National Standards: Regulation of Insurance Products

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MEETING AGENDAMarch 12, 2013

• Welcome and Overview
• Structure of Uniform Standards
• Scope of Uniform Standards by Product Line
• Actuarial Requirements
• Common Filing Objections by Product Line
• Other Issues
• Questions and Conclusion

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The IIPRC Today
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Overview of Insurance Compact

• Innovative vehicle formalizing joint and
  cooperative action among states
• Leveraging regulatory expertise to establish
  Uniform Standards
• Central clearinghouse for prompt review of
  asset-based insurance products using the Uniform
  Standards

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Overview of Insurance Compact

• Compact filings submitted through the System for
  Electronic Rate and Form Filing (SERFF)
• File one submission under one set of standards
  for one review and one approval valid in all
  Compact jurisdictions.
• Uniform Standards for individual and group life,
  annuity, disability income and long-term care

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Compacts Value-Added Benefits

• Submit one product filing vs. state-by-state
• Use one set of comprehensive Uniform Standards to
  prepare product forms vs. multiple state
  variations
• Undergo one filing review vs. many reviews
• Reduce duplicative paperwork, processes and
  systems implementations

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Compacts Value-Added Benefits

• Receive one approval on behalf of 41 Compacting
  States for individual life, annuities, and
  disability income
• Receive one approval on behalf of 37 Compacting
  States for individual LTC products
• Compact-approved LTC forms can be submitted for
  Partnership via easier certification /approval
  process

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Compacts Value-Added Benefits

• Straightforward filing process using SERFF
• Tools and checklists for filers on IIPRC web site
• Prompt, easy access to professional team of
  product reviewers and actuaries who will work
  with companies pre- and post-filing to answer
  questions and provide guidance for compliance
• Average approval in 60 review days or less

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Compacts Value-Added Benefits

• Easy to update product filings and add states to
  previously-approved filings
• Mix and match accommodates product needs
• Implement and administer standard product forms
  across Compacting States
• Streamlined systems programming, testing, rollout
• Simplified producer training

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Uniform Standards

• 86 Uniform Standards adopted to date
• Individual Life
• Individual Annuities
• Individual Long-Term Care
• Individual Disability Income and Business
  Overhead Expense
• Group Life
• Combination product filings accepted

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Getting Started with the Compact

• Visit the IIPRC website
• insurancecompact.org
• Check out the Company Resources Web Page
• View IIPRC Tutorials
• Contact IIPRC Office with any questions or to set
  up a one-on-one webinar
• Reviewers are available to answer questions both
  before and after you make your filing

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Getting Started with the CompactProduct Review
Team

• Charlie Rapacciuolo is our Product Operations
  Coordinator
• David Morris is our Primary Life Reviewer
• Karen Givens is our Primary Annuity Reviewer
• Maureen Perry is our Primary LTC/DI Reviewer
• Alice Fontaine is our part-time Actuary
• Jeanne Daharsh is our full-time Actuary

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Getting Started with the Compact

• IIPRC has unique submission requirements
  (supporting documentation)
• Payment of filing fees
• Identification of applicable Uniform Standards
• Actuarial memorandum / Rate Schedule for LTC
• Flesch Score certification
• Statement of Variability
• Statement of Intent Schedule

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How to Prepare a Compact Filing

• Review the Uniform Standards on the Record
• Review the Operating Procedure for the Review and
  Filing of Product Filings
• Review the TOI Link to see the variety of
  products that can be filed
• Print off the applicable reviewer checklists
• Review the Filing Information Notices
• Review IIPRC General Instructions in SERFF

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Filing Information Notices

• Issued by the Compact Office
• Explains or clarifies steps or requirements in
  the process for filing and review
• References applicable Uniform Standards or
  Operating Procedures
• When involves interpretation of Uniform Standard,
  will consult PSC or Actuarial Working Group

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Filing Information Notices

• FIN 2010-2 Bonus Feature for Deferred Annuity
• FIN 2012-2 Rider Charges for GLB on NV Annuity
• FIN 2012-3 Changes in Nonforfeiture Interest
• FIN 2012-4 Product Filings Subject to AG38
• FIN 2013-1 Guaranteed Living Benefit Amounts
  Contingent on Inability to Perform Activities of
  Daily Living
• FIN 2013-2 Individual Long-Term Care Filings

