S.C. Code Regs. § 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.

Notes

S.C. Code Regs. § 69-20