Insurance and Annuities Blog

Life Insurance and Annuity Review Standards for the State of Indiana

1. Annuities		Authority
Table of cash surrender values, if any, for 20 years (not applicable to variable, immediate, or flexible premium deferred annuities)		IC 27-1-12.6-3
Prohibition against a provision that automatically Withdraws or places a loan against annuity forfeiture values in order to pay premiums on a life or annuity policy.		IC 27-1-12.6-4
10-day free look period. The policy can be returned to the company or the agent through whom it was purchased. The provision must be on the front cover.		IC 27-1-12.6-5
Requires certain disclosures requirements if a cash value or death benefit is not provided.		IC 27-1-12.6-6
Requires a statement of the mortality table, if any, and interest rate used to determine the nonforfeiture benefits and death benefits.		IC 27-1-12.5-2(a)(3)
Requires a statement that the nonforfeiture values and death benefits are not less than that required by law.		IC 27-1-12.5-2(a)(4)
2. Group Annuities
Filing requirements.		Bulletin 93
3. Charitable and Gift Annuities
Exemption from regulation.		IC 27-1-12.4-2
4. Individual and Joint Life
The title of the policy (i.e. Term Life, Universal Life) must be on the face of the policy and the back of the policy. The back title page must face outward.		IC 27-1-12-6(11)
Under the "Free Look" provision the insured may return the policy to the insurer (the company), the agent who sold the policy, or to any other agent of the insurer. The free look provision must be on the front cover of the policy. All of the premium received must be refunded.		IC 27-1-12-43
There must be a provision that settlement will be done within two (2) months of receiving a death claim.		IC 27-1-12-6(10)
Under either Cash Surrender or Cash Surrender Value, there should be a statement that if the policy is surrendered within thirty (30) days of a policy anniversary, the cash surrender value will not be less than the cash surrender value on that policy anniversary. (Does not apply to individual variable or universal policies)		IC 27-1-12-7(b)
Company may not prohibit loans in the first policy year, they may not have a minimum loan amount or limit the amount of the loan to a certain percentage of the cash value. The loan value is the cash value minus the cost of insurance and the loan interest rate to the next anniversary. (Note: The exception is on variable universal life insurance, it may have a minimum loan amount and the loan value may be up to 90% of the cash value).		IC 27-1-12-6(8)
The limit on incontestability is two (2) years maximum.		IC 27-1-12-6(3)
Misstatement of Age should state that the proceeds will be what the premium received would have purchased at the correct age or sex.		IC 27-1-12-6(4)
There should be a grace period provision of thirty (30) days.		IC 27-1-12-6(2)
There must be a provision that interest will be paid if payment is not received in thirty (30) days. Interest will be from the date of death to the date of settlement.		IC 27-1-12-35(a)(b)
5. Group Life
Under the "Free Look" provision the insured may return the policy to the insurer (the company), the agent who sold the policy, or to any other agent of the insurer. The free look provision must be on the front cover of the policy. All of the premium received must be refunded.		IC 27-1-12-43
There must be a provision that settlement will be done within two (2) months of receiving a death claim.		IC 27-1-12-6(10)
Company may not prohibit loans in the first policy year, they may not have a minimum loan amount or limit the amount of the loan to a certain percentage of the cash value. The loan value is the cash value minus the cost of insurance and the loan interest rate to the next anniversary. (Note: The exception is on variable universal life, it may have a minimum loan amount and the loan value may be up to 90% of the cash value).		IC 27-1-12-6(8)
The limit on incontestability is two (2) years maximum.		IC 27-1-12-6(3)
Misstatement of Age should state that the proceeds will be what the premium received would have purchased at the correct age or sex.		IC 27-1-12-6(4)
There should be a grace period provision of thirty (30) days.

FAQ About the Standard Life Insurance Company

What happened to Standard Life Insurance Company of Indiana? regarding

After efforts to raise additional capital, Standard Life Insurance Company of Indiana (Standard Life of Indiana), the company consented to an Order of Rehabilitation on December 18, 2008 by the Marion County Circuit Court in response to a petition by the Indiana Department of Insurance (IDOI). The Department took action after determining that Standard Life of Indiana's investment portfolio had deteriorated under current market conditions to the point that the Department of Insurance needed to act to protect the annuity holders of the Company.

