Administrative History Effective date: January 1, 1969 —————— Chapter recodified from COMAR 09.30.48 to COMAR 31.09.01 effective September 7, 1998 (25:18 Md. R. 1439) Authority Insurance Article, §§ 2-109 , 16-102 , and 16-217 , Annotated Code of Maryland

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.01 Definition. A. "Wholesale life insurance" means life insurance distributed on a mass merchandising basis and administered by group methods provided, with or without evidence of insurability, by individual policies and made available to employees or members under a program sponsored by: (1) An employer; (2) An association of employers; (3) A union or association of unions; (4) An association of persons having the same occupation or profession; (5) An association of civil service employees; (6) A religious, charitable, recreational, educational, civic, or fraternal organization or association; (7) A school; (8) A sports team; (9) A volunteer fire department; or (10) Any substantially similar group approved by the Commissioner. B. The program may also cover dependents of the employees or members. C. As used in this chapter, the term "wholesale life insurance policy" does not include policies issued in connection with: (1) Employee benefit trusts and plans forming part of a retirement, stock bonus, pension, profit-sharing, annuity, deferred compensation, disability, or death benefit plan established by an employer for the benefit of some or all of his employees or their dependents or beneficiaries qualified or exempt under the United States Internal Revenue Code of 1954, as amended from time to time; (2) Employee trusts and plans established under the Federal Self-Employed Individuals Tax Retirement Act of 1962; (3) Tax sheltered annuity programs for certain organizations exempt from federal income tax and for public schools; and (4) Buy-and-sell agreements. D. An arrangement for premium payment such as salary deduction, salary savings, or payroll allotment may not in and of itself cause a policy to be classified as wholesale life insurance. Except where the context indicates otherwise, references to policy in this chapter shall refer to a wholesale life insurance policy.

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.02 Plan of Insurance. Wholesale life insurance policies may be issued on the yearly or more frequently renewable term plan or on any other term or on any whole life or endowment plan. If the policy is issued on the yearly or more frequently renewable term plan or any other term plan, it shall contain the right of renewal to at least age 65 nearest birthday (subject, however, to the insurer's right to refuse renewal in accordance with Regulation .05 of this chapter ), and shall contain the right to convert to a whole life or endowment plan after termination of the final term period. However, the policy need not provide the privilege of renewal of term insurance on a dependent child beyond age 19 nearest birthday. Whenever the policy is not eligible for renewal as a wholesale life insurance policy, it shall contain such additional conversion rights as are hereinafter set forth if written on a yearly or more frequently renewable term basis or, if written on other than a yearly or more frequently renewable term basis, shall give the insured employee or member the right to continue the insurance under the original policy at the same premium, or at a stated higher premium which may not exceed rates charged by the insurer for ordinary policies issued under the same policy plan of insurance for the same class of risk.

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.03 Premium Rates. A. Premium rates for wholesale life insurance policies may be less than rates customarily charged by the insurer for ordinary policies issued under the same policy plan of insurance for the same class of risk. B. Policies Issued on the Yearly or More Frequently Renewable Term Plan. The policy shall contain a table of renewable premiums for all ages up to the limiting age for renewal. Ages may be grouped for the purpose of premium rates either by one group for ages under 40 or by decennial (10-year) or smaller age groupings for ages under 40, and by quinquennial (5-year) or smaller age groupings for ages 40 to 75. The insurer may reserve the right to change the table of rates upon 30 days prior written notice to the sponsor and to the insured employee or member, the change to become effective on a premium due date or on a policy renewal date specified in the notice, but an increase in rates may not become effective within 1 year after issue of the policy or after the effective date of any prior change in the table of rates. C. Policies Issued on Other Than the Yearly or More Frequently Renewable Term Plan. A policy issued on other than the yearly or more frequently renewable term plan shall have premium rates guaranteed in the policy. These rates may not be changed while the policy is continued as a wholesale life insurance policy. However, the insurer may make a change in its schedule of premium rates to be effective for policies issued after the effective date of the change to employees or members of the same sponsor. D. Nondiscrimination. Premium rates shall be self-supporting on reasonable assumptions as to mortality, interest, and expense and may not unfairly discriminate between any class or classes of persons insured. E. Experience Refund. An insurer may grant experience refunds to a case either retrospectively or prospectively, if all wholesale life insurance cases of the same class are experience rated by the insurer on a equitable basis taking into consideration size, credibility, and other relevant factors.

