Weekly Tip: Conditional Receipts in Compact Filings

 

Weekly Tips

 Conditional Receipts in Compact Filings

1/21/2016

Several filers have contacted the IIPRC Office and the Kansas Insurance Department about the impact of Bulletin 2015-4 on Compact-approved individual life insurance applications. The Bulletin was issued by the Department on December 15, 2015.  This weekly tip was developed in collaboration with the Kansas Insurance Department and is dedicated to helping you navigate this state coverage rule and how it applies to Conditional Receipts filed through the IIPRC pursuant to the Individual Life Insurance Application Standards (IIPRC-L-APP-I). You can also find this information under IIPRC General Instructions.

Let's look at Kansas state law. Bulletin 2015-4 reiterates that K.S.A 40-451 states when an insurer or its agent accepts initial premium with an application, temporary coverage takes effect until the applicant is provided notice of an adverse underwriting decision and return of unearned premium.  The only conditions that may limit the temporary coverage are stated in the statute and do not include that the covered person must be insurable or have completed medical examinations before coverage takes effect.  Kansas does not require the written receipt to be filed for review either with the Department or through the IIPRC on behalf of Kansas, and Bulletin 2015-4 has not changed that.  Kansas is asking life insurers to confirm that if initial premium is accepted, applicants are given a written receipt consistent with K.S.A. 40-451.

Now let's turn to the Insurance Compact.  The Compact does not have specific uniform standards for receipts of any kind and when coverage applies is based on state law.  If a filing contains a Temporary Insurance Agreement and/or Conditional Receipt, the Compact applies IIPRC-L-APP-I to the content of the form. However, the Compact uniform standards do not control the process by which an insurer acknowledges receipt of premium or binds insurance coverage.  It is each insurer's responsibility to comply with state requirements for the marketing, sales and administration of Compact-approved products.  This means an insurer can file a Temporary Insurance Agreement or a Conditional Receipt with the Insurance Compact and receive approval, but the administration of a Compact-approved insurance product must not run afoul of Kansas's market regulation of products available in the Kansas market.  This has always been the case for all Compacting States—the uniform standards do not eliminate state market conduct requirements.

A filer should ensure that if it is accepting initial premium with an application in Kansas that it can show a written receipt consistent with Kansas's temporary coverage law, K.S.A. 40-451, was provided to the applicant.  Here are a few options for filers submitting Conditional Receipts to the Compact: 

  • A written receipt consistent with K.S.A. 40-451 coverage requirements does not have to be filed but must be provided.  It is not necessary to file the written receipt directly with Kansas or with the IIPRC for approval.  In other words, Kansas does not require this receipt / language to be filed for approval.
  • If a filer wishes to satisfy this requirement with language in a Compact-approved form, it is not necessary to re-file or amend a Compact-approved Temporary Insurance Agreement or Conditional Receipt that is already consistent with K.S.A. 40-451.
  • If a filer wishes to satisfy this requirement with language in a Compact-approved form, IIPRC-L-APP-I allows for acknowledgement of state-specific disclosures to be marked as variable. See § 1B, Variability of Information, and § 3K(2)(b), Agreements. It is acceptable for a Compact-approved application to contain a variable item addressing the written receipt requirement for temporary life insurance in Kansas.
  • If a filer wishes to satisfy this requirement with language in a Compact-approved form, a Temporary Insurance Agreement or Conditional Receipt consistent with K.S.A. 40-451 can be filed with the IIPRC.
  • The Compact will permit an approved filing to be reopened for the sole purpose of adding a variable item to a previously-approved individual life insurance application (including a Conditional Receipt or Temporary Insurance Agreement) as described above.
  • The Compact will permit an approved filing to be reopened for the sole purpose of adding or amending a Temporary Insurance Agreement or Conditional Receipt to include language consistent with K.S.A. 40-451 (note the language cannot indicate it is applicable only for Kansas residents unless it is marked as variable).
  • As a reminder, K.S.A. 40-451 is triggered only when the insurer or its agent accepts initial premium with an application.  If a company wishes to discontinue this practice in Kansas, this change can be documented via Note to Reviewer in a Compact filing.

If you have questions about Kansas Bulletin 2015-4 with respect to temporary insurance coverage requirements, please contact the Kansas Insurance Department.  If you have questions about how to handle this requirement in forms filed with the IIPRC, please contact the IIPRC Office or the Kansas Insurance Department.  If you have questions about IIPRC Uniform Standards, please contact the IIPRC office.