Insurance Commissioner, Jim Atterholt, was appointed as Rehabilitator of Standard Life of Indiana. Indiana Commissioner of Insurance Jim Atterholt has appointed Randolph Lamberjack, President of Noble Consulting Services Inc., as Special Deputy Rehabilitator to oversee the rehabilitation process.  

What is the current financial condition of Standard Life Insurance Company of Indiana?

The Order and Management's Consent to the Rehabilitation was a pre-emptive measure to preserve capital. This was done to protect the overall account values of our annuity holders. The current financial condition of the Company has been impacted with the overall downturn of the financial markets and the economy at large. We believe the current market value impact of our investments is a temporary condition that will recover in time. The investment portfolio is performing and is structured to mature with our contractual obligations. Full surrenders would create a fire sale of the assets which would further impact the overall financial condition. The current value of the portfolio is a result of the overall market conditions resulting from extraordinary devaluation in the broad stock and bond markets. Overall values of the U.S. stocks have declined; this has flowed into the bond market. Standard Life of Indiana's investment portfolio did include a number of investments that declined or became impaired but the vast majority of the investment portfolio is government backed and includes quality corporate bonds. Unfortunately, new capital was not available to replace the losses experienced in recent months that lead up to this action.

What is the purpose of a Rehabilitation Order?

Rehabilitation is a Court approved safeguard used in conjunction with the Department of Insurance in an effort to extend powers not available to a company in the normal course of business. Rehabilitation is used in an effort to exercise certain actions that are initiated, we believe, to be in the best interest and protection of the Company and its policyholders. The Rehabilitation Order for Standard Life of Indiana was consensual; meaning that it was approved by the Board of Directors of Standard Life of Indiana. As a result of the Order, certain legal actions can be stayed, administrative and service contracts can be amended to save costs, investments will be administered under the Department of Insurance control, and it will allow the Department of Insurance to oversee operations on site with the Company. This is all being done with the best interest of policyholders and annuitants in mind to safeguard the account balances for the long-term and to continue selected services in a cost effective manner.

Who is running the company?

Executive Management changes have occurred as a result of the Rehabilitation Order. Essentially, Commissioner Atterholt replaces the Board of Directors of the Company. Commissioner Atterholt has appointed Randolph Lamberjack, President Noble Consulting Services, to serve as Special Deputy, overseeing the rehabilitation process.

How safe is my account value?

At this time, market values and income streams of the portfolio appear sufficient to honor all contract obligations with the exception of surrender options. ALL features of the annuity contracts will be honored under the contract provisions and will be processed on a normal basis with the exception of partial and full surrenders. Therefore, all other payments and benefits will be honored under the normal course which includes: scheduled payments at maturity, annuities in payout, contracts that allow access due to nursing home care, and death benefits.

Will my interest rate or crediting rate change?

Interest crediting rates will continue as normal. This may change in the future depending on market conditions.

Can I still get my monthly interest payments?

Yes, existing monthly interest distributions will continue uninterrupted. You may request the distribution of monthly-earned interest be established if your contract includes this provision. Please consult your contract.

Will Required Minimum Distributions (RMD's) from IRA's be available?

Yes, all new and existing RMD's for traditional IRA contracts will be processed as received. Note that bulk distributions or transfers other than RMD's will not be allowed at this time.

Will the penalty free partial withdrawals be allowed?

Unfortunately, partial principal withdrawals will not be honored or processed at this time. However, you may apply for monthly payouts of interest if you have a contract that includes this feature. Consult your contract.

How will surrenders or requests for distributions be handled during the Rehabilitation?

There is a 6-month moratorium on partial and full surrenders. The liquidity of the portfolio, the current market values and the current capital position do not provide sufficient liquidity and value to allow mass redemptions. These are the primary reasons for the need for the protection of a Rehabilitation Order. Therefore, we are freezing distributions such as cash surrenders and transfers at this time. Annuities that mature will be honored and annuities in payout will continue.

How long will the moratorium or freeze on surrenders be in place?

Again, because of the market value of the investment portfolio account, surrenders cannot be honored at this time. At the present time, the Court has approved a moratorium of 6 months on all Standard Life of Indiana's policies.

