication in the State Register.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX A. RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES FOR THE STATE OF _ FOR THE REPORTING YEAR 20[ ]

Company Name:___

Address:___ ___

Phone Number:___

Due: March 1 annually

Instructions:

The purpose of this form is to report all rescissions of long term care insurance policies or certificates. Those rescissions voluntarily effectuated by an insured are not required to be included in this report. Please furnish one form per rescission.

Policy #Policy and #Name of Date of Date/s Date of

Form Certificate Insured Policy Claim/s Rescission

Issuance Submitted

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

Detailed reason for rescission:___ ___ ___ ___

__________

Signature

__________

Name and Title (please type)

__________

Date

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX B. Long-term Care Insurance

Personal Worksheet

People buy long term care insurance for many reasons. Some don't want to use their own assets to pay for long term care. Some buy insurance to make sure they can choose the type of care they get. Others don't want their family to have to pay for care or don't want to go on Medicaid. But long term care insurance may be expensive, and may not be right for everyone.

By state law, the insurance company must fill out part of the information on this worksheet and ask you to fill out the rest to help you and the company decide if you should buy this policy.

Premium Information

Policy Form Numbers __________

The premium for the coverage you are considering will be [$__________per month, or $__________ per year,] [a one-time single premium of $__________.]

Type of Policy (noncancellable/guaranteed renewable):__________

The Company's Right to Increase Premiums:__________

[The company cannot raise your rates on this policy.] [The company has a right to increase premiums on this policy form in the future, provided it raises rates for all policies in the same class in this state.] [Insurers shall use appropriate bracketed statement. Rate guarantees shall not be shown on this form.]

Rate Increase History

The company has sold long term care insurance since [year] and has sold this policy since [year]. [The company has never raised its rates for any long term care policy it has sold in this state or any other state.] [The company has not raised its rates for this policy form or similar policy forms in this state or any other state in the last 10 years.] [The company has raised its premium rates on this policy form or similar policy forms in the last 10 years. Following is a summary of the rate increases.]

[Note: A company may use the first bracketed sentence above only if it has never increased rates under any prior policy forms in this state or any other state. The issuer shall list each premium increase it has instituted on this or similar policy forms in this state or any other state during the last 10 years. The list shall provide the policy form, the calendar years the form was available for sale, and the calendar year and the amount (percentage) of each increase. The insurer shall provide minimum and maximum percentages if the rate increase is variable by rating characteristics. The insurer may provide, in a fair manner, additional explanatory information as appropriate.]

Questions Related to Your Income

How will you pay each year's premium?

[ ] From my Income [ ] From my Savings/Investments [ ] My Family will Pay

[[ ] Have you considered whether you could afford to keep this policy if the premiums went up, for example, by 20%?]

[Note: The issuer is not required to use the bracketed sentence if the policy is fully paid up or is a noncancellable policy.]

What is your annual income? (check one) [ ] Under $10,000 [ ] $[10-20,000] [ ] $[20-30,000] [ ] $[30-50,000] [ ] Over $50,000

[Note: The issuer may choose the numbers to put in the brackets to fit its suitability standards.]

How do you expect your income to change over the next 10 years? (check one)

[ ] No change [ ] Increase [ ] Decrease

If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income.

Will you buy inflation protection? (check one) [ ] Yes [ ] No

If not, have you considered how you will pay for the difference between future costs and your daily benefit amount?

[ ] From my Income [ ] From my Savings/Investments [ ] My Family will Pay

The national average annual cost of care in [insert year] was [insert $ amount], but this figure varies across the country. In ten years the national average annual cost would be about [insert $ amount] if costs increase 5% annually.

[Note: The projected cost can be based on federal estimates in a current year. In the above statement, the second figure equals 163% of the first figure.]

What elimination period are you considering? Number of days __________Approximate cost $__________ for that period of care.

