# Title 45 — Insurance, Commissioner of

## Article 45-04 — Life Insurance

## Chapter 45-04-14 — Military Sales Practices

### § 45-04-14-01. Definitions.

1. "Active duty" means full-time duty in the active military service of the United States and
includes members of the reserve component such as the national guard and reserve while
serving under published orders for active duty or full-time training. The term does not include
members of the reserve component who are performing active duty or active duty for training
under military calls or orders specifying periods of less than thirty-one calendar days.
2. "Commissioner" means the North Dakota insurance commissioner.
3. "DoD personnel" means all active duty service members and all civilian employees, including
nonappropriated fund employees and special government employees of the department of
defense.
4. "Door to door" means a solicitation or sales method whereby an insurance producer proceeds
randomly or selectively from household to household without prior specific appointment.
5. "General advertisement" means an advertisement having as its sole purpose the promotion of
the reader's or viewer's interest in the concept of insurance, or the promotion of the insurer or
the insurance producer.
6. "Insurance producer" means a person required to be licensed under the laws of this state to
sell, solicit, or negotiate life insurance, including annuities.
7. "Insurer" means an insurance company required to be licensed under the laws of this state to
provide life insurance products, including annuities.
8. "Known" or "knowingly" means the insurance producer or insurer had actual awareness or in
the exercise of ordinary care should have known at the time of the act or practice complained
of that the person solicited is a service member.
9. "Life insurance" means insurance coverage on human lives, including benefits of endowment,
annuities, benefits in the event of death or dismemberment by accident, and benefits for
disability income.
10. "Military installation" means any federally owned, leased, or operated base, reservation, post,
camp, building, or other facility to which service members are assigned for duty, including
barracks, transient housing, and family quarters.
11. "MyPay" is a defense finance and accounting service (DFAS) web-based system that enables
service members to process certain discretionary pay transactions or provide updates to
personal information data elements without using paper forms.
12. "Service member" means any active duty commissioned or warrant officer or enlisted member
of the United States armed forces.
13. "SGLI" means the United States department of veterans affairs servicemembers' group life
insurance program of low cost group life insurance for servicemembers on active duty, ready

reservists, members of the national guard, members of the commissioned corps of the
national oceanic and atmospheric administration and the public health service, cadets and
midshipmen of the four service academies, and members of the reserve officer training corps.
14. "Side fund" means a fund or reserve, excluding individually issued annuities, that is part of or
otherwise attached to a life insurance policy by rider, endorsement, or other mechanism which
accumulates premium or deposits with interest or by other means. The term does not include:
a. Accumulated value or cash value or secondary guarantees provided by a universal life
policy;
b. Cash values provided by a whole life policy which are subject to standard nonforfeiture
law for life insurance; or
c. A premium deposit fund which:
(1) Contains only premiums paid in advance which accumulate at interest;
(2) Imposes no penalty for withdrawal;
(3) Does not permit funding beyond future required premiums;
(4) Is not marketed or intended as an investment; and
(5) Does not carry a commission, either paid or calculated.
15. "Specific appointment" means a prearranged appointment agreed upon by both parties and
definite as to place and time.
16. "United States armed forces" means all components of the army, navy, air force, marine corps,
and coast guard.
17. "VGLI" means the United States department of veterans affairs veterans' group life insurance
program of post-separation insurance which allows servicemembers to convert their SGLI
coverage to renewable term insurance.
History: Effective January 1, 2008.
General Authority: NDCC 26.1-01-08, 28-32-02
Law Implemented: NDCC 26.1-04, 26.1-33-02
### § 45-04-14-02. Scope.

1. This chapter applies to the solicitation or sale of any life insurance or annuity product by an
insurer or insurance producer to an active duty service member of the United States armed
forces. This rule shall not apply to solicitations or sales involving;
a. Credit insurance;
b. Group life insurance or group annuities when there is no in-person, face-to-face
solicitation of individuals by an insurance producer or when the contract or certificate
does not include a side fund;
c. An application to the existing insurer that issued the existing policy or contract when a
contractual change or a conversion privilege is being exercised or, when the existing
policy or contract is being replaced by the same insurer pursuant to a program filed with
and approved by the commissioner or, when a term conversion privilege is exercised
among corporate affiliates;