How will death claims on annuity contracts be handled?

Death claims will be processed without interruption and paid in full. We will discontinue paying Death Benefits via our Strategic Asset Management (SAM) Accounts, going forward death benefit payments will be made to designated beneficiary. There is NO other impact or change to death benefit processing during the Rehabilitation.

Can I continue to add money to my account?

NO. At this time we believe the most responsible stance is not take additional revenue that could be restricted. Therefore, new contracts or additional deposits are not being accepted or processed until further notice. Effective Friday, December 19, 2008, the Company will not accept new money for new or existing accounts. We have also returned all new applications that were in process as soon as action could be taken. We believe the discontinuance of automated or bank draft contributions is in the best interest of our customers.  

Replacement of Existing Life Insurance Policies

REPLACING AGENT:
It is the duty of the replacing agent to present to the applicant, not later than at the time of taking an application, a Comparative Information Form as described by 760 I.A.C. 1-16.1-1. A separate "Form" must be used for each policy being replaced. The replacing agent must complete the Comparative Information Form in its entirety and leave a copy with the applicant, prior to submission of the application for new insurance to the company. The information regarding the replacing policy must be accurate and the information regarding the replaced policy or policies must be substantially correct.
REPLACING INSURER:
It is the duty of the replacing insurer to verify the accuracy of the information contained in the Comparative Information Form received from the replacing agent regarding the proposed policy or policies. Should the information not be correct, the replacing insurer must obtain a correct Comparative Information Form. The corrected "Form" must be signed by the replacing agent and the proposed insured applicant before the insurer can begin processing the application. The information regarding the replaced policy must be substantially correct.
When the application and Comparative Information Form, as required by Section 7C1 and 2, are received by the replacing insurer, they must send a substantially correct verified copy of the "Form" to the existing insurer within 3 days of the date of the application, or the date its policy is issued, whichever is sooner.
EXISTING INSURER:
Where the existing insurer undertakes a conservation action, it is the duty of the existing insurer, within twenty (20) days of the date this Comparative Information Form is received, to correct and
complete any and all information that is inaccurately completed by the replacing agent or provide the policyholder with an accurate Policy Summary. The existing insurer must also furnish a copy of the corrected Comparative Information Form or a Policy Summary to the replacing life insurance company.
ALL PARTIES:
All spaces contained within the Comparative Information Form must have appropriate written answers. A summary of the replacing and/or existing policy or policies may be attached additionally if desired, however, any attachments must follow the exact format, line by line, of the approved Comparative Information Form. The exemptions listed in Rule 16.1 apply only to existing policies. We also expect detailed explanations of the policies involved including the reasons for replacement.
The Department of Insurance expects all parties to comply with all requirements set forth in Rule 16.1 and this Bulletin. Failure to comply with Rule 16.1 and this Bulletin will lead to disciplinary action by the Indiana Department of Insurance.

To learn more about annuities

Guaranty Funds

In Indiana, some insurance policies are protected from whole or partial loss by guaranty funds.  Guaranty funds operate something like the FDIC – covering a consumer’s losses up to a certain amount if the insurer is found to be insolvent and ordered into liquidation by a court.  However, not all policies are covered by the guaranty funds, and consumers should always exercise prudence in selecting an insurance policy.

Consumer Alert

The Department of Insurance recently published a consumer alert regarding The Indiana Life and Health Insurance Guaranty Association (ILHIGA).

Limited Coverage

The amount of coverage provided by the guaranty associations generally depends on the type of insurance product.  Basic coverage limits are:

• Life Insurance:  $300,000 in death benefit and $100,000 in net cash surrender value per insured regardless of the number of policies you may have with the liquidated company.
• Health Insurance:  $300,000 in health insurance benefits per insured regardless of the number of policies you may have with the liquidated company.
• Annuity Contracts:  $100,000 in present value of the annuity benefits (including net cash surrender and withdrawal value) per annuitant regardless of the number of annuities you may have with the liquidated company.
• Property & Casualty Insurance: $100,000 per covered claim, up to $300,000 per occurrence

Life and Health Guaranty Fund

The Indiana Life and Health Insurance Guaranty Association, or ILHIGA, was created by the state legislature.