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.04 Permissible Cases. A. Evidence of Insurability. The insurer may require evidence of insurability on individual lives. B. Contributory and Noncontributory. Premiums for the policies may be paid by the sponsor or by the employee or member insured, or partly by the sponsor and partly by the employee or member insured. C. Employer Sponsored Case. (1) The class or classes of persons to be insured initially shall consist of not less than two employees. An employer sponsored case which meets the qualifications for a group life insurance policy under Insurance Article, Title 17, Annotated Code of Maryland , as amended to date, and under which more than 32 employees are initially eligible, may not be written on a wholesale life insurance basis. The term "employees" may include: (a) Directors and officers, if the employer is a corporation; (b) An individual proprietor or partner, if the employer is an individual proprietor or a partnership; (c) Elected or appointed officials, if the employer is a government unit, department, or agency; and (d) Retired employees. (2) For purposes of this chapter, employees of affiliated corporations, proprietorships, or partnerships under common control may be regarded as employees of the employer. D. Other Sponsors. If a sponsor is other than an employer, the case may be written only if the persons, excluding dependents, to be initially insured shall number at least five, and if the number of persons, excluding dependents, initially eligible exceeds 32, only if the case does not qualify for a group life insurance policy under Insurance Article, Title 17, Annotated Code of Maryland , as amended to date.

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.05 Right to Refuse Renewal. A. The insurer may reserve the right to nonrenew a policy in the wholesale life insurance category only for one or more of the following reasons as may be specified in the policy: (1) Nonpayment of premium; (2) Termination of the employee's employment with the sponsor, or the termination of his employment in an eligible class of employees of the sponsor; (3) The termination of membership in the sponsor, or the termination of membership in an eligible class of membership of the sponsor, or when a member ceases to practice the profession or occupation with respect to which the policy was issued; (4) The maturity of the policy, or the attainment of the limiting age for renewal stated in the policy; (5) The nonrenewal at the request of the sponsor of all policies issued in the case; (6) The nonrenewal by the insurer of all policies issued to employees or members of the sponsors, the nonrenewal to be effective on a premium due date or on a renewal date following the insurer's giving at least 60 days prior written notice to the sponsor and to each employee or member insured; or (7) Any other condition for nonrenewal approved by the Commissioner. B. Written notice under §A of this regulation may be given by timely mailing of the notice to the employee or member insured at his most recent address known to the insurer or to the sponsor. C. Effective Date of Nonrenewal. Termination or nonrenewal of a wholesale life insurance policy for a reason other than nonpayment of premium may not be made effective on a date other than a premium due date or a policy renewal date.

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.06 Notice of Conversion. Whenever a conversion privilege is available under the policy or whenever a policy which is not eligible for renewal as a wholesale life insurance policy may be continued by payment of an increased premium, the insurer shall give the individual employee or member insured written notice of the right to convert or continue. The notice shall be given not more than 60 days before or more than 15 days after the termination or nonrenewal of insurance under the wholesale life insurance policy. If the notice is given more than 15 days after termination or nonrenewal of insurance, the time allowed for the exercise of the privilege of conversion or payment of the increased premium shall be extended for 15 days after the giving of the notice, but not beyond 90 days after the termination or nonrenewal of insurance. An extension of the time to convert or continue the policy does not operate to extend the coverage beyond the period stated in the policy, unless the policy specifically provides for an extension of the coverage. Written notice under this provision may be given by timely mailing of the notice to the employee or member insured at the employee's or member's most recent address known to the insurer or to the sponsor. Notice described in this regulation is not required when the policy may be continued as a wholesale life insurance policy with the same sponsor at an increased premium which is called for in the policy's schedule of premiums because of an increase in the attained age of the person insured or because of a change in the table of rates stated in the policy. In event of a change in the table of rates, notice shall be given as set forth in Regulation .03B of this chapter .

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.07 Brief Description. Each wholesale life insurance policy shall have legibly inscribed on the first page a brief description which shall include the word "wholesale" and such other information as may be required by Insurance Article, §16-213, Annotated Code of Maryland .

