The Life and Health Actuarial Task Force has posted an exposure draft of a proposed revision to Actuarial Guideline XXV.
The LHATF, an arm of the National Association of Insurance Commissioners, Kansas City, Mo., wants to add a funeral expense threshold amount provision to A.G. XXV, which covers "Calculation of Minimum Reserves and Minimum Nonforfeiture Values for Policies with Guaranteed Increasing Death Benefits Based on an Index."
A nonforfeiture provision already in the guideline requires insurers to increase minimum nonforfeiture death benefits at a higher rate for big policies than for small policies.
The maximum increase rate for big policies is 2%, and the maximum increase rate for small policies is 4.5%.
The cut-off between big policies and small policies has been $10,000.
If the NAIC adopts the proposed guideline change, insurers would instead use a "threshold amount" that would "be based on the increase in the Funeral Expenses expenditure category of the Consumer Price Index for All Urban Consumers as of the end of June (index)," according to the exposure draft.
The threshold amount would be $10,000 until Dec. 31, 2009. After December 31, 2009, the threshold amount for a statement year would be "the product of $25,000 and the ratio of 1) the index for June of the statement year to 2) the index as of June 2009."
"If this calculation would result in a decrease in the threshold amount the unadjusted threshold amount shall continue. pay higher interest rates on minimum death benefits," according to the exposure draft.