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Questions?
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Structure of Uniform Standards

• Cover Page
• Uniform Standard Title Number
• Short overview of Purpose Scope
• Adoption Effective Date
• Rules Repealed, Amended or Suspended by the Rule
• Statutory Authority

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Structure of Uniform Standards

• First Page
• Scope -- carefully review to see what is and what
  is not covered by the standard
• Definitions only applicable to terms used in
  Standard
• Drafting Notes provide guidance for filers and
  reviewers

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Structure of Uniform Standards

• 1 Additional Submission Requirements
• Components of filing including Actuarial
  Memorandum requirements
• Variability requirements
• Readability requirements
• 2 General Form Requirements
• Cover Page
• Specifications Page
• Fairness

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Structure of Uniform Standards

• 3 Contract Provisions
• Alphabetical order
• Several provisions are common across standards
• 4 Additional Standards for Fraternal Benefit
  Associations
• 5 Specialized Products/Marketing
• Appendices
• Pay particular attention to nonforfeiture
  demonstration requirements or certifications

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Life Uniform Standards

• Term Life
• Whole Life
• Endowment
• Non-Variable Adjustable Life
• Variable Adjustable Life
• Each has Single Premium vs. Multi pay version
• Joint Last to Die vs. Single Life version

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Universal Life Uniform Standards

• No lapse requirements in Section 5
• Appendix for Nonforfeiture demonstration
• Appendix for Sample certification of compliance

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Benefit Features on Life

• Return of Premium on Term (IIPRC-LB-04-I-ROP)
• Graded Death Benefit on Whole Life
• Additional Term riders
• Index linked crediting for UL
• Overloan protection for UL
• Accelerated Death Benefits

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• Questions?

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Core Annuity Uniform Standards

• Deferred - Non-Variable and Variable versions
• Specific instructions on prospective and
  retrospective tests for General Account
• Retrospective required for Variable investment
  options
• Immediate Non-Variable and Variable versions
• Longevity Non-variable only

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Benefit Features on Annuities

• Bonus Benefits
• Variable
• Bonus is considered part of Gross Consideration
• Certification required on tradeoff
• Non-Variable
• Bonus not considered part of Gross Consideration
• Level imputed interest rate in Prospective Test

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Benefit Features on Annuities

• Index-Linked Interest
• Non-Variable only
• Prospective Test and level imputed rate
• Market Value Adjustment (MVA)
• Non-Variable and the general account portions of
  variable annuities (IIPRC-A-07-I-2)
• Separate Account (IIPRC-A-07-I-3)
• MYGA Definition does not include Index

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Benefit Features on Annuities

• Guaranteed Minimum Death Benefits Variable Only
• GMDB for Non-Variable being considered
• Guaranteed Living Benefits
• Variable vs. Non-Variable
• Charges on Non-Variable cannot impact base policy
  Retrospective minimum values.
• Examples of impact on values of changes or
  withdrawals both before and after election

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• Questions?

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Long-Term Care

• Ten Uniform Standards
• Application, Policy, Forms, Outline of Coverage,
  Benefit Features, Rates, and Advertisements
• Adopted August 13, 2010 with effective date of
  December 1, 2010.
• Rate standards updated August 11, 2011

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Long-Term Care

• Uniform standards only apply to new issues
• Do Not permit mix and match within product
• Combination mix and match filings are allowed
• Can be used to file with state for Partnership
  status

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LTC Rate Standards

• Rate standards address both initial rates as well
  as rate increases
• Issue Age Rate Schedules
• Modified Rate Schedules
• Not permitted in Colorado, Illinois, Maryland,
  Oklahoma, and Washington
• Only available if, in addition to the modified
  rate schedule, an issue age rate schedule is also
  approved by the IIPRC

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Long-Term Care

• Annual actuarial certification
• Currently marketed rates
• Closed forms
• Triennial submission of the supporting actuarial
  memorandum

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Long-Term Care

• Policy Form certifications
• Found in LTC Core Standards
• Compliance of non-forfeiture and inflation
  benefits
• Exemption for / products
• Rate Memorandum certifications
• Template for detailed assumptions

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Disability Income

• Effective 1/12/12
• DBOE effective 2/19/12
• Loss Ratio requirements
• Sample format in Appendix
• Separate standard for Rate Increases vs. Initial
  Rates

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• Questions?

