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					 DIVISION OF INSURANCE
MARKET CONDUCT EXAMINATION REPORT
           AS OF December 31, 1996

  Jackson National Life Insurance Company
             5901 Executive Drive
            Lansing, Michigan 48911


           NAIC Group Code - 0918
          NAIC Company Code - 65056
  PREPARED BY INDEPENDENT CONTRACTORS FOR
COLORADO DEPARTMENT OF REGULATORY AGENCIES
            DIVISION OF INSURANCE
            Terrence J. Corlett, AIE, FLMI
                Mary L. Drake, FLMI
           Independent Contract Examiners




                         1
February 6, 1998
The Honorable Jack Ehnes
Commissioner of Insurance
State of Colorado
1560 Broadway
Denver, Colorado 80202
Commissioner:

This market conduct examination of Jackson National Life Insurance Company was conducted
pursuant to Section 10-1-203 and Section 10-3-1106 Colorado Revised Statutes, which authorize
the Insurance Commissioner to examine life insurance companies. We examined the company’s
records at its office located at 5901 Executive Drive, Lansing, Michigan, 48911. The market
conduct examination covered the period from January 1, 1995 through December 31, 1996.
The report of the examination is herein respectfully submitted by the following independent
market conduct examiners.

Terrence J. Corlett, AIE, FLMI
Independent Examiner In-Charge
Mary L. Drake, FLMI
Independent Examiner




                                               2
                       Jackson National Life Insurance Company
                                  TABLE OF CONTENTS

I.     COMPANY PROFILE
II.    PURPOSE AND SCOPE OF EXAMINATION
III.   EXAMINERS' METHODOLOGY
IV.    EXAMINATION REPORT SUMMARY
V.     FACTUAL FINDINGS
       Marketing and Sales

       Producers
       Underwriting / Rating / Policy Forms
VI.    SUMMARY OF ISSUES AND RECOMMENDATIONS
VII.   EXAMINATION REPORT SUBMISSION




                                              3
COMPANY PROFILE
History and Organization

Jackson National Life Insurance Company (JNL) (henceforth referred to as the Company), a
legal reserve stock life insurance company, was incorporated on June 19, 1961 and commenced
business on August 30, 1961.

One hundred percent of the publicly traded stock was acquired by Prudential Corporation of
London, England in 1986.
The Company was licensed in Colorado on October 6, 1978, and is licensed in 49 states and the
District of Columbia. The Company specializes in the sale of fixed and variable annuities and
individual life insurance.
The Company solicits business through a network of non-exclusive agents, broker-dealers, and
through its Institutional Marketing Group, which markets through banks and thrifts.
In 1996, the Company reported combined life and annuity premium of $42,111,867 in the State
of Colorado and eight (8) complaints, representing a complaint ratio of .19.




                                               4
PURPOSE AND SCOPE OF EXAMINATION
Independent examiners, contracting with the Colorado Division of Insurance (DOI), in
accordance with Colorado Insurance Law, §10-1-203, C.R.S., which empowers the
Commissioner to require any company, entity, or new applicant to be examined by independent
examiners, prepared this market conduct examination report in order to review certain business
practices of the Company. The findings in this report, including all work products developed in
producing it, are the sole property of the Colorado Division of Insurance.
Examiners performed this market conduct examination on a routine basis to assist the Colorado
Commissioner of Insurance in meeting statutory examination requirements. The purpose of the
examination was to determine if the Company’s business practices comply with Colorado
insurance law. Examination information contained in this report should serve only these
purposes. The conclusions and findings of this report are public record. The preceding
statements are not intended to limit or restrict the distribution of this report.
Examiners conducted the examination in accordance with procedures and guidelines developed
by the (1) National Association of Insurance Commissioners, (2) the Colorado Division of
Insurance, and the (3) Insurance Regulatory Examiners Society. They relied primarily on
records and materials maintained by the Company. The market conduct examination covered the
period from January 1, 1995 through December 31, 1996.
The examination included, but was not limited to, review of the following:
               Company Operations / Management
               Marketing and Sales
               Complaints
               Producers
               Policyholder Services
               Underwriting/ Rating / Policy Forms
               Claims
File sampling was based on review of systematically selected samples of underwriting and
claims files by category. Sample sizes were chosen based on guidance from procedures
developed by the National Association of Insurance Commissioners. Upon review of each file,
any concerns or discrepancies were noted on comment forms. These comment forms were
delivered to the Company for review. Once the Company was advised of a finding contained in
a comment form, the Company was given the opportunity to respond. For each finding the
Company was requested to agree, disagree or otherwise justify the Company’s noted action. At
the conclusion of each sample, the Company was provided a summary of the findings for that
sample. The report of the examination is, in general, a report by exception. Therefore, much of
the material reviewed will not be contained in this written report as reference to any practices,
procedures, or files, which manifested no improprieties, were omitted.