How are you planning to pay for your care during the elimination period? (check one)

[ ] From my Income [ ] From my Savings/Investments [ ] My Family will Pay

Questions Related to Your Savings and Investments

Not counting your home, about how much are all of your assets (your savings and investments) worth? (check one)

[ ] Under $20,000 [ ] $20,000-$30,000 [ ] $30,000-$50,000 [ ] Over $50,000

How do you expect your assets to change over the next ten years? (check one)

[ ] Stay about the same [ ] Increase [ ] Decrease

If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long term care.

Disclosure Statement

The answers to the questions above describe my financial situation.

Or

I choose not to complete this information.

(Check one.)

I acknowledge that the carrier and/or its agent (below) has reviewed this form with me including the premium, premium rate increase history and potential for premium increases in the future. [For direct mail situations, use the following: I acknowledge that I have reviewed this form including the premium, premium rate increase history and potential for premium increases in the future.] I understand the above disclosures. I understand that the rates for this policy may increase in the future. (This box must be checked).

Signed: ___________________

(Applicant) (Date)

[I explained to the applicant the importance of completing this information.

Signed: _______________

(Agent) (Date)

Agent's Printed

Name:__________]

[In order for us to process your application, please return this signed statement to [name of company], along with your application.]

[My agent has advised me that this policy does not seem to be suitable for me. However, I still want the company to consider my application.

Signed: ___________________

(Applicant) (Date)

The company may contact you to verify your answers.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX C. Things You Should Know Before You Buy Long Term Care Insurance

Long Term A long term care insurance policy may pay most of the costs for

Care your care in a nursing home. Many policies also pay for care at

Insurance home or other community settings. Since policies can vary in

coverage, you should read this policy and make sure you

understand what it covers before you buy it.

[You should not buy this insurance policy unless you can afford

to pay the premiums every year.] [Remember that the company can

increase premiums in the future.]

[Note:For single premium policies, delete this bullet; for noncancellable

policies, delete the second sentence only.]

The personal worksheet includes questions designed to help you

and the company determine whether this policy is suitable for

your needs.

Medicare Medicare does not pay for most long term care.

Medicaid Medicaid will generally pay for long term care if you have very

little income and few assets. You probably should not buy this

policy if you are now eligible for Medicaid.

Many people become eligible for Medicaid after they have used up

their own financial resources by paying for long term care

services.

When Medicaid pays your spouse's nursing home bills, you are

allowed to keep your house and furniture, a living allowance,

and some of your joint assets.

Your choice of long term care services may be limited if you are

receiving Medicaid. To learn more about Medicaid, contact your

local or state Medicaid agency.

Shopper's Make sure the insurance company or agent gives you a copy of a

Guide book called the National Association of Insurance

Commissioners' Shopper's Guide to Long Term Care Insurance.

Read it carefully. If you have decided to apply for long term

care insurance, you have the right to return the policy within

30 days and get back any premium you have paid if you are

dissatisfied for any reason or choose not to purchase the

policy.

Counseling Free counseling and additional information about long term care

insurance are available through your state's insurance

counseling program. Contact your state insurance department or

department on aging for more information about the senior

health insurance counseling program in your state.

Facilities Some long term care insurance contracts provide for benefit

payments in certain facilities only if they are licensed or

certified, such as in assisted living centers. However, not all

states regulate these facilities in the same way. Also, many

people move to a different state from where they purchased

their long term care insurance policy. Read the policy

carefully to determine what types of facilities qualify for

benefit payments, and to determine that payment for a covered

service will be made if you move to a state that has a

different licensing scheme for facilities than the one in which

you purchased the policy.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX D. Long Term Care Insurance Suitability Letter

Dear [Applicant]:

Your recent application for long term care insurance included a "personal worksheet," which asked questions about your finances and your reasons for buying long term care insurance. For your protection, state law requires us to consider this information when we review your application, to avoid selling a policy to those who may not need coverage.

