2023 California Code › Insurance Code - INS › DIVISION 2 - CLASSES OF INSURANCE › PART 2 - LIFE AND DISABILITY INSURANCE › CHAPTER 4 - Standard Provisions in Disability Policies › ARTICLE 2.1 - Accelerated Death Benefits › Section 10295.4.

10295.4. An insurer shall file with the commissioner an actuarial memorandum prepared, dated, and signed by a member of the American Academy of Actuaries that includes all of the following information:
(a) A description of the accelerated death benefit, including the effects of payment of the accelerated death benefit on all life insurance policy benefits and any subsequent accelerated death benefits, premium payments, cost of insurance rates, and values, including any outstanding loan, if applicable, for all types of forms with which the accelerated death benefit will be used.
(b) A description of, and justification for, expense charges associated with the accelerated death benefit and the maximum expense charges.
(c) A description of the interest rate or interest rate methodology used in any present value calculation or in accruing interest on the amount of the accelerated death benefit, which shall not exceed the greater of the current yield on 90-day treasury bills, or a variable rate determined in accordance with the National Association of Insurance Commissioners (NAIC) Model Policy Loan Interest Rate Bill No. 590.
(d) A description of the mortality basis and methodology, including the period of time applicable to any mortality discount, used in any present value calculation of the accelerated death benefit.
(e) A description of the mortality and morbidity basis and methodology used in the determination of any separate premium or costs of insurance for the accelerated death benefit.
(f) The formula used to determine the accelerated death benefit, including any limitations on the amount of the benefit, and the formula used to determine the postacceleration premium for the accelerated death benefit as well as the life insurance policy.
(g) A sample calculation of the accelerated death benefit. If the life insurance policy contains a loan provision, the example shall assume that there is an outstanding loan on the date of acceleration. All policy and accelerated death benefit benefits, premium payments, cost of insurance charges and values, including the outstanding loan, if applicable, immediately before and immediately after acceleration shall be shown in the example.
(h) If an accelerated death benefit will be paid in installments, the actuarial memorandum shall explain the basis used in the calculation of the minimum periodic payment for the payment period and a sample calculation of a minimum periodic payment, and the basis used, and a sample calculation of the lump sum payable if the insured dies before all periodic payments for the payment period are made.
(i) (1) For any accelerated death benefit subject to this article, a certification that the value and premium of the accelerated death benefit is 10 percent or less of the total value of the benefits over the life of the policy. These values shall be measured as of the date of issue.
(2) The certification shall be in the following form:
“I,____________________of ___________________________ am a Member in good standing of the American Academy of Actuaries and am qualified to provide this Certification with respect to the accelerated death benefit described in the Actuarial Memorandum to which this Certification is attached.
I certify that:
(1) The value of the benefits provided, on an aggregated basis, in respect of the filed accelerated death benefit, determined according to the formula below applied over a range of underwriting classes and plans at which the benefit is being made available, is not in any case greater than 10%.
(NSP2 – NSP1) / NSP1
Where:
(a) NSP1 and NSP2 are determined using an effective annual interest rate of 6%.
(b) NSP1 is the net single premium for the base policy benefits assuming there is no accelerated death benefit.
(c) NSP2 is the net single premium for the base policy benefits assuming that the full death benefit is paid at time of death or the occurrence of the non-death accelerated death benefit trigger.
(2) In developing the assumptions, other than the interest assumption, used in calculating NSP1 and NSP2, I have complied with all applicable laws, regulations, and Actuarial Standards of Practice (ASOPs). The assumptions used represent anticipated experience factors, as defined in actuarial literature and by generally accepted actuarial practice.
(3) The assumptions, other than the interest assumption, used in calculating NSP1 and NSP2 will be reviewed at least annually by the Company to ensure that the value of the accelerated death benefit provided, as defined in (1) above, continues to be incidental. If, after such review and while this accelerated death benefit is being actively issued, the value of the benefits provided by this benefit are no longer incidental based on then current anticipated experience factors, the Company will discontinue offering the accelerated death benefit which is no longer incidental.
(4) If a separate premium or cost of insurance (COI) charge is being charged for the accelerated death benefit provided, the ratio of the present value of the accelerated death benefit premiums or COI charges over the life of the policy to the present value of the policy premiums or COI charges exclusive of any riders, does not exceed 10%. The present values in this item (4) are determined using an effective annual interest rate of 6%.”
(Added by Stats. 2013, Ch. 345, Sec. 7. (SB 281) Effective January 1, 2014.)