PROPOSED STATE OF ILLINOIS RULES AFFECTING SMALL BUSINESS

Following are proposed rules of possible interest to small businesses published in the March 2, 2007 Illinois Register. During the 45-day comment period, individuals have an opportunity to express their support or opposition to the rule. To submit comments or to learn more about the proposed rules, contact Katy Khayyat at the Department of Commerce and Economic Opportunity Entrepreneurship Network Information Center via e-mail at Katy.Khayyat@Illinois.gov or call (800) 252-2923 or (217) 785-8020.

This newsletter is now available online. To read the online version, go to www.ienconnect.com/regflex.

The following proposed regulation will impact insurance producers who are licensed to sell, solicit, or negotiate insurance:

The Department of Financial and Professional Regulation proposed a new Part and 2 amendatory rulemakings to supplement its policies regarding sales of certain insurance products. The new Part titled “Suitability in Annuity Transactions” (50 Ill. Adm. Code 3120; 31 Ill. Reg. 3241) adopts the National Association of Insurance Commissioners (NAIC) model regulations for appropriate annuity contracts and business practices by insurance companies and producers offering that product. The Part defines “recommendation” as advice to a consumer that results in the purchase o exchange of an annuity contract. It prescribes standards of practice for companies or individual producers, such as a duty to make reasonable efforts regarding the consumer’s financial and tax status and investment objectives. An insurance company or producer must have reasonable grounds for believing that a recommendation for purchase or exchange of an annuity is appropriate, based on facts disclosed by the customer. Insurance companies are directed to establish protocols for compliance with their duties regarding sales recommendations, including maintenance of written procedures, and insurers have the option of contracting with the 3^rd party (e.g. a managing general agent) to provide such supervision. If a 3^rd party is appointed for the supervisor role, additional protocols and annual certifications by that party are required. Compliance with the National Association of Securities Dealers Conduct Rules (incorporated by reference) satisfies the requirements regarding recommendations for purchase of variable annuities. The Director may order an insurance company, producer, or managing general agent to take corrective action for any consumer harmed by a violation of this Part. Such violations are classified as unfair trade practices under the Insurance Code.

Bottom Line: This new Part adopts the NAIC Model Regulation for Suitability in Annuity Transactions. The regulation contains various suitability standards, exemptions, recordkeeping requirements and provisions for non-compliance. For further information, contact James C. Rundblom, Department of Financial and Professional Regulation (217) 785-8559.

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The following proposed regulation will impact insurance producers:

DFPR proposed amendments to “Advertising and Sales Promotion of Life Insurance an Annuities” (50 Ill. Adm. Code 909; 31 Ill. Reg. 3228) to address “predatory” sales practices regarding variable life insurance policies and annuities. Besides defining new terms, the amendments prescribe restrictions regarding advertising targeted at seniors. Violations of the Part are upgraded from offenses warranting fines to unfair trade practices.

Bottom Line: The proposed amendments to this Part include provisions borrowed from California law and are designed to prohibit certain predatory practices in the sale of variable life insurance and annuities to senior citizens. Additionally, the amendments require that insurers maintain a system of control so that recommendations of such products are not unsuitable to the applicant. For further information contact James C. Rundblom, Department of Financial and Professional Regulation (217) 785-8559.

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The following proposed regulation will impact insurance producers:

DFPR also proposed amendments to “Licensing Requirements for the Solicitation of Variable Contract” (50 Ill. Adm. Code 3117); 31 Ill. Reg. 3236). Besides adding definitions for terms used within the Part, a new practice standard is added that bars any purchase recommendation or sale of variable life insurance in the absence of a reasonable belief that the purchase of the policy is suitable for the applicant based on the applicant’s age, insurance, financial situation, investment and insurance objectives, tax status, or other information known to the insurer or producer making the recommendation. A new section classifies violations of the Part as unfair trade practices under the insurance Code. An additional amendment expands the Part title to include “suitability” requirements for insurance solicitation.

Bottom Line: The proposed amendments update the regulation and supplement requirements for solicitation of variable life insurance, so that products are not recommended that are unsuitable to the applicant in view of his or her financial situation. For further information contact James C. Rundblom, Department of Financial and Professional Regulation (217) 785-8559.

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Employer Workshops / Business Expos

For information regarding in-depth workshops that address Unemployment Insurance claims / protest issues and value-added programs and services available to you, or to schedule a workshop, please contact Bill Harrison, manager of Employer Outreach, at 309.343.3100 ext 202 or by email, William.Harrison@illinois.gov. For more information on the workshops listed below, go to: http://www.ides.state.il.us/employer/workshops/default.asp.

There are 15 events scheduled. For more information, click the name of the event.

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