[Your answers indicate that long term care insurance may not meet your financial needs. We suggest that you review the information provided along with your application, including the booklet "Shopper's Guide to Long Term Care Insurance" and the page titled "Things You Should Know Before Buying Long Term Care Insurance." Your state insurance department also has information about long term care insurance and may be able to refer you to a counselor free of charge who can help you decide whether to buy this policy.]

[You chose not to provide any financial information for us to review.]

[Note: Choose the paragraph that applies.]

We have suspended our final review of your application. If, after careful consideration, you still believe this policy is what you want, check the appropriate box below and return this letter to us within the next 60 days. We will then continue reviewing your application and issue a policy if you meet our medical standards.

If we do not hear from you within the next 60 days, we will close your file and not issue you a policy. You should understand that you will not have any coverage until we hear back from you, approve your application and issue you a policy.

Please check one box and return in the enclosed envelope.

[ ] Yes, [although my worksheet indicates that long term care insurance may not be a suitable purchase,] I wish to purchase this coverage. Please resume review of my application.

[Note: Delete the phrase in brackets if the applicant did not answer the questions about income.]

[ ] No. I have decided not to buy a policy at this time.

___________________________

APPLICANT'S SIGNATURE DATE

Please return to [issuer] at [address] by [date].

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX E. Claims Denial Reporting Form

Long Term Care Insurance

For the State of __________

For the Reporting Year of __________

Company Name: __________Due: June 30 annually

Company Address: ___ ___

Company NAIC Number: ___

Contact Person: __________Phone Number: __________

Line of Business: Individual Group

Instructions

The purpose of this form is to report all long term care claim denials under in force long term care insurance policies. "Denied" means a claim that is not paid for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition.

-------------------------------------------------------------------------------

State Nationwide

Data Data [FN1]

-------------------------------------------------------------------------------

1 Total Number of Long Term Care Claims

Reported

-------------------------------------------------------------------------------

2 Total Number of Long Term Care Claims

Denied/Not Paid

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3 Number of Claims Not Paid due to

Preexisting Condition Exclusion

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4 Number of Claims Not Paid due to Waiting

(Elimination) Period Not Met

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5 Net Number of Long Term Care Claims Denied

for Reporting Purposes (Line 2 Minus

Line 3 Minus Line 4)

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6 Percentage of Long Term Care Claims Denied

of Those Reported (Line 5 Divided By

Line 1)

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7 Number of Long Term Care Claim Denied due

to:

-------------------------------------------------------------------------------

8 Long Term Care Services Not Covered under

the Policy [FN2]

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9 Provider/Facility Not Qualified under the

Policy [FN3]

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10 Benefit Eligibility Criteria Not Met [FN4]

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11 Other

-------------------------------------------------------------------------------

FN [FN1]. The nationwide data may be viewed as a more representative and

credible indicator where the data for claims reported and denied for your

state are small in number.

FN [FN2]. Example--home health care claim filed under a nursing home only

policy.

FN [FN3]. Example--a facility that does not meet the minimum level of care

requirements or the licensing requirements as outlined in the policy.

FN [FN4]. Examples--a benefit trigger not met, certification by a licensed

health care practitioner not provided, no plan of care.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX F. Long Term Care Insurance

Potential Rate Increase Disclosure Form

Instructions:

This form provides information to the applicant regarding premium rate schedules, rate schedule adjustments, potential rate revisions, and policyholder options in the event of a rate increase.

Insurers shall provide all of the following information to the applicant:

1. [Premium Rate] [Premium Rate Schedules]: [Premium rate] [Premium rate schedules] that [is][are] applicable to you and that will be in effect until a request is made and approved for an increase [is][are] [on the application][$__________])

2. The [premium] [premium rate schedule] for this policy [will be shown on the schedule page of] [will be attached to] your policy.

3. Rate Schedule Adjustments:

The company will provide a description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.) (fill in the blank):__________.

