MEETING AGENDA March 12, 2013 Welcome and Overview Structure of Uniform Standards Scope of Uniform Standards by Product Line Actuarial Requirements Common Filing Objections by Product Line Other Issues Questions and Conclusion

The IIPRC Today

Overview of Insurance Compact Innovative vehicle formalizing joint and cooperative action among states Leveraging regulatory expertise to establish Uniform Standards Central clearinghouse for prompt review of asset-based insurance products using the Uniform Standards

Overview of Insurance Compact Compact filings submitted through the System for Electronic Rate and Form Filing (SERFF) File one submission under one set of standards for one review and one approval valid in all Compact jurisdictions. Uniform Standards for individual and group life, annuity, disability income and long-term care

Compact’s Value-Added Benefits Submit one product filing vs. state-by-state Use one set of comprehensive Uniform Standards to prepare product forms vs. multiple state variations Undergo one filing review vs. many reviews Reduce duplicative paperwork, processes and systems implementations

Compact’s Value-Added Benefits Receive one approval on behalf of 41 Compacting States for individual life, annuities, and disability income Receive one approval on behalf of 37 Compacting States for individual LTC products Compact-approved LTC forms can be submitted for Partnership via easier certification /approval process

Compact’s Value-Added Benefits Straightforward filing process using SERFF Tools and checklists for filers on IIPRC web site Prompt, easy access to professional team of product reviewers and actuaries who will work with companies pre- and post-filing to answer questions and provide guidance for compliance Average approval in 60 review days or less

Compact’s Value-Added Benefits Easy to update product filings and add states to previously-approved filings Mix and match accommodates product needs Implement and administer standard product forms across Compacting States Streamlined systems programming, testing, rollout Simplified producer training

Uniform Standards 86 Uniform Standards adopted to date Individual Life Individual Annuities Individual Long-Term Care Individual Disability Income and Business Overhead Expense Group Life Combination product filings accepted

(C) IIPRC 2009

Getting Started with the Compact Visit the IIPRC website insurancecompact.org Check out the Company Resources Web Page View IIPRC Tutorials Contact IIPRC Office with any questions or to set up a one-on-one webinar Reviewers are available to answer questions both before and after you make your filing

Getting Started with the Compact Product Review Team Charlie Rapacciuolo is our Product Operations Coordinator David Morris is our Primary Life Reviewer Karen Givens is our Primary Annuity Reviewer Maureen Perry is our Primary LTC/DI Reviewer Alice Fontaine is our part-time Actuary Jeanne Daharsh is our full-time Actuary

Getting Started with the Compact IIPRC has unique submission requirements (supporting documentation) Payment of filing fees Identification of applicable Uniform Standards Actuarial memorandum / Rate Schedule for LTC Flesch Score certification Statement of Variability Statement of Intent Schedule

How to Prepare a Compact Filing Review the Uniform Standards on the Record Review the Operating Procedure for the Review and Filing of Product Filings Review the TOI Link to see the variety of products that can be filed Print off the applicable reviewer checklists Review the Filing Information Notices Review IIPRC General Instructions in SERFF

(C) IIPRC 2009

Filing Information Notices Issued by the Compact Office Explains or clarifies steps or requirements in the process for filing and review References applicable Uniform Standards or Operating Procedures When involves interpretation of Uniform Standard, will consult PSC or Actuarial Working Group

Filing Information Notices FIN : Bonus Feature for Deferred Annuity FIN : Rider Charges for GLB on NV Annuity FIN : Changes in Nonforfeiture Interest FIN : Product Filings Subject to AG38 FIN : Guaranteed Living Benefit Amounts Contingent on Inability to Perform Activities of Daily Living FIN : Individual Long-Term Care Filings

(C) IIPRC 2009

Questions?

Structure of Uniform Standards Cover Page –Uniform Standard Title & Number –Short overview of Purpose & Scope –Adoption & Effective Date –Rules Repealed, Amended or Suspended by the Rule –Statutory Authority

Structure of Uniform Standards First Page –Scope -- carefully review to see what is and what is not covered by the standard –Definitions – only applicable to terms used in Standard –Drafting Notes – provide guidance for filers and reviewers

Structure of Uniform Standards § 1 – Additional Submission Requirements –Components of filing including Actuarial Memorandum requirements –Variability requirements –Readability requirements §2 – General Form Requirements –Cover Page –Specifications Page –Fairness

Structure of Uniform Standards §3 – Contract Provisions –Alphabetical order –Several provisions are common across standards §4 – Additional Standards for Fraternal Benefit Associations §5 – Specialized Products/Marketing Appendices –Pay particular attention to nonforfeiture demonstration requirements or certifications

Life Uniform Standards Term Life Whole Life Endowment Non-Variable Adjustable Life Variable Adjustable Life Each has Single Premium vs. Multi pay version Joint Last to Die vs. Single Life version

Universal Life Uniform Standards No lapse requirements in Section 5 Appendix for Nonforfeiture demonstration Appendix for Sample certification of compliance

Benefit Features on Life Return of Premium on Term (IIPRC-LB-04- I-ROP) Graded Death Benefit on Whole Life Additional Term riders Index linked crediting for UL Overloan protection for UL Accelerated Death Benefits

Questions?

