Current through Register Vol. 43, No. 39, September 26, 2024
(a) As used in this
regulation or in a life insurance or annuity contract providing for accelerated
benefits, each of the following terms shall have the meaning specified in this
subsection:
(1) "Accelerated benefits" means
benefits that meet the following conditions:
(A) Are payable under an individual or group
life insurance or annuity contract to a policyowner or certificate holder
during the lifetime of the insured for the occurrence of a qualifying
condition;
(B) reduce the death or
annuity benefit otherwise payable under the contract; and
(C) are payable upon the occurrence of a
qualifying condition, which results in the payment of a benefit amount fixed at
the time of acceleration.
(2) "Commissioner" means commissioner of
insurance.
(3) "Elimination period"
means a specified period of time during which the insured continuously meets
the requirements of a qualifying condition before an accelerated benefit
becomes payable.
(4) "Qualifying
condition" means a prerequisite designated in a contract for the payment of
accelerated benefits. Each contract providing for accelerated benefits shall
include as a qualifying condition a medical condition that a health care
provider licensed to practice medicine and surgery or osteopathy predicts will
result in a limited life expectancy of 24 months or less. Any contract
providing for accelerated benefits may include any of the following as a
qualifying condition:
(A) A medical condition
that has required or requires extraordinary medical intervention, including a
major organ transplant or continuous artificial life support, without which the
insured would die;
(B) any
condition that is reasonably expected to require continuous confinement in an
eligible institution as defined in the contract if the insured is expected to
remain there for the rest of the insured's life;
(C) a medical condition that medical evidence
indicates would, in the absence of extraordinary medical intervention, result
in a limited life expectancy of 24 months or less;
(D) a chronic illness, which shall mean
either of the following:
(i) An illness that
renders the insured permanently unable to perform, without substantial
assistance from another individual, a specified number of activities of daily
living, except that a company's definition of chronic illness shall not require
the inability to perform more than two activities of daily living; or
(ii) permanent severe cognitive impairment
and similar forms of dementia; or
(E) any other similar condition approved by
the commissioner as a qualifying condition.
(b) Each contract providing for an
accelerated benefit shall have a title printed on or attached to the first page
of the contract or rider. The title shall describe the coverage provided and
shall be followed or accompanied by a description of the coverage containing
the phrase "accelerated benefit" or words of similar meaning.
(c) Each applicant for a contract providing
for an accelerated benefit shall be given a summary of the accelerated benefit
provisions at or before the time the application is completed. For group
policies, each certificate holder shall be given a copy of the summary with the
certificate. This summary shall include the following:
(1) A brief description of the accelerated
benefit and definitions of the qualifying conditions that would result in
payment of the benefit;
(2) the
existence and amount of any separately identifiable premium for the accelerated
benefit and a description of any charge for administrative expense;
(3) a generic illustration numerically
demonstrating the effect of the payment of a benefit on cash values,
accumulation accounts, death benefits, premiums, policy loans, and policy
liens;
(4) a statement that receipt
of the accelerated benefit could be taxable;
(5) a statement that receipt of accelerated
benefits could affect medicaid eligibility; and
(6) an acknowledgement, signed and dated by
the agent and the applicant for the group or individual coverage, that the
summary has been furnished. Each direct response insurer shall incorporate the
summary and acknowledgement in the application or attach them to the
application.
(d)
Contract payment options shall include the option to take the accelerated
benefit as a lump sum. The accelerated benefit shall not be made available as
an annuity contingent upon the life of the insured.
(e) No contract shall restrict the use of the
proceeds.
(f) No contract shall
limit the time frame within which a claim must be submitted following the
occurrence of a qualifying condition.
(g) If the accelerated benefit is offered
without an additional premium, a separate written explanation of how the
accelerated benefit is funded shall be filed with the commissioner and included
with the summary.
(h) Each time an
accelerated benefit is requested and whenever a previous summary becomes
invalid, the irrevocable beneficiary and either the individual policyowner or
group certificate holder shall be given a summary. This summary shall include
statements meeting the following conditions:
(1) Warning that receipt of the accelerated
benefit could be taxable and that assistance from a tax advisor is
suggested;
(2) showing the effect
that the payment of the accelerated benefit will have on cash values,
accumulation accounts, death benefits, premiums, policy loans, and policy
liens; and
(3) disclosing that
receipt of accelerated benefit payments may adversely affect the recipient's
eligibility for medicaid or other government benefits or
entitlements.
(i) Each
time an accelerated benefit option is exercised, the policyowner and
certificate holder shall be given an endorsement, rider, or schedule page that
reflects any revisions to cash values, death benefits, accumulation accounts,
premiums, policy loans, policy liens, and any other values that change as a
result of the payment or payments.
(j) Insurers shall not unfairly discriminate
among in-sureds with different or similar qualifying conditions covered under
the policy. Insurers shall not apply any additional conditions to the payment
of the accelerated benefits other than those conditions specified in the policy
or rider.
