Field Bulletin

Date: September 14, 2009
To: North American Annuity Agents in South Carolina and Wisconsin
From: North American Company - Annuity Division
RE: South Carolina and Wisconsin Adopt NAIC Replacement Model

NAIC Model Regulation for Replacement

The following states have adopted the NAIC Life Insurance and Annuity Replacement Model Regulation: Alabama, Alaska, Arizona, Colorado, Hawaii, Iowa, Kentucky, Louisiana, Maine, Maryland, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Texas, Utah, Vermont, Virginia, West Virginia, and Wisconsin.

The Model Regulation becomes effective September 24, 2009 in South Carolina and in Wisconsin on November 1, 2009. The model increases producer and insurer responsibilities.

To follow is a copy of the replacement form, Important Notice: Replacement of Life Insurance or Annuities form (6779Z), which is to be used in all Model Regulation states. You may begin using this form immediately. Please discontinue use of the current replacement forms 6779Z-SC, for South Carolina, and 6779Z-WI, for Wisconsin, effective 11/01/2009. Supplies of the new replacement form can be obtained through normal supply channels.


A replacement is defined as a transaction in which a new policy/contract is to be purchased, and it is known to the proposing producer, that because of this transaction, an existing policy/contract has been or will be:

  1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or terminated;
  2. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;
  3. Amended to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;
  4. Reissued with any reduction in cash value;
  5. Used in financed purchase. A “financed purchase” means the purchase of a new policy or contract involving the actual or intended use of funds obtained by the withdrawal or surrender or the borrowing from values of an existing policy to pay all or part of any premium due on a new policy, issued by the same insurer.  For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same company with four months before or 13 months after the effective date of the new policy, it will be deemed that there is sufficient evidence of the policyholder’s intent to finance the purchase of the new policy with existing policy values.


  • All applications require the producer to obtain a statement indicating whether the applicant has existing policies/contracts. The producer and applicant must sign the statement. If there are no existing policies/contracts, the producer does not have to do anything further with respect to the replacement regulations.
  • If there are existing policies/contracts, the producer must present and read the Important Notice: Replacement of Life Insurance or Annuities form (6779Z). The applicant and the producer must sign the Form attesting to the following:
    1. that the notice was read aloud or the applicant did not wish to have it read, and
    2. that a copy of the Form was left with the applicant no later than when the application is taken.
  • The producer must have the applicant list all policies/contracts proposed to be replaced on the Form, including the insurer, insured and contract number and indicate whether the policy/contract will be replaced or used to finance a new policy/contract.

The producer must leave the original or a copy of all sale materials with the applicant at the time the application is completed. For electronically presented materials, the producer must provide the applicant with a printed copy no later than policy/contract delivery. "Marketing communication" or "sales material" means a sales illustration and any other written, printed, or electronically presented information created or completed or provided by the insurer or agent; and, used in the presentation to the policy or contract owner relating to the policy or contract.

The producer must send the following information to the insurer along with the application:

A completed and signed Replacement Form, which includes:

  • A signed statement as to whether the applicant owns existing policies/contracts.
  • A signed statement identifying any preprinted or electronically presented company-approved marketing communications used, and copies of any individualized marketing communications, including any illustrations related to the specific policy or contract purchased.


  • Within five business days of receiving a replacement notice from a replacing insurer, the existing insurer must send a letter to the policy/contract owner notifying him or her of the right to receive information regarding the existing policy/contract value including, if available, an in-force illustration or policy summary if an in-force illustration cannot be produced. For registered contracts, in lieu of an illustration or policy summary, the existing insurer shall provide premium/contract contribution amounts and identify the appropriate prospectus or circular.
  • Where the existing insurer receives a request to borrow, surrender or withdraw any policy values, the existing insurer shall send a notice advising the policy/contract owner how the release of policy values may affect the guaranteed elements, non-guaranteed elements, face amount, or surrender values. The notice must be sent under separate cover from the check when the check is sent to someone other than the policy/contract owner. For consecutive automatic premium loan or systematic withdrawals, the notice is sent only at the time of the first loan or withdrawal.
  • Retention – maintain at home office or regional office copies of any notification of proposed replacement, indexed by the replacing insurer for five years.


  • Verify that the application and required forms are complete and that they comply with the replacement regulation.
  • Within five business days, notify the existing insurer that may be affected by the proposed replacement.
  • When the replacement is identified, if not indicated on the applications, within five business days of the request from an existing insurer, mail a copy of the available illustration or policy summary for the proposed policy or available disclosure document for the replacement contract. For registered contracts, in lieu of an illustration or policy summary, the existing insurer shall provide premium/contract contribution amounts and identify the appropriate prospectus or circular.
  • If requested by the exiting insurer, provide a copy of the available illustration or policy summary for the proposed policy or an available disclosure document for the proposed contract within five business days of the request.
  • Provide to the policy/contract owner a 30-day right to return to the policy/contract from the date of policy/contract delivery for an unconditional full refund.
  • For internal replacements, allow credit for time elapsed under the replaced policy’s provision for incontestability and suicide period up to the face amount of the existing policy/contract. For financed purchases, the credit may be limited to the amount by which the face amount of the existing policy is reduced by the use of the existing policy values to fund the new policy/contract.
  • If replacing insurer requires the use of only company-approved marketing communications within 10 days of the date the replacement policy/contract is issued, the replacing insurer must:
    1. Notify the applicant either in writing or verbal communication that the producer has represented that copies of all the marketing communications used were left with the applicant;
    2. Provide the applicant with a toll-free number to contact the company if copies were not left with the applicant; and,
    3. Stress the importance of keeping the marketing communications.
  • Maintain at its home office the Important Notice: Replacement of Life Insurance or Annuities form (6779Z) indexed by producer, for five years.
  • If the replacing insurer requires that use of only company-approved sale materials, maintain a copy of the letter sent to the policy/contract owner or verification that such letter was sent in the policy/contract file at the home office or regional office for at least five years after the policy/contract terminates.

If you have any questions about this regulation, please contact Flora Robb at 1-800-800-3656, extension 87668.




Annuity Service Center | P.O. Box 79905 | Des Moines, IA 50325

PRT 09-09



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