Sec. 59.5. Minimum benefit ratio standards

Minimum benefit ratio standards shall apply to life, accident and health, and blanket insurance certificates which are subject to this Part. Monitoring procedures to assure that such standards are met are contained in section 59.7 of this Part.

(a) Life insurance.

The following standards will apply to group life insurance certificates, except where the policyholder pays the entire premium.

(1) For certificates providing term insurance, the following minimum benefit ratios are applicable:

(i) A 60-percent benefit ratio.

(ii) The minimum benefit ratio in subparagraph (i) of this paragraph shall be modified as follows:

(a) If the expected average annual premium per certificate is less than $210, the minimum benefit ratio shall be decreased by five percentage points.

(b) If the expected average annual premium per certificate exceeds $600, the minimum benefit ratio shall be increased by five percentage points.

(c) In 1987 and subsequent years, the dollar amounts in clauses (a) and (b) of this subparagraph will be multiplied by an “inflation factor.” The inflation factor shall be the ratio of the Consumer Price Index for urban wage earners, as compiled by the U.S. Bureau of Labor Statistics, of the current to the previous calendar year.

(2) In any case where it has been demonstrated to the superintendent's satisfaction that a particular policy form is of special or unique value to the public, considering such matters as availability and consumer demand, and where it has been demonstrated that the policy form cannot reasonably meet the otherwise applicable minimum benefit ratio standard, the superintendent may modify these standards.

(3) An actuarial memorandum shall be submitted demonstrating, in accordance with subparagraph (i) or (ii) of this paragraph, that the minimum benefit ratio is expected to be met over a period of 10 years, or a period longer than 10 years if justified by the insurer and approved by the superintendent. This actuarial memorandum shall be hereinafter referred to as the filing memorandum.

(i) The demonstration should use reasonable assumptions as to mortality, morbidity, lapse rates and interest (not less than four percent per annum). The demonstrated benefit ratio should be the present value of expected incurred losses divided by the present value of the difference of the expected incurred premiums and any dividends expected to be paid.

(ii) Such other demonstration appropriate to the business written and subject to the approval of the superintendent.

(4) For certificates providing other than term insurance, the insurer shall demonstrate that the premiums are reasonable in relation to the benefits provided. Such demonstration should be consistent with the requirements of paragraphs (1)-(3) of this subdivision, modified to reflect the benefits provided, including the expected payments of any cash surrender values.

(b) Accident and health insurance.

The following standards will apply to group accident and health and blanket insurance certificates, except where the policyholder pays the entire premium.

(1) The minimum benefit ratios of certificates providing accident and health and blanket insurance are as follows:

(i) For all certificates subject to this Part, except those covered by subparagraphs (ii) and (iii) of this paragraph, the minimum benefit ratio shall be 60 percent.

(ii) For certificates issued to persons 65 and over, the minimum benefit ratio shall be 65 percent.

(iii) The minimum benefit ratio required by subparagraph (i) of this paragraph is modified as follows:

(a) If the expected average annual premium per certificate is less than $240, the minimum benefit ratio shall be decreased by five percentage points.

(b) If the expected average annual premium per certificate exceeds $1,200, the minimum benefit ratio shall be increased by five percentage points.

(c) In 1987 and subsequent years, the dollar amounts in clauses (a) and (b) of this subparagraph will be multiplied by an “inflation factor.” The inflation factor shall be the ratio of the Consumer Price Index for urban wage earners, as compiled by the U.S. Bureau of Labor Statistics, of the current to the previous calendar year.

(iv) In any case where it has been demonstrated to the superintendent's satisfaction that a particular policy form is of special or unique value to the public, considering such matters as availability and consumer demand, and where it has been demonstrated that the policy form cannot reasonably meet the otherwise applicable benefit ratio standard, the superintendent may modify these standards.

(2) The superintendent will require, using reasonable assumptions as to mortality, morbidity, lapse rates and interest, an actuarial memorandum demonstrating that the benefit ratio is expected to equal or exceed the applicable minimum benefit ratio. The benefit ratio means the ratio at the time of rate filing of the present value of future benefits to the present value of future premiums.