Weekly Tip: Actuarial Submission Requirements for Accelerated Death Benefits

 

Weekly Tips

Actuarial Submission Requirements for Accelerated Death Benefits

10/01/2014

The Standards for Accelerated Death Benefits have some requirements that are typically overlooked.  This week we are going to highlight these for your actuary in order to have a more efficient filing experience. 

Our Actuary, Jeanne Daharsh, receives numerous questions regarding the Actuarial Submission Requirements (found under the Additional Submission Requirements in the Uniform Standards adopted in February 2007), specifically subparagraph (i).  

If the accelerated death benefit form provides acceleration based on a qualifying event of the types two through five as defined in the Uniform Standards, then the company must submit an actuarial certification.  The certification is not required if the only qualifying event is a terminal illness; qualifying event type one.

This certification is to certify that the benefits and additional premiums/costs of insurance charges are incidental.  This certification must include a statement that the assumptions will be reviewed at least annually to ensure that the value for the accelerated death benefit provided continues to be incidental.  If the accelerated death benefits are no longer incidental, then the company must discontinue offering them. 

Additionally, sometimes there are parameters that impact the value of the accelerated benefit that vary for new policies within a range of values specified in the statement of variability.  These parameters may be adjusted for new issues within the stated range as a means of ensuring that the currently marketed accelerated death benefit continues to be incidental.

Jeanne also receives a few questions on the comparison between NSP1 and NSP2.  The comparison between NSP1 and NSP2 is to determine whether the payment of the death benefit upon the occurrence of the non-death trigger is incidental (less than 10% of the NSP for the policy without an accelerated death benefit rider).  Many companies have maximum limits on the amount of the accelerated benefit which will be paid; i.e. 50% of the face amount.  Therefore, in determining NSP1 and NSP2, the calculations should assume payment of 100% of the face upon death and the maximum (say 50% of the face) is paid upon the non-death trigger.  If the company makes adjustments such as paying the present value of the accelerated death benefit amount, the NSP2 calculations should take this into consideration when calculating the value of the benefit payable upon the non-death trigger.  In other words, the formula should utilize the payment amount at the time of the trigger.

If you have any questions about the these requirements or the Weekly Tip, please contact the Insurance Compact’s office.