Core Annuity Uniform Standards Deferred - Non-Variable and Variable versions –Specific instructions on prospective and retrospective tests for General Account –Retrospective required for Variable investment options Immediate – Non-Variable and Variable versions Longevity – Non-variable only

Benefit Features on Annuities Bonus Benefits –Variable Bonus is considered part of Gross Consideration Certification required on tradeoff –Non-Variable Bonus not considered part of Gross Consideration Level imputed interest rate in Prospective Test

Benefit Features on Annuities Index-Linked Interest Non-Variable only Prospective Test and level imputed rate Market Value Adjustment (MVA) Non-Variable and the general account portions of variable annuities (IIPRC-A-07-I-2) Separate Account (IIPRC-A-07-I-3) MYGA Definition – does not include Index

Benefit Features on Annuities Guaranteed Minimum Death Benefits – Variable Only –GMDB for Non-Variable being considered Guaranteed Living Benefits –Variable vs. Non-Variable –Charges on Non-Variable cannot impact base policy Retrospective minimum values. –Examples of impact on values of changes or withdrawals both before and after election

Questions?

Long-Term Care Ten Uniform Standards Application, Policy, Forms, Outline of Coverage, Benefit Features, Rates, and Advertisements Adopted August 13, 2010 with effective date of December 1, Rate standards updated August 11, 2011

Long-Term Care Uniform standards only apply to new issues Do Not permit “mix and match” within product Combination “mix and match” filings are allowed Can be used to file with state for Partnership status

LTC Rate Standards Rate standards address both initial rates as well as rate increases Issue Age Rate Schedules Modified Rate Schedules –Not permitted in Colorado, Illinois, Maryland, Oklahoma, and Washington –Only available if, in addition to the modified rate schedule, an issue age rate schedule is also approved by the IIPRC

Long-Term Care Annual actuarial certification –Currently marketed rates –Closed forms Triennial submission of the supporting actuarial memorandum

Long-Term Care Policy Form certifications –Found in LTC Core Standards –Compliance of non-forfeiture and inflation benefits Exemption for $/$ products Rate Memorandum certifications Template for detailed assumptions

Disability Income Effective 1/12/12 DBOE effective 2/19/12 Loss Ratio requirements Sample format in Appendix Separate standard for Rate Increases vs. Initial Rates

Questions?

Actuarial Requirements Actuaries should be familiar with all applicable standards for forms submitted –Scope of Standard –Actuarial Memorandum Requirements –Appendices Templates for nonforfeiture demos Templates for Actuarial Certifications Specific instructions regarding demos and assumptions

Actuarial Requirements Common Actuarial Objections –AM material attached under Actuarial Memorandum field in SERFF –Actuarial Certifications Need to be Submitted –Signature Requirements for AM –Consistent with SOV ranges –Impermissible references to state law

Common Filing Objections & Pitfalls – Traditional Life Issue age and minimum issue amounts Ranges and charges Demonstrations or rationale of Nonforfeiture compliance (even ETI, RPU, Child riders) Guaranteed Charges for Additional Term if Indeterminate

Common Filing Objections & Pitfalls - UL Issue age and minimum issue amounts Follow template for demonstration with respect to BOY/EOY Sample calculation of initial expense charge Juvenile issue age mortality No lapse rider impact on form compliance

Common Filing Objections & Pitfalls - Annuities Range of Issue Ages Bonus ranges > 0 MYGA definition and MVA requirements Prospective Test Maturity Value Sample calculation to easily produce values GLB specified examples – lots of scenarios to cover

Common Filing Objections & Pitfalls – Long-Term Care Inflation and nonforfeiture certifications Insufficient detail in assumptions Demonstration that margins don’t deviate materially across issue ages, class, & plan No statement in rate schedule that they are the rates to which the actuarial memo applies

Common Filing Objections & Pitfalls – Long-Term Care Statement that rates not less than the rates for existing similar forms except for reasonable differences in benefits Enough detail in the table of relationship between net and gross premiums Rates and AM in Rate/Rule section of SERFF

Common Filing Objections & Pitfalls – Disability Insufficient detail in assumptions –In addition to description and source of each assumption Missing statement regarding overall expenses plus contingency/risk margins as a percentage of premiums on a PV basis

Common Filing Objections & Pitfalls – Disability No statement in rate schedule that they are the rates to which the actuarial memo applies No explanation of actuary’s review of policy design, underwriting, and claim adjudication Rates and AM in Rate/Rule section of SERFF

Questions?

Updates for AG38 Compliance Monitoring AG38 developments Consider using the Compact to file updated products for AG38 compliance –IIPRC will conduct form & non-forfeiture review –FIN Issued December 20, 2012

Nonforfeiture Interest Rates Consider using the Compact to file updated products –Compact does recognize the one-year delay Changes to non-forfeiture rate for a product previously approved by the Compact requires prior approval –Request that filing be re-opened FIN Issued September 20, 2012

Statement of Intent Schedule (Mix and Match) Forms filed with Compact should not affect values in state-approved form (and vice-versa) State-approved forms cannot be mixed and matched with Compact-approved forms in order to comply with a Uniform Standard (Compact form must fully comply with applicable standard)

Other Current Issues Reopen filing to update MIB statement – no filing fee if certify no other changes Group Term Life Policy Standards effective January 6, 2013 Non-variable Annuity GMDB Standard – Exposure draft open for comment (due 3/19) Commencing 5-year review process

Questions?

CONTACT IIPRC For more information, please contact us at: Phone: (202) Jeanne M. Daharsh, FSA, MAAA Consulting Actuary, IIPRC