(k) Any insurer may offer
a waiver of premium for the accelerated benefit provision if a regular waiver
of premium provision is not in effect. When the accelerated benefit is claimed,
the insurer shall explain any continuing premium requirement to keep the policy
in force.
(l) Accelerated benefits
shall be funded by any of the following methods:
(1) Requiring the policyowner to pay an
additional premium;
(2) utilizing
the present value of the face amount of the policy if the following conditions
are met:
(A) The present value calculation is
based on an actuarial discount appropriate to the policy design;
(B) the interest rate used in the present
value calculation is based on sound actuarial principles and disclosed in the
contract or actuarial memorandum; and
(C) the maximum interest rate is no more than
the greater of either of the following:
(i)
The current yield on 90-day treasury bills; or
(ii) the current maximum policy loan interest
rate permitted by
K.S.A.
40-420c, and amendments thereto; or
(3) accruing an
interest charge on the amount of the accelerated benefits at an interest rate
based on sound actuarial principles and disclosed in the contract or actuarial
memorandum and no more than the greater of either of the following:
(A) The current yield on 90-day treasury
bills; or
(B) the current maximum
policy loan interest rate permitted by K.S.A. 40-240c, and amendments
thereto.
(m)
When an accelerated benefit is payable, no more than a proportionate reduction
in the cash value shall be made, unless the payment of the accelerated benefits
and any accrued interest can be treated as a lien against the death benefit of
the policy or rider. Therefore, access to the cash value may be restricted to
any excess of the cash value over the sum of any other outstanding loans, and
the lien and access to additional policy loans may be limited to the difference
between the cash value and the sum of the lien and any other outstanding policy
loans on the policy under which the accelerated benefits were paid.
(n)
(1) If
payment of an accelerated benefit results in a proportionate reduction in the
cash value, the payment shall not be applied toward repaying an amount greater
than a proportionate portion of any outstanding policy loans; or
(2) if the payment is considered a lien as
provided in subsection (m), the insurance company may require any accelerated
death benefit payment to be applied toward repaying the portion of any other
outstanding policy loan that causes the sum of the accelerated benefit and
policy loan to exceed the cash value.
(o) The death benefit shall not be reduced
more than the amount of the accelerated benefits after adjustment for any
actuarial discount or accrued interest as provided in subsection (l) and any
administrative expense charge required by policies providing accelerated
benefits without an additional premium charge as disclosed on the summary
required by subsection (c).
(p) If
any death benefit remains after payment of an accelerated benefit, the
accidental death benefit, if any, in a policy or rider shall not be affected by
the payment of an accelerated benefit.
(q) The valuation method and assumptions used
to produce the accelerated benefit provisions shall be filed with the insurance
department with the related policy form or rider. The assumptions shall reflect
the statutory mortality and interest rate assumptions for the life insurance
provisions and appropriate assumptions for the other provisions incorporated in
the policy or rider. Each insurer shall maintain in its files descriptions of
the bases and procedures used to calculate benefits, which shall be made
available for examination by the commissioner or a designee upon
request.
(r) A qualified actuary
shall describe the accelerated benefits, the risks, the expected costs, and the
calculation of statutory reserves in an actuarial memorandum accompanying each
filing of accelerated benefits products with the commissioner. Each insurer
shall maintain in its files descriptions of the bases and procedures used to
calculate benefits payable under these provisions. These descriptions shall be
made available for examination by the commissioner upon request.
(1) If benefits are provided through the
acceleration of benefits under group or individual life policies or riders to
these policies, policy reserves shall be determined in accordance with the
standard valuation law. All valuation assumptions used in constructing the
reserves shall be determined as appropriate for statutory valuation purposes by
a member in good standing of the American academy of actuaries. Mortality
tables and interest rates currently recognized for life insurance reserves by
the national association of insurance commissioners, as well as appropriate
assumptions for other provisions incorporated in the contract, may be used. The
actuary shall follow both actuarial standards and certification for good and
sufficient reserves. Reserves in the aggregate shall be sufficient to cover the
following:
(A) Policies upon which no claim
has yet arisen; and
(B) policies
upon which an accelerated claim has arisen.
(2) For policies and certificates that
provide actuarially equivalent benefits, no additional reserves shall be
required to be established.
(3)
Policy liens and policy loans, including accrued interest, shall represent
assets of the company for statutory reporting purposes. For any policy on which
the policy lien exceeds the policy's statutory reserve liability, the excess
shall be held as a non-admitted asset.
(s) The accelerated benefit provision shall
become effective on the effective date of the policy or rider.
(t) Any contract may include an elimination
period for the qualifying conditions of continuous confinement and chronic
illness, other than chronic illness meeting the requirements of 26 U.S.C.
sections 7702B and 202(g) of the United States internal revenue code or any
subsequent corresponding internal revenue code, as amended. The elimination
period shall not exceed 90 days from the time the qualifying condition first
manifests itself after the effective date of the contract.
(u) The individual and group life insurance
and annuity contracts subject to this regulation shall not be described or
marketed as being long-term care insurance or as providing long-term care
benefits.
