Minimum Valuation Standards for Life, Accident and Health and Annuity Contracts

PURPOSE: This rule specifies standards for valuation of specifically identified life insurance, health and accident insurance policies. This rule was adopted pursuant to the provisions of section 374.045, RSMo and implements sections 376.380, 376.390, 376.405, 376.410 and 376.670, RSMo. (1) Life Insurance. (A) Group Insurance. 1. Yearly renewable term life insurance (including waiver of premium and accidental death benefits). A. Gross pro rata unearned premium method. B. The Commissioners 1960 Standards Group Mortality Table with interest as specified in section 376.380, RSMo. C. Any other valuation basis producing higher reserves. 2. Inasmuch as the Federal Employees Group Life Insurance Act of 1954, 5 U.S.C.A. Section 8701, provides that appointive or elective officers or employees of the United States government, at a time and under conditions of eligibility as the Civil Service Commission by regulation may prescribe, shall be eligible to be insured for specified amounts of group life insurance and specified amounts of group accidental death and dismemberment insurance, as provided in the Act; and since as the Act requires the maintenance of a special contingency reserve upon group insurance issued or reinsured in accordance with its provisions, the provisions of this rule shall not be applicable to any group insurance issued or reinsured by a life insurance company in accordance with the provision of the Act. 3. Inasmuch as the Servicemen’s Group Life Insurance Act of 1965, 38 U.S.C.A. section 765, provides that members of the uniformed services on active duty shall be eligible to be insured for specified amounts of group life insurance, as provided in the Act; and inasmuch as the Act requires that maintenance of a special contingency reserve upon group insurance issued or reinsured in accordance with its provisions, the provisions of this rule shall not be applicable to any group insurance issued or reinsured by any life insurance company in accordance with the provisions of the Act. (B) Credit Life Insurance. All credit life insurance shall be valued on the 1958 Commissioners Standards Ordinary Mortality Table with interest assumption of three and one-half percent (3 1/2%) or any other valuation basis producing higher reserves. (C) Other Standards. 1. Extra or additional reserves, calculated according to the previously mentioned standards, will be required in all cases to cover the nondeduction of deferred fractional premiums or return of premiums, in the event of death. No extra reserve is required when the basic policy reserve makes a provision for this, for example, when continuous functions are used. 2. Other valuation standards may be used so long as the reserves computed on those standards for each of the previously mentioned categories are greater in the aggregate than the reserves computed according to minimum standards. 3. Reserves for annuity and pure endowment contracts, for disability and accidental death benefits in all policies and contracts, for life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, and for all other benefits, except life insurance and endowment benefits in life insurance policies, shall be calculated by a method consistent with the principles of the commissioner’s reserve valuation method, as defined in section 376.380.2(b), RSMo. In the calculation of reserves for life policies containing coupon or annual pure endowment benefits, each benefit shall be treated as a pure endowment maturing for its cash value on the date it becomes due. This coupon or annual pure endowment benefit shall be considered to be a part of the guaranteed benefits provided for by the policies. (2) Policies of Accident or Health Insurance, or Combination Policies of Accident and Health Insurance. (A) On all such policies actually written there shall be maintained an unearned gross premium reserve computed according to the provisions of sections 376.410(1), RSMo. (B) On all such policies written on a noncancellable plan and under the terms of which the company is obligated to renew or continue for a stated period, or to a stated age or for life, there shall be maintained active life reserves and reserves for losses in amounts not less than active life and loss reserves determined in accordance with the applicable minimum reserve standards prescribed by the National Association of Insurance Commissioners (NAIC) in its Accounting Practices and Procedures Manual. (C) On all such policies other than those written on a noncancellable plan there shall be maintained reserves for losses in amounts not less than loss reserves determined in accordance with the applicable minimum reserve standards prescribed by the NAIC in its Accounting Practices and Procedures Manual. (D) In addition to the minimum reserves mentioned in section 376.410, RSMo, and elsewhere in this section, companies shall maintain reserves for extraordinary losses in amounts not less than extraordinary loss reserves determined in accordance with the applicable minimum reserve standards prescribed by the NAIC in its Accounting Practices and Procedures Manual. (E) Credit Accident and Health Insurance. All credit accident and health insurance (both individual and group) shall be established and maintained on the basis of not less than the unearned gross premium computed on the basis of the sum of digits formula, commonly known as the Rule of 78. (F) This section shall not apply to total and permanent disability benefits, or to accidental death benefits, contained in or supplemental to life insurance policies or other contracts and for which benefits the standard of valuation is prescribed by section 376.380, RSMo, or other sections of this or other rules of the Department of Commerce and Insurance. (3) The new operative date with respect to this rule, means the date on or before January 1, 1989 when the company files a written notice with the director of its election to comply with the provisions of section 376.380(3), RSMo or if no election is filed, the date is January 1, 1989. AUTHORITY: sections 374.045, 376.380, 376.390, 376.405, 376.410 and 376.670, RSMo 2000.* This rule was previously filed as 4 CSR 190-11.090. This version of rule filed Dec. 5, 1969, effective Dec. 15, 1969. Amended: Filed Aug. 5, 1974, effective Aug. 15, 1974. Amended: Filed July 9, 1976, effective Feb. 20, 1977. Amended: Filed Aug. 16, 1977, effective Dec. 11, 1977. Rescinded and readopted: Filed May 11, 1984, effective Nov. 13, 1984. Amended: Filed Dec. 14, 2000, effective July 30, 2001. Non-substantive change filed Sept. 11, 2019, published Oct. 31, 2019. *Original authority: 374.045, RSMo 1967 amended 1993, 1995; 376.380, RSMo 1939, amended 1943, 1947, 1959, 1961, 1965, 1971, 1975, 1979, 1982, 1993; 376.390, RSMo 1939, amended 1943; 376.405, RSMo 1959, amended 1984; 376.410, RSMo 1945; and 376.670, RSMo 1943, amended 1959, 1961, 1965, 1975, 1979, 1982. Survivors Ben. Ins. Co. v. Farmer, 514 SW2d 565 (Mo. 1974). Superintendent of insurance has the duty to approve or disapprove life insurance contracts and forms and no contract or form may be used in Missouri without the approval of the superintendent.