d. Individual stand-alone health policies, including disability income policies;
e. Contracts offered by SGLI or VGLI, as authorized by 38 U.S.C. section 1965 et seq.;
f. Life insurance contracts offered through or by a nonprofit military association qualifying
under section 501(c)(23) of the Internal Revenue Code and which are not underwritten
by an insurer; or
g. Contracts used to fund:
(1) An employee pension or welfare benefit plan that is covered by the Employee
Retirement and Income Security Act (ERISA);
(2) A plan described by sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the Internal
Revenue Code, as amended, if established or maintained by an employer;
(3) A government or church plan defined in section 414 of the Internal Revenue Code, a
government or church welfare benefit plan, or a deferred compensation plan of a
state or local government or tax-exempt organization under section 457 of the
Internal Revenue Code;
(4) A nonqualified deferred compensation arrangement established or maintained by an
employer or plan sponsor;
(5) Settlements of or assumptions of liabilities associated with personal injury litigation
or any dispute or claim resolution process; or
(6) Prearranged funeral contracts.
2. This chapter shall not abrogate the ability of nonprofit organizations or other organizations to
educate members of the United States armed forces in accordance with department of
defense DoD instruction 1344.07 - personal commercial solicitation on DoD installations or a
successor directive.
3. General advertisements, direct mail, and internet marketing shall not constitute solicitation.
Telephone marketing shall not constitute solicitation provided the caller explicitly and
conspicuously discloses that the product concerned is life insurance and makes no
statements that avoid a clear and unequivocal statement that life insurance is the subject
matter of the solicitation. Provided however, nothing in this chapter shall be construed to
exempt an insurer or insurance producer from this rule in any in-person, face-to-face meeting
established as a result of the solicitation exemptions identified in this subsection.
History: Effective January 1, 2008.
General Authority: NDCC 26.1-01-08, 28-32-02
Law Implemented: NDCC 26.1-04, 26.1-33-02
### § 45-04-14-03. Practices declared false, misleading, deceptive, or unfair on a military

installation.
1. The following acts or practices when committed on a military installation by an insurer or
insurance producer with respect to the in-person, face-to-face solicitation of life insurance are
declared to be false, misleading, deceptive, or unfair:
a. Knowingly soliciting the purchase of any life insurance product door to door or without
first establishing a specific appointment for each meeting with the prospective purchaser;
b. Soliciting service members in a group or mass audience or in a captive audience where
attendance is not voluntary;

c. Knowingly making appointments with or soliciting service members during their normally
scheduled duty hours;
d. Making appointments with or soliciting service members in barracks, day rooms, unit
areas, or transient personnel housing or other areas where the installation commander
has prohibited solicitation;
e. Soliciting the sale of life insurance without first obtaining permission from the installation
commander or the commander's designee;
f. Posting unauthorized bulletins, notices, or advertisements;
g. Failing to present DD form 2885, personal commercial solicitation evaluation, to service
members solicited or encouraging service members solicited not to complete or submit a
DD from 2885; or
h. Knowingly accepting an application for life insurance or issuing a policy of life insurance
on the life of an enlisted member of the United States armed forces without first obtaining
for the insurer's files a completed copy of any required form which confirms that the
applicant has received counseling or fulfilled any other similar requirement for the sale of
life insurance established by regulations, directives, or rules of the department of defense
or any branch of the United States armed forces.
2. The following acts or practices when committed on a military installation by an insurer or
insurance producer constitute corrupt practices, improper influences, or inducements and are
declared to be false, misleading, deceptive, or unfair:
a. Using department of defense personnel, directly or indirectly, as a representative, or
agent in any official or business capacity with or without compensation with respect to the
solicitation or sale of life insurance to service members; or
b. Using an insurance producer to participate in any United States armed forces-sponsored
education or orientation program.
History: Effective January 1, 2008.
General Authority: NDCC 26.1-01-08, 28-32-02
Law Implemented: NDCC 26.1-04, 26.1-33-02
### § 45-04-14-04. Practices declared false, misleading, deceptive, or unfair regardless of

location.
1. The following acts or practices by an insurer or insurance producer constitute corrupt
practices, improper influences, or inducements and are declared to be false, misleading,
deceptive, or unfair:
a. Submitting, processing or assisting in the submission or processing of any allotment form
or similar device used by the United States armed forces to direct a service member's
pay to a third party for the purchase of life insurance, including using or assisting in using
a service member's "MyPay" account or other similar internet or electronic medium. This
subdivision does not prohibit assisting a service member by providing insurer or premium
information necessary to complete any allotment form;
b. Knowingly receiving funds from a service member for the payment of premium from a
depository institution with which the service member has no formal banking relationship.
For purposes of this section, a formal banking relationship is established when the
depository institution:

