Definitions
1 In this Regulation,
(a) “contract”
means a contract of insurance relating to life insurance;
(b) “replacement
of a contract” or “replacement” means any transaction whereby life insurance is
purchased in a single contract or in 2 or more related contracts by a person
from an insurer and, as a consequence of the transaction, one or more existing
contracts are
(i) rescinded, lapsed or surrendered,
(ii) changed to paid‑up insurance or continued as extended term
insurance or under automatic premium loans,
(iii) changed in any other manner to effect a reduction of benefits,
(iv) changed so that cash values in excess of 50% of the tabular cash
value are released, or
(v) subjected to the borrowing of any policy loan value, whether in a
single loan or under a schedule of borrowing over a period of time, whereby an
amount in excess of 50% of the tabular cash value is borrowed,
but does not include a
transaction whereby a new purchase is made pursuant to a contractual privilege
being exercised by the policyholder under an existing contract or an existing
contract is replaced by an annuity.
Inducement to replace
contract
2 An insurer or insurance agent must not,
where it would be detrimental to the interests of the policyholder, directly or
indirectly induce or attempt to induce a policyholder to effect a replacement
of a contract.
Agent’s duty where replacement could be detrimental
3(1) Where, in the opinion of an insurance agent who
is recommending the replacement of a contract, the replacement would be
detrimental to the interests of a policyholder, the insurance agent must make
every reasonable effort to ensure that the existing contract is maintained in
force.
(2) Notwithstanding
subsection (1), where a policyholder initiates a replacement that, in the
opinion of an insurance agent, would be detrimental to the policyholder’s
interests, the insurance agent must advise the policyholder of the advantages
and disadvantages to the policyholder that would result from the replacement.
Agent’s duty where contract should be changed
4 Where it comes to the knowledge of an
insurance agent that, due to a change in circumstances, an existing contract
should be amended or replaced, the insurance agent must endeavour to have the
existing contract amended or replaced by the insurer that issued it, in a
manner that is consistent with the policyholder’s best interests and in such a
manner that any values, credits or privileges in the existing contract are
transferred to the amended or replacing contract.
Disclosure statement
on replacement
5(1) Where replacement of a contract is recommended
by an insurance agent or instructed by a policyholder, the insurance agent
must, prior to taking a new application,
(a) complete
and present to and review with the applicant a disclosure statement in a form
approved by the Minister, and
(b) obtain
on the disclosure statement the signature of the applicant or other person
whose life will be insured under the replacement contract, to indicate receipt
of the disclosure statement by the applicant or other person.
(2) The holder of a level 1 or
probationary life insurance agent’s certificate of authority must have the
disclosure statement countersigned by the holder of a full life insurance
agent’s certificate of authority who, by countersigning it, accepts
responsibility for the completion of the disclosure statement as if the holder
of the full life insurance agent’s certificate of authority had completed the
disclosure statement as the insurance agent.
(3) References
in subsection (2) to a level of life insurance certificate are references to
the level of a certificate of authority to act as a life insurance agent
specified in the Insurance Agents and
Adjusters Regulation.
AR 127/2001 s5;9/2003
Agent’s duty on new contract application
6 An insurance agent for an insurer
(a) must
obtain as part of an application for a contract a statement signed by the
applicant stating whether replacement of a contract is intended, and
(b) must
prepare and forward to the insurer with the application a statement signed by
the agent stating whether replacement is intended.
Delivery of contract
and statements
7 On taking an application where
replacement of a contract is intended, an insurance agent
(a) must
forward to the insurer whose existing contract is intended to be replaced a
copy of the disclosure statement, completed in accordance with section 5,
within 3 working days of the date of application,
(b) must
forward to the insurer that has been requested to issue a new contract a copy
of the disclosure statement, completed in accordance with section 5, a copy of
all written proposals presented to the applicant by the insurance agent and all
written directions received by the insurance agent from the applicant, and
(c) must
deliver the new contract as soon as is practicable unless contrary written
instructions are received from the applicant.
No insurance agent
8 Where there is no insurance agent, the
insurer that is replacing an insurance policy must comply with sections 3 to 7
as if that insurer were an insurance agent.
Right to withdraw
application
9 An applicant for the replacement of a
contract may in writing withdraw the application within 20 days of the date on
which the applicant signed the completed disclosure statement.
Refund on withdrawal
10 Where the applicant withdraws an
application under section 9, the insurer must refund any premium, deposit or
other payment made by the applicant in respect of the proposed replacement, and
if the application is for a single premium life insurance policy or a policy
whose value depends on a stated rate of interest or a stated group of assets,
the refund must be adjusted to reflect the change in the capital value of the
contract.
Transitional
11 Any disclosure statement approved by the
Minister under the Replacement of Life
Insurance Contracts Regulation (AR 63/90) is continued as if it were
approved by the Minister under this Regulation.
Repeal
12 The Replacement
of Life Insurance Contracts Regulation (AR 63/90) is repealed.
Expiry
13 For the purpose of ensuring
that this Regulation is reviewed for ongoing relevancy and necessity, with the
option that it may be repassed in its present or an amended form following a
review, this Regulation expires on April 30, 2016.
AR 127/2001 s13;95/2006
Coming into force
14 This Regulation comes into force on the
coming into force of any section of the Insurance
Act (SA 1999 cI‑5.1).
