(1) (a) This section shall
apply to all policies issued on or after the operative date of this section. Except as
provided in subsection (7) of this section, the adjusted premiums for any policy shall
be calculated on an annual basis and shall be such uniform percentage of the
respective premiums specified in the policy for each policy year, excluding amounts
payable as extra premiums to cover impairments or special hazards, and also
excluding any uniform annual contract charge or policy fee specified in the policy in
a statement of the method to be used in calculating the cash surrender values and
paid-up nonforfeiture benefits, that the present value, at the date of issue of the
policy, of all adjusted premiums shall be equal to the sum of:
(I) The then present value of the future guaranteed benefits provided for by
the policy;
(II) One percent of either the amount of insurance, if the insurance be
uniform in amount, or the average amount of insurance at the beginning of each of
the first ten policy years; and
(III) One hundred twenty-five percent of the nonforfeiture net level premium
as specified in subsection (2) of this section.
(b) In applying the percentage specified in subparagraph (III) of paragraph (a)
of this subsection (1), no nonforfeiture net level premium shall be deemed to exceed
four percent of either the amount of insurance, if the insurance is uniform in
amount, or the average amount of insurance at the beginning of each of the first ten
policy years. The date of issue of a policy for the purpose of this section shall be the
date as of which the rated age of the insured is determined.
(2) The nonforfeiture net level premium shall be equal to the present value,
at the date of issue of the policy, of the guaranteed benefits provided for by the
policy divided by the present value, at the date of issue of the policy, of an annuity
of one per annum payable on the date of issue of the policy and on each anniversary
of such policy on which a premium falls due.
(3) In the case of policies which cause on a basis guaranteed in the policy
unscheduled changes in benefits or premiums, or which provide an option for
changes in benefits or premiums other than a change to a new policy, the adjusted
premiums and present values shall initially be calculated on the assumption that
future benefits and premiums do not change from those stipulated at the date of
issue of the policy. At the time of any such change in the benefits or premiums, the
future adjusted premiums, nonforfeiture net level premiums, and present values
shall be recalculated on the assumption that future benefits and premiums do not
change from those stipulated by the policy immediately after the change.
(4) Except as otherwise provided in subsection (7) of this section, the
recalculated future adjusted premiums for any such policy shall be such uniform
percentage of the respective future premiums specified in the policy for each policy
year, excluding amounts payable as extra premiums to cover impairments and
special hazards, and also excluding any uniform annual contract charge or policy
fee specified in the policy in a statement of the method to be used in calculating
the cash surrender values and paid-up nonforfeiture benefits, that the present
value, at the time of change to the newly defined benefits or premiums, of all such
future adjusted premiums shall be equal to the excess of:
(a) The sum of the then present value of the then future guaranteed benefits
provided for by the policy, and the additional expense allowance, if any; over
(b) The then cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(5) The additional expense allowance, at the time of the change to the newly
defined benefits or premiums, shall be the sum of:
(a) One percent of the excess, if positive, of the average amount of insurance
at the beginning of each of the first ten policy years subsequent to the change over
the average amount of insurance prior to the change at the beginning of each of the
first ten policy years subsequent to the time of the most recent previous change, or,
if there has been no previous change, the date of issue of the policy; and
(b) One hundred twenty-five percent of the increase, if positive, in the
nonforfeiture net level premium.
(6) The recalculated nonforfeiture net level premium shall be equal to the
result obtained by dividing the amount specified in paragraph (a) by the amount
specified in paragraph (b) of this subsection (6) where:
(a) This paragraph (a) equals the sum of:
(I) The nonforfeiture net level premium applicable prior to the change times
the present value of an annuity of one per annum payable on each anniversary of
the policy on or subsequent to the date of the change on which a premium would
have fallen due had the change not occurred; and
(II) The present value of the increase in future guaranteed benefits provided
for by the policy; and where
(b) This paragraph (b) equals the present value of an annuity of one per
annum payable on each anniversary of the policy on or subsequent to the date of
change on which a premium falls due.
(7) Notwithstanding any other provisions of this section to the contrary, in
the case of a policy issued on a substandard basis which provides reduced graded
amounts of insurance so that, in each policy year, such policy has the same tabular
mortality cost as an otherwise similar policy issued on the standard basis which
provides higher uniform amounts of insurance, adjusted premiums and present
values for such substandard policy may be calculated as if it were issued to provide
such higher uniform amounts of insurance on the standard basis.
