DEPARTMENT OF LABOR AND REGULATION
DIVISION OF INSURANCE
GENERALLY RECOGNIZED EXPENSE TABLE APPROVED BY THE DIRECTOR
Chapter 20:06:38
APPENDIX A
SEE: § 20:06:38:34
Source: 23 SDR 228, effective July 1, 1997.
DEPARTMENT OF REVENUE AND REGULATION
DIVISION OF INSURANCE
SAMPLE ACKNOWLEDGMENT
Chapter 20:06:38
APPENDIX B
SEE: § 20:06:38:13
Source: 24 SDR 33, effective September 22, 1997.
SAMPLE ACKNOWLEDGMENT
I certify that I displayed a computer screen illustration for ______________________ that complies with state requirements and for which no hard copy was furnished. The illustration was based on the following personal and policy information:
1. Gender Male _____ Female _____
2. Age _______________________________
3. Underwriting or rating class _______________________________
4. Type of policy _______________________________
5. Type of rider _______________________________
6. Initial death benefit _______________________________
7. Dividend option election _______________________________
(or application of non-
guaranteed elements, if
applicable)
8. Guaranteed interest rate(s) _______________________________
9. Nonguaranteed interest rate(s) _______________________________
_______________________________
AGENT
DATE:_________________________
I acknowledge that I viewed a computer screen illustration based on the information as stated above. No hard copy of the illustration was furnished. I understand that an illustration conforming to the policy as issued will be provided to me no later than at the time the policy is delivered.
_______________________________
APPLICANT
DATE:_________________________
An illustration conforming to the requirements of the model must be prepared and personally delivered by the agent on or before delivery of the policy.
CHAPTER 20:06:38
LIFE INSURANCE ILLUSTRATIONS
Section
20:06:38:01 Definitions.
20:06:38:02 Applicability and scope.
20:06:38:03 Policies to be illustrated.
20:06:38:04 Information required in illustration.
20:06:38:05 Prohibited practices.
20:06:38:06 Interest rate illustrations.
20:06:38:07 Standards for basic illustrations -- Format.
20:06:38:08 Standards for basic illustrations -- Narrative summary.
20:06:38:09 Standards for basic illustrations -- Numeric summary.
20:06:38:10 Standards for basic illustrations -- Statements.
20:06:38:11 Standards for basic illustrations -- Tabular detail.
20:06:38:12 Standards for supplemental illustrations.
20:06:38:13 Basic illustration -- Use in sale of policy.
20:06:38:14 Basic illustration -- Not used in sale of policy.
20:06:38:15 Basic illustration -- Delivery by mail.
20:06:38:16 Basic illustration -- Retention by insurer.
20:06:38:17 Annual report -- Requirement.
20:06:38:18 Annual report -- Content for universal life policies.
20:06:38:19 Annual report -- Content for all other policies.
20:06:38:20 Annual report -- Policies without nonforfeiture values.
20:06:38:21 Annual report -- Notice if in-force illustration not included.
20:06:38:22 Annual report -- Notice of change in nonguaranteed elements.
20:06:38:23 In-force illustration -- Furnished at policy owner’s request.
20:06:38:24 Annual certification -- Disciplined current scale and illustrated scales.
20:06:38:25 Illustration actuary requirements.
20:06:38:26 Change of illustration actuary.
20:06:38:27 Annual certification -- Currently payable scale.
20:06:38:28 Annual certification -- Expenses.
20:06:38:29 Annual certification -- Additional certifications.
20:06:38:30 Annual certification -- Inability to certify scale.
20:06:38:31 Annual certification -- Officer of the insurer.
20:06:38:32 Annual certification -- Date due.
20:06:38:33 Disciplined current scale.
20:06:38:34 Expenses.
20:06:38:35 Generally recognized expense table -- Approval.
Appendix A Generally Recognized Expense Table Approved by the Director.
Appendix B Sample Acknowledgment.