4. Potential Rate Revisions:

This policy is Guaranteed Renewable. This means that the rates for this product may be increased in the future. Your rates can NOT be increased due to your increasing age or declining health, but your rates may go up based on the experience of all policyholders with a policy similar to yours.

If you receive a premium rate or premium rate schedule increase in the future, you will be notified of the new premium amount and you will be able to exercise at least one of the following options:

Pay the increased premium and continue your policy in force as is.

Reduce your policy benefits to a level such that your premiums will not increase. (Subject to state law minimum standards.)

Exercise your nonforfeiture option if purchased. (This option is available for purchase for an additional premium.)

Exercise your contingent nonforfeiture rights.* (This option may be available if you do not purchase a separate nonforfeiture option.)

*Contingent Nonforfeiture

If the premium rate for your policy goes up in the future and you didn't buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here's how to tell if you are eligible:

You will keep some long term care insurance coverage, if:

Your premium after the increase exceeds your original premium by the percentage shown (or more) in the following table; and

You lapse (not pay more premiums) within 120 days of the increase.

The amount of coverage (i.e., new lifetime maximum benefit amount) you will keep will equal the total amount of premiums you've paid since your policy was first issued. If you have already received benefits under the policy, so that the remaining maximum benefit amount is less than the total amount of premiums you've paid, the amount of coverage will be that remaining amount.

Except for this reduced lifetime maximum benefit amount, all other policy benefits will remain at the levels attained at the time of the lapse and will not increase thereafter.

Should you choose this Contingent Nonforfeiture option, your policy, with this reduced maximum benefit amount, will be considered "paid-up" with no further premiums due.

Example:

You bought the policy at age 65 and paid the $1,000 annual premium for 10 years, so you have paid a total of $10,000 in premium.

In the eleventh year, you receive a rate increase of 50%, or $500 for a new annual premium of $1,500, and you decide to lapse the policy (not pay any more premiums).

Your "paid-up" policy benefits are $10,000 (provided you have a least $10,000 of benefits remaining under your policy.)

Contingent Nonforfeiture

Cumulative Premium Increase over Initial Premium

That qualifies for Contingent Nonforfeiture

(Percentage increase is cumulative from date of original issue. It does NOT represent a one-time increase.)

Issue Age Percent Increase Over Initial Premium

29 and under 200%

30-34 190%

35-39 170%

40-44 150%

45-49 130%

50-54 110%

55-59 90%

60 70%

61 66%

62 62%

63 58%

64 54%

65 50%

66 48%

67 46%

68 44%

69 42%

70 40%

71 38%

72 36%

73 34%

74 32%

75 30%

76 28%

77 26%

78 24%

79 22%

80 20%

81 19%

82 18%

83 17%

84 16%

85 15%

86 14%

87 13%

88 12%

89 11%

90 and over 10%

[The following contingent nonforfeiture disclosure need only be included for those limited pay policies to which Sections 28D(4) and 28D(6) of this Regulation ].

In addition to the contingent nonforfeiture benefits described above, the following reduced "paid-up" contingent nonforfeiture benefit is an option in all policies that have a fixed or limited premium payment period, even if you selected a nonforfeiture benefit when you bought your policy. If both the reduced "paidup" benefit AND the contingent benefit described above are triggered by the same rate increase, you can chose either of the two benefits.

You are eligible for the reduced "paid-up" contingent nonforfeiture benefit when all three conditions shown below are met:

1. The premium you are required to pay after the increase exceeds your original premium by the same percentage or more shown in the chart below;

Triggers for a Substantial Premium Increase

Issue Age Percent Increase Over Initial Premium

Under 65 50%

65-80 30%

Over 80 10%

2. You stop paying your premiums within 120 days of when the premium increase took effect; AND

3. The ratio of the number of months you already paid premiums is 40% or more than the number of months you originally agreed to pay.

