Industry Frequently Asked Questions
Group Life Insurance
Do premium rates need to be filed for group life insurance?
1. For some groups the approval of the rates is required. This would apply regardless of the plan of insurance (e.g., term insurance vs. whole life). The approval is required in instances where the New York Insurance Law requires that the premium charged be reasonable in relation to the benefits provided. There are two areas where this occurs.
- Credit Life Insurance as authorized by section 4216(b)(3) of the Insurance Law. Subparagraph (M) of this paragraph requires the filing of rates, and requires that the relationship between premiums and benefits be reasonable. The standards for judging reasonableness are found in Regulation 27A, which is also known as Part 185 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York, or 11 NYCRR 185.
- Certificates deemed to have been delivered in this state by section 3201(a)(1) of the Insurance Law. These would be any certificate covering a New York life where the group is not recognized in Paragraphs (1)-(11) of subsection 4216(b) of the Insurance Law. This would include such groups as financial institutions (depositors or revolving credit customers), affinity associations (Alumni Associations, American Legion), and what is often referred to as discretionary groups. The standards for judging reasonableness are found in Regulation 123, which is also known as Part 59 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York, or 11 NYCRR 59.
2. There are also a number of other areas where we have concerns with the rates, although rates may not actually need to be submitted:
- Paragraph 4216(c)(1) requires that the rates used by any insurer for all groups, regardless of where issued, be expected to be self-supporting.
- In the case of group insurance related to employment, any employee contribution generally may not vary by the gender of the insured.
- Regulation 149 (11 NYCRR 42) places specific restriction on the renewability of term insurance after age 80. In addition to the Regulation, the following must be considered.
- Section 42(a)(1) of Regulation 149 would allow coverage after age 80 if both benefit and premiums are level after age 80. However, in the absence of any other considerations, given the fairly rapid increase in expected claim cost after age 80, the Department has found it to be unfairly discriminatory to charge this entire set of people the same rate. We have permitted age grouping of no more than five years, with the rate per $1,000 of insurance for each age group increasing with the increase in expected claims for each successive age group.
- A level rate would not be considered discriminatory if the insured was provided with the appropriate non-forfeiture benefit along with the death benefit. However, this is seldom desirable in what is intended to be a group term life program.
- Coverage ending at age 85 with level premium rates and level benefits from age 80 to 84 would satisfy Regulation 149. However, in situations where the insured has the protection of the Federal Age Discrimination in Employment Act (ADEA) the termination of coverage at a specified age would not be permitted by ADEA.
- Where the insurance is subject to ADEA, we have given some preference to the Federal statute that will accept the use of increasing premium rates per unit of insurance after age 80 (with age grouping as described in B above) along with a decreasing insurance benefit such that the actual premium charge remains level. An example might be useful.
|Ages||Premium Rate Per $1,000 Insurance||Amount of Insurance||Monthly Premium|
In practice, it may be difficult to produce a table of premium rates for these ages which, together with the pattern of scheduled reductions, produces exactly a level premium. Because of this, it may be desirable to express the amount of insurance for the higher ages in terms of the amount of insurance at some younger age. For example:
|Ages||Amount Premium of Insurance|
65.0% of the age 80 amount
44.0% of the age 80 amount
18.5% of the age 80 amount
These comments are specifically for the situation when the coverage is subject to ADEA and the insured pays 100% of the cost of insurance. However, the basic principal expressed here would apply in other instances, although its application and effect would change somewhat.