§ 26.1-33-23 — Calculation of adjusted premiums - Industrial policies

North Dakota § 26.1-33-23

• Jurisdiction: North Dakota
• Title 26.1: Insurance
• Ch. 26.1-33: Life Insurance

Text

This section does not apply to industrial policies issued on or after the operative date of
section 26.1-33-24. In the case of industrial policies issued on or after the operative date of this
section, all adjusted premiums and present values referred to in sections 26.1-33-18 through
26.1-33-28 must be calculated on the basis of the commissioners 1961 standard industrial
mortality table and the rate of interest specified in the policy for calculating cash surrender
values and paid-up nonforfeiture benefits, provided that such rate of interest may not exceed
three and one-half percent per annum except that a rate of interest not exceeding five and
one-half percent per year may be used for policies issued after June 30, 1977, except that for
any single premium whole life or endowment insurance policy a rate of interest not exceeding
six and one-half percent per year may be used. 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 1961
industrial extended term insurance table. For insurance issued on a substandard basis, the
calculations of any such adjusted premiums and present values may be based on such other
table of mortality as may be specified by the insurer and approved by the commissioner. Upon
the operative date of this section, any insurer 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,
1968. After the filing of such notice, upon the specified date, which must be the operative date of
this section for that insurer, this section must become operative with respect to the industrial
policies issued after that date by the insurer. If an insurer makes no election, the operative date
of this section for the insurer is January 1, 1968.
26.1-33-24. Calculations of adjusted premiums by the nonforfeiture net level premium
method.
1. This section applies to all policies issued on or after the operative date of this section.
Except as provided in subsection 7, the adjusted premiums for any policy must be
calculated on an annual basis and must 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 equals the sum of:

a. The then present value of the future guaranteed benefits provided for by the
policy;
b. One 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; and
c. One hundred twenty-five percent of the nonforfeiture net level premium as
hereinafter defined.
In applying the percentage specified in subdivision c, no nonforfeiture net level
premium may 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 is
the date as of which the rated age of the insured is determined.
2. The nonforfeiture net level premium is equal to the present value, at the date of issue
of the life insurance 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 the policy
on which a premium falls due.
3. In the case of life insurance policies that cause on a basis guaranteed in the policy
unscheduled changes in benefits or premiums, or that provide an option for changes in
benefits or premiums other than a change to a new policy, the adjusted premiums and
present values must 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 change in the benefits or premiums the future adjusted premiums,
nonforfeiture net level premiums, and present values must 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, the recalculated future adjusted
premiums for any life insurance policy must be the 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 equals the
excess of:
a. The sum of:
(1) The then present value of the then future guaranteed benefits provided for
by the policy; plus
(2) The additional expense allowance, if any; divided by
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, is 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 is equal to the result obtained by
dividing the sum of 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 the present value of the increase in
future guaranteed benefits provided for by the policy by 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 provision of this section to the contrary, in the case of a life
insurance policy issued on a substandard basis which provides reduced graded
amounts of insurance so that, in each policy year, the 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 the substandard policy may be calculated as if it were issued to provide the higher
uniform amounts of insurance on the standard basis.
8. All adjusted premiums and present values referred to in sections 26.1-33-18 through
26.1-33-28 must for all ordinary life insurance policies be calculated on the basis of the
commissioners 1980 standard ordinary mortality table, or at the election of the insurer
for any one or more specified plans of life insurance, the commissioners 1980
standard ordinary mortality table with ten-year select mortality factors; must for all
policies of industrial insurance be calculated on the basis of the commissioners 1961
standard industrial mortality table; and must for all policies issued in a particular
calendar year 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. However:
a. At the option of the insurer, 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
26.1-33-18, must 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. An insurer 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 ordinary life insurance policies and not more
than the commissioners 1961 industrial extended term insurance table for
industrial insurance policies.
e. For insurance issued on a substandard basis, the calculation of any adjusted
premiums and present values may be based on appropriate modifications of the
tables.
f. For policies issued before 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
adopted 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. For policies issued on or
after the operative date of the valuation manual, the valuation manual must
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. For policies issued before 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
adopted 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. For policies issued on or after the operative date of the valuation manual,
the valuation manual must 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. The nonforfeiture interest rate is defined:
a. For policies issued before the operative date of the valuation manual, the
nonforfeiture interest rate per annum for any policy issued in a particular calendar
year shall be equal to one hundred twenty-five percent of the calendar year
statutory valuation interest rate for such policy as defined in chapter 26.1-35,
rounded to the nearer one quarter of one percent, but 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 provided by the valuation manual.
10. Notwithstanding any other provision in this title 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 does not require refiling of any other provisions of that
policy form.
11. Upon the operative date of this section, any insurer may file with the commissioner a
written notice of its election to comply with the provision of this section after a specified
date before January 1, 1989, which must be the operative date of this section for the
insurer. If an insurer makes no election, the operative date of this section for the
insurer is January 1, 1989.