If you exercise this option your coverage will be converted to reduced "paid-up" status. That means there will be no additional premiums required. Your benefits will change in the following ways:

a. The total lifetime amount of benefits your reduced paid up policy will provide can be determined by multiplying 90% of the lifetime benefit amount at the time the policy becomes paid up by the ratio of the number of months you already paid premiums to the number of months you agreed to pay them.

b. The daily benefit amounts you purchased will also be adjusted by the same ratio.

If you purchased lifetime benefits, only the daily benefit amounts you purchased will be adjusted by the applicable ratio.

Example:

You bought the policy at age 65 with an annual premium payable for 10 years.

In the sixth year, you receive a rate increase of 35% and you decide to stop paying premiums.

Because you have already paid 50% of your total premium payments and that is more than the 40% ratio, your "paid-up" policy benefits are .45 (.90 times .50) times the total benefit amount that was in effect when you stopped paying your premiums. If you purchased inflation protection, it will not continue to apply to the benefits in the reduced "paid-up" policy.

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

APPENDIX G. Long Term Care Insurance

Replacement and Lapse Reporting Form

For the State of __________For the Reporting Year of __________

Company Name: __________Due: June 30 annually

Company Address: __________Company NAIC Number: __________

Contact Person: __________Phone Number: (__________)__________

Instructions

The purpose of this form is to report on a statewide basis information regarding long term care insurance policy replacements and lapses. Specifically, every insurer shall maintain records for each agent on that agent's amount of long term care insurance replacement sales as a percent of the agent's total annual sales and the amount of lapses of long term care insurance policies sold by the agent as a percent of the agent's total annual sales. The tables below should be used to report the ten percent (10%) of the insurer's agents with the greatest percentages of replacements and lapses.

Listing of the 10% of Agents with the Greatest Percentage of Replacements

-------------------------------------------------------------------------------

Agent's Number of Policies Number of Policies Number of Replacements As

Name Sold By This Replaced By This % of Number Sold By This

Agent Agent Agent

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

Listing of the 10% of Agents with the Greatest Percentage of Lapses

-------------------------------------------------------------------------------

Agent's Number of Policies Number of Policies Number of Lapses As % of

Name Sold By This Lapsed By This Number Sold By This

Agent Agent Agent

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

Company Totals

Percentage of Replacement Policies Sold to Total Annual Sales __________%

Percentage of Replacement Policies Sold to Policies In Force (as of the end of the preceding calendar year) __________%

Percentage of Lapsed Policies to Total Annual Sales __________%

Percentage of Lapsed Policies to Policies In Force (as of the end of the preceding calendar year)__________%

HISTORY: Added by State Register Volume 13, Issue No. 6, effective 180 days after June 23, 1989. Amended by State Register Volume 34, Issue No. 5, eff May 28, 2010.

69-45. Data Reporting and Determination of Excess Profits.

Section 1. Purpose.

The purpose of this regulation is to provide standards for both the reporting of the loss and expense experience data required by South Carolina Code Section 38-13-300 (1976), as amended, as well as for the determination of the calculation of excess profits required by South Carolina Code Sections 38-73-1100 and 38-73-1110 (1976), as amended.

Section 2. Data Reporting.

South Carolina Code Section 38-13-300 requires that all licensed property or casualty insurers record and report to the Chief Insurance Commissioner, loss and expense experience and any other data which may be necessary to determine that rates are not excessive, inadequate or unfairly discriminatory.

The loss and expense experience report required by this regulation and Section 38-13-300 shall be used, in addition to the supplemental report required by Section 38-13-310, and any other data which the Commissioner may find necessary, to determine whether an insurer has, pursuant to the provisions of Section 38-73-1100 and Section 38-73-1110, earned an aggregate operating profit in excess of a reasonable amount.

Section 3. Determination of Excess Profits.

(A) Procedure.

If the Commissioner determines that an insurer writing property, casualty, surety, marine, title or allied lines of insurance in South Carolina has earned an aggregate operating profit in excess of either 15% of earned premiums or 25% of the average policyholder surplus over a five-year period, he may:

(1) Order a general reduction in the rates applicable to such line(s) which will reduce the operating profit to a reasonable amount; and

(2) Order a prorata refund of any excessive or unreasonable operating profits, with interest.

