20-1241.04. Duties of insurers that use insurance producers

A. An insurer that uses an insurance producer shall comply with the requirements of this section.

B. The insurer shall maintain a system for supervision and control of insurance producers that ensures compliance with the requirements of this article including at least the following:

1. A method to inform insurance producers of the requirements of this article and to incorporate those requirements into the insurer's relevant insurance producer training manuals.

2. A system to provide each insurance producer with a written statement of the insurer's position on the acceptability of replacements to guide the insurance producer as to the appropriateness of a replacement transaction.

3. A system to review the appropriateness of each replacement transaction for compliance with the insurer's replacement policy described in paragraph 2 of this subsection.

4. A procedure to confirm that the requirements of this article have been met.

5. A procedure to detect replacement transactions that have not been reported as such by the applicant or insurance producer. An insurer may comply with this requirement by systematic customer surveys, interviews, confirmation letters or programs of internal monitoring.

C. The insurer shall have the capacity to monitor each producer's policy and contract replacements for that insurer and shall be able to produce, on request, and make available to the department the following records for each insurance producer:

1. Life replacements, including financed purchases, as a percentage of the producer's total annual sales for life policies covered under section 20-1241.01.

2. Number of lapses of policies by the insurance producer as a percentage of the insurance producer's total annual sales for life policies covered under section 20-1241.01.

3. Annuity contract and 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 detected by the insurer's monitoring system as required by subsection B, paragraph 5 of this section.

5. Replacements, indexed by the replacing insurance producer and the existing insurer.

D. With or as a part of each application for a policy or contract, the insurer shall require the signed statement prescribed by section 20-1241.03, subsection A.

E. With each application for a replacement policy or contract, the insurer shall require the notice prescribed by section 20-1241.03, subsections C and D.

F. If an applicant has an existing policy or contract, the insurer shall require and shall be able to produce for at least five years after the termination or expiration of the proposed policy or contract:

1. Copies of any sales materials.

2. The basic illustration and any supplemental illustrations related to the specific policy or contract that is purchased.

3. The insurance producer's and applicant's signed statements with respect to financing and replacement.

G. The insurer shall ascertain that the sales material and illustrations used in the replacement, as provided in section 20-1241.03, subsection G, meet the requirements of this article and are complete and accurate for the proposed policy or contract.

H. If an application does not meet the requirements of this article, the insurer shall notify the insurance producer and applicant and fulfill any outstanding requirements.

I. An insurer may maintain the records required by this section in paper, photograph, microprocess, magnetic, mechanical or electronic media, or other process that accurately reproduces that actual document.