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Title XXIV BUSINESS AND FINANCIAL INSTITUTIONS

Chapter 375

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  375.1503.  Definitions. — As used in sections 375.1500 to 375.1527, the following terms shall mean:

  (1)  "Actuarial standards board", the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice;

  (2)  "Contract premium", the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration;

  (3)  "Currently payable scale", a scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next ninety-five days;

  (4)  "Disciplined current scale", a scale of nonguaranteed elements constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer.  Further guidance in determining the disciplined current scale as contained in standards established by the actuarial standards board may be relied upon if the standards:

  (a)  Are consistent with sections 375.1500 to 375.1527;

  (b)  Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred;

  (c)  Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and

  (d)  Do not permit assumed expenses to be less than minimum assumed expenses;

  (5)  "Generic name", a short title descriptive of the policy being illustrated such as "whole life", "term life" or "flexible premium adjustable life";

  (6)  "Guaranteed elements", the premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue;

  (7)  "Illustrated scale", a scale of nonguaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

  (a)  The disciplined current scale; or

  (b)  The currently payable scale;

  (8)  "Illustration", a presentation or depiction that includes nonguaranteed elements of a policy of life insurance over a period of years and that is one of the three types defined below:

  (a)  "Basic illustration", a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and nonguaranteed elements;

  (b)  "Supplemental illustration", an illustration furnished in addition to a basic illustration that meets the applicable requirements of sections 375.1500 to 375.1527, and that may be presented in a format differing from the basic illustration, but may only depict a scale of nonguaranteed elements that is permitted in a basic illustration;

  (c)  "In-force illustration", an illustration furnished at any time after the policy that it depicts has been in force for one year or more;

  (9)  "Illustration actuary", an actuary meeting the requirements of section 375.1524 who certifies to illustrations based on the standard practice promulgated by the actuarial standards board;

  (10)  "Lapse-supported illustration", an illustration of a policy form failing the test of self-supporting illustration as defined in subdivision (16) of this section, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five years and one hundred percent policy persistency thereafter;

  (11)  "Minimum assumed expenses", the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form.  The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

  (a)  Fully allocated expenses;

  (b)  Marginal expenses; and

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

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Marginal expenses may be used only if greater than a generally recognized expense table.  If no generally recognized expense table is approved, fully allocated expenses shall be used;

  (12)  "Nonguaranteed elements", the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue;

  (13)  "Nonterm group life", a group policy or individual policies of life insurance issued to members of an employer group or other permitted group where:

  (a)  Every plan of coverage was selected by the employer or other group representative;

  (b)  Some portion of the premium is paid by the group or through payroll deduction; and

  (c)  Group underwriting or simplified underwriting is used;

  (14)  "Policy owner", the owner named in the policy or the certificate holder in the case of a group policy;

  (15)  "Premium outlay", the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket;

  (16)  "Self-supporting illustration", an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies, or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available.  For this purpose, "policy owner value" shall include cash surrender values and any other illustrated benefit amounts available at the policy owner's election.

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(L. 1998 S.B. 722 § 7)


---- end of effective   28 Aug 1998 ----

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