INSURANCE

DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

Actuarial Services

Actuarial Requirements for Flexible-Factor Policy Forms

Adopted Amendments: N.J.A.C. 11:4-47

Proposed: July 2, 2001 at 33 N.J.R. 2268(a)

Adopted: October 12, 2001 by Donald Bryan, Acting Commissioner for Insurance, Department of Banking and Insurance.

Filed: October 15, 2001 as R. 2001 d. 411, without change.

Authority: N.J.S.A. 17:1-8.1, 17:1-15e, 17B:25-18, 17B:25-19, 17B:27-25, 17B:28-5 and 17B:30-1 et seq.

Effective Date: November 5, 2001

Expiration Date: November 30, 2005.

Summary of Public Comment and Agency Response:

The Department received one comment from the American Council of Life Insurers (ACLI).

COMMENT: The commenter stated that no statutory authority exists for the Department's proposed requirements at N.J.A.C. 11:4-47.5(a)1 and 2. These provisions require that nonforfeiture compliance for term insurance riders that create a "target" death benefit be based upon the combined coverage provided by the base policy form and rider be based upon the total coverage provided by the base plan/rider combination, and that all other term insurance riders shall be tested for nonforfeiture compliance as if they provide stand-alone term insurance coverage.

RESPONSE: N.J.S.A. 17B:25-19c states that nonforfeiture compliance when a rider provides additional life insurance is subject to the (additional) test that the cash value for the combined coverage cannot be less than the cash value of the base policy and the cash value of the rider considered on a stand-alone basis. The Department's proposed provisions merely clarify that this is the standard that applies in the case of most riders. However, in the case of riders that create a target death benefit in combination with the base policy, which cannot really be considered on a stand-alone basis, nonforfeiture compliance is demonstrated on a combined basis.

Federal Standards Statement

A Federal standards analysis is not required because these adopted amendments clarify form submission requirements, and are not subject to any Federal standards or requirements.

Full text of the adoption follows: