DISCLOSURE REQUIREMENTS FOR POLICIES

05/01/2003

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On 31 March 2003 the Ministry of Finance an-nounced rules governing information to be dis-closed regarding with-profits life insurance policies and without-profit life insurance policies. The main points are as follows:

I.Information to be disclosed in product literature

The wording "This insurance policy is a with-profits policy" (or "without-profits policy") must appear on all sales literature given to ap-plicants, on the cover page of the insurance pol-icy, and in the policy conditions. On a with-profits policy, the statement "Bonuses on this policy do not form part of the benefits guaranteed under this policy, and the insurer does not guarantee the amount of any bonuses payable" must also be displayed in the same manner. On a without-profits policy, the state-ment "This is a without-profits policy; it does not participate in the distribution of profits, and no bonuses are payable" must also be displayed in the same manner.

II.Matters for attention regarding product sales

Sales literature for with-profits policies and without-profit policies must not merely stress projected bonus rates, and must not mislead applicants by comparing rates of return on the policy with those of other financial products.

Sales literature for a with-profits policy must clearly state the conditions for and method of bonus payments. Guaranteed and non-guaranteed payments must be separately expressed, for the guidance of applicants.

All statements, graphs and tables used to pre-sent policy bonus examples must be expressed fairly and reasonably and must not deliber-ately mislead applicants.

Policy bonus examples must be based on possible bonus amounts payable at each an-niversary of the policy, estimated by an actu-ary using reasonable actuarial assumptions and formulae, and examples based on other assumptions must also be shown to test the sensitivity of the bonus amounts to interest rate variations, for the guidance of applicants.

An additional section must be provided on the policy application form containing the fol-lowing wording, which must be signed and dated by the applicant:

"I understand that policy bonuses are not guaranteed, and may vary upward or down-ward. I confirm that the salesperson has in-formed me the of the above situation."

An additional section must be provided on related report forms for sales staff containing the following wording, which must be signed and dated by the salesperson:

"I confirm that I have informed the applicant that policy bonuses are not guaranteed, and may vary upward or downward. I have made no assurances to the applicant."

III.Other matters for attention

If sales literature given to applicants presents policy bonus examples, these must be pro-duced by the insurer or used with the insurer's consent. Insurance business solicitors (in-cluding insurance brokers, agents, and sales agent) may not use an insurer's sales literature without the insurer's authorization.

If for two consecutive years a with-profits insurance policy has failed to generate the cumulative bonus amounts projected using the above-mentioned reasonable actuarial as-sumptions, the insurer must explain the rea-sons, and measures undertaken to improve the situation, to the regulatory authority. If the insurer alters the above-mentioned possible bonus amounts projected using the reasonable actuarial assumptions, it must also explain the reasons to applicants in writing.