HISTORY: Added by State Register Volume 14, Issue No. 3, eff March 23, 1990. Amended by State Register Volume 21, Issue No. 6, Part 2, eff June 27, 1997.

69-46. MEDICARE SUPPLEMENT INSURANCE.

(Statutory Authority: S.C. Code Sections 38-3-110(2), 38-71-530(b), 1-23-110 et seq. (1976), as amended)

HISTORY: Added by State Register Volume 13, Issue 1, adopted Jan. 27, 1989, eff July 1, 1989. Amended by State Register Volume 14, Issue 6, eff June 22, 1992; State Register Volume 14, Issue 6, eff June 22, 1990; State Register Volume 15, Issue 12, adopted Dec. 27, 1991, eff May 1, 1992; State Register Volume 20, Issue No. 4, eff April 28, 1; State Register Volume 23, Issue No. 3, eff March 26, 1999; State Register Volume 27, Issue No. 10, eff October 24, 2003; State Register Volume 29, Issue No. 7, eff July 22, 2005; State Register Volume 33, Issue No. 5, eff May 22, 2009.

Table of Contents

Section 1. Purpose

Section 2. Authority

Section 3. Applicability and Scope

Section 4. Definitions

Section 5. Policy Definitions and Terms

Section 6. Policy Provisions

Section 7. Minimum Benefit Standards for Pre-Standardized Medicare Supplement

Benefit Plan Policies or Certificates Issued for Delivery Prior

to May 1, 1992

Section 8. Benefit Standards for 1990 Standardized Medicare Supplement

Benefit Plan Policies or Certificates Issued for Delivery on or

After May 1, 1992 and With an Effective Date for Coverage Prior

to June 1, 2010

Section 8.1 Benefit Standards for 2010 Standardized Medicare Supplement

Benefit Plan Policies or Certificates Issued for Delivery With

an Effective Date for Coverage on or After June 1, 2010

Section 9. Standard Medicare Supplement Benefit Plans for 1990 Standardized

Medicare Supplement Benefit Plan Policies or Certificates Issued

for Delivery on or After May 1, 1992 and With an Effective Date

for Coverage Prior to June 1, 2010

Section 9.1 Standard Medicare Supplement Benefit Plans for 2010 Standardized

Medicare Supplement Benefit Plan Policies or Certificates Issued

for Delivery With an Effective Date for Coverage on or After

June 1, 2010

Section 10. Medicare Select Policies and Certificates

Section 11. Open Enrollment

Section 12. Guaranteed Issue for Eligible Persons

Section 13. Standards for Claims Payment

Section 14. Loss Ratio Standards and Refund or Credit of Premium

Section 15. Filing and Approval of Policies and Certificates and Premium Rates

Section 16. Permitted Compensation Arrangements

Section 17. Required Disclosure Provisions

Section 18. Requirements for Application Forms and Replacement Coverage

Section 19. Filing Requirements for Advertising

Section 20. Standards for Marketing

Section 21. Appropriateness of Recommended Purchase and Excessive Insurance

Section 22. Reporting of Multiple Policies

Section 23. Prohibition Against Preexisting Conditions, Waiting Periods,

Elimination Periods and Probationary Periods in Replacement

Policies or Certificates

Section 24. Prohibition Against Use of Genetic Information and Requests for

Genetic Testing

Section 25. Severability

Section 26. Effective Date

Appendix A Reporting Form for Calculation of Loss Ratios

Appendix B Form for Reporting Duplicate Policies

Appendix C Disclosure Statements

Section 1. Purpose

The purpose of this regulation is to provide for the reasonable standardization of coverage and simplification of terms and benefits of Medicare Supplement policies; to facilitate public understanding and comparison of such policies; to eliminate provisions contained in such policies which may be misleading or confusing in connection with the purchase of such policies or with the settlement of claims; and to provide for full disclosures in the sale of accident and sickness insurance coverages to persons eligible for Medicare.

