Weekly Tip: Current Assumption Whole Life or Flexible Premium Adjustable Life - Which One Is It?

 

Weekly Tips

Current Assumption Whole Life or Flexible Premium Adjustable Life - Which One Is It?

12/01/2016

In recent months, the IIPRC review team has encountered individual life insurance products that were submitted as universal life insurance products, but were ultimately reviewed and approved using the Current Assumption Whole Life Insurance Uniform Standards. Switching the applicable Uniform Standards after substantive review has begun is time-consuming and costly for all involved. Wondering whether your new product should be submitted using the Individual Flexible Premium Adjustable Life Insurance Policy Standards (IIPRC-L-09-I) or the Individual Current Assumption Whole Life Insurance Policy Standards(IIPRC-L-07-I-5)? This week, we will highlight some key points to keep in mind as you work through your product filing development process.

The primary distinction between the two products is the premium structure – specifically, whether the owner is permitted to pay additional premium. Current Assumption Whole Life products are sometimes referred to as Interest Sensitive Whole Life, or Fixed Premium Universal Life. There is only one Uniform Standard applicable to these products. The Scope of the Individual Current Assumption Whole Life Insurance Policy Standards states that the "standards apply to individual current assumption whole life or endowment insurance policies including limited pay policies. The policy has a required scheduled premium with a 31-day grace period, reduced paid-up and/or extended term benefits upon default in premium payment, and an interest-sensitive account value that is the retrospective accumulation of premiums less charges accumulated at no less than a guaranteed minimum interest rate." The Uniform Standards do not apply to policies that allow the owner to pay additional premiums. The Uniform Standards require compliance with the minimum nonforfeiture values of Section 6B of the NAIC Universal Life Model Regulation #585.

There are two possible Uniform Standards that may be referenced for Flexible Premium Adjustable life products – either the Individual Flexible Premium Adjustable Life Insurance Policy Standards or the Individual Modified Single Premium Adjustable Life Insurance Policy Standards(IIPRC-L-09-I-1). A Modified Single Premium policy allows the owner to pay a single premium at issue of at least 80% of the single premium necessary to comply with the federal Guideline Single Premium Test or Cash Value Accumulation Test. Subsequent to policy issue, the owner is permitted to pay any balance of the single premium necessary. A Flexible Premium policy allows the owner to vary the amount and/or timing of premium payments. There is a minimum 60-day grace period following the first monthly deduction date for which the account value less indebtedness is insufficient to provide an entire additional month of insurance. The policy may also provide a secondary no lapse guarantee. The policy may be adjustable; i.e. the amount of insurance may be increased or decreased. The policy may provide more than one death benefit option – specified amount, specified amount plus account value, specified amount plus return of premium. These Uniform Standards require compliance with the minimum nonforfeiture values of Section 6A of the NAIC Universal Life Model Regulation #585​.

If you still have questions regarding your product design after reviewing these points, please reach out to the IIPRC Office. For more specific product development questions, please use the Pre-Filing Communication Form found on the Insurer Resources page of the IIPRC Website.