                                                5
6
The final exam report developed by the market conduct examiners is a report written by
exception. References to additional practices, procedures, or files, which had no improprieties,
were omitted. Based on review of these areas, comment forms were prepared for the Company
identifying any concerns and/or discrepancies. The comment form contains a section that allows
the Company to submit a written response to the examiners’ comments.

Examination findings may result in administrative action by the Division of Insurance.
Examiners may not have discovered all unacceptable or non-complying practices at the
Company. Therefore, failure to identify specific Company practices does not constitute
acceptance of such practices. This report should not be construed to either endorse or discredit
any insurance company or insurance product.




                                                7
EXAMINERS' METHODOLOGY
 Examiners obtained and reviewed Colorado insurance laws and regulations and compared them
to the Company’s practices and procedures to determine the Company’s compliance with C.R.S.
                 10-1-203 insurance laws and regulations shown in Exhibit 1.
                                         Exhibit 1

 Law/Regulation                                     Concerning

Section 10-1-108 & Duties of Commissioner – reports – publications – fees –
10-1-109           disposition of funds – adoption of rules, and Rules and regulations
                   of commissioner.

Section 10-1-127     Anti-fraud Plan
(6)(a)

Section 10-2-101     Producers – Licensing
et. seq.

Section 10-3-105     Certificate of Authority

Section 10-3-        Unfair Competition – Deceptive Practices
1101/1104

Section 10-7-        Individual Policy Provisions
102/109

Section 10-7-112     Interest Payable on Benefits or Proceeds

Section 10-7-113     Acceleration of Benefits

Section 10-7-202     Group Policy Provisions

Section 10-7-302     Nonforfeiture Compulsory Policy Provisions

Regulation 1-1-7     Market Conduct Record Retention

Regulation 1-2-9     Fees Charged by Agents/Brokers

Regulation 1-2-10    Colorado Single Producers Act: Conditions and Fees

Regulation 4-1-1     Variable Annuity Contracts

Regulation 4-1-2     Advertising and Sales Promotion of Life Insurance



                                                8
  Law/Regulation                                    Concerning

 Regulation 4-1-3      Variable Life Insurance Policies

 Regulation 4-1-4      Concerning Replacement of Life Insurance or Annuity Contracts

 Regulation 4-1-5      Permitting Same Minimum Nonforfeiture Standards for Men and
                       Women Insured Under 1980 CSO and 1980 CET Mortality Tables

 Regulation 4-2-9      Concerning Non-Discriminatory Treatment of Acquired Immune
                       Deficiency Syndrome (AIDS) and Human Immunodeficiency
                       Virus (HIV) Related Illness by Insurers of Life and Health
                       Insurance

 Regulation 6-1-1      Limiting Coverage

 Regulation 6-1-3      Concerning Unfair Discrimination on the Basis of Blindness or
                       Partial Blindness

 Regulation 6-2-1      Complaint Record Maintenance

 Regulation 6-2-2      Responses to Division Inquiries Regarding Complaints



Company Operations/Management
Examiners reviewed Company management and administrative controls, internal/external
auditing functions, record retention, and timely cooperation with the examination process.

Marketing and Sales
The examiners reviewed all marketing, sales, and advertising materials for language that does
not accurately represent products and for any disparaging comparisons. In addition, examiners
determined if the Company has methods of control over advertising content.