(8) All adjusted premiums and present values referred to in this part 3 for all
policies of ordinary insurance issued on or after the operative date of this section
shall be calculated on the basis of the commissioners 1980 standard ordinary
mortality table or, at the election of the company for any one or more specified
plans of life insurance, on the basis of the commissioners 1980 standard ordinary
mortality table with ten-year select mortality factors; for all policies of industrial
insurance issued on or after the operative date of this section shall be calculated on
the basis of the commissioners 1961 standard industrial mortality table; and for all
policies issued in a particular calendar year on or after the operative date shall be
calculated on the basis of a rate of interest not exceeding the nonforfeiture interest
rate as defined in this section for policies issued in that calendar year, subject to
the following:
(a) At the option of the company, calculations for all policies issued in a
particular calendar year may be made on the basis of a rate of interest not
exceeding the nonforfeiture interest rate, as defined in this section, for policies
issued in the immediately preceding calendar year.
(b) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions, any cash surrender value available, whether or not required by section 10-7-302, shall be calculated on the basis of the mortality table and rate of interest
used in determining the amount of such paid-up nonforfeiture benefit and paid-up
dividend additions, if any.
(c) A company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit, including any paid-up additions under the policy, on the basis
of an interest rate no lower than that specified in the policy for calculating cash
surrender values.
(d) In calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates
of mortality assumed may be not more than those shown in the commissioners 1980
extended term insurance table for policies of ordinary insurance and not more than
the commissioners 1961 industrial extended term insurance table for policies of
industrial insurance.
(e) For insurance issued on a substandard basis, the calculation of any such
adjusted premiums and present values may be based on appropriate modifications
of the tables specified in this subsection (8).
(f) (I) For policies issued prior to the operative date of the valuation manual,
any commissioners standard ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, that are approved by rule
promulgated by the commissioner for use in determining the minimum
nonforfeiture standard may be substituted for the commissioners 1980 standard
ordinary mortality table with or without ten-year select mortality factors or for the
commissioners 1980 extended term insurance table.
(II) For policies issued on or after the operative date of the valuation manual,
the valuation manual shall provide the commissioners standard mortality table for
use in determining the minimum nonforfeiture standard that may be substituted for
the commissioners 1980 standard ordinary mortality table with or without ten-year
select mortality factors or for the commissioners 1980 extended term insurance
table. If the commissioner approves by rule any commissioners standard ordinary
mortality table adopted by the National Association of Insurance Commissioners for
use in determining the minimum nonforfeiture standard for policies issued on or
after the operative date of the valuation manual, then that minimum nonforfeiture
standard supersedes the minimum nonforfeiture standard provided by the valuation
manual.
(g) (I) For policies issued prior to the operative date of the valuation manual,
any commissioners standard industrial mortality tables, adopted after 1980 by the
national association of insurance commissioners, that are approved by rule
promulgated by the commissioner for use in determining the minimum
nonforfeiture standard may be substituted for the commissioners 1961 standard
industrial mortality table or the commissioners 1961 industrial extended term
insurance table.
(II) For policies issued on or after the operative date of the valuation manual,
the valuation manual shall provide the commissioners standard mortality table for
use in determining the minimum nonforfeiture standard that may be substituted for
the commissioners 1961 standard industrial mortality table or the commissioners
1961 industrial extended term insurance table. If the commissioner approves by rule
any commissioners standard industrial mortality table adopted by the National
Association of Insurance Commissioners for use in determining the minimum
nonforfeiture standard for policies issued on or after the operative date of the
valuation manual, then that minimum nonforfeiture standard supersedes the
minimum nonforfeiture standard provided by the valuation manual.
(9) (a) For policies issued prior to the operative date of the valuation manual,
the nonforfeiture interest rate per annum for any policy issued in a particular
calendar year must be equal to one hundred twenty-five percent of the calendar
year statutory valuation interest rate for such policy as defined in this part 3,
rounded to the nearer one-quarter of one percent; except that the nonforfeiture
interest rate may not be less than four percent.
(b) For policies issued on or after the operative date of the valuation manual,
the nonforfeiture interest rate per annum for any policy issued in a particular
calendar year must be as provided by the valuation manual.
(10) Notwithstanding any other provision in this article to the contrary, any
refiling of nonforfeiture values or their methods of computation for any previously
approved policy form which involves only a change in the interest rate or mortality
table used to compute nonforfeiture values shall not require refiling of any other
provisions of that policy form.
(11) On or after July 1, 1981, any company may file with the commissioner a
written notice of its election to comply with the provisions of this section after a
specified date before January 1, 1989, which specified date shall be the operative
date of this section for such company. If a company makes no such election, the
operative date of this section for such company shall be January 1, 1989.