On April 20, 2009, Commissioner Sullivan (the “Commissioner”) of the Connecticut Insurance Department (the “Department”) released Bulletin IC–22 (the “Bulletin”), which serves as a reminder to chief executive officers of all insurance companies licensed in the State of Connecticut of their responsibility to not harm the public’s confidence in the insurance industry and to not engage in unfair trade practices.
The Bulletin covers the Commissioner’s concern that the current global financial services crisis may lead to an “erosion of consumer confidence in the life insurance industry” and drive consumers to surrender policies or request policy loans of otherwise financially sound life insurers. According to the Commissioner, this type of situation is aggravated when consumers are advised to replace a policy based on a perception of an insurer’s weakened financial strength, which may be unwarranted when the insurer remains well-capitalized to meet its policyholder obligations. For consumers, this means facing tax consequences and heavy transactional costs that may not be apparent at the time. Therefore, the Bulletin asks the insurance industry to be mindful of its responsibility to take affirmative steps to avoid contributing to the loss of public confidence by not making unfair or misleading statements, implications or innuendos about the financial condition or solvency of other companies. Further, the Bulletin serves to remind insurers that the Department will hold them responsible for the conduct of their agents in connection with such unfair and deceptive acts or practices. To monitor adherence to Connecticut law, the Bulletin states that the Department will carefully scrutinize replacement activity of all insurance policies, e.g. sales promotional schemes and compensation designs which seem to be applicable only to replacement situations.
The Bulletin also reminds insurers that Connecticut law prohibits making use of the insurance guaranty association protection for consumers in the solicitation, negotiation, procurement or effectuation of insurance, but that Connecticut law does not prevent efforts to make the public aware of Connecticut Life and Health Insurance Guaranty Association and/or the Connecticut Insurance Guaranty Association as a way to preserve consumer confidence.
To see the full text of the Bulletin, please click here.