Complaints
Examiners reviewed and compared the Division of Insurance complaint log against the
Company’s log to verify the accuracy of the Company’s tracking system. The examiners also
evaluated the Company’s complaint handling methodology, measured the Company’s response
time to determine compliance with the twenty (20) calendar day regulation, and reviewed the
reasons and dispositions for the complaints.

Producers
Examiners reviewed and compared the producer lists supplied by the Company and the Division
to verify the appointment and termination dates of producers and to determine if there were any
discrepancies that needed resolution.
                                                9
10
Policyholder Services
Examiners reviewed policy files to determine that general policyholder servicing was completed
in a fair and timely manner. Areas reviewed included billing, policy issuance, termination,
reinstatement and correspondence.

Underwriting / Rating / Policy Forms
Underwriting:
Examiners reviewed the Company’s underwriting manuals and procedures to determine that
underwriting standards are non-discriminatory and in compliance with Colorado insurance law.
A review of individual policy files was performed to determine if underwriting decisions were
made in a fair, timely, and consistent manner.
A sample of 100 individual policyholder files was systematically selected for examination to
determine compliance with Colorado insurance laws pertaining to the following:
           1. adequate file documentation

           2. policy delivery
           3. rejected or declined policies
           4. free look provisions
           5. non-forfeiture
           6. replacement of insurance
           7. rescission

           8. continuation of benefits
           9. agents licensing

Rating:
Examiners reviewed one hundred (100) applications and policy files to determine rates charged
to policyholders were non-discriminatory, consistent, based upon adequate and reliable
information and in compliance with Colorado insurance laws.

Policy Forms:
Examiners obtained and reviewed all policy forms and applications used by the Company for the
period beginning January 1, 1995 through December 31, 1996 for compliance with Colorado
insurance laws and regulations.

Claims:
Examiners reviewed fifty (50) individual life and all fifty-six (56) annuity death claims received
during the exam period. Claims were reviewed for the Company’s overall claims handling
practices to determine timeliness of payment, accuracy of processing, and entitlement to policy
                                                11
benefits.




            12
                         EXAMINATION REPORT SUMMARY
The examination resulted in a total of four (4) findings in which the Company did not comply
with Colorado Statutes and Regulations. The following is a summary of the examiners’ findings
and recommendations.

   •   Company Operations/Management: No exceptions were noted during the review of the
       Company’s operations and management.

   •   Marketing and Sales: Examiners found two (2) areas of concern during the review of
       advertising and marketing materials and procedures.
          1. Examiners identified one hundred thirteen (113) advertising pieces, which failed
             to disclose the sources of the statistics quoted in the sales materials.
          2. The examination of policy files identified a lack of consistency in complying with
             Colorado Insurance Regulation 4-1-4 relating to policy replacement.

   •   Complaints: No exceptions were noted during the review of the Company’s complaint
       handling.

   •   Producers: The examiners found one area of concern during the review of the
       Company’s producer appointment procedures.
          1. The Company does not appear to have adequate controls to ensure that all agents
             are appointed before accepting applications for life and annuity coverage.

   •   Policyholder Services: No exceptions were noted during the review of the Company’s
       policyholder services.

   •   Underwriting/Rating/Policy Forms: Examiners found one area of concern during the
       review of forms, rates and underwriting.
          1. Examiners identified two policy forms that incorrectly state the period covered by
             Colorado’s suicide provision.

   •   Claims: No exceptions were noted during the review of the Company’s claims handling
       procedures.




                                             13
            . Issue B1: Failure to disclose source of statistics in advertising.

Colorado Insurance Regulation 4-1-2, defines as a misrepresentation in Advertising and Sales
Promotion of Life Insurance:
       III. Policy

       A. Misleading, through omissions, use of irrelevant material or improper emphasis.
Section 10-3-1104(1)(a), C.R.S., Unfair methods of competition and unfair or deceptive acts or
practices, states:

       The following are defined as unfair methods of competition and unfair or deceptive acts
       or practices in the business of insurance:
       Misrepresentations and false advertising of insurance policies: Making, issuing,
       circulating, or causing to be made, issued, or circulated, any estimate, circular, statement,
       sales presentation, omission, or comparison….
The following statements were made in the Company’s life and annuity brochures in which the
source of the statements/statistics was not disclosed:

   •   Sixty-five (65) brochures state "The 20th largest life insurance Company in the U.S. (by
       asset)

   •   Four (4) brochures state "America’s largest writers of fixed single premium deferred
       annuities in 1993."

