State RegulationsVA specificDifficulty 2/5
A Virginia producer is replacing a client's existing life policy with a new one from a different insurer. Under the replacement rules, which statement about the flow of information and the parties' roles is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under 14 VAC 5-30-40, the replacement information gathered by the producer flows to the replacing insurer, which is responsible for notifying the existing insurer of the proposed replacement. The existing insurer, once notified, may take protective steps — including attempting to conserve the business by pointing out the consequences of replacement. This structured notification is what keeps replacements transparent rather than letting them happen silently behind the applicant's back.
Why the other options are wrong
- A) The rules require affirmative notification to the existing insurer through the replacing insurer; silence until delivery defeats the purpose of the disclosure scheme.
- B) The existing insurer has no approval right over the applicant's decision; its role after notice is to respond, including by attempting conservation.
- D) The producer's filings go through the replacing insurer under 14 VAC 5-30-40; the Bureau is not a substitute for insurer-to-insurer notification.
Memory hook
Producer collects, replacing insurer notifies, existing insurer may conserve — a triangle, not a secret.