2015 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 15 - Life Insurance and Annuity Contracts 15.15-342 Adjusted premiums operative at option of insurer or on January 1, 1989.
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304.15-342
1989.
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Adjusted premiums operative at option of insurer or on January 1,
This section shall apply to all policies issued on or after the effective date of this
section as defined in subsection (11) of this section. Except as provided in
subsection (7) of this section, the adjusted premiums for any policy shall be
calculated on an annual basis and shall be such uniform percentage of the respective
premiums specified in the policy for each policy year, excluding amounts payable as
extra premiums to cover impairments or special hazards and also excluding any
uniform annual contract charge or policy fee specified in the policy in a statement of
the method to be used in calculating the cash surrender values and paid-up
nonforfeiture benefits, that the present value, at the date of issue of the policy, of all
adjusted premiums shall be equal to the sum of:
(a) The then present value of the future guaranteed benefits provided for by the
policy;
(b) One percent (1%) of either the amount of insurance, if the insurance is
uniform in amount, or the average amount of insurance at the beginning of
each of the first ten (10) policy years; and
(c) One hundred twenty-five percent (125%) of the nonforfeiture net level
premium as hereinafter defined.
Provided, however, that in applying the percentage specified in (c) above, no
nonforfeiture net level premium shall be deemed to exceed four percent (4%) of
either the amount of insurance, if the insurance is uniform in amount, or the average
amount of insurance at the beginning of each of the first ten (10) policy years. This
date of issue of a policy for the purpose of this section shall be the date as of which
the rated age of the insured is determined.
The nonforfeiture net level premium shall be equal to the present value, at the date
of issue of the policy, of the guaranteed benefits provided for by the policy divided
by the present value, at the date of issue of the policy, of an annuity of one (1) per
annum payable on the date of issue of the policy and on each anniversary of such
policy on which a premium falls due.
In the case of policies which cause, on a basis guaranteed in the policy, unscheduled
changes in benefits or premiums, or which provide an option for changes in benefits
or premiums other than a change to a new policy, the adjusted premiums and
present values shall initially be calculated on the assumption that future benefits and
premiums do not change from those stipulated at the date of issue of the policy. At
the time of any such change in the benefits or premiums the future adjusted
premiums, nonforfeiture net level premiums and present values shall be recalculated
on the assumption that future benefits and premiums do not change from those
stipulated by the policy immediately after the change.
Except as otherwise provided in subsection (7) of this section, the recalculated
future adjusted premiums for any such policy shall be such uniform percentage of
the respective future premiums specified in the policy for each policy year,
excluding amounts payable as extra premiums to cover impairments and special
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hazards, and also excluding any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in calculating the
cash surrender values and paid-up nonforfeiture benefits, that the present value, at
the time of change to the newly defined benefits or premiums, of all such future
adjusted premiums shall be equal to the excess of (a) the sum of the then present
value of the then future guaranteed benefits provided for by the policy and the
additional expense allowance, if any, over (b) the then cash surrender value, if any,
or present value of any paid-up nonforfeiture benefit under the policy.
The additional expense allowance, at the time of the change to the newly defined
benefits or premiums, shall be the sum of:
(a) One percent (1%) of the excess, if positive, of the average amount of
insurance at the beginning of each of the first ten (10) policy years subsequent
to the change over the average amount of insurance prior to the change at the
beginning of each of the first ten (10) policy years subsequent to the time of
the most recent previous change, or, if there has been no previous change, the
date of issue of the policy; and
(b) One hundred twenty-five percent (125%) of the increase, if positive, in the
nonforfeiture net level premium.
The recalculated nonforfeiture net level premium shall be equal to the result
obtained by dividing (a) by (b) where:
(a) Equals the sum of:
1.
The nonforfeiture net level premium applicable prior to the change times
the present value of an annuity of one (1) per annum payable on each
anniversary of the policy on or subsequent to the date of the change on
which a premium would have fallen due had the change not occurred,
and
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The present value of the increase in future guaranteed benefits provided
for by the policy, and
(b) Equals the present value of an annuity of one (1) per annum payable on each
anniversary of the policy on or subsequent to the date of change on which a
premium falls due.
Notwithstanding any other provisions of this section to the contrary, in the case of a
policy issued on a substandard basis which provides reduced graded amounts of
insurance so that, in each policy year, such policy has the same tabular mortality
cost as an otherwise similar policy issued on the standard basis which provides
higher uniform amounts of insurance, adjusted premiums and present values for
such substandard policy may be calculated as if it were issued to provide such
higher uniform amounts of insurance on the standard basis.
