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B.C. Reg. 327/90
O.C. 1351/90
Deposited September 7, 1990
effective September 15, 1990
This consolidation is current to April 9, 2024.
Link to Point in Time

Financial Institutions Act

Insurance Contracts (Life Insurance
Replacement) Regulation

[includes amendments up to B.C. Reg. 10/2012, January 26, 2012]

Contents
1Interpretation
2Replacement of life insurance contract
3Duties of life insurance agent licensees
4Duties of life insurer
Schedule

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(a) rescinded, lapsed or surrendered,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.]

Schedule

[en. B.C. Reg. 10/2012, s. 5.]

Life Insurance Replacement Declaration

Do not cancel your existing policy until the new policy is in force and you accept it. Before you cancel your life insurance policy you should have answers to the questions below. Ask any insurance agent or broker, or an independent person, for help if you need it.

Questions about your present life insurance policy

1. Why do you want to replace your policy? Is the new policy better for you? How?

2. Should you just buy more insurance or change your policy? How much will these changes cost?

3. When should you cancel your present policy? When will your next annual dividend be paid? Will the timing affect your cancellation charges?

4. Will you pay more income tax if you cancel your present policy?

Questions on the advantages and disadvantages of a new life insurance policy

1. Do you understand the type of insurance policy you are buying? Is it a term life, whole life, or universal life insurance policy? You should know the differences.

2. Are there times when the new policy will not pay all the benefits that your present policy does? Examples are suicide and contestable periods and contractual exclusions.

3. Will the new policy pay as much as your present policy? Examples are death benefits, cash values, and dividends.

4. Does the new policy have the same extra, or optional, benefits as your present policy? Examples are waiver of premium, guaranteed insurability, accidental death, and family member riders.

5. Are there cancellation charges on the new policy?

6. What guarantees apply to your present and proposed policies? Which policy has the best guarantees?

7. Will either of the policy premiums (payments) increase? For how long will the premiums stay the same? How much will they increase?

Important: Please ensure that the agent or broker provides you with copies of the written explanation of the advantages and disadvantages of replacing your life insurance policy with a new policy.

I confirm that I have received this Life Insurance Replacement Declaration.

........................................................
Client's signature
.........................................
Date

I have given the client this document and a written explanation of the advantages and disadvantages of replacing their life insurance policy, before starting the application for a new policy.

........................................................
Agent or broker's signature
.........................................
Date

Note: Your agent or broker should deliver and review the new policy with you. If the policy is not satisfactory for any reason you may have a right to reject it and receive a full refund of premiums, under provincial or territorial law or under contract. Check the policy and the law for the right of rejection and the time limit for rejection.

[Provisions relevant to the enactment of this regulation: Financial Institutions Act, R.S.B.C. 1996, c. 141, sections 177 (a) and 289 (4) (d) and (e)]