Section 2. Authority

This regulation is issued pursuant to the authority vested in the director under S.C. Code Sections 38-3-110(2), 38-71-530(b) and 1-23-10 et seq.

Section 3. Applicability and Scope

A. Except as otherwise specifically provided in Sections 7, 13, 14, 17 and 22, this regulation shall apply to:

(1) All Medicare Supplement policies delivered or issued for delivery in this state on or after the effective date of this regulation; and

(2) All certificates issued under group Medicare Supplement policies, which certificates have been delivered or issued for delivery in this state.

B. This regulation shall not apply to a policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations.

Section 4. Definitions

For purposes of this regulation:

A. "Applicant" means:

(1) In the case of an individual Medicare Supplement policy, the person who seeks to contract for insurance benefits; and

(2) In the case of a group Medicare Supplement policy, the proposed certificateholder.

B. "Bankruptcy" means when a Medicare Advantage organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in the state.

C. "Certificate" means any certificate delivered or issued for delivery in this state under a group Medicare Supplement policy.

D. "Certificate form" means the form on which the certificate is delivered or issued for delivery by the issuer.

E. "Continuous period of creditable coverage" means the period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than sixty-three (63) days.

F. "Creditable coverage"

(1) "Creditable coverage" means, with respect to an individual, coverage of the individual provided under any of the following:

(a) A group health plan;

(b) Health insurance coverage;

(c) Part A or Part B of Title XVIII of the Social Security Act (Medicare);

(d) Title XIX of the Social Security Act (Medicaid), other than coverage consisting solely of benefits under Section 1928;

(e) Chapter 55 Title 10 of the United States Code (TRICARE);

(f) A medical care program of the Indian Health Service or of a tribal organization;

(g) A state health benefits risk pool, including the South Carolina Health Insurance Pool;

(h) A health plan offered under Chapter 89 of Title 5 United States Code (Federal Employees Health Benefits Program);

(i) A public health plan as defined in federal regulations; and

(j) A health benefit plan under Section 5(e) of the Peace Corps Act (22 U.S.C. 2504(e)).

(2) "Creditable coverage" shall not include one or more, or any combination of, the following:

(a) Coverage only for accident or disability income insurance, or any combination of accident and disability income insurance;

(b) Coverage issued as a Supplement to liability insurance;

(c) Liability insurance, including general liability insurance and automobile liability insurance;

(d) Workers' compensation or similar insurance;

(e) Automobile medical payment insurance;

(f) Credit-only insurance;

(g) Coverage for on-site medical clinics; and

(h) Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.

(3) "Creditable coverage" shall not include the following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the plan:

(a) Limited scope dental or vision benefits;

(b) Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; and

(c) Such other similar, limited benefits as are specified in federal regulations.

(4) "Creditable coverage" shall not include the following benefits if offered as independent, noncoordinated benefits:

(a) Coverage only for a specified disease or illness; and

(b) Hospital indemnity or other fixed indemnity insurance.

(5) "Creditable coverage" shall not include the following if it is offered as a separate policy, certificate or contract of insurance:

(a) Medicare Supplemental health insurance as defined under Section 1882(g)(1) of the Social Security Act;

(b) Coverage supplemental to the coverage provided under Chapter 55 Title 10 of the United States Code; and

(c) Similar supplemental coverage provided to coverage under a group health plan.

G. "Employee welfare benefit plan" means a plan, fund or program of employee benefits as defined in 29 U.S.C. Section 1002 (Employee Retirement Income Security Act).

H. "Insolvency" means when an issuer, licensed to transact the business of insurance in this state, has had a final order of liquidation entered against it with a finding of insolvency by a court of competent jurisdiction in the issuer's state of domicile.

I. "Issuer" includes insurance c