No. 28487 (Amendment): R590-227. Submission of Annuity Filings

DAR File No.: 28487
Filed: 02/01/2006, 03:34
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this amendment is to set forth procedures for submitting annuity filings under Section 31A-21-201.

 

Summary of the rule or change:

The changes to this rule include: updating publication dates for incorporation by reference documents; making regulatory changes to the standard nonforfeiture law as a result of the passage of H.B. 52, 2004 Legislature, and to be implemented in June 2006. (DAR NOTE: H.B. 52 (2004) is found at UT L 2004 Ch 97, and was effective 05/03/2004.)

 

State statutory or constitutional authorization for this rule:

Sections 31A-2-201, 31A-2-201.1, and 31A-2-202

 

This rule or change incorporates by reference the following material:

Utah Annuity Filing Certification, dated June 2006; Utah Life, and Annuity, Credit Life, and Credit Accident and Health Group Questionnaire, dated June 2006; and Utah Life, and Annuity, Credit Life, and Credit Accident and Health Request for Discretionary Group Authorization, dated June 2006

 

Anticipated cost or savings to:

the state budget:

These changes will create no change in the work done by department employees, nor will it change fees or revenues to the department or state fund.

 

local governments:

Local governments will not be affected by this rule since it relates only to the relationship between the department and the licensed insurer.

 

other persons:

As a result of the new standard nonforfeiture law for annuities, insurers are required to adopt a floating interest rate calculation. Once the law passed, insurers began to implement it immediately. At this time most, if not all, are in compliance. The minimum nonforfeiture interest rate on these policies was 3%; now it may vary from 1% to 3%. The rule gives more flexibility to insurers as to choice of forms to market and so perhaps there could be a slight increase in earnings. There will be a slight cost to insurers to update, print and file new forms. This rule has no direct cost or savings on consumers.

 

Compliance costs for affected persons:

As a result of the new standard nonforfeiture law for annuities, insurers are required to adopt a floating interest rate calculation. Once the law passed, insurers began to implement it immediately. At this time most, if not all, are in compliance. The minimum nonforfeiture interest rate on these policies was 3%; now it may vary from 1% to 3%. The rule gives more flexibility to insurers as to choice of forms to market and so perhaps there could be a slight increase in earnings. There will be a slight cost to insurers to update, print, and file new forms. This rule has no direct cost or savings on consumers.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes in this rule will have minimal fiscal impact on businesses. D. Kent Michie, Commissioner

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

 

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

03/17/2006

 

This rule may become effective on:

03/18/2006

 

Authorized by:

Jilene Whitby, Information Specialist

 

 

RULE TEXT

R590. Insurance, Administration.

R590-227. Submission of Annuity Filings.

R590-227-1. Authority.

This rule is promulgated by the insurance commissioner pursuant to Subsections 31A-2-201(3), 31A-2-201.1, and 31A-2-202(2).

 

R590-227-3. Incorporation by Reference.

(1) The department requires that documents described in this rule must be used for all filings. Actual copies may be used or you may adapt them to your word processing system. If adapted, the content, size, font, and format must be similar.

(2) The following documents are hereby incorporated by reference and are available at www.insurance.utah.gov.

(a) "NAIC Life, Accident and Health, Annuity, Credit Transmittal Document," dated January 1, 200[5]6.

(b) "NAIC Uniform Life, Accident and Health, Annuity and Credit Coding Matrix," dated January 1, 200[5]6.

(c) "NAIC Instruction Sheet for Life, Accident and Health, Annuity, Credit Transmittal Document," dated January 1, 200[3]6.

(d) "NAIC Instruction Sheet for Life, Accident and Health, Annuity, Credit Transmittal Document Form Filing Attachment," dated January 1, 200[3]6.

(e) "Utah Annuity Filing Certification," dated [May 1,2004]June 2006.

(f) "Utah Life[,] and Annuity[, Credit Life, and Credit Accident and Health] Group Questionnaire," dated [May 1, 2004]June 2006.

(g) "Utah Life[,] and Annuity[, Credit Life, and Credit Accident and Health] Request for Discretionary Group Authorization," dated [May 1, 2004]June 2006.

 

R590-227-5. General Filing Information.

(1) Each filing document submitted within the filing must be accurate, consistent, and complete. Each filing must[and] contain all required documents in order for the filing to be processed in a timely and efficient manner. The commissioner may request any additional information deemed necessary.

(2) Insurers and filers are responsible for assuring compliance with Utah laws and rules. A filing not in compliance with Utah laws and rules is subject to regulatory action under Section 31A-2-308.

(3) A filing[s] that does not comply with this rule may be rejected and returned to the filer. A rejected filing is not considered filed with the department.

(4) A prior filing will not be researched to determine the purpose of the current filing.