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.08 Policy Provisions. A. With respect to each insured employee or member, an individual policy which identifies the insured employee or member by name shall be issued covering himself or his dependents, or both. The policy shall contain all of the provisions required by §§B—M of this regulation, except that any provision or portion thereof which in the opinion of the Commissioner is not applicable to the plan of insurance shall, to the extent inapplicable, not be incorporated in the policy. In lieu of any of the provisions required by this chapter, the Commissioner may approve any provision which he deems more favorable to the policyholder. B. Grace Period. A grace period of not less than 30 days shall be allowed within which the payment of any premium payable under the policy (except the first premium) may be made, during which grace period the policy shall continue in full force. If a claim arises under the policy during the grace period, the insurer may deduct the amount of any premium due from the policy proceeds. C. Incontestability. The policy shall be incontestable as to life insurance benefits (exclusive of additional benefits relating to disability or accidental death), except for nonpayment of premium, after it has been in force during the lifetime of the insured for a period of 2 years from its date of issue. D. Entire Contract. The policy shall provide that it, or it together with any application for a policy if a copy of the application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the insurer and the policyholder, and if the application is so made a part of the policy, that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties. E. Misstatement of Age. The policy shall provide that if the age of the insured or any other person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages. F. Payment of Claims. The policy shall provide that any benefits becoming payable by reason of the death of the insured shall be made to the person entitled to them upon receipt of due proof of death. G. Beneficiary. The policy shall have endorsed on it, or on an application attached to it, the name of the beneficiary and reserve to the policy owner the right to change the beneficiary unless the owner elects to designate a beneficiary irrevocably. The policy may also provide that if the beneficiary designated in the policy does not make a claim under the policy or does not surrender the policy with due proof of death within the period stated in the policy, which may not be less than 30 days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give a valid release, then the insurer may make any payment under the policy to the estate of the insured, or to any relative of the insured by blood or legal adoption or connection by marriage, or to any person appearing to the insurer to be equitably entitled to payment by reason of having been named beneficiary, or by reason of having incurred expense for the maintenance, medical attention, or burial of the insured. The policy may also include a similar provision applicable to any other payment due under the policy. At the option of the insurer, the policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, or otherwise accepted by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. If the policy provides that the proceeds may be payable in installments or as an annuity, the policy shall include a table showing the amount and period of the installment or annuity if determinable at issue. H. Reinstatement. The policy shall provide that unless it has been surrendered for its cash surrender value, or its cash surrender value has been exhausted by reason of policy indebtedness, or the paid-up term insurance, if any, has expired, the policy may be reinstated at any time within 3 years from the due date of the first premium in default upon written application to the insurer and the production of evidence of insurability satisfactory to the insurer, and the payment of all premiums in arrears and payment or reinstatement of any other indebtedness to the insurer upon the policy and the payment of interest at a specified rate not exceeding an effective rate of 6 percent per annum compounded annually on all premiums in arrears and indebtedness. I. Nonforfeiture Values. The policy shall contain nonforfeiture provisions not less favorable to the policyholder in every respect than those required under Insurance Article, Title 16, Subtitle 3, Annotated Code of Maryland , for a policy of ordinary life insurance issued on the same plan of insurance and containing the same benefits. J. Policy Loans. The policy shall contain a provision that after 3 full years premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on proper assignment or pledge of the policy and on the sole security of the policy, at a specified rate of interest not exceeding an effective rate of 6 percent per annum, an amount equal to or, at the option of the person entitled to payment, less than the loan value of the policy. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, provided that the insurer may deduct, either from the loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining the cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year, and interest on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due, it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value of the policy, then the policy shall terminate and become void, but not until at least 30 days notice has been mailed by the insurer to the last known address of the insured or policy owner and of any assignee of record at the home office of the insurer. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for 6 months after application therefor. The policy, at the insurer's option, may provide for automatic premium loan, subject to an election of the person entitled to elect. At the option of the insurer, this provision may be omitted in a policy of term life insurance. K. Dividends. (1) If the policy is issued on a participating basis, it shall provide that the insurer shall annually ascertain and apportion any divisible surplus under the policy which will accrue on the policy anniversary or other dividend date specified in the policy and that dividends arising from this apportionment shall be credited annually beginning not later than the end of the third policy year. The payment of any dividend payable on or after the end of the third policy year may not be made contingent upon the payment of any premium due on or after the date when the dividend becomes payable. (2) The policy shall provide that the person entitled to the dividend shall have the right, at his option, to have the dividend arising from the participation: (a) Paid in cash; (b) Applied to the payment of premium if any then be due; (c) Applied to provide paid-up additions to the policy; or (d) Left to accumulate at a rate of interest not less than that specified in the policy. (3) However, in the case of a term policy, the policy need not provide the options of §K(2)(c) or (d) of this regulation. (4) The policy shall further provide that a specified option shall become effective if the person entitled to the dividend fails to notify the insurer in writing of his election not later than 30 days following the date on which any dividend is payable. L. Conversion on Termination of Eligibility. A yearly or more frequently renewable term wholesale life insurance policy shall contain a provision that if the coverage is not continued as a wholesale life insurance policy because the employee or dependent has attained the limiting age or because of termination of employment with the sponsor or termination in an eligible class of employees, or termination of membership in the sponsor, or termination of membership in an eligible class of membership of the sponsor or where a member ceases to practice the profession or occupation with respect to which the policy was issued, the persons covered under the policy shall be entitled to have issued to them by the insurer, without evidence of insurability, individual policies of life insurance without disability or accidental death benefits, provided: (1) Application for the individual policy shall be made and the first premium paid to the insurer within 31 days after the termination or attainment of a limiting age; (2) The individual policy shall, at the option of the person, be on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for the amount applied for; (3) The individual policy shall be in an amount not in excess of the amount of life insurance which is discontinued under the wholesale life insurance policy, less the amount of any life insurance for which the person is or becomes eligible under the same or any other wholesale life or group life insurance policy within 31 days after the discontinuance; and (4) The premium on the individual policy shall be at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which the person then belongs, and to his age attained on the effective date of the individual policy. M. Conversion on Termination or Nonrenewal of Case. A yearly or more frequently renewable term wholesale life insurance policy shall contain a provision that if the policy is not continued as a wholesale life insurance policy because of nonrenewal of the case by the insurer or by the sponsor, every employee, member, or dependent insured at the date of discontinuance who has been so insured for at least 5 years before discontinuance shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same conditions provided in §L of this regulation , except that the amount of insurance on that person under the converted policy may not exceed the smaller of: (1) The amount of the person's protection terminating under the wholesale life insurance policy less the amount of any life insurance for which he is or becomes eligible under any group life or wholesale life insurance policy issued or reinstated by the same or another insurer within 31 days after discontinuance; or (2) $2,000.

