Life Insurance and Annuity Advertising in Michigan
Michigan’s life and annuity advertising rules, R 500.1371 to R 500.1387 of the Michigan Administrative Code, tell you what a sales message may say and what it must disclose. They sit alongside MCL 500.2007, which makes any untrue, deceptive or misleading advertisement an unfair practice. The rules turn that principle into specifics: the words to avoid, the facts to show and where to show them. The rule text says “commissioner.” The Director of the Department of Insurance and Financial Services now holds that authority (MCL 500.102(a)).
What Counts as an Advertisement
An advertisement is material designed to create public interest in life insurance, annuities or an insurer, or to induce the public to purchase, increase, modify, reinstate or retain a policy (R 500.1371(a)). The test is purpose, not format. The definition includes:
- Printed, published and audiovisual material of an insurer, such as direct mail, newspapers, magazines, radio and television scripts, and billboards.
- Descriptive literature and sales aids of all kinds issued by an insurer or an agent, including circulars, leaflets, booklets, illustrations and form letters.
- Prepared sales talks, presentations and material for sales personnel and agents.
The second and third items are about you. A flyer you design or a script you read from can be an advertisement. Excluded are material used inside an insurer’s organization and not available to the public, communications with policyholders that are not designed to persuade them to buy, change or keep a policy, and a group or blanket policyholder’s general announcement to eligible people that a policy has been arranged.
A “policy” here includes a plan, certificate, contract, agreement, statement of coverage, rider or endorsement providing life or annuity benefits (R 500.1371(b)).
The Overall Impression Test
Advertisements must be truthful and not misleading in fact or by implication, and sufficiently complete and clear to avoid deception. Whether one misleads is decided from the overall impression it may reasonably be expected to create (R 500.1375(1)). A piece in which every sentence is literally true can still fail.
Required disclosures cannot be minimized, obscured or mixed into the text so that they confuse (R 500.1377(1)). An ad also may not omit material information, or use words or illustrations, in a way that misleads about benefits, losses covered, premiums, or state or federal tax consequences. Offering the policy for inspection, or a refund, does not cure a misleading statement (R 500.1377(2)).
Words and Claims
Investment Language
An ad may not use “investment,” “investment plan,” “expansion plan,” “profit,” “profits,” “profit sharing,” “interest plan,” “savings,” “savings plan” or similar terms in a context that leads a prospect to believe they will or may receive something other than a policy, or a benefit not available to others of the same class and equal expectation of life (R 500.1375(2)). Context decides. Calling a whole life policy a “savings plan” so that a prospect thinks they are opening an account is forbidden.
An ad also may not suggest that a buyer will share in a stated percentage or portion of earnings on the insurer’s general account assets (R 500.1377(10)).
Describing the Policy
| If the ad… | Then it must… | Citation |
|---|---|---|
| Says “Non-Medical” or “No Physical Examination Required” and issue is not guaranteed | Say nearby, with equal prominence, that issuance depends on answers to the application’s health questions, if that is the fact | R 500.1377(3) |
| Names a policy | Use the words “life insurance” in the name, or add language clearly indicating it is life insurance | R 500.1377(4) |
| Promotes any policy | Prominently describe the type of policy | R 500.1377(5) |
| Sells by direct response | Not claim cost savings from having no agent or commission, unless that is the fact | R 500.1377(6) |
| Promotes graded or modified benefits | Prominently display any limitation of benefits, and any coverage change where the premium is level | R 500.1377(7) |
| Promotes non-level premiums | Prominently describe the premium changes | R 500.1377(8) |
| Uses statistics | Reflect recent and relevant facts accurately, and identify the source | R 500.1377(11) |
Dividends
An ad may not state or imply that the payment or amount of dividends is guaranteed. Illustrated dividends must use the insurer’s current dividend scale and carry a statement that they are not guarantees or estimates of future dividends (R 500.1377(9)(b)). An ad may not imply that illustrated dividends will someday replace premium payments, unless it clearly and precisely explains what benefits would be provided, when and on what conditions (R 500.1377(9)(c)). If level benefits depend on dividends buying term or paid-up insurance, the ad must disclose that insufficient or no dividends will reduce or eliminate the supplemental coverage or require more premium (R 500.1377(9)(d)).
