Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 12 - Trade Practices and Frauds › Section 806 KAR 12:140 - Life insurance illustrations

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO: KRS 304.12-010, 304.12-020
NECESSITY, FUNCTION, AND CONFORMITY: KRS 304.2-110(1)
				authorizes the Executive Director of the Office of Insurance to promulgate
				administrative regulations necessary for or as an aid to the effectuation of
				any provision of the Kentucky Insurance Code, KRS Chapter 304. This
				administrative regulation provides illustration formats, prescribes standards
				to be followed if illustrations are used, and specifies the disclosures that
				are required in connection with illustrations for life insurance
				policies.
Section 1. Definitions.
(1) "Actuarial Standards Board" means the
			 board established by the American Academy of Actuaries to develop and
			 promulgate standards of actuarial practice.
(2) "Agent" is defined by KRS 304.9-020(1).
(3) "Basic
			 illustration" means a ledger or proposal used in the sale of a life insurance
			 policy that shows both guaranteed and non-guaranteed elements and is given to
			 the applicant or policy owner no later than the time of delivery of the
			 policy.
(4) "Contract premium"
			 means the gross premium required to be paid under a fixed premium policy,
			 including the premium for a rider for which benefits are shown in the
			 illustration.
(5) "Currently
			 payable scale" means a scale of non-guaranteed elements in effect for a policy
			 form as of the preparation date of the illustration or declared to become
			 effective within the next ninety-five (95) days.
(6) "Disciplined current scale" means a scale
			 of non-guaranteed elements constituting a limit on illustrations currently
			 being illustrated by an insurer that is reasonably based on actual recent
			 historical experience.
(7)
			 "Executive director" is defined by KRS 304.1-050(1).
(8) "Generic name" means a short title
			 descriptive of the policy being illustrated.
(9) "Guaranteed elements" means the premiums,
			 benefits, values, credits or charges under a policy of life insurance that are
			 guaranteed and determined at issue.
(10) "Illustrated scale" means a scale of
			 non-guaranteed elements currently being illustrated and not more favorable to
			 the policy owner than the lesser of:
(a) The
			 disciplined current scale; or
(b)
			 The currently payable scale.
(11) "Illustration" means a presentation or
			 depiction that includes non-guaranteed elements of a policy of life insurance
			 over a period of years and that is either a basic illustration, supplemental
			 illustration, or in force illustration.
(12) "Illustration actuary" means an actuary
			 meeting the requirements of Section 12 of this administrative regulation who
			 certifies to illustrations based on the standard of practice promulgated by the
			 Actuarial Standards Board.
(13) "In
			 force illustration" means an illustration furnished after the policy has been
			 in force for one (1) year or more.
(14) "Lapse-supported illustration" means an
			 illustration of a policy form failing the test of self-supporting illustration,
			 under a modified persistency rate assumption using persistency rates underlying
			 the disciplined current scale for the first five (5) years and 100 percent
			 policy persistency thereafter.
(15)
			 "Minimum assumed expenses" means the minimum expenses that may be used in the
			 calculation of the disciplined current scale for a policy form.
(16) "Nonguaranteed elements" means the
			 premiums, benefits, values, credits, or charges under a policy of life
			 insurance that are not guaranteed or not determined at issue.
(17) "Nonterm group life" means a group
			 policy or individual policies of life insurance issued to members of an
			 employer group or other permitted group if:
(a) Every plan of coverage was selected by
			 the employer or other group representative;
(b) Some portion of the premium is paid by
			 the group or through payroll deduction; and
(c) Group underwriting or simplified
			 underwriting is used.
(18) "Policy owner" means the owner named in
			 the policy or the certificate holder in the case of a group policy.
(19) "Premium outlay" means the amount of
			 premium assumed to be paid by the policy owner or other premium payer
			 out-of-pocket.
(20)
			 "Self-supporting illustration" means an illustration of a policy form for which
			 it shall be demonstrated that, if using experience assumptions underlying the
			 disciplined current scale, for all illustrated points in time on or after the
			 15th policy anniversary or the 20th policy anniversary for
			 second-or-later-to-die policies or upon policy expiration if sooner, the
			 accumulated value of all policy cash flows equals or exceeds the total policy
			 owner value available.
(21)
			 "Supplemental illustration" means an illustration furnished in addition to a
			 basic illustration.