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.09 Combination of Life and Health Insurance. A wholesale life insurance policy may include, or may provide by rider, health insurance benefits, in which case the policy shall contain provisions relating to the health insurance which may not be less favorable to the insured employee or member than the applicable provisions required under Insurance Article, Title 15, Annotated Code of Maryland , and under any applicable regulations issued thereunder for a policy providing similar benefits. Upon discontinuance of the policy as a wholesale life insurance policy, any health insurance benefits originally provided may not be included in any conversion privilege unless the insurer, at its option, shall so provide, in which case the provision in the policy regarding the conversion privilege shall clearly indicate the extent of health insurance benefits which may be continued after the policy ceases to be a wholesale life insurance policy.

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.10 Policy Restrictions. A. Prohibited Provisions. A wholesale life insurance policy may not contain any provision which is prohibited under Insurance Article, §12-209 or 16-216, Annotated Code of Maryland. B. Limitations of Liability. A wholesale life insurance policy may not contain any limitation of liability which is less favorable to the policyholder than limitations permitted under Insurance Article, §16-215, Annotated Code of Maryland . C. Separate Agreements. A separate agreement may not be entered into between the insurer and the sponsor which would purport to change the terms and conditions of any wholesale life insurance policy delivered to an employee or member.

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.11 Validity of Noncomplying Forms. Any wholesale life insurance policy hereafter issued and otherwise valid which contains any condition or provision not in compliance with the requirements of Insurance Article, Annotated Code of Maryland , and of any applicable regulations may not be thereby rendered invalid, but shall be construed in accordance with conditions and provisions at least as favorable as those required under Insurance Article, Annotated Code of Maryland , and the applicable regulations.

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.12 Effective Date. This chapter shall take effect January 1, 1969, provided, however, that for any case in existence before the effective date of this chapter and for any new case initially made effective before June 1, 1969, the insurer may issue policy forms approved by the Maryland Insurance Administration before January 1, 1969, for use as wholesale life insurance policies which approval was in effect on the initial effective date of that case, and, unless the Commissioner otherwise prescribes pursuant to the provisions of Insurance Article, Annotated Code of Maryland , and §3 of Chapter 553 of the Acts of the 1963 General Assembly of Maryland, the insurer may hereafter continue to issue those policy forms to employees or members newly insured under that case.

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Previous Subtitle 09 LIFE INSURANCE AND ANNUITIES

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