40 Pa. Stat. § 625-1

Current through Pa Acts 2024-53, 2024-56 through 2024-111

Section 625-1 - Definitions

As used in this article, the following words and phrases shall have the meanings given to them in this section:

"Actuarial standards board." The board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

"Agent." A licensed representative of an insurer as defined in section 601 of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of 1921."

"Basic illustration." A ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and nonguaranteed elements.

"Broker." A licensed representative of an insurance applicant or insured as defined in section 621 of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of 1921."

"Commissioner." The Insurance Commissioner of the Commonwealth.

"Contract premium." The gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration.

"Currently payable scale." A scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or which has a future effective date not later than ninety-five (95) days from the date the illustration is shown.

"Department." The Insurance Department of the Commonwealth.

"Disciplined current scale." A scale of nonguaranteed elements constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience, as certified annually by an illustration actuary designated by the insurer. Further guidance in determining the disciplined current scale as contained in standards established by the Actuarial Standards Board may be relied upon if the standards:

(1) Are consistent with all provisions of this act.

(2) Limit a disciplined current scale to reflect only actions that have already been taken or events that have already occurred.

(3) Do not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date.

(4) Do not permit assumed expenses to be less than minimum assumed expenses.

"Existing life insurance or annuity." A life insurance or annuity policy in force, including life insurance under a binding or conditional receipt or a life insurance policy or annuity that is within an unconditional refund period where a commission and a premium have already been paid.

"Fraternal benefit society." Any entity licensed to engage in the business of insurance under the act of December 14, 1992 (P.L. 835, No. 134) , known as the "Fraternal Benefit Societies Code."

"Generic name." A short title descriptive of the policy being illustrated such as "whole life," "term life" or "flexible premium adjustable life."

"Guaranteed elements." The premiums, benefits, values, credits or charges under a policy of life insurance that are guaranteed and determined at issue.

"Illustrated scale." A scale of nonguaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of:

(1) the disciplined current scale; or

(2) the currently payable scale.

"Illustration." Anything that purports to describe a life insurance policy or annuity in a ledger-type format reflecting guaranteed/nonguaranteed future contract premiums, premium outlays, surrender values and benefits and is used in the sales presentation.

"In-force illustration." An illustration furnished at any time after the policy that it depicts has been in force for one (1) year or more.

"Insurer." Life insurer or fraternal benefit society.

"Lapse-supported illustration." An illustration of a policy form failing the test of self-supporting as defined in this act, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first five (5) years and 100 per centum (100%) policy persistency thereafter.

"Life insurance illustration." A presentation or depiction that includes nonguaranteed elements of a policy of life insurance over a period of years and that is a basic illustration, a supplemental illustration or an in-force illustration.

"Life insurer'' or "insurer." An entity licensed to engage in the business of insurance under this act.

"Minimum assumed expenses." The minimum expenses that may be used in the calculation of the disciplined current scale for a policy form. The insurer may choose to designate each year the method of determining assumed expenses for all policy forms from the following:

(1) Fully allocated expenses.

(2) Marginal expenses.

(3) A generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the Insurance Commissioner. Marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.

"Nonguaranteed elements." The premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

"Nonterm group life." A group policy or individual policies of life insurance issued to members of an employer group or other permitted group where:

(1) Every plan of coverage was selected by the employer or other group representative.

(2) Some portion of the premium is paid by the group or through payroll deduction.

(3) Group underwriting or simplified underwriting is used.

"Policy owner." The owner named in the policy or the certificateholder in the case of a group policy.

"Premium outlay." The amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket.

"Producer." An agent or broker.

"Replacement." A transaction in which new life insurance or a new annuity is to be purchased and it is known to the proposing agent, broker or proposing insurer that, by reason of the transaction, existing life insurance or annuity has been or is to be one of the following:

(1) Lapsed, forfeited, surrendered, assigned to the replacing insurer or otherwise terminated.

(2) Converted to reduce paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits, dividend cash values or other policy cash values.

(3) Amended so as to effect a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid.

(4) Reissued with a reduction in cash value.

(5) Pledged as collateral or subjected to borrowing, whether in a single loan or under a schedule of borrowing over a period of time for amounts in the aggregate exceeding twenty-five (25%) of the loan value set forth in the policy. The term does not include group life insurance or group annuities, life insurance issued under the act of September 2, 1961 (P.L. 1232, No. 540), known as the "Model Act for the Regulation of Credit Life Insurance and Credit Accident and Health Insurance," life insurance issued in connection with a pension, profit-sharing or other benefit plan qualifying for deductibility of premiums, transactions involving an application to the existing insurer that issued the existing life insurance or annuity in which a contractual change or a conversion privilege is being exercised.

"Self-supporting illustration." An illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second or later-to-die policies, or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available. For this purpose, policy owner value will include cash surrender values and any other illustrated benefit amounts available at the policy owner's election.

"Supplemental illustration." An illustration furnished in addition to a basic illustration that meets the applicable requirements of this act and that may be presented in a format differing from the basic illustration, but may only depict a scale of nonguaranteed elements that is permitted in a basic illustration.

40 P.S. § 625-1

1921, May 17, P.L. 682, No. 284, added 1996, Dec. 18, P.L. 1003, No. 154, § 3, effective 7/1/1997.