(5) The department does not review or proofread every filing.

(a) Filings may be reviewed:

(i) when submitted;

(ii) as a result of a complaint;

(iii) during a regulatory examination or investigation; or

(iv) at any other time the department deems necessary.

(b) If a filing is reviewed and is found to be not in compliance with Utah laws and rules, an ORDER TO PROHIBIT USE will be issued to the filer. The commissioner may require the filer to disclose deficiencies in forms or rating practices to affected contract holders.

([5]6) Filing Correction. [(a) ]No filing transmittal is required when making corrections to misspelled words and punctuation in a filing. The filing will be considered an informational filing.[clerical or typographical corrections are made to a filing previously filed if the corrected filing is submitted within 30 days of the date "filed" with the department.] The filer will need to reference the original filing.

(b) A new filing is required if a clerical or typographical correction is made more than 30-days after the filed date of the original filing. The filer will need to reference the original filing.

(7) Revised forms. A form that is revised from a previously filed form is considered a new form and must be filed for use. The filer will need to reference the original filing and explain the changes to the form.[(7) Filing withdrawal. A filer must notify the department when the filer withdraws a previously filed form, rate, or supplementary information.]

 

R590-227-6. Filing Submission Requirements.

Filings must be submitted by market type and type of insurance. A filing may not include more than one type of insurance, or request filing for more than one insurer. A complete filing consists of the following documents and submitted in the following order:

(1) Transmittal. Note: Based on the use of the NAIC Transmittal Document, a cover letter is not required. The "NAIC Life, Accident and Health, Annuity, Credit Transmittal Document" must be used. It can be found at www.insurance.utah.gov/LH_Trans.pdf.

(a) COMPLETE THE TRANSMITTAL BY USING THE FOLLOWING:

(i) "NAIC Coding Matrix"

www.insurance.utah.gov/LifeA&H_Matrix.pdf,

(ii) "NAIC" Instruction Sheet"

www.insurance.utah.gov/LH_Trans_Inst.pdf,

(iii) "Life Content Standards"

www.insurance.utah.gov/Life_STM.html.

(iv) Do not submit the documents described in section (a)(i), (ii), and (iii) with a filing.

(b) Filing Description Section. The following information must be included in the Filing Description Section of the NAIC transmittal and must be presented in the order shown below:

(i) Domiciliary Approval. Foreign insurers and filers must first submit filings to their domicile state.

(A) If a filing was submitted to the domicile state provide a stamped copy of the approval letter from the domicile state for the filing.

(B) If a filing was not submitted to the domicile state, or the domicile state did not provide specific approval for the filing, then alternate information must be provided.

(ii) Marketing Facts.

(A) List the issue ages.

(B) List the minimum initial premium.

(C) Identify the intended market for the filing, such as senior citizens, nonprofit organizations, association members, including any particular tax qualified market and the federal law under which the contract will be marketed.

(D) Describe the marketing and advertising in detail, i.e. individually solicited through licensed producers, marketed through a marketing association, financial institutions, Internet, or telemarketing.

(iii) Description of Filing.

(A) Provide a detailed description of the purpose of the filing.

(B) Describe the benefits and features of each form in the filing including specific features and options, including nonforfeiture options.

(C) Identify any new, unusual, or controversial provisions.

(D) Identify any unresolved previously prohibited provisions and explain why the provisions are included in the filing.

(E) Explain any changes in benefits, charges, terms, premiums, or other provisions that may occur while the contract is in force.

(F) If the filing is replacing or modifying a previous submission, provide information that identifies the filing being replaced or modified, the Utah filed date, and a detailed description of the changes and highlight the changed provisions.

(G) If the filing includes forms for informational purposes, provide the dates the forms were filed.

(H) If filing an application, rider, or endorsement, and the filing does not contain a contract, identify the affected contract form number, the Utah filed date, and describe the effect of the submitted forms on the base contract.

(iv) Underwriting Methods. Provide a general explanation of the underwriting applicable to this filing.

(2) Certification. In addition to completing the certification on the NAIC transmittal, the filer must complete and submit the "Utah Annuity Filing Certification". A filing will be rejected if the certification is missing or incomplete. A certification that is inaccurate may subject the filer to administrative action.

(3) Group Questionnaire or Discretionary Group Authorization Letter. All group filings must identify each type of group, and include either a completed "Utah Life[,] and Annuity[, Credit Life and Credit Accident and Health Insurance] Group Questionnaire", or copy of the "Utah Life[,] and Annuity[, Credit Life and Credit Accident and Health Insurance] Discretionary Group Authorization letter".

(4) Letter of Authorization. If the filer is not the insurer, a letter of authorization from the insurer must be included. The insurer remains responsible for the filing being in compliance with Utah laws and rules.

