Marketing for Actuaries (LIMRA) - Chapter VII - APPENDIX II - NAIC LIFE INS ILLUSTRATINOS MODEL REGULATION

Overview

N/a to
- variable life
- ind and gruop annuities
- credit life
- life policies w/ no illustrated DB > 10k
disciplined current scale - reasonably based on actuarl recent hist exp
- does not allow projected improvements
- does not allow assumed expenses < minimums
illustrated scale - lesser of
- disciplined current scale
- currently payable scale
lapse-supported illustration - disciplined current scale ecxept 100% persistency years 6+
min assumed expenses
- fully allocated expenses
- marginal expenses (only OK if > GRET)
- GRET
- if no approved GRET, must use fully allocated
self supporting illustration - accum CF >= PO value (CV adn other available amts) for 15th policy yer & all illustrated points beyond
- 20th yer for 2nd to die

Policies to Be Illustrated

can't use an illustration prior to 1st anniv if policy form marketed w/o illustration
if mktd w/ illustration, illustration must follow reg
quotations for non-term group life: show sample age values <> illustration for purposes of reg
- but illustrated values must be consistent w/ illustrated scale
- basic illustration must be available to any non-term gruop life enrollee who requests it
General Rules and Prohibitions
- labeled "Life Ins Illustration" adn contain basic info
  - name of insurer name adn address of sales rep
  - name/age/gender of prospect u/w/rating class illustrations base upon
  - generic & company prodict name and form #
  - initial DB dividend option election or application or non-guar elements
- shall NOT
  - represent pol as anything other than life ins pol
  - use or describe non-guar elements in a misleadaing manner
  - state or imply that non-guar elements are guar
  - use a non-compliant illustration
  - use an illustration more favorable than reality
  - provide an incomplete illustration
  - represent that prem payments not req'd to maintain illustrated DB unless that is true
  - use "vanish"
  - use "lapse-supported" illustratino, unless prodcut has no non-f benefits
  - use a non-self-supporting illustration
- int rate can't be greater than disciplined scale rate

Standards for Basic Illustration

Format
- boat load of caveats adn supplemental explanations for anything not guaranteed
- have date prepared and page # of ##
Narrative Summary
- brief descriptoin of policy
- breif desc of prem outlay
- brief desc of policy features/riders/options
- identification adn brief def of column headings and key terms
- not-guaranteed caveat
Numeric Summary
- Pol years 5,10,20,AA70
- Policy guarantees
- insurer's illustrated scale
- "mid-point" scale
  - divs @ 50%
  - credited rates @ avg guar & illustrated
  - non-guar charges @ avg guar & illustrated
Statements
- one signed by applicant/PO
- one signed by sales rep
Tabular Detail
- basic illustrations
  - every year 1-10 adn 5th year thereafter
  - any year premium outlay changes
  - prem outlay and mode of payment
  - guar db
  - guar csv
  - non-guar elements may be shown if described in contract
    - must show at same durations
    - must show 0 in guar column

Standards for Supplemental Illustrations

must be associated w/ basic illustration
can't show values more favorable than basic illustration
non-guar caveat
must include notice to look @ basic illustration

Delivery of Illustration and Record Retention

copy if signed illustration attached to app
revised illustration need to be signed if policy issued other than applied for
agent must sign if no illustration used and illustration provided w/ policy
signed illustration must be kept in file for 3 years after policy no longer in force

Annual Report; Notice to PO

Illustrated policies must provide annual status reports
- UL
  - beg adn end odate of report period
  - pol value @ end of last and current period
  - total amts credited/debited - by type
  - current Db
  - CSV
  - loan balance
  - lapse notice - if applicable
- Other Pols
  - current DB
  - ann prem
  - current CSV
  - current DIV
  - applicatoin of current div
  - outstanding loan
- if pol has no nonf values, only need to supply annual report when change made to non-guar elements

Annual Certifications

Illustration Actuary - appointed by board of directors
Ill Act will certify that illustrations in compliance
Illustratio Actuary is
- MAAA
- familiar w/ illustration ASOP
- not been bad - from an illustration actuary perpsective
- disclose material changes in scales/assumptions
- disclose expense assumptoin
- certify policy forms annually adn before first use
another responsible officer certified
- illustrations in use are ones Ill Act certified
- co gave agents info about expenses
- company will promptly inform when and why illustration actuary changes

Copyright © 2004 Steve Welander.
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