   •   Eighteen (18) brochures state "America’s largest fixed interest single premium deferred
       annuity writer in 1993 with $1.2 billion in individual premium written."

   •   Twenty-six (26) brochures state "America’s leading writer of individual single premium
       deferred fixed annuities in 1993, with more than $1.2 billion in premium."
These omissions of sources appear to be in violation of Colorado Insurance Regulation 4-1-
2(III)(A), and Section 10-3-1104(1)(a), C.R.S.

______________________________________________________________________________
Recommendation No. 1: Within 30 days, the Company should provide documentation
demonstrating why it should not be considered to be in violation of Colorado Insurance
Regulation 4-1-2(III)(A) and Section 10-3-1104(1)(a), C.R.S. In the event the Company is
unable to provide such proof, it should demonstrate to the Division of Insurance that it will
amend its practices by disclosing the information source for all statistically based facts used in
advertising material.

                                                 14
            Issue B2: Failure to comply with replaced policy disclosure and
            notification requirements.

Colorado Insurance Regulation 4-1-4(VI)(A)(2) concerning replacement of life insurance or
annuity contracts; duties of the agent states:
       The agent shall obtain with or as a part of each application for life insurance or an
       annuity a statement signed by the applicant as to whether the insurance or annuity will
       replace existing life insurance or an existing annuity on the same life.
Colorado Insurance Regulation 4-1-4(VII)(A)(4)(b), promulgated under the authority of Section
10-1-109(1), C.R.S., concerning replacement of life insurance or annuity contracts; duties of the
insurer states:
       If the Statement contained in Appendix IV is not received with the application, or if the
       Statement is received unsigned, it shall be presumed that the applicant desires that the
       transaction be considered confidential and the replacing insurer shall not notify the
       replaced insurer. If the applicant signs the Statement indicating that he or she wants the
       replaced insurer to be notified, then within 5 days of receipt of the application, and prior
       to commencing any underwriting, the replacing company shall send a written notification
       of the replacement to the home office of each replaced insurer. Notification shall include
       the applicant’s name, the insured’s name, the number of the policy being replaced, the
       generic name and the face amount of the replacing policy and the legal name of all
       insurers.
Systematically selected samples of one hundred (100) life and fifty (50) annuity policies were
reviewed. The samples yielded nine (9) occasions on which the Company failed to notify the
replaced insurer within the time period required by Colorado Insurance Regulation 4-1-
4(VII)(A)(4)(b).

               Replaced Insurers Not Notified Within Five Days

   Population Size          Sample Size              Number of         Percentage of Errors
                                                     Exceptions

         903                     150                     9                      6%

From a population of 903 policy files, a systematically selected sample of 150 files was
reviewed. The Company’s form provides for the applicant to check if he or she does not want
the replaced insurer to be notified. In nine (9) cases this box was not checked. However, a
replacement letter was not sent to the replaced insurer within five (5) days.
The Company’s failure to send a replacement letter to the replaced insurer within five (5) days of
the receipt of an application appears to be in violation of Colorado Insurance Regulation 4-1-4

                                                15
(VII)(A)(4)(b).




                  16
The replaced policy sample cited above also yielded twenty (20) occasions on which the
Company failed to maintain a signed replacement disclosure form, as depicted in Appendix IV,
Colorado Insurance Regulation 4-1-4, in the policy file.

               Replaced Policies Lacking a Signed Disclosure Statement

   Population Size           Sample Size             Number of          Percentage of Errors
                                                     Exceptions

         903                     150                      20                   13.3%

From a population of 903 policy files, a systematically selected sample of 150 files was
reviewed. Of these, twenty (20) policy files lacked signed replacement disclosure statements.
The Company’s failure to obtain and maintain this statement in each replacement file is a
violation of Colorado Insurance Regulation 4-1-4 (VI)(A)(2).