(5) Statement of Variability. Any item or provision on the data page or within the form that is variable must be contained within the brackets. List the ranges of variable items or factors within the brackets. Each variable item must be identified and explained in a statement of variability. If the information contained within the brackets changes, the form must be refiled.

(6) Items being submitted for filing. Refer to each applicable subsection of this rule for general procedures and additional procedures on how to submit forms and reports.

(7) Annuity Report. All annuity filings must include a sample annuity annual report.

(8) Actuarial Memorandum, Demonstration, and Certification of Compliance. An actuarial memorandum, demonstration, and a certification of compliance are required in annuity filings. The memorandum must be currently dated and signed by the actuary. The memorandum must include:

(a) description of the coverage in detail;

(b) demonstration of compliance with applicable nonforfeiture and valuation laws; and

(c) a certification of compliance with Utah law.

(9) Return Notification Materials.

(a) Return notification materials are limited to:

(i) a copy of the transmittal; and

(ii) a self-addressed, stamped envelope.

(b) Notice of filing will not be provided unless return notification materials are submitted.

 

R590-227-7. Procedures for Filings.

(1) Forms in General.

(a) Forms are "File and Use" filings.

(b) Each form must:

(i) be identified by a unique form number; and

(ii) contain a descriptive title on the cover page.

(c) The form number and the policy cover page descriptive title may not be variable.

([c]d) Forms must be in final printed form or printer's proof format. Drafts may not be submitted.

([d]e) The form must be completed in John Doe fashion to accurately represent the intended market, purpose, and use.

(i) If the market intended is for the senior age market, the form must be completed with data representative of senior annuitants.

(ii) All John Doe data in the forms including the [specification page]data page must be accurate and consistent with the actuarial memorandum, the application, and any marketing materials, as applicable.

(iii) When submitting a rider or endorsement, include a sample data page that includes the rider or endorsement information.

(iv) Forms may include variable data. All variable data must be identified within the brackets or a statement of variability must be included with the submission.

(2) Contract Filings.

(a) Each type of annuity must be filed separately. A contract filing consists of one contract form for a single type of insurance including its related forms, an application, data page, rider or endorsement, and an actuarial memorandum.

(b) A data page must be included with every contract filing.

(c) Only one contract form for a single type of insurance may be submitted.

(d) A data page that changes the basic feature of the contract may not be filed without including the entire contract form in the filing. Separate data page filings without the contract form will be rejected as incomplete.

(3) Rider or Endorsement Filings.

(a) Related riders or endorsements may be filed together as a single filing.

(b) A single rider or endorsement that affects multiple related forms must reference all affected contract forms.

(c) A rider or endorsement that is based on morbidity risks such as critical illness or long-term care, is considered accident and health insurance and must be filed in accordance with Rule R590-220, "Accident and Health Insurance Filings".

(d) The filing must include:

(i) a listing of all base contract form numbers, title and dates filed with the Utah Insurance Department.

(ii) a description of how each filed rider or endorsement affects the base contract.

(iii) a sample data page with data for the submitted form.

(4) Application Filings. Each application or enrollment form may be submitted as a separate filing or may be filed with its related contract or certificate filing. If an application has been previously filed or is filed separately, an informational copy of the application must be included with a contract or certificate filing.

 

R590-227-8. Additional Procedures for Fixed Annuity Filings.

(1) Insurers filing annuity forms are advised to review the following code sections and rules prior to submitting a filing:

(a) Section 31A-21 Part III, "Specific Clauses in Contracts;"

Section 31A-22 Part IV, "Life Insurance and Annuities;"

(c) R590-93, "Replacement of Life Insurance and Annuities;"

(d) R590-96, "Annuity Mortality Tables;" and

(e) R590-191, "Unfair Life Insurance Claims Settlement Practice."

(2) Every filing of an individual annuity contract, rider or endorsement providing benefits, and every group annuity filing including certificates that are marketed individually, shall include an actuarial memorandum, a demonstration, and a certification of compliance with nonforfeiture and valuation laws:

(a) Section 31A-22-409, "Standard Nonforfeiture Law for Deferred Annuities;" and

(b) Section 31A-17 Part V, "Standard Valuation Law."

(3) When submitting annuity filings the filing description of the transmittal must:

(a) identify the specific subsection of the Utah nonforfeiture law, which applies to the submitted annuity;

(b) describe the basic features of the form submitted;

(c) identify and describe the interest earning features; including the guaranteed interest rate, the guaranteed interest terms, and any market value adjustment feature;

(d) describe the guaranteed and nonguaranteed values including any bonuses;

(e) describe all charges, fees and loads;

(f) list and describe all accounts, options and strategies, if any;

(g) identify whether the accounts are fixed interest general accounts, registered separate accounts including modified guaranteed separate accounts; and

(h) describe any restrictions or limitations regarding withdrawals, surrenders, and the maturity date or settlement options.

