230 R.I. Code R. 230-RICR-20-35-1.28

Current through December 3, 2024

Section 230-RICR-20-35-1.28 - Nonforfeiture Benefit Requirement

A. This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.

B. To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of R.I. Gen. Laws § 27-34.2-19:

1. A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in § 1.28(E) of this Part; and

2. The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the prospective policyholder.

C. If the offer required to be made under R.I. Gen. Laws § 27-34.2-19 is rejected, the issuer shall provide the contingent benefit upon lapse described in this section. Even if this offer is accepted for a policy with a fixed or limited premium paying period, the contingent benefit on lapse in § 1.28(D)(4) of this Part shall still apply.

D. After rejection of the offer required under R.I. Gen. Laws § 27-34.2-19, for individual and group policies without nonforfeiture benefits, the issuer shall provide a contingent benefit upon lapse.

1. In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

2. The contingent benefit on lapse shall be triggered every time an issuer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, and the policy or certificate lapses within one hundred twenty (120) days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase
Issue Age	Percent Increase Over Initial Premium
29 and Under	200%
30-34	190%
35-39	170%
40-44	150%
45-49	130%
50-54	110%
55-59	90%
60	70%
61	66%
62	62%
63	58%
64	54%
65	50%
66	48%
67	46%
68	44%
69	42%
70	40%
71	38%
72	36%
73	34%
74	32%
75	30%
76	28%
77	26%
78	24%
79	22%
80	20%
81	19%
82	18%
83	17%
84	16%
85	15%
86	14%
87	13%
88	12%
89	11%
90 and Over	10%

3. A contingent benefit on lapse shall also be triggered for policies with a fixed or limited premium paying period every time an issuer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth below based on the insured's issue age, the policy or certificate lapses within 120 days of the due date of the premium so increased, and the ratio in § 1.28(D)(5)(b) of this Part is forty percent (40%) or more. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase
Issue Age	Percentage Increase Over Initial Premium
Under 65	50%
65-80	30%
Over 80	10%

4. On or before the effective date of a substantial premium increase as defined in § 1.28(D)(2) of this Part, the issuer shall:

a. Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased:

b. Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of § 1.28(E) of this Part. This option may be elected at any time during the one hundred twenty (120) day period referenced in § 1.28(D)(2) of this Part; and

c. Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty (120) day period referenced in § 1.28(D)(2) of this Part shall be deemed to be the election of the offer to convert in § 1.28(D)(4)(b) of this Part above unless the automatic option in § 1.28(D)(5)(c) of this Part applies.

5. On or before the effective date of a substantial premium increase as defined in § 1.28(D)(3) of this Part above, the issuer shall:

a. Offer to reduce policy benefits provided by the current coverage consistent with the requirements of § 1.27 of this Part so that required premium payments are not increased;

b. Offer to convert the coverage to a paid-up status where the amount payable for each benefit is ninety percent (90%) of the amount payable in effect immediately prior to lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period. This option may be elected at any time during the 120-day period referenced in § 1.28(D)(3) of this Part; and

c. Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in § 1.28(D)(3) of this Part shall be deemed to be the election of the offer to convert in § 1.28(D)(5)(b) of this Part above if the ratio is forth percent (40%) or more.

6. For any long-term care policy issued in this state on or after January 1, 2019.

a. In the event the policy or certificate was issued at least twenty (20) years prior to the effective date of the increase, a value of 0% shall be used in place of all values in the above table; and

b. Values above 100% in the table in § 1.28(D)(3) of this Part above shall be reduced to 100%.

E. Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with § 1.28(D)(2) of this Part but not § 1.28(D)(3) of this Part, are described in this subsection:

1. For purposes of this subsection, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least one percent per year prior to age fifty (50), and at least three percent (3%) per year beyond age fifty (50).

2. For purposes of this subsection, the nonforfeiture benefit shall be a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in § 1.28(D)(3) of this Part.

3. The standard nonforfeiture credit will be equal to 100 percent (100%) of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The issuer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty (30) times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of § 1.28(F) of this Part.

4. The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit on lapse shall be effective during the first three (3) years as well as thereafter.

a. Notwithstanding § 1.28(E)(4) of this Part for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(1) The end of the tenth year following the policy or certificate issue date; or

(2) The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

5. Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

F. All benefits paid by the issuer while the policy or certificate is in premium paying status and in the paid-up status will not exceed the maximum benefits which would have been payable if the policy or certificate had remained in premium paying status.

G. There shall be no difference in the minimum nonforfeiture benefits as required under this section for group and individual policies.

H. The requirements set forth in this section shall become effective as provided in Section 31 of the former Insurance Regulation 44 that this Part has replaced, and shall apply as follows:

1. Except as provided in § 1.28(H)(2) of this Part below, the provisions of this section apply to any long-term care policy issued in this state on or after September 8, 1998.

2. For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in R.I. Gen. Laws § 27-34.2-4(4)(i), which policy was in force on September 8, 1998, the provisions of this section shall not apply.

3. The last sentence in §§ 1.28(C), (D)(3) and (D)(5) of this Part shall apply to any long-term care insurance policy or certificate issued in this state after six (6) months after their adoption, except new certificates on a group policy one (1) year after their adoption.

I. Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of §§ 1.19, 1.20 and 1.20.1 of this Part treating the policy as a whole.

J. To determine whether contingent nonforfeiture upon lapse provisions are triggered under §§ 1.28(D)(2) or (D)(3) of this Part, a replacing issuer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another issuer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original issuer.

K. A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

1. The nonforfeiture provision shall be appropriately captioned;

2. The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts approved by the Director for the same contract form; and

3. The nonforfeiture provision shall provide at least one of the following:

a. Reduced paid-up insurance;

b. Extended term insurance;

c. Shortened benefit period; or

d. Other similar offerings approved by the Director.

230 R.I. Code R. 230-RICR-20-35-1.28

Amended effective 5/26/2019