All adjusted premiums and present values referred to in this section shall for all
policies of ordinary insurance be calculated on the basis of the commissioners 1980
standard ordinary mortality table or at the election of the insurer for any one (1) or
more specified plans of life insurance, the commissioners 1980 standard ordinary
mortality table with ten-year select mortality factors; shall for all policies of
industrial insurance be calculated on the basis of the commissioners 1961 standard
industrial mortality table; and shall for all policies issued in a particular calendar
year be calculated on the basis of a rate of interest not exceeding the nonforfeiture
interest rate as defined in this section for policies issued in that calendar year.
Provided, however, that:
(a) At the option of the insurer, calculations for all policies issued in a particular
calendar year may be made on the basis of a rate of interest not exceeding the
nonforfeiture interest rate, as defined in this section, for policies issued in the
immediately preceding calendar year;
(b) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions, any cash surrender value available, whether or not required by KRS
304.15-310, shall be calculated on the basis of the mortality table and rate of
interest used in determining the amount of such paid-up nonforfeiture benefit
and paid-up dividend additions, if any;
(c) Any insurer may calculate the amount of any guaranteed paid-up nonforfeiture
benefit including any paid-up additions under the policy on the basis of an
interest rate no lower than that specified in the policy for calculating cash
surrender values;
(d) In calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the
rates of mortality assumed may be not more than those shown in the
commissioners 1980 extended term insurance table for policies of ordinary
insurance and not more than the commissioners 1961 industrial extended term
insurance table for policies of industrial insurance;
(e) For insurance issued on a substandard basis, the calculation of any such
adjusted premiums and present values may be based on appropriate
modifications of the aforementioned tables;
(f) For policies issued prior to the operative date of the valuation manual, any
Commissioner's Standard ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, that are approved by
regulation promulgated by the commissioner for use in determining the
minimum nonforfeiture standard may be substituted for the commissioners
1980 standard ordinary mortality table with or without ten-year select
mortality factors or for the commissioners 1980 extended term insurance
table;
(g) For policies issued on or after the operative date of the valuation manual, the
valuation manual shall provide the Commissioners' Standard mortality table
for use in determining the minimum nonforfeiture standard that may be
substituted for the Commissioners' 1980 Standard Ordinary Mortality Table,
with or without Ten-Year Select Mortality Factors, or for the Commissioners'
1980 Extended Term Insurance Table. If the commissioner promulgates an
administrative regulation adopting any Commissioners' Standard ordinary
mortality table, adopted by the NAIC, for use in determining the minimum
nonforfeiture standard for policies issued on or after the operative date of the
valuation manual, then that minimum nonforfeiture standard supersedes the
minimum nonforfeiture standard provided by the valuation manual;
(h) For policies issued prior to the operative date of the valuation manual, any
Commissioners' Standard industrial mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, that are approved by
regulation promulgated by the commissioner for use in determining the
minimum nonforfeiture standard may be substituted for the commissioners
1961 standard industrial mortality table or the commissioners 1961 industrial
extended term insurance table; and
(i) For policies issued on or after the operative date of the valuation manual, the
valuation manual shall provide the Commissioners' Standard mortality table
for use in determining the minimum nonforfeiture standard that may be
substituted for the Commissioners' 1961 Standard Industrial Mortality Table
or the Commissioners' 1961 Industrial Extended Term Insurance Table. If the
commissioner promulgates an administrative regulation adopting the
Commissioners' Standard industrial mortality table as adopted by the NAIC,
for use in determining the minimum nonforfeiture standard for policies issued
on or after the operative date of the valuation manual, then that minimum
nonforfeiture standard supersedes the minimum nonforfeiture standard
provided by the valuation manual.
(9) (a) For policies issued prior to the operative date of the valuation manual, the
nonforfeiture interest rate per annum for any policy issued in a particular
calendar year shall be equal to one hundred twenty-five percent (125%) of the
calendar year statutory valuation interest rate for such policy as defined in
KRS 304.6-130 to 304.6-180, inclusive to the nearer one quarter of one
percent (0.25%), except that the nonforfeiture interest rate shall not be less
than four percent (4%).
(b) For policies issued on or after the operative date of the valuation manual, the
nonforfeiture interest rate per annum for any policy issued in a particular
calendar year shall be provided by the valuation manual.
(10) Notwithstanding any other provision in this code to the contrary, any refiling of
nonforfeiture values or their methods of computation for any previously approved
policy form which involves only a change in the interest rate or mortality table used
to compute nonforfeiture values shall not require refiling of any other provisions of
that policy form.
(11) Any insurer may file with the commissioner a written notice of its election to
comply with the provisions of this section after a specified date before January 1,
1989, which shall be the effective date of this section for such insurer. If an insurer
makes no such election, the effective date of this section for such insurer shall be
January 1, 1989.
Effective: June 24, 2015
History: Amended 2015 Ky. Acts ch. 57, sec. 16, effective June 24, 2015. -- Amended
2010 Ky. Acts ch. 24, sec. 1185, effective July 15, 2010. -- Created 1982 Ky. Acts
ch. 263, sec. 4, effective July 15, 1982.
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