Special Offers and Enrollment Periods
Unless it is the fact, an ad may not call an individual policy an introductory, initial or special offer, promise substantial advantages not available later, limit it to a specified group (R 500.1377(12)(a)), imply that special advantages mean only a specific number will be sold or sales will end at a fixed time (R 500.1377(12)(b)), or promise membership in a special class with special rates, dividends or underwriting (R 500.1377(13)). An enrollment period may not be called “special” or “limited” when successive periods are the insurer’s usual marketing method (R 500.1377(12)(a)).
Where a policy is sold on an individual basis during an enrollment period, R 500.1377(12)(c) adds a schedule:
- At least 3 months must pass between the close of one period and the opening of the next for the same policy.
- There may be no more than two such periods in a calendar year.
- The ad must state a mailing date for the application, not less than 10 days and not more than 40 days from the date the period is first advertised.
The schedule counts all advertising by an insurer and its affiliates under common management or control. It does not apply to a cutoff for a guaranteed issue application sent at the applicant’s request, or to a group policyholder soliciting its own eligible people. For a direct mail product marketed through a sponsoring organization, it applies separately to each organization.
Comparisons
An ad may not make unfair or incomplete comparisons of the policies, benefits, dividends or rates of other insurers, or falsely or unfairly describe other insurers or their policies, services or marketing methods (R 500.1377(14)).
Deferred Annuities
R 500.1377(15) applies to individual deferred annuities and deposit funds, but not to variable or investment annuities.
- Interest rates. An illustration above the guaranteed rate must show, with equal prominence, a comparable one at the guaranteed rate. The higher rate cannot exceed what the company now credits, unless publicly declared with an effective date for new issues not more than 3 months after the declaration. Illustrations use gross premiums.
- Charges. An ad stating premiums, net interest rates or accumulation values must disclose nearby, with equal prominence, how net and gross premium relate, describing first year and renewal charges.
- No cash value. If a contract provides no cash value or return of premium on surrender or death before annuity payments begin, the illustration must say so prominently. Return of premium or cash value may not be called a death benefit.
Identifying the Insurer
The ad must clearly identify the insurer, and a specific individual policy must be identified by form number or other appropriate description. A trade name, group name, parent company name, slogan or symbol needs the insurer’s name in equal or greater prominence and close by, if it would otherwise mislead about who the insurer is or who is responsible for the policy (R 500.1379(1)).
An ad may not use words, symbols or materials so similar to those of a governmental program or agency that prospects are misled into thinking the solicitation is connected with it (R 500.1379(2)).
Licensing, Endorsements and Ratings
An ad reaching beyond the insurer’s licensed jurisdictions may not imply licensing there (R 500.1381(1)). It may say the insurer is licensed in the state where the ad appears, as long as it does not exaggerate that or imply that competitors are not licensed (R 500.1381(2)).
An ad may not create the impression that a governmental entity recommends or endorses the insurer, its finances, its claims payment or its policies, unless that is the fact, and any recommendation, endorsement or rating must be fully explained (R 500.1381(3)). Nor may it mislead about the insurer’s assets, liabilities, insurance in force, structure, financial condition, age or relative position. A commercial rating may appear only if the ad clearly defines its scope and extent (R 500.1383).
Records and Other Rules
The insurer keeps a file, open to the Director’s inspection, with a specimen of each printed, published or prepared advertisement of its policies disseminated in Michigan, noting its distribution and the form number of any policy advertised. Each stays in the file for 4 years or until the next regular examination report is filed, whichever is longer (R 500.1385(1)). With its annual statement, the insurer files a certificate of compliance signed by an authorized officer (R 500.1385(2)).
That file is the insurer’s duty, so it needs to know what you use. A sensible working habit is to submit anything you create to the insurer first.
These rules do not displace Michigan’s rules on cost comparison, deceptive sales practices or replacement, and a disclosure those rules require is not an advertisement (R 500.1387). Universal life adds the requirements of MCL 500.4038, and MCL 500.4047(6) bars sales material presenting a banned policy type.
Lesson summary
- An advertisement is defined by purpose and includes your own sales aids and prepared sales talks.
- The test is the overall impression, and a free look or refund offer does not cure a misleading ad.
- Terms such as “savings plan” or “investment” are barred in a context that suggests something other than a policy.
- “Non-Medical” claims need a nearby, equally prominent health question disclosure when issue is not guaranteed.
- Dividends may never be presented as guaranteed, and illustrations must use the current scale.
- Enrollment periods need a gap of at least 3 months, no more than two a year, and a mailing date 10 to 40 days out.
- Deferred annuity illustrations above the guaranteed rate must show the guaranteed rate with equal prominence.
- The insurer keeps each advertisement for at least 4 years and files a yearly certificate of compliance.