C.3 Life Illustration Reg Model

Question 1

Premium Outlay vs Contract Premium

Answer 1

Premium outlay = amount assumed to be paid by PH

Contract Premium - Total GP required by policy

Question 2

Current payable scale
vs disciplined current scale
vs Illustrated Scale

Answer 2

Non-gtd scale effective within 95 days of illustration date

disciplined current scale - NG scale based on recent experience and guidance form actuarial standards board

• cannot reflect future events / actions
• cannot include projected improvements

Illustrated Scale - the worse of the two scales above

Question 3

Guaranteed Elements vs NGE

Answer 3

Guaranteed Elements - Policy Values gtd at issue

NGE - not gtd at issue

Question 4

Self Supported vs Lapse Supported

Answer 4

self supported - accumulated CF > CSV for years 15+

Lapse Supported - for policies that fail the self-supported test when a modified lapse assumption is used:
yr 1-5 = use disciplined current scale lapses
year 5+ assumes 0% lapse

Question 5

Illustration Types: Basic, supplemental, inforce, and lapse supported

Answer 5

Basic - used to see life insurance, includes gtd and NGE
Supplemental - additional illustration
in force - furnished any time after the policy is 1+ yr old

Question 6

Rules for Producers

Answer 6

Producers and Sales Reps MUST
• Represent policy only as life insurance
• Show NGEs correctly
• NOT say NGEs are guaranteed
• Comply with this reg
• Use illustrated scale or worse
• Provide complete illustrations
• NOT say premiums are not required when in fact they are
• Avoid using the term “vanish” or “vanishing premium”
• NOT use illustrations that are not self-supporting

Question 7

Illustration Actuary

Answer 7

• must be appointed by board
• must annually certify that disciplined current scale conforms with ASB guidelines and this regulation

• Academy member in good standing
• Know the SOP on life insurance illustrations
• Must NOT be:
– In violation of any insurance laws
– Guilty of fraudulent practices
– Incompetent, uncooperative, or untrustworthy
– Terminated as illustration actuary in last 5 years due to any of the above
• Must disclose if currently payable scale is reduced because of experience other than what was used for disciplined current scale
• Must disclose expense allocation method used
• Must file annual certification with board and NAIC for all policy forms that use illustrations
Also anytime a new policy form is created
• Notify board of errors in previous certifications