Insurance agents are not allowed to advertise the fact that a policy is subject to coverage by the guaranty association.  

Property and Casualty Guaranty Fund

The property and casualty guaranty association – known as the Indiana Insurance Guaranty Association, or IIGA – was also created by the state legislature.  

Insurance agents are not allowed to use the existence of the Indiana Insurance Guaranty Association for the purpose of selling or soliciting the sale of any form of insurance covered by IIGA.  

State Health Insurance Regulations

State insurance regulation of health insurance covers millions of Americans. The health insurance regulatory breakdown for Americans is as follows:

• State regulation. Some employer or employee groups purchase health insurance coverage from an insurance company. Others may purchase group health coverage from a health maintenance organization (HMO). Both are called fully insured health benefit plans. The Indiana Department of Insurance regulates Indiana insurers of such plans.
• Federal regulation. Some employer or employee groups provide what are called self-funded health benefit plans. This means an employer or employee group may set aside funds and employee premiums each month to pay health coverage claims submitted to the plan. If the plan is self-funded and offered by a private sector employer or bona fide union, the designated regulatory authority is the U.S. Department of Labor’s (DOL) Pension and Welfare Benefits Administration.

Sometimes self-funded health benefit plans are confused with fully insured benefit plans. Employers often hire an insurance company, an HMO, or a third party administrator to process claims for a self-funded health benefit plan. If you do not know what kind of plan you have, review any written plan information you have been given. If you are still uncertain, ask your employer or plan administrator.

How to Make an Insurance Claim or Dispute a Claim Denial

Things to do before you file a claim:

• Review your policy or employee booklet carefully to be sure the service in question is covered.
• Follow any managed care rules, including pre-certification requirements and use of network providers.
• Give claim forms to the provider, with your policy number and other identifying information.

How to submit claim properly:

• Find out if your provider submits the claim for you or if you need to do it.
• If you need to do it, review the information to be sure it is complete and correct.
• File it as soon as you get the bill from the provider.
• Send it to the right address.
• Keep a copy for your reference.

Allow reasonable time for company to process your claim. The company should inform you if it needs any additional information to complete the claim. Sometimes, it will request additional information directly from the providers or return the claim form to you to get more information. After the company has all the information it needs, it has a certain number of working days to process your claim. The company must send you an explanation of benefits that explains its decision.

If your claim is paid:

• If you assigned benefits to the provider, the benefit check will be sent directly to the provider.
• You will pay any deductibles and co-insurance.
• If you did not assign the benefits, the check will come to you and you will need to pay your provider(s) for the entire amount.

If your claim is denied:

• The reason for denial should be stated on your explanation of benefits.
• If you disagree with the basis stated for denial, check your policy or employee booklet for the company's appeal procedures.
• The company should be able to answer procedural questions about appeals over the phone.
• Your appeal should be in writing and may require information from your doctor.

Filing a consumer complaint with the Indiana Department of Insurance:

If you've tried unsuccessfully to resolve a claim problem with your company or agent, contact the Indiana Department of Insurance. Very often, companies will resolve disputes after the Department intervenes on a consumer’s behalf. A formal complaint form is not essential, however, every request for Department assistance must be in writing. It should include the following information to speed processing of your complaint:

• Include your name, address (with ZIP code), and daytime phone number.
• Include the name of the company or agent against whom you are complaining.
• Include your policy number and/or claim number.
• Include a brief description of the problem and how you think it should be resolved.

 It is also helpful if you:

• Supply any documentation you have to support your case including phone notes.
• State what has been done to resolve your problem including whom you have talked to and what you were told.
• For future reference, keep a copy of your letter to the state insurance department.

Learn more about health insurance, life insurance, and annuities

Employee Rights for Health Insurance in the State of Indiana

When you leave a plan All group health plans must give you a certificate that shows how many months of coverage you had under their plan. This certificate of "prior creditable coverage" must be provided to you when:

• You leave your job or
• You exhaust your COBRA benefits or
• You ask for it within 24 months after leaving the plan.

When you enroll in a new plan All group health insuranceplans must tell you about any pre-existing condition limits in their plan.

They must tell you what will be required to show proof of prior coverage.

After receiving proof of prior coverage, the plan must advise you if any conditions you have will be excluded as a pre-existing condition.