______________________________________________________________________________
Recommendation No. 2: Within 30 days, the Company should provide documentation why it
should not be considered in violation of Colorado Insurance Regulations 4-1-4(VII)(A) (4)(b),
and 4-1-4(VI)(A)(2). In the event, the Company is unable to provide such proof, it should
demonstrate to the Division of Insurance that it will implement procedures that address the
issuance of required replacement letters. These replacement letters must be sent within five (5)
days after receipt of a life or annuity application, if the application indicates the insured wishes
to replace another policy. The Company should also implement procedures which address the
obtaining, as a part of each application for life insurance or annuity, a statement signed by the
applicant as to whether the insurance or annuity will replace existing life insurance or an existing
annuity on the same life.




                                                17
            Issue D1: Failure to appoint producers.

Section 10-2-415(1), C.R.S., Appointment of insurance producer by insurer – continuation –
exceptions, states:

       No insurance producer shall claim to be a representative or authorized or appointed agent
       of, or any other term implying a contractual relationship with, a particular insurer or
       accept applications on behalf of such insurer unless such insurance producer becomes a
       producer appointee, appointed by that insurer in accordance with this section, to act in the
       capacity of an agent of that insurer.

Review of fifty (50) annuity policies issued by the Company, identified eleven (11) cases in
which the agent accepting the application for coverage was not properly appointed by the
Company to write business in the State of Colorado.

                                    Annuity Policy Sample

      Population Size        Policies Reviewed        Policies Issued by        Error Rate
                                                         Unappointed
                                                           Agents

           1490                      50                       11                   22%

 From a population of 1490 annuity policies, 50 were reviewed. Of these, 11 policies indicated
applications were submitted by agents who were not properly appointed in the State of Colorado.

Review of one hundred (100) life insurance policies, issued by the Company, identified fifty-five
(55) cases in which the agent accepting the application for coverage was not properly appointed
by the Company to write business in the State of Colorado.

                                       Life Policy Sample

      Population Size       Policies Reviewed        Policies Issued by        Error Rate
                                                  Unappointed Agents

           2052                    100                      55                    55%

From a population of 2052 life policies, 100 policies were reviewed. Of these, 55 policies
indicated applications were submitted by agents who were not properly appointed in the State of
Colorado.



                                                18
______________________________________________________________________________
Recommendation No. 3: Within 30 days, the Company should provide documentation why it
should not be considered in violation of Section 10-2-415(1), C.R.S. In the event, the Company
is unable to provide such proof, provide procedures for and implement a system, which will
ensure that an agent is properly appointed before accepting an application for insurance in the
State of Colorado. Within 90 days, the Company should perform an internal Company audit of
its agents licensing and appointment procedures and report the status of all agents appointed to
write insurance in the State of Colorado. Any fees that should have been forwarded to the
Colorado Division of Insurance for licensing or termination, and which were not properly paid,
should accompany the audit report.




                                               19
            Issue F1: Failure to comply with the one-year suicide exclusion period as
            required by Colorado insurance law.

Section 10-7-109, C.R.S., Suicide no defense for nonpayment, states:

       The suicide of a policyholder after the first policy year of any life insurance policy issued
       by any life insurance company doing business in this state shall not be a defense against
       the payment of a life insurance policy, whether said suicide was voluntary or involuntary,
       and whether said policyholder was sane or insane.
The Company’s Family Insurance Rider, Form No. 9315 9/88, states "If the Insured, Spouse or
Child commits suicide, while sane or insane within two (2) years…."
The Company’s Children’s Insurance Rider, Form No. 9314 9/88, states "If the Insured or a
Child commits suicide, while sane or insane, within two (2) years…"

Both of the above riders appear to violate Section 10-7-109, C.R.S., which limits suicide
exclusions to one (1) year or less for Colorado life insurance policies.

______________________________________________________________________________
Recommendation No. 4: Within 30 days, the Company should provide documentation why it
should not be considered in violation of Section 10-7-109, C.R.S. In the event, the Company is
unable to provide such proof, it should demonstrate to the Division of Insurance that it will
comply. The Company should revise the Family Insurance Rider, Form No. 9315 9/88, and the
Children’s Insurance Rider, Form No. 9314 9/88 to state a one-year suicide provision period.




