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Summary Contract Prospectuses for Variable Annuities

SEC Rule 498A: More reader-friendly.
New cost savings.

As of July 1, 2020 providers can replace lengthy contract prospectuses for variable annuity and variable life insurance products with simple summaries. The summaries are easier for investors to understand and provide new savings on costs of paper and postage (SEC Rule 498A).

The summaries use a “layered disclosure” approach. That is, a concise, reader-friendly summary is sent by mail or email, and greater details are provided online. 

The rule provides an opportunity to vastly improve your client’s experience. Use of a smaller document can also reduce costs associated with paper and postage which the SEC estimates for the industry overall could amount to over $30M.

Summary of the new rule

Life insurers and annuity providers are now permitted, but not required, to satisfy their prospectus delivery obligations under the Securities Act of 1933 by providing the following documents: 

  • Initial summary prospectus to new investors (“ISP”)
  • Updating summary prospectus to existing investors (“USP”) 

Both versions convey key information about contract terms, benefits and risks. Under the new rule, issuers are also required to make these disclosures available on a public website, as well as the following more detailed disclosure documents: 

  • Full statutory prospectuses
  • Statement of Additional Information (SAI)
  • Underlying fund prospectuses (and related investment disclosures)

In addition, paper or electronic copies must be provided to investors upon request, at no cost to the investor. The final rule also includes updates and enhancements to the registration forms for variable annuity and variable life contracts, requiring Inline eXtensible Business Reporting Language (“Inline XBRL”) for certain required disclosures. The new rules apply to all initial registration statements on Forms N-3, N-4 and N-6, as well as all post effective amendments.

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