Insurance, Administration

Rule R590-177

Life Insurance Illustrations Rule

Change in Proposed Rule

DAR File No.: 32698
Filed: 10/01/2009 05:12:01 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Additional changes are being made to the rule in order to adopt suggestions made during the initial comment period.

Summary of the rule or change:

In Section R590-177-3, the dollar amount at which a policy illustration is required is being changed from $15,000 to the original amount of $10,000. The changes in Subsection R590-177-11(C)(6)(c) are being made for consistency with Subsection R590-177-4(k)(1)(c) of this rule. Subsection R590-177-11(H) is being changed back to the way it was. It was determined that it was easier to remember to notify the department at the time the illustration actuary is changed rather than when the insurer makes its next filing. (DAR NOTE: This change in proposed rule has been filed to make additional changes to a proposed amendment that was published in the June 15, 2009, issue of the Utah State Bulletin, on page 48. Underlining in the rule below indicates text that has been added since the publication of the proposed new rule mentioned above; strike out indicates text that has been deleted. You must view the change in proposed rule and the proposed amendment together to understand all of the changes that will be enforceable should the agency make this rule effective.)

State statutory or constitutional authorization for this rule:

• Section 31A-23a-402
• Section 31A-2-201
• Section 31A-22-425

Anticipated cost or savings to:

the state budget:

The additional changes to this rule will not require additional filings for the department and thus no additional work nor will the changes require the department's licensees to pay additional fines or fees.

local governments:

The changes to this rule will not affect local governments since the rule deals only with the relationship between licensed life insurers and the insurance department.

small businesses:

This rule impacts life insurance companies, which are organizations of more than 50 employees. There should be no impact on small employers.

persons other than small businesses, businesses, or local governmental entities:

In Section R590-177-3, the dollar amount at which an illustration is required to accompany the policy is being changed from $15,000 back to the original amount of $10,000 to maintain the national standard. This should have very little if any impact on insurers required to provide these illustrations since so few policies have a face value as low as $10,000 to $15,000. Essentially all life policies have higher values and are required to be accompanied by an illustration when given to the insured.

Compliance costs for affected persons:

In Section R590-177-3, the dollar amount at which an illustration is required to accompany the policy is being changed from $15,000 back to the original amount of $10,000 to maintain the national standard. This should have very little if any impact on insurers required to provide these illustrations since so few policies have a face value as low as $10,000 to $15,000. Essentially all life policies have higher values and are required to be accompanied by an illustration when given to the insured.

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes to this rule should have very little, if any, fiscal impact on Utah businesses.

D. Kent Michie, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

11/16/2009

This rule may become effective on:

11/23/2009

Authorized by:

Jilene Whitby, Information Specialist

R590. Insurance, Administration.

R590-177. Life Insurance Illustrations Rule.

 

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R590-177-3. Applicability and Scope.

A. This rule applies to all group and individual life insurance policies and certificates except:

(1) variable life insurance;

(2) individual and group annuity contracts;

(3) credit life insurance; or

(4) life insurance policies with no illustrated death benefits on any individual exceeding [$15,000]$10,000.

B. The provisions of this rule apply to policies sold on or after January 1, 1997.

 

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R590-177-11. Annual Certifications.

A. The board of directors of each insurer shall appoint one or more illustration actuaries.

B. The illustration actuary shall certify that :

(1) the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of Practice No. 24, Compliance with the NAIC Life Insurance Illustrations Model Regulation promulgated by the Actuarial Standards Board ;[,] and[that]

(2) the illustrated scales used in insurer-authorized illustrations meet the requirements of this rule.

C. The illustration actuary shall:

(1) be a member in good standing of the American Academy of Actuaries;

(2) be familiar with the standard of practice regarding life insurance policy illustrations;

(3) not have been found by the commissioner, following appropriate notice and hearing, to have:

(a) violated any provision of, or any obligation imposed by, the insurance law or other law in the course of dealings as an illustration actuary;

(b) been found guilty of fraudulent or dishonest practices;

(c) demonstrated incompetence, lack of cooperation, or untrustworthiness to act as an illustration actuary; or

(d) resigned or been removed as an illustration actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards;

(4) not fail to notify the commissioner of any action taken by a commissioner of another state similar to that under Subsection (3) above;

(5) disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in force policies, this shall be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in force policies are not consistent with the nonguaranteed elements actually being paid, charged or credited to the same or similar forms, this shall be disclosed in the annual certification; and

(6) disclose in the annual certification the method used to allocate overhead expenses for all illustrations:

(a) fully allocated expenses;

(b) marginal expenses; or

(c) a generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the National Association of Insurance Commissioners or by the commissioner.

D.(1) The illustration actuary shall file a certification with the board:

(a) annually for all policy forms for which illustrations are used; and

(b) before a policy form is illustrated.

(2) If an error in a previous certification is discovered, the illustration actuary shall notify the board of directors of the insurer and the commissioner promptly.

E. If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary shall notify the board of directors of the insurer and the commissioner promptly of the inability to certify.

F. A responsible officer of the insurer, other than the illustration actuary, shall certify annually:

(1) that the illustration formats meet the requirements of this rule and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary; and

(2) that the company has provided its producers with information about the expense allocation method used by the company in its illustrations and disclosed as required in Subsection C(6) of this section.

G. The annual certifications shall be completed each year by a date determined by the insurer. The certifications shall be maintained by the insurer for a period of 5 years and be available for inspection by the commissioner.

H. If an insurer changes the illustration actuary responsible for all or a portion of the company's policy forms, the insurer shall notify the commissioner and disclose the reason for the change.[The notification shall be included as a supporting document with the insurer's next submitted form filing.]

 

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KEY: insurance

Date of Enactment or Last Substantive Amendment: 2009

Notice of Continuation: March 31, 2006

Authorizing, and Implemented or Interpreted Law: 31A-23-302