(4) The contract must be complete with a sample specification page attached.

(5) The actuarial memorandum must:

(a) be currently dated and signed by the actuary;

(b) identify the specific subsections of the Utah nonforfeiture law[,] which applies to the submitted annuity;

(c) describe all contract provisions in detail, including all guaranteed and non-guaranteed elements, that may affect the values;

(d) identify the guaranteed minimum interest crediting rates;

(e) describe in detail the particular methods of crediting interest, including:

(i) guaranteed fixed interest rates; and

(ii) guaranteed interest terms.

(f) specifically identify, [and ]describe and list all charges and fees, including loads, surrender charges, market value adjustments or any other adjustment feature;

(g) describe in detail all accounts and factors that are used to calculate guaranteed minimum nonforfeiture values and minimum cash surrender values in[under] the contract and the elements used in the calculation of the minimum values required by the law; and

(h) include the formulas used to calculate the minimum guaranteed values provided by the contract and the formulas used to calculate the minimum guaranteed values required by the applicable subsections of the nonforfeiture law.

(6) The actuarial demonstration must:

(a) [be submitted on paper and on a diskette on which the formulas are not hard coded,]compare minimum contract values with minimum nonforfeiture values;

(b) [demonstrate compliance with the applicable nonforfeiture law for representative ages and the highest possible issue age,]be based on representative premium patterns, for flexible premium products use both a single premium and level premium payment, and for both age 35 and age 60 or the highest issue age if lower;

(c) numerically demonstrate that the values based on the guaranteed minimum interest rates, the maximum surrender charges, fees, loads, and any other factors affecting values, provide values that are in compliance with the Standard Nonforfeiture Law using both the retrospective and the prospective tests, each test must be clearly identified, and include the following:

(i) For the retrospective test, describe the net consideration and the interest rates used in the accumulation. Numerically compare the guaranteed contract values with the minimum values required by the nonforfeiture law.

(ii) For the prospective test, identify the maturity value and the interest rate used for each respective year to determine the present value. Numerically compare the guaranteed contract values with the minimum values required by the nonforfeiture law.

(7) The actuarial certification of compliance must be currently dated and signed by the actuary. The certification must state that the formulas used and values provided are in compliance with Utah laws and rules.

 

R590-227-9. Additional Procedures for Group Annuity Filings.

(1) Insurers submitting group annuity filings are advised to review the following code sections and rules prior to submitting a filing:

(a) Section 31A-21 Part III, "Specific Clauses in Contracts;"

(b) Section 31A-22 Part IV, "Life Insurance and Annuities;"

(c) Section 31A-22 Part V, "Group Life Insurance;" and

(d) R590-191, "Unfair Life Insurance Claims Settlement Practice."

(2) A group contract must be included with each certificate filing along with the master application and enrollment form.

(3) Every group annuity filing must include an actuarial memorandum describing the features of the contract and certifying compliance with applicable Utah laws. A group filing that includes a group certificate that is marketed to individuals, must include an actuarial memorandum, demonstration and certification of compliance with the applicable Utah nonforfeiture law.

(4) Eligible Groups. A filing for an eligible group must include a completed "Utah Life[,] and Annuity[, Credit Life, Credit Accident and Health] Group Questionnaire."

(a) A questionnaire must be completed for each eligible group under Sections 31A-22-502 through 508.

(b) When a filing applies to multiple employer-employee groups under Section 31A-22-502, only one questionnaire is required to be completed.

(5) Discretionary Group. If a group is not an eligible group, then specific discretionary group authorization must be obtained prior to submitting the filing. If a filing is submitted without discretionary group authorization, the filing will be rejected.

(a) To obtain discretionary group authorization a "Utah Life[,] and Annuity[, Credit Life, and Credit Accident and Health] Request For Discretionary Group Authorization" must be submitted and include all required information.

(b) Evidence or proof of the following items are some factors considered in determining acceptability of a discretionary group:

(i) existence of a verifiable group;

(ii) that granting permission is not contrary to public policy;

(iii) the proposed group would be actuarially sound;

(iv) the group would result in economies of acquisition and administration which justify a group rate; and

(v) the group would not present hazards of adverse selection.

(c) Discretionary group filings that do not provide authorization documentation will be rejected.

(d) Any changes to an authorized discretionary group must be submitted to the department, such as; change of name, trustee, domicile state, within 30 days of the change.

(e) The commissioner may periodically re-evaluate the group's authorization.

 

R590-227-14. Enforcement Date.

The commissioner will begin enforcing the provisions of this rule [May]June 1, 200[4]6.

 

KEY: annuity insurance filings

Date of Enactment or Last Substantive Amendment: [April 28, 2005]2006

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-2-201.1; 31A-2-202