§ 44-407.24 — Policies issued on or after operative date of law; adjusted premiums; present values; how calculated; filing of election

Nebraska § 44-407.24

• Jurisdiction: Nebraska
• Ch. 44: Insurance

Text

(1) This section shall apply to all policies issued
on or after the operative date of this section as defined herein. 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 (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 be 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 defined in this
section. In applying the percentage specified in (c) above no nonforfeiture
net level premium shall be deemed to exceed four 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. 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 percent 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 premium, 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 (i) the then present value of the then future
guaranteed benefits provided for by the policy and (ii) 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 (a) by (b), where (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 (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 sections 44-407 to 44-409 shall for all policies of ordinary insurance be calculated
on the basis of (a) the Commissioners 1980 Standard Ordinary Mortality Table
or (b) at the election of the company for any one or more specified plans
of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table
with Ten-Year Select Mortality Factors; shall for all policies of industrial
insurance be calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table; and shall 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.
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. Under any
paid-up nonforfeiture benefit, including any paid-up dividend additions, any
cash surrender value available whether or not required by section 44-407.01 ,
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. 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. 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. For insurance
issued on a substandard basis, the calculation of any such adjusted premiums
and present values may be based on appropriate modifications of such tables. For policies issued prior to the operative date of the valuation
manual designated in subsection (2) of section 44-8908 , any Commissioners
Standard ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, that are approved by regulation
promulgated by the Department of Insurance 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 designated
in subsection (2) of section 44-8908 , 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
Department of Insurance approves by rule and regulation 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 designated
in subsection (2) of section 44-8908 , then that minimum nonforfeiture standard
supersedes the minimum nonforfeiture standard provided by the valuation manual.
For policies issued prior to the operative date of the valuation manual designated
in subsection (2) of section 44-8908 , any commissioners standard industrial
mortality tables, adopted after 1980 by the National Association of Insurance
Commissioners, that are approved by regulation promulgated by the Department
of Insurance 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 designated in subsection (2) of section 44-8908 ,
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 Department of Insurance
approves by rule and regulation 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 designated in subsection
(2) of section 44-8908 , then that minimum nonforfeiture standard supersedes
the minimum nonforfeiture standard provided by the valuation manual.
(9) For policies issued before the operative
date of the valuation manual designated in subsection (2) of section 44-8908 ,
the nonforfeiture interest rate per annum for any policy issued
in a particular calendar year shall be equal to one hundred and twenty-five
percent of the calendar year statutory valuation interest rate for such policy
as defined in section 44-8907 , rounded to the nearer
one-quarter of one percent,
except that the nonforfeiture interest rate shall not be less than four percent.
For policies issued on and after the operative date of the valuation manual
designated in subsection (2) of section 44-8908 , the nonforfeiture interest
rate per annum for any policy issued in a particular calendar year shall be
provided by the valuation manual.
(10) Notwithstanding any other provision in sections 44-407 to 44-407.06 , 44-407.08 , 44-407.09 , 44-407.24 to 44-407.26 , and 44-8907 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) After the effective date of this section any company may file with
the Department of Insurance a written notice of its election to comply with
the provisions of this section after a specified date before January 1, 1989,
which 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, except that the Director of Insurance may advance
the operative date of this section for such a company after investigating
and finding that (a) it is in the best interests of the policyholders of such
company to do so, and (b) a majority of states in which such company is doing
business have adopted legislation similar to sections 44-407 to 44-407.06 , 44-407.08 , 44-407.09 , 44-407.24 to 44-407.26 , and 44-8907 .

Legislative History

Source: Laws 1981, LB 355, § 11; Laws 2014, LB755, § 15. Cross References: Mortality tables, see Appendix, Nebraska Revised Statutes, Volume 2A.