Interpretation

1   In this regulation:

"Act" means the Financial Institutions Act;

"contract of life insurance" means individual life insurance policies, policy riders and annuity contracts issued by a life insurance company;

"declaration statement" means the declaration statement in the form set out in the Schedule;

"life insurance agent licensee" means a person licensed as an insurance agent for life insurance, or life insurance together with either or both of accident insurance and sickness insurance;

"replacement of a contract of life insurance" means any transaction in which life insurance is to be purchased in a single contract or in more than one related contract by a person from an insurer and, as a consequence of the transaction, any existing contracts of life insurance have been or are to be

(a) rescinded, lapsed or surrendered,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 other manner to effect a reduction of benefits in a contract of life insurance,

(d) changed so that cash values in excess of 50% of the tabular cash value of any contracts of life insurance are released, or

(e) subjected to substantial 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% of the tabular cash value is borrowed on one or more contracts of life insurance,

but does not include a transaction in which

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

(g) the contract to be replaced is an annuity, or

(h) a contract is replaced by group insurance.

[am. B.C. Reg. 10/2012, s. 1.]

Replacement of life insurance contract

2   (1) An inducement described in section 177 (a) of the Act by a life insurance agent licensee is only permitted if the replacement or proposed replacement of the existing contract of life insurance with the new one

(a) is not detrimental to the interests of the insured, and

(b) is in accordance with section 3.

(2) A life insurance agent must not make a recommendation to or induce an insured to lapse, forfeit or surrender for cash, or for paid up or extended insurance, or for other valuable consideration, the insured's contract of life insurance with an insurer in order to effect another contract of life insurance with that insurer unless replacement of the existing contract of life insurance with the new one

(a) is not detrimental to the interests of the insured, and

(b) is in accordance with section 3.

(3) A life insurance agent must not make a recommendation to an insured to lapse, forfeit or surrender for cash, or for paid up or extended insurance, or for other valuable consideration, the insured's contract of life insurance with an insurer in order to effect a contract of life insurance with another insurer unless replacement of the existing contract of life insurance with the new one

(a) is not detrimental to the interests of the insured, and

(b) is in accordance with section 3.

(4) An insurer must not make a recommendation to or induce an insured to lapse, forfeit or surrender for cash, or for paid up or extended insurance, or for other valuable consideration, the insured's contract of life insurance in order to effect a contract of life insurance with that or another insurer unless replacement of the existing contract of life insurance with the new one

(a) is not detrimental to the interests of the insured, and

(b) is in accordance with section 3.

[am. B.C. Reg. 10/2012, s. 2.]

Duties of life insurance agent licensees

3   (1) If an insured requests or makes an application for a replacement of a contract of life insurance that, in the opinion of an insurer or a life insurance agent licensee, would be detrimental to the insured's interests, the insurer or life insurance agent licensee must advise the insured of the advantages and disadvantages to the insured that would result from the replacement.

(2) Where it appears that, due to a change in circumstances, an existing contract of life insurance should be amended or changed to another contract of life insurance, a life insurance agent licensee must endeavour to have the existing contract amended or changed by the insurer that issued the existing contract of life insurance, in order that any values, credits or privileges in the existing contract may be transferred to the amended or changed contract of life insurance, unless the amendment or change by the existing insurer is detrimental to the interests of the insured.

(3) Every life insurance agent licensee must

(a) obtain, as part of each application for a contract of life insurance, a statement signed by the applicant stating whether or not replacement of a contract of life insurance is intended, and

(b) prepare and forward to the insurer with each application for a contract of life insurance a statement as to whether or not replacement of a contract of life insurance is intended.

(4) If replacement of a contract of life insurance is intended, every life insurance agent licensee, before taking a new application, must

(a) present and review with the applicant a declaration statement, and

(b) secure the applicant's signature, along with the signature of the life insured if other than the applicant, attesting to the receipt of the declaration statement.

(5) Once an insurer has issued a new contract of life insurance and given the contract to a life insurance agent licensee, the life insurance agent licensee must deliver the new contract to the applicant as soon as possible, unless the applicant has provided written instructions to the contrary to the life insurance agent licensee.

[am. B.C. Reg. 10/2012, s. 3.]

Duties of life insurer

4   (1) A life insurer who is replacing a contract of life insurance must comply with the duties imposed on life insurance agent licensees under section 3 (2) to (5) if there is no life insurance agent licensee involved in replacing the contract.

(2) An applicant for the replacement of a contract of life insurance may withdraw, in writing, the application within 20 days of the date on which the applicant signed the declaration statement.

(3) If the applicant withdraws an application under subsection (2), the life insurer must refund any premium deposit or other payment made by the applicant in respect of the proposed replacement of a contract of life insurance, unless the application is for a single premium contract of life insurance or for a contract of life insurance the value of which depends upon a stated rate of interest or a stated group of assets or both; and in that case the refund must be adjusted to reflect the change in the capital value of the contract.

[am. B.C. Reg. 10/2012, s. 4.]