Guaranteed Issue Life Products and the Mortality Basis for Nonforfeiture
This weekly tip focuses on nonforfeiture values for guaranteed issue individual life insurance products. The Compact Office has received questions and filings using the 2017 CSO mortality table to determine Model # 808’s minimum nonforfeiture values on guaranteed issue products. However, consistent with the Valuation Manual's VM-02 Section 4E quoted below, the minimum nonforfeiture values on policies issued in 2021 and later must be based on the 2001 CSO mortality table if the product meets the definition of "guaranteed issue life insurance policy" as defined in Valuation Manual VM-01. Note that a different table may be used for a product’s nonforfeiture values only if the actuarial memorandum demonstrates that the nonforfeiture values produced by a different table are higher than the minimums produced by the 2001 CSO mortality table for all ages, rate classes, and durations.
Valuation Manual's VM-02 Section 4E states:
Guaranteed Issue Life Insurance
The minimum nonforfeiture standard values for GI life insurance policies issued before Jan. 1, 2020, shall be determined using the ultimate form of the 2001 CSO Table. The company may elect to use the 2017 CSO Table in place of the 2001 CSO ultimate table for policies issued Jan. 1, 2017, through Dec. 31, 2019.
The minimum nonforfeiture standard values for GI life insurance policies issued after Dec. 31, 2019, shall be determined using the ultimate form of the 2001 CSO Table. The company may elect to use the 2017 Commissioners Standard Guaranteed Issue Mortality Tables (2017 CSGI) defined in VM-M in place of the 2001 CSO ultimate tables for policies issued during calendar year 2019.
Valuation Manual's VM-02 states:
The term “guaranteed issue (GI) life insurance policy” means a life insurance policy or certificate where the applicant must be accepted for coverage if the applicant is eligible. Additionally, the following must hold:
- Eligibility requirements may include being within a specified age range and/or being an active member in an eligible group (e.g., group solicitation in direct marketing).
- Inclusion of any of the following characteristics or product types disqualifies the policy as GI:
- Actively at work requirement.
- Employer groups.
- Acceptance based on any health-related questions or information.
- Waiving of underwriting requirements based on minimum participation thresholds, such as for worksite marketing.
- Corporate-owned life insurance (COLI) or bank-owned life insurance (BOLI).
- Credit life contracts.
- Juvenile-only products (e.g., under age 15).
- Preneed life contracts.
- Policies and certificates issued as a result of exercising a provision (e.g., conversion or guaranteed insurability option riders) from a policy, rider or certificate that do not qualify as GI life insurance.
If you have any questions regarding this Weekly Tip or filing with the Compact, please contact the Compact Office.