R.R.O. 1990, Reg. 674: REPLACEMENT OF LIFE INSURANCE CONTRACTS

Insurance Act
Loi sur les assurances

R.R.O. 1990, REGULATION 674

REPLACEMENT OF LIFE INSURANCE CONTRACTS

Historical version for the period July 1, 1995 to December 16, 2010.

Last amendment: O. Reg. 761/94.

This Regulation is made in English only.

1. In this Regulation,

“replacement of a contract of life insurance” means a transaction whereby life insurance is purchased in a single contract or in several related contracts by a person from an insurer and as a consequence of the transaction one or more contracts of the insurance are,

(a) rescinded, lapsed or surrendered,

(b) changed to paid-up insurance or continued as extended term insurance or under automatic premium loan,

(c) changed in any manner so as to effect a reduction in benefits,

(d) changed so that cash values in excess of 50 per cent of the tabular cash value of the insurance contract are released, or

(e) subjected to borrowing of any policy loan values whether in a single loan or under a schedule of borrowing over a period of time whereby an amount in excess of 50 per cent of the tabular cash value is borrowed on one or more contracts of life insurance,

but does not include a transaction where,

(f) a new contract of life insurance is made with an insurer with whom the person has an existing contract of life insurance in furtherance of a contractual conversion privilege exercised by the person,

(g) a contract is replaced by an annuity, or

(h) a contract is replaced by group insurance;

“working day” means a day other than Saturday or a holiday. R.R.O. 1990, Reg. 674, s. 1.

Duties of Agent

2. (1) Every agent for an insurer shall, upon receiving an application for a contract of insurance,

(a) obtain as part of the application, a statement signed by the applicant that sets out whether or not replacement of a contract of life insurance is intended; and

(b) forward to the insurer with the application a statement signed by the agent that sets out whether or not replacement of a contract of life insurance is intended. R.R.O. 1990, Reg. 674, s. 2 (1).

(2) Where replacement of a contract of life insurance is intended, the agent shall,

(a) prior to accepting an application for a contract of insurance,

(i) obtain from the applicant a list of all life insurance contracts intended to be replaced,

(ii) complete, sign, review with the applicant and |leave with the applicant a disclosure statement in Form 1 respecting each contract of life insurance intended to be replaced, and

(iii) obtain on each completed disclosure statement referred to in subclause (ii), the signature of the applicant and the signature of the life insured, if other than the applicant, attesting to the receipt of the completed disclosure statement;

(b) within three working days from the date of receiving the application for the contract of insurance, forward to every insurer whose contract is intended to be replaced, a copy of the completed disclosure statement as presented to and signed by the applicant without the information recorded under the column entitled “Proposed Replacement Policy”;

(c) where there is borrowing on an existing contract of insurance involved in the transaction, caution the applicant that it is not usually advisable to borrow against policy loan values beyond the expected ability or intention of the applicant to repay;

(d) forward to each insurer requested to issue a new life insurance contract,

(i) an application for a contract of insurance,

(ii) a copy of the completed disclosure statement as presented to and signed by the applicant,

(iii) a copy of all written proposals presented to the applicant by the agent during the solicitation of the application for a contract of insurance,

(iv) all written directions received from the applicant; and

(e) deliver each new contract of life insurance to the applicant as soon as is practical in the circumstances after receiving it from the insurer, unless contrary written directions have been received from the applicant. R.R.O. 1990, Reg. 674, s. 2 (2); O. Reg. 761/94, s. 1.

Duties of Insurer

3. Every insurer shall,

(a) where the insurer receives an application that discloses that replacement of a contract of life insurance is intended, ensure that a duly completed copy of Form 1 is filed with the application;

(b) maintain its principal office or place of business in Canada for at least three years, copies of all material forwarded by its agent under this Regulation;

(c) upon receiving and approving an application for a new contract of life insurance, issue the new contract of life insurance as soon as is practical in the circumstances;

(d) provide such information as is necessary to other insurers or their agents for purposes of completing Form 1, as soon as is practicable in the circumstances after receiving a request for such information; and

(e) upon providing information under clause (d), make a written record of the information and maintain the record for at least three years. R.R.O. 1990, Reg. 674, s. 3.

4. (1) An applicant for the replacement of a contract of life insurance may withdraw the application within twenty days of the delivery to the applicant of the disclosure statement referred to in subclause 2 (2) (a) (ii) by notifying the insurer or any agent of the insurer of the applicant’s intention to withdraw the application.

(2) Where an applicant withdraws an application for the replacement of a contract of life insurance, the insurer shall refund any premium deposit or other payment made by the applicant in respect of the proposed replacement of a contract of life insurance, except where the application is for a single premium life insurance policy or a policy the value of which depends upon a stated rate of interest or a stated group of assets.

(3) Where an applicant withdraws an application with respect to a single premium life insurance policy or a policy the value of which depends upon a stated rate of interest or a stated group of assets, the refund shall be adjusted to reflect the change in the capital value of the contract. R.R.O. 1990, Reg. 674, s. 4.

FORM 1
LIFE INSURANCE DISCLOSURE FORM

Insurance Act

O. Reg. 761/94, s. 2.