Discrimination based on medical history prohibited The new Indiana laws prohibit all group health plans from discriminating against you based on your health status. In other words, the plan can not treat you any differently from other individuals covered under your plan because you have a medical condition (such as cancer or a disability) or have a history of filing medical claims.

Employer (Or Plan) Responsibilities

Prior Coverage Certification

All group health employer plans must provide written certification of prior coverage to all individuals losing coverage. The certificate must identify the covered person, period of coverage, and waiting periods (if any). It should be sent by first class mail to the employee's last known address. The plan must also provide specific benefit information upon request to another employer's plan.

Notice of Pre-existing Condition Exclusion Certain information must be included in the Summary Plan Description (SPD) employee booklet to notify of their right to:

• Receive notice of the pre-existing condition exclusion.
• Receive credit for prior coverage.
• Request certificates of coverage from previous plan.The notice also must say the plan will help the participants get their certificates, if necessary.

Special Enrollment Periods

Plans must provide a special enrollment period:

• For individuals who become dependents by marriage, birth or adoption. At that time, the employee or spouse may also elect coverage, if not already covered.
• For employees/dependents who initially decline your plan coverage because they were covered under another plan. (For example, the employee is covered through their spouse and then loses that coverage.)

Disclosure Requirements (for self-insured plans only)

Plans must provide notice of material reduction in benefits or services within 60 days.

The Summary Plan Description must include information about the third-party administrators of the plan.

Employer Rights The laws also grant employers certain rights.

Some important examples:

• Guaranteed renewability for all fully insured group plans. Insurance companies are required to automatically renew you group coverage each year.
• Guaranteed availability for small employers. Health insurers in this market must make all their health plans available to all small employer groups that apply.
• Upon written request, the insurance company must provide the employer a written outline of all group health plans offered.

Mental Health Coverage Large employer and self-funded health plans are prohibited from imposing different annual or lifetime dollar limits on benefits provided for mental health conditions than for medical and surgical coverage. In other words, if your plan has a $50,000 annual limit on benefits for medical conditions, it must have the same annual limit for mental health coverage.

There is an exception to this rule. A plan can opt out, i.e. not provide this coverage, if they can show that their plan costs would increase by 1%.

Individual Health Plans Individual health insurance policies must be guaranteed renewable. However, policies still may be canceled for non-payment of premiums or fraud.

Tax Benefits Long-term Care Insurance

The federal law (HIPAA) provides for favorable tax treatment for "qualified long-term care plans." If you have a qualified plan:

You may deduct all or part of the premium as a medical expense.

Benefits paid out by the policy will generally not be taxable as income.

You should consult with your attorney, accountant, or tax advisor regarding the tax implications of purchasing long-term care insurance. For more information about long-term care insurance in Indiana, please call the Senior Health Insurance Information Program (SHIIP) at the Indiana Department of Insurance, 1-800-452-4800 or (317) 233-3475.

The Health Insurance Portability and Accountability Act for Indiana Consumers and Business Owners

Recent federal and Indiana state laws provide important consumer protections for those who have pre-existing medical conditions and move from one job to another.

The federal law, officially called the "Health Insurance Portability and Accountability Act of 1996" (HIPAA), also referred to as the "Kassebaum-Kennedy Act", was enacted by President Clinton on August 21, 1996.

This document is designed to provide a general overview of the HIPAA law and how it interacts with existing state laws.

We hope this document will also help correct a few misconceptions about the recent laws.

You may have heard that you'll be able "to take your medical coverage with you." This is only partially true. You do not actually take your exact plan of health benefits with you, but you do get to "take the credit" for the time you've served under your former plan to your new employer's plan. In general, the new laws require employer group health plans to cover pre-existing conditions sooner by giving you credit for coverage under your former health plan.

The law applies to most health plans. The "portability" or take it with you concept does not apply if you are changing from one individual health plan to another individual health plan. Pre-existing conditions limits will still apply.

The laws do not affect all health insurance policies in exactly the same way. Group policies have different rules than policies purchased by individuals.

As a consumer, you need to know what kind of plan you have and which laws apply to your plan. In general, most of the new laws cover group health plans only. Very few changes were made to individual health plans. Tax changes were also made to long-term care plans and health savings accounts.