N.Y. Comp. Codes R. & Regs. tit. 11 § 48.2

Current through Register Vol. 46, No. 45, November 2, 2024

Section 48.2 - Non-guaranteed elements

(a)

(1) An insurer shall establish board-approved criteria for determining non-guaranteed charges or benefits.

(2) An insurer, in the assignment of policies into classes of policies, for the purpose of determining non-guaranteed elements:

(i) shall not unfairly discriminate among policies with similar expectations as to anticipated experience factors;

(ii) shall assign policies into classes based on sound actuarial principles;

(iii) shall assign policies with material differences in expected costs into different classes;

(iv) shall have sufficient refinement of classes to place reasonable limits on anti-selection;

(v) shall distinguish between policies when the cost of guarantees are not similar. For example, policies with a low guaranteed interest rate shall not be combined with policies with a high guaranteed interest rate;

(vi) may distinguish based on the date of policy issue with different issue periods;

(vii) shall not result in a change to a less favorable underwriting risk class applied to existing coverage than the underwriting risk class assigned to existing coverage prior to the change; and

(viii) shall be consistent with the language of the policy and the solicitation, advertising or other material provided by the insurer to the policy owner.

(b) Readjustments to non-guaranteed elements on existing policies shall be subject to the following:

(1) At the time of revision of a scale for an indeterminate premium policy, the difference from the point of revision between the revised scale and the scale in effect at the later of the date of issue or the date of last revision, shall be reasonably based on the difference from the point in time of revision and application of the anticipated experience factors underlying the two scales with respect to expenses, mortality, policy claims, taxes, investment income and lapses.

(2) At the time of revision of a scale of non-guaranteed elements for a policy subject to Insurance Law section 4232(b), the difference from the point in time of revision and application of the revised scale and the scale in effect at the later of the date of issue or the date of last revision, shall be reasonably based on the difference from the point of revision of the anticipated experience factors underlying the two scales with respect to expenses, mortality, investment income and persistency.

(3) At the time of revision of a scale of non-guaranteed elements for a policy subject to Insurance Law section 4232(a), the difference from the point in time of revision and application of the revised scale and the scale in effect at the later of the date of issue or the date of last revision, shall be reasonably based on the difference from the point of revision of the anticipated experience factors underlying the two scales with respect to expenses, mortality and investment income.

(4) At the time of revision of a scale of non-guaranteed elements for a policy not subject to paragraphs (1), (2), or (3) of this subdivision, the difference from the point in time of revision and application of the revised scale and the scale in effect at the later of the date of issue or the date of last revision, shall be reasonably based on the difference from the point of revision of the anticipated experience factors underlying the two scales.

(5) At the time of revision of a scale of non-guaranteed elements for a policy, an insurer shall not increase the profit margins at any policy duration above the profit margin projected at that duration at the date of issue of the policy, unless approved by the superintendent upon a finding that the increase is necessary due to the financial condition of the insurer.

(6) A readjustment to non-guaranteed elements on existing policies shall be based on expectations as to future experience and shall not recoup past losses. Experience factors from the later of the date of issue or the date of last revision and up until the time of new revision shall be assumed to equal the anticipated experience factors as of the later of the date of issue or the date of last revision.

(c) Any readjustment in non-guaranteed charges and benefits on in-force policies resulting from a change in board-approved criteria shall meet the requirements of subdivision (b) of this section.

(d) An insurer shall not consider cost of reinsurance agreements or other third party agreements, when changing non-guaranteed elements, if it would cause an adverse impact on non-guaranteed elements of any existing policy, unless the costs are consistent with the insurer's own anticipated experience assumptions and the insurer would have made the changes to the non-guaranteed elements in the absence of the costs.

(e) An insurer's procedures for readjustment of non-guaranteed elements on an assumed or acquired class of business shall not be less favorable to policy owners than the procedures used by the original insurer when the policies in the class were issued, unless approved by the superintendent upon a finding that the increase is necessary due to the financial condition of the original insurer.

(f) The board-approved criteria shall:

(1) require that anticipated experience factors be consistent with experience that is credible and relevant, if any;

(2) require the examination, as needed, of anticipated experience factors at specified times and under specified conditions but no less frequently than required by law to determine if the factors are reasonable; and

(3) include a statement of the maximum period, not to exceed five years, between reviews of anticipated experience factors and non-guaranteed elements for reasonableness.

(g) In addition to the criteria required under subdivision (f) of this section, board-approved criteria also may include:

(1) an amount of in-force policies, either by number issued or premium volume, below which no changes in an anticipated experience factor will be made because of a lack of statistical credibility;

(2) a minimum change in anticipated experience factors that will result in readjustment to non-guaranteed elements, provided that the minimum change: shall be reasonable in relation to the value provided to the policy owner and the cost of implementing a change in non-guaranteed elements; and the minimum change in anticipated experience factors that cause a readjustment in non-guaranteed elements favorable to policy owners shall be no greater than the minimum change in anticipated experience factors that causes a change in non-guaranteed elements adverse to policy owners; and

(3) averaging, smoothing, interpolating and rounding that are reasonable in relation to the values and benefits provided and that do not have a bias toward reducing policy benefits or values.

(h) Board-approved criteria shall place reasonable limits on the policy owner's exposure to higher unit expense costs from discontinued sales or a volume of sales significantly less than anticipated.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 48.2

Adopted New York State Register September 20, 2017/Volume XXXIX, Issue 38, eff. 3/19/2018