South Carolina Warranty Association notice emphasizes limitations

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The South Carolina Department of Insurance will soon require life and health insurers to provide a standardized guarantee association notice to all new coverage holders.

The notice requirement applies to annuity purchases, as well as purchases of products such as life insurance, major medical insurance and accident insurance, the department announced earlier this month, in Bulletin Number 2020-11: New Notice Requirement Guarantee Association.

A life or health insurer will have to provide the guarantee association’s notice each time it delivers a policy or contract to the policy holder, holder of the contract holder’s certificate and enrolled, according to the bulletin.


  • A copy of South Carolina 2020-11 Bulletin: New warranty membership requirement is available here.
  • An article on insurance regulator discussions about warranty association notices is available here.

The new warranty association notice delivery requirement is set to take effect in mid-February.

Like other states, South Carolina has a guarantee association that provides life and health policyholders and annuity contract holders with some protection against the failure of an insurer.

The South Carolina Life, Accident and Health Insurance Association (SCLAHIGA) does not hold reservations. It relies on member assessments to raise funds necessary to provide protection.

The rules governing SCLAHIGA and other guarantee associations limit the amount of guaranteed benefits, and state laws and regulations impose limits on the guarantee association’s valuation values.

The limitations mean that consumers affected by a major insurer’s bankruptcy, or consumers caught in a wave of insurer bankruptcies, may have to wait years, or longer, to get all the help offered by a guarantee association.

Insurance companies belonging to guarantee associations generally argue that consumers and agents should help to enforce market discipline and prevent the growth of unstable companies by offering great deals by looking carefully at insurers’ finances. Insurers have objected to any notification requirements that might encourage consumers to rely on guarantee associations to help insurers.

South Carolina’s new notice acknowledges the existence of SCLAHIGA, but emphasizes the limitations of protecting the association.

The South Carolina Secretariat warns in the notice, in capital letters, in bold, “COVERAGE MAY NOT BE AVAILABLE FOR YOUR POLICY.”

“Coverage is generally conditioned to residency in this state,” says the secretary in the announcement. “Other conditions that may prevent or exclude coverage are described in this notice. Even if coverage is provided, there are significant limits and exclusions. “

The department says, in a list of some of the protection exclusions, that SCLAHIGA does not provide coverage for “a part of a policy or contract or part of it not guaranteed by the member insurer, or under which the risk is borne by the policy or owner of the contract. “

SCLAHIGA will refuse to protect a consumer against the loss of the value of the policy or contract linked to inflation protection features, variable credit rate features or other features with changes in value that exceed an average rate, in accordance with the Notice.

The list of exclusions described in the notice also includes health coverage provided through multi-employer social security agreements (MEWAs) and employer loss insurance agreements.

– Read What will happen if health insurers fail?, on ThinkAdvisor.

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