(1) Provides the service member a deposit agreement and periodic statements and
makes the disclosures required by the Truth in Savings Act [12 U.S.C. 4301 et seq.]
and the regulations adopted under it; and
(2) Permits the service member to make deposits and withdrawals unrelated to the
payment or processing of insurance premiums;
c. Employing any device or method or entering into any agreement whereby funds received
from a service member by allotment for the payment of insurance premiums are
identified on the service member's leave and earnings statement or equivalent or
successor form as savings or checking and when the service member has no formal
banking relationship as defined in subdivision b;
d. Entering into any agreement with a depository institution for the purpose of receiving
funds from a service member whereby the depository institution, with or without
compensation, agrees to accept direct deposits from a service member with whom it has
no formal banking relationship;
e. Using department of defense personnel, directly or indirectly, as a representative or
agent in any official or unofficial capacity with or without compensation with respect to the
solicitation or sale of life insurance to service members who are junior in rank or grade,
or to the family members of such personnel;
f. Offering or giving anything of value, directly or indirectly, to department of defense
personnel to procure their assistance in encouraging, assisting or facilitating the
solicitation or sale of life insurance to another service member;
g. Knowingly offering or giving anything of value to a service member with a pay grade of
E-4 or below for attending any event where an application for life insurance is solicited; or
h. Advising a service member with a pay grade of E-4 or below to change his or her income
tax withholding or state of legal residence for the sole purpose of increasing disposable
income to purchase life insurance.
2. The following acts or practices by an insurer or insurance producer lead to confusion
regarding source, sponsorship, approval, or affiliation and are declared to be false,
misleading, deceptive, or unfair:
a. Making any representation or using any device, title, descriptive name, or identifier that
has the tendency or capacity to confuse or mislead a service member into believing that
the insurer, insurance producer, or product offered is affiliated, connected, or associated
with, endorsed, sponsored, sanctioned, or recommended by the United States
government, the United States armed forces, or any state or federal agency or
government entity. Examples of prohibited insurance producer titles include "battalion
insurance counselor", "unit insurance advisor", "servicemen's group life insurance
conversion consultant", or "veteran's benefits counselor"; or
b. Soliciting the purchase of any life insurance product through the use of or in conjunction
with any third party organization that promotes the welfare of or assists members of the
United States armed forces in a manner that has the tendency or capacity to confuse or
mislead a service member into believing that either the insurer, insurance producer, or
insurance product is affiliated, connected or associated with, endorsed, sponsored,
sanctioned, or recommended by the United States government or the United States
armed forces.
3. This section does not prohibit a person from using a professional designation awarded after
the successful completion of a course of instruction in the business of insurance by an