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Actuarial Requirements

• Actuaries should be familiar with all applicable
  standards for forms submitted
• Scope of Standard
• Actuarial Memorandum Requirements
• Appendices
• Templates for nonforfeiture demos
• Templates for Actuarial Certifications
• Specific instructions regarding demos and
  assumptions

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Actuarial Requirements

• Common Actuarial Objections
• AM material attached under Actuarial Memorandum
  field in SERFF
• Actuarial Certifications Need to be Submitted
• Signature Requirements for AM
• Consistent with SOV ranges
• Impermissible references to state law

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Common Filing Objections Pitfalls Traditional
Life

• Issue age and minimum issue amounts
• Ranges and charges
• Demonstrations or rationale of Nonforfeiture
  compliance (even ETI, RPU, Child riders)
• Guaranteed Charges for Additional Term if
  Indeterminate

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Common Filing Objections Pitfalls - UL

• Issue age and minimum issue amounts
• Follow template for demonstration with respect to
  BOY/EOY
• Sample calculation of initial expense charge
• Juvenile issue age mortality
• No lapse rider impact on form compliance

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Common Filing Objections Pitfalls - Annuities

• Range of Issue Ages
• Bonus ranges gt 0
• MYGA definition and MVA requirements
• Prospective Test Maturity Value
• Sample calculation to easily produce values
• GLB specified examples lots of scenarios to
  cover

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Common Filing Objections Pitfalls Long-Term
Care

• Inflation and nonforfeiture certifications
• Insufficient detail in assumptions
• Demonstration that margins dont deviate
  materially across issue ages, class, plan
• No statement in rate schedule that they are the
  rates to which the actuarial memo applies

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Common Filing Objections Pitfalls Long-Term
Care

• Statement that rates not less than the rates for
  existing similar forms except for reasonable
  differences in benefits
• Enough detail in the table of relationship
  between net and gross premiums
• Rates and AM in Rate/Rule section of SERFF

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Common Filing Objections Pitfalls Disability

• Insufficient detail in assumptions
• In addition to description and source of each
  assumption
• Missing statement regarding overall expenses plus
  contingency/risk margins as a percentage of
  premiums on a PV basis

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Common Filing Objections Pitfalls Disability

• No statement in rate schedule that they are the
  rates to which the actuarial memo applies
• No explanation of actuarys review of policy
  design, underwriting, and claim adjudication
• Rates and AM in Rate/Rule section of SERFF

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• Questions?

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Updates for AG38 Compliance

• Monitoring AG38 developments
• Consider using the Compact to file updated
  products for AG38 compliance
• IIPRC will conduct form non-forfeiture review
• FIN 2012-4 Issued December 20, 2012

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Nonforfeiture Interest Rates

• Consider using the Compact to file updated
  products
• Compact does recognize the one-year delay
• Changes to non-forfeiture rate for a product
  previously approved by the Compact requires prior
  approval
• Request that filing be re-opened
• FIN 2012-3 Issued September 20, 2012

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Statement of Intent Schedule(Mix and Match)

• Forms filed with Compact should not affect values
  in state-approved form (and vice-versa)
• State-approved forms cannot be mixed and matched
  with Compact-approved forms in order to comply
  with a Uniform Standard (Compact form must fully
  comply with applicable standard)

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Other Current Issues

• Reopen filing to update MIB statement no filing
  fee if certify no other changes
• Group Term Life Policy Standards effective
  January 6, 2013
• Non-variable Annuity GMDB Standard Exposure
  draft open for comment (due 3/19)
• Commencing 5-year review process

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Questions?
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CONTACT IIPRC

• For more information, please contact us at
• Comments_at_insurancecompact.org
• www.insurancecompact.org
• Phone [phone]
• Jeanne M. Daharsh, FSA, MAAA
• Consulting Actuary, IIPRC
• jdaharsh_at_insurancecompact.org