(a) The “Code of Ethical Practices with Respect to the Insuring of the Benefits of Union or Union-Management Welfare and Pension Funds” was adopted by the National Association of Insurance Commissioners to prevent a recurrence of abuses arising from the insuring of such benefits, including the payment of excessive commissions and fees or allowances, by serving as a declaration of applicable principles in the proper conduct of insuring benefits of employee welfare and pension funds.

(b) This department determined that the principles enunciated in the code were generally applicable in the insuring of such benefits irrespective of the form in which abuses become manifest and that adherence to such principles would be in the public interest; accordingly, the department adopted the code and subscribed fully to its principles by circular letter dated December 19, 1957.

(c) It is now deemed advisable, however, to issue a regulation with respect to the applicability of these principles to one area of abuse of which this department has become aware. Commissions, fees and other allowances have been paid on individual life insurance policies to groups of employees on a mass merchandising basis under plans sponsored by union-management employee welfare funds at the same rates as business solicited on an individual basis. Such excessive compensation tends to reduce the level of benefits payable to the beneficiaries of employee welfare and pension funds and is prejudicial to the interest of policyholders. Accordingly, in the best interests of the public and the beneficiaries of such funds, this Part sets forth a commission scale which is deemed reasonable and not excessive. The scale provides for decremental rates in recognition of the fact that, with respect to policies sold on a mass merchandising basis, sales efforts and services, as well as administrative and acquisition costs, decrease as the premium volume increases.