                                                20
                ISSUE                      REC. PA                RECOMMENDATION                            ISSUE
                                           NO. GE                                                            NO.
                                                NO.

MARKETING AND SALES

Failure to disclose source of statistics    1   15    Within 30 days, the Company should provide             B1
in several brochures published in 1995.               documentation why it should not be considered
                                                      in violation of Colorado Insurance Regulation 4-
Violation of Colorado Insurance                       1-2.
Regulation
                                                      In the event, the Company is unable to provide
4-1-2.                                                such proof, it should demonstrate to the Division
                                                      of Insurance that it will comply.

                                                      The Company should disclose the source of all
                                                      statistically based facts used in advertising
                                                      material.

Failure to send replacement letter to       2   17    Within 30 days, the Company should provide             B2
replaced insurer within five (5) days of              documentation why it should not be considered
receipt of application, and failure to                in violation of Colorado Insurance Regulation 4-
maintain a signed replacement                         1-44-1-4(VI)(A)(2) and (VII)(A) (4)(b).
disclosure form.
                                                      In the event, the Company is unable to provide
Violation of Colorado Insurance                       such proof, it should demonstrate to the Division
Regulation 4-1-4.                                     of Insurance that it will comply.

                                                      The Company must have procedures in place
                                                      which address the obtaining, as a part of each
                                                      application for life insurance or annuity, a
                                                      statement signed by the applicant as to whether
                                                      the insurance or annuity will replace existing
                                                      life insurance or an existing annuity on the same
                                                      life.

                                                      The Company must also have procedures in
                                                      place which address the issuance of a letter to
                                                      replaced insurers within five (5) days after
                                                      receipt of a life or annuity application indicating
                                                      the policy is replacing another policy, if so
                                                      requested by the applicant.




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PRODUCERS




Failure to ensure proper appointing of     3   20   Within 30 days, the Company should provide             D1
agents submitting applications.                     documentation why it should not be considered in
                                                    violation of Section 10-2-415(1), C.R.S. In the
Violation of Section 10-2-415(2), C.R.S.            event, the Company is unable to provide such proof,
                                                    it should demonstrate to the Division of Insurance
                                                    that it will comply.

                                                    The company must provide procedures for and
                                                    implement a system, which will ensure that an agent
                                                    is properly appointed before accepting an
                                                    application for insurance in the State of Colorado.

                                                    Within 90 days, the Company should perform an
                                                    internal Company audit of its agents licensing and
                                                    appointment procedures and report the status of all
                                                    agents appointed to write insurance in the State of
                                                    Colorado. Any fees that should have been
                                                    forwarded to the Colorado Division of Insurance for
                                                    licensing or termination, which were not properly
                                                    paid should accompany the audit report.



UNDERWRITING/RATING/POLICY
FORM FINDINGS

The Company’s Family Insurance Rider,      4   22   Within 30 days, the Company should provide             F1
form 9315 9/88, and Children’s Insurance            documentation why it should not be considered in
Rider, form 9314 9/88 do not comply with            violation of Section 10-7-109, C.R.S. In the event,
the one-year suicide provision period.              the Company is unable to provide such proof, it
                                                    should demonstrate to the Division of Insurance that
Violation of Section 10-7-109, C.R.S.               it will comply.

                                                    The Company should revise the Family Insurance
                                                    Rider, Form No. 9315 9/88, and the Children’s
                                                    Insurance Rider, Form No. 9314 9/88 to state a one-
                                                    year suicide provision period.




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_____________________________________________________________________________________________



                               Independent Market Conduct Examiners
                         Terrence J. Corlett, AIE, FLMI, Examiner in Charge
                                          Mary L. Drake, FLMI
                                            Contracting with
                                   The Colorado Division of Insurance
                                            1290 Broadway
                                         Denver, Colorado 80202
                                             (303) 894-7499
                 participated in this examination and in the preparation of this report.



          If you have any questions please contact Kirk Yeager, Supervisor, Market Conduct Section of
                             Colorado Division of Insurance. At 894-7499 ext. 375.




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