Kansas Administrative
Regulations
Agency 40. Insurance Department
Article 4. Accident and Health Insurance
40-4-37k.
(a) Long-term care insurance; minimum loss ratios.
Long-term
care insurance policies shall return the following to policyholders in the form
of aggregate benefits under the policy:
(1)
At least 65 percent of the aggregate amount of premiums earned in the case of
group policies; and
(2)
at least 60 percent of the aggregate amount of premiums earned in the case of
individual policies.
(b)
Subsection (a) of this regulation shall not apply to the following policies:
(1)
Any long-term care policy or certificate issued in this state on or after
January 1, 2003; and
(2)
certificates issued on or after January 1, 2003 under group long-term care
insurance policy as defined in K.S.A. 40-2227(e), and amendments thereto, if
the policy was in force at the time this amended regulation became effective.
Subsection (a) of this regulation shall not apply to the policy anniversary
following 12 months after January
1,
2003.
(c)
Insurers shall determine aggregate benefits returned under the policy on the
basis of incurred claims experience and earned premiums for the entire period
for which rates are computed, in accordance with accepted actuarial principles
and practices.
(d)
Long-term care benefits provided through the acceleration of the death benefit
under a life insurance policy or annuity, if the payment of the long-term care
benefits does not result in the decrease of the total amount of benefits payable
under the policy, shall be subject to the following requirements in lieu of
subsection (a), (b) or (c) of this regulation:
(1)
The separately identifiable charge for the acceleration benefit shall not be
excessive and shall meet either of the following criteria:
(A)
Be a permanent and guaranteed charge; or
(B)
have a guaranteed maximum cost that can never be increased.
(2)
At the time of policy form filing, the insurer shall file a cost disclosure
illustration with the insurance department.
(A)
The cost disclosure illustration shall state separately the charges for the
life insurance policy and for the accelerated death benefit provision provided
for either in the policy or by rider, and the method of application of those
charges.
(B)
If the separately identifiable charge is illustrated as a percentage, the value
or policy feature against which the percentage is to be applied shall also be
disclosed.
(C)
The cost disclosure illustration shall clearly state whether the accelerated
death benefit provision is offered either as a permanent and guaranteed charge
or with a guaranteed maximum cost. In policies offering a guaranteed maximum
cost, the exact figure of the guaranteed maximum cost shall be clearly and
unambiguously disclosed.
(3)
At the time of delivery of the outline of coverage, a cost disclosure
illustration identical to or substantially similar to that filed with the
insurance department shall be delivered to the prospective applicant for
review. The cost disclosure illustration shall include all the information
required to be filed with the insurance department as set out in paragraphs
(2)(A) and (B) of this subsection.
(4)
The provisions of paragraphs (1)(A) and (B) shall not apply to and shall have
no effect upon the underlying mortality costs and calculations that make up the
basic premium for the life insurance policy itself.
(5)
In the case of a single premium life insurance policy or annuity providing
long-term care benefits via acceleration of the death benefit, the loss ratio
requirements of this regulation shall be satisfied if the following conditions
are met:
(A)
Long-term care benefits are not separately terminated.
(B)
At the time of policy form filing, the insurer files a benefit-to-premium
illustration, relating cash values to premiums over a 15-year period of time,
that is certified as appropriate by a member of the American academy of
actuaries using the following assumptions:
(i)
Mortality costs according to the appropriate percentage of the 1975-80 select
and ultimate mortality tables as annually determined by the society of
actuaries;
(ii)
cash values calculated using minimum guaranteed interest and maximum total
mortality and morbidity charges;
(iii)
minimum reserves; and
(iv)
lapses as follows:
1st
year ................................................. 20%
2nd
year................................................ 15%
3rd
year ................................................ 13%
4th
year................................................. 10%
5th
year................................................... 8%
6th
year through 14th year...................... 7%
15th
year..............................................100%
The
resulting benefit-to-premium ratio shall, in the aggregate, not be less than
75% when based upon an expected distribution of insureds for the age range for
which the policy is issued.
(6)
At the time of delivery of the single premium life policy or annuity, the
insurer shall provide the policyholder with a cost disclosure setting out the
year-by-year cash value increases on both a guaranteed and projected basis
using current assumptions, for at least 20 years if any, and the total gross
premium. The illustration shall including the following, clearly and
unambiguously:
(A)
A statement that specifies that the long-term care accelerated death benefit is
an integral part of the policy or annuity and shall not be separately
terminated;
(B)
a statement of the maximum total charge for mortality and long-term care
accelerated death benefit and the method of application of that charge; and
(C)
a statement that the maximum total charge includes a charge for a long-term
care accelerated death benefit.
(Authorized
by K.S.A. 40-103, K.S.A. 40-2228; implementing K.S.A. 40-2228; effective Jan.
4, 1993; amended Aug. 16, 2002.)