Current through Register Vol. 46, No. 39, September 25, 2024
(a)
(1) An insurer shall establish board-approved
criteria for determining non-guaranteed charges or benefits.
(2) An insurer, in the assignment of policies
into classes of policies, for the purpose of determining non-guaranteed
elements:
(i) shall not unfairly discriminate
among policies with similar expectations as to anticipated experience
factors;
(ii) shall assign policies
into classes based on sound actuarial principles;
(iii) shall assign policies with material
differences in expected costs into different classes;
(iv) shall have sufficient refinement of
classes to place reasonable limits on anti-selection;
(v) shall distinguish between policies when
the cost of guarantees are not similar. For example, policies with a low
guaranteed interest rate shall not be combined with policies with a high
guaranteed interest rate;
(vi) may
distinguish based on the date of policy issue with different issue
periods;
(vii) shall not result in
a change to a less favorable underwriting risk class applied to existing
coverage than the underwriting risk class assigned to existing coverage prior
to the change; and
(viii) shall be
consistent with the language of the policy and the solicitation, advertising or
other material provided by the insurer to the policy owner.
(b) Readjustments to
non-guaranteed elements on existing policies shall be subject to the following:
(1) At the time of revision of a scale for an
indeterminate premium policy, the difference from the point of revision between
the revised scale and the scale in effect at the later of the date of issue or
the date of last revision, shall be reasonably based on the difference from the
point in time of revision and application of the anticipated experience factors
underlying the two scales with respect to expenses, mortality, policy claims,
taxes, investment income and lapses.
(2) At the time of revision of a scale of
non-guaranteed elements for a policy subject to Insurance Law section 4232(b),
the difference from the point in time of revision and application of the
revised scale and the scale in effect at the later of the date of issue or the
date of last revision, shall be reasonably based on the difference from the
point of revision of the anticipated experience factors underlying the two
scales with respect to expenses, mortality, investment income and
persistency.
(3) At the time of
revision of a scale of non-guaranteed elements for a policy subject to
Insurance Law section 4232(a), the difference from the point in time of
revision and application of the revised scale and the scale in effect at the
later of the date of issue or the date of last revision, shall be reasonably
based on the difference from the point of revision of the anticipated
experience factors underlying the two scales with respect to expenses,
mortality and investment income.
(4) At the time of revision of a scale of
non-guaranteed elements for a policy not subject to paragraphs (1), (2), or (3)
of this subdivision, the difference from the point in time of revision and
application of the revised scale and the scale in effect at the later of the
date of issue or the date of last revision, shall be reasonably based on the
difference from the point of revision of the anticipated experience factors
underlying the two scales.
(5) At
the time of revision of a scale of non-guaranteed elements for a policy, an
insurer shall not increase the profit margins at any policy duration above the
profit margin projected at that duration at the date of issue of the policy,
unless approved by the superintendent upon a finding that the increase is
necessary due to the financial condition of the insurer.
(6) A readjustment to non-guaranteed elements
on existing policies shall be based on expectations as to future experience and
shall not recoup past losses. Experience factors from the later of the date of
issue or the date of last revision and up until the time of new revision shall
be assumed to equal the anticipated experience factors as of the later of the
date of issue or the date of last revision.
(c) Any readjustment in non-guaranteed
charges and benefits on in-force policies resulting from a change in
board-approved criteria shall meet the requirements of subdivision (b) of this
section.
(d) An insurer shall not
consider cost of reinsurance agreements or other third party agreements, when
changing non-guaranteed elements, if it would cause an adverse impact on
non-guaranteed elements of any existing policy, unless the costs are consistent
with the insurer's own anticipated experience assumptions and the insurer would
have made the changes to the non-guaranteed elements in the absence of the
costs.
(e) An insurer's procedures
for readjustment of non-guaranteed elements on an assumed or acquired class of
business shall not be less favorable to policy owners than the procedures used
by the original insurer when the policies in the class were issued, unless
approved by the superintendent upon a finding that the increase is necessary
due to the financial condition of the original insurer.
(f) The board-approved criteria shall:
(1) require that anticipated experience
factors be consistent with experience that is credible and relevant, if
any;
(2) require the examination,
as needed, of anticipated experience factors at specified times and under
specified conditions but no less frequently than required by law to determine
if the factors are reasonable; and
(3) include a statement of the maximum
period, not to exceed five years, between reviews of anticipated experience
factors and non-guaranteed elements for reasonableness.
(g) In addition to the criteria required
under subdivision (f) of this section, board-approved criteria also may
include:
(1) an amount of in-force policies,
either by number issued or premium volume, below which no changes in an
anticipated experience factor will be made because of a lack of statistical
credibility;
(2) a minimum change
in anticipated experience factors that will result in readjustment to
non-guaranteed elements, provided that the minimum change: shall be reasonable
in relation to the value provided to the policy owner and the cost of
implementing a change in non-guaranteed elements; and the minimum change in
anticipated experience factors that cause a readjustment in non-guaranteed
elements favorable to policy owners shall be no greater than the minimum change
in anticipated experience factors that causes a change in non-guaranteed
elements adverse to policy owners; and
(3) averaging, smoothing, interpolating and
rounding that are reasonable in relation to the values and benefits provided
and that do not have a bias toward reducing policy benefits or
values.
(h)
Board-approved criteria shall place reasonable limits on the policy owner's
exposure to higher unit expense costs from discontinued sales or a volume of
sales significantly less than anticipated.