accredited institution of higher learning. Such designations include chartered life underwriter
(CLU), chartered financial consultant (ChFC), certified financial planner (CFP), master of
science in financial services (MSFS), or masters of science financial planning (MS).
4. The following acts or practices by an insurer or insurance producer lead to confusion
regarding premiums, costs, or investment returns and are declared to be false, misleading,
deceptive, or unfair:
a. Using or describing the credited interest rate on a life insurance policy in a manner that
implies that the credited interest rate is a net return on premium paid; or
b. Excluding individually issued annuities or misrepresenting the mortality costs of a life
insurance product, including stating or implying that the product costs nothing or is free.
5. The following acts or practices by an insurer or insurance producer regarding SGLI, or VGLI
are declared to be false, misleading, deceptive or unfair:
a. Making any representation regarding the availability, suitability, amount, cost, exclusions
or limitations to coverage provided to a service member or dependents by SGLI, or VGLI,
which is false, misleading, or deceptive;
b. Making any representation regarding conversion requirements, including the costs of
coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers
which is false, misleading, or deceptive; or
c. Suggesting, recommending, or encouraging a service member to cancel or terminate the
servicemember's SGLI policy or issuing a life insurance policy which replaces an existing
SGLI policy unless the replacement shall take effect upon or after the service member's
separation from the United States armed forces.
6. The following acts or practices by an insurer or insurance producer, or both, regarding
disclosure are declared to be false, misleading, deceptive, or unfair:
a. Deploying, using, or contracting for any lead generating materials designed exclusively
for use with service members that do not clearly and conspicuously disclose that the
recipient will be contacted by an insurance producer, if that is the case, for the purpose of
soliciting the purchase of life insurance;
b. Failing to disclose that a solicitation for the sale of life insurance will be made when
establishing a specific appointment for an in-person, face-to-face meeting with a
prospective purchaser;
c. Excluding individually issued annuities, failing to clearly and conspicuously disclose the
fact that the product being sold is life insurance;
d. Failing to make, at the time of sale or offer to an individual known to be a service
member, the written disclosures required by section 10 of the Military Personnel Financial
Services Protection Act [Pub. L. 109-290; 120 Stat. 1317; 10 U.S.C. 992]; or
e. Excluding individually issued annuities, when the sale is conducted in-person
face-to-face with an individual known to be a service member, failing to provide the
applicant at the time the application is taken:
(1) An explanation of any free look period with instructions on how to cancel if a policy
is issued; and

(2) Either a copy of the application or a written disclosure. The copy of the application
or the written disclosure shall clearly and concisely set out the type of life insurance,
the death benefit applied for and its expected first-year cost. A basic illustration that
meets the requirements of chapter 45-04-01.1 shall be deemed sufficient to meet
this requirement for a written disclosure.
7. The following acts or practices by an insurer or insurance producer with respect to the sale of
certain life insurance products are declared to be false, misleading, deceptive, or unfair:
a. Excluding individually issued annuities, recommending the purchase of any life insurance
product which includes a side fund to a service member in pay grades E-4 and below
unless the insurer has reasonable grounds for believing that the life insurance death
benefit, standing alone, is suitable;
b. Offering for sale or selling a life insurance product which includes a side fund to a service
member in pay grades E-4 and below who is currently enrolled in SGLI is presumed
unsuitable unless, after the completion of a needs assessment, the insurer demonstrates
that the applicant's SGLI death benefit, together with any other military survivor benefits,
savings and investments, survivor income, and other life insurance are insufficient to
meet the applicant's insurable needs for life insurance.
(1) "Insurable needs" are the risks associated with premature death taking into
consideration the financial obligations and immediate and future cash needs of the
applicant's estate, survivors, and dependents.
(2) "Other military survivor benefits" include the death gratuity, funeral reimbursement,
transition assistance, survivor and dependents' educational assistance, dependency
and indemnity compensation, TRICARE health care benefits, survivor housing
benefits and allowances, federal income tax forgiveness, and social security
survivor benefits.
c. Excluding individually issued annuities, offering for sale or selling any life insurance
contract which includes a side fund:
(1) Unless interest credited accrues from the date of deposit to the date of withdrawal
and permits withdrawals without limit or penalty;
(2) Unless the applicant has been provided with a schedule of effective rates of return
based upon cash flows of the combined product. For this disclosure, the effective
rate of return will consider all premiums and cash contributions made by the
policyholder and all cash accumulations and cash surrender values available to the
policyholder in addition to life insurance coverage. This schedule will be provided for
at least each policy year from one to ten and for every fifth policy year thereafter
ending at age one hundred, policy maturity, or final expiration; and
(3) Which by default diverts or transfers funds accumulated the side fund to pay,
reduce, or offset any premiums due.
d. Excluding individually issued annuities, offering for sale or selling any life insurance
contract which after considering all policy benefits including endowment, return of
premium, or persistency, does not comply with standard nonforfeiture law for life
insurance; or
e. Selling any life insurance product to an individual known to be a service member which
excludes coverage if the insured's death is related to war, declared or undeclared, or any
act related to military service except for an accidental death coverage, such as a double
indemnity provision, which may be excluded.

History: Effective January 1, 2008.
General Authority: NDCC 26.1-01-08, 28-32-02
Law Implemented: NDCC 26.1-04, 26.1-33-02