20:06:38:01. Definitions. Terms used in this chapter mean:
(1) Actuarial Standards Board," the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice;
(2) "Assumed expenses," expenses as calculated in § 20:06:38:34 that may be used in the calculation of the disciplined current scale for a policy form;
(3) "Basic Illustration," a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and nonguaranteed elements;
(4) "Contract premium," the gross premium that is required to be paid under a fixed premium policy, including the premium for a rider for which benefits are shown in the illustration;
(5) "Currently payable scale," a scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next 95 days;
(6) "Generic name," a short title descriptive of the policy being illustrated, such as "whole life," "term life," or "flexible premium adjustable life";
(7) "Guaranteed elements," the premiums, benefits, values, credits, or charges under a policy of life insurance that are guaranteed and determined at issue;
(8) "Illustrated scale," a scale of nonguaranteed elements currently being illustrated that is not more favorable to the policy owner than the lesser of the disciplined current scale or the currently payable scale;
(9) "Illustration," a presentation or depiction that includes nonguaranteed elements of a policy of life insurance over a period of years and that is either a "basic illustration," a "supplemental illustration," or an "in-force illustration";
(10) "Illustration actuary," an actuary meeting the requirements of § 20:06:38:25 who certifies to illustrations based on the standard of practice contained in the Actuarial Standard of Practice No. 24 - Compliance With The NAIC Life Insurance Illustrations Model Regulation, effective March 31, 1996;
(11) "In-force illustration," an illustration furnished at any time after the policy that it depicts has been in force for one year or more;
(12) "Lapse-supported illustration," an illustration of a policy form failing the test of self-supporting as defined in this section, under a modified persistency rate assumption using persistency rates underlying the disciplined current scale for the first 5 years and 100 percent policy persistency thereafter;
(13) "Minimum assumed expenses," the minimum expenses that may be used in the calculation of the disciplined current scale for a policy form;
(14) "Nonterm group life," a group policy or individual policies of life insurance which are issued to members of an employer group or another permitted group and which meet the following requirements:
(a) Every plan of coverage was selected by the employer or another group representative;
(b) Some portion of the premium is paid by the group or through payroll deduction; and
(c) Group underwriting or simplified underwriting is used;
(15) "Nonguaranteed elements," the premiums, benefits, values, credits, or charges under a policy of life insurance that are not guaranteed and determined at issue;
(16) "Policy owner," the owner named in the policy or the certificate holder in the case of a group policy;
(17) "Premium outlay," the amount of premium assumed to be paid by the policy owner or other premium payer out-of-pocket;
(18) "Second-or-later-to-die policies," life insurance policies which insure two or more lives and pay the death proceeds upon the death of the second or last insured to die;
(19) "Self-supporting illustration," an illustration of a policy form for which it can be demonstrated that, when using experience assumptions underlying the disciplined current scale, for all illustrated points in time on or after the fifteenth policy anniversary or the twentieth policy anniversary for second-or-later-to-die policies, or upon policy expiration if sooner, the accumulated value of all policy cash flows equals or exceeds the total policy owner value available, including cash surrender values and any other illustrated benefit amounts available at the policy owner’s election.
Source: 23 SDR 228, effective July 1, 1997; 26 SDR 26, effective September 1, 1999; 27 SDR 54, effective December 4, 2000; 30 SDR 39, effective September 28, 2003.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
Reference: Actuarial Standards of Practice, American Academy of Actuaries. Copies may be obtained free of charge on the website: http://www.actuarialstandardsboard.org/asops.htm.
20:06:38:02. Applicability and scope. This chapter applies to all group and individual life policies and certificates sold on or after the effective date of this chapter except the following:
(1) Variable life insurance;
(2) Individual and group annuity contracts;
(3) Credit life insurance; and
(4) Life insurance policies with no illustrated death benefits on any individual exceeding $10,000.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:03. Policies to be illustrated. Each insurer marketing policies to which this chapter is applicable shall notify the director whether a policy form is to be marketed with or without an illustration. For all policy forms being actively marketed on the effective date of this chapter, the insurer shall identify in writing those forms and whether or not an illustration will be used with them. For policy forms filed after the effective date of this chapter, the identification shall be made at the time of filing. Any previous identification may be changed by notice to the director.
If the insurer identifies a policy form as one to be marketed without an illustration, any use of an illustration for any policy using that form prior to the first policy anniversary is prohibited.
If a policy form is identified by the insurer as one to be marketed with an illustration, a basic illustration prepared and delivered in accordance with this chapter is required. However, a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.
Potential enrollees of nonterm group life subject to this chapter must be furnished a quotation with the enrollment materials. The quotation shall show potential policy values for sample ages and policy years on a guaranteed and nonguaranteed basis applicable to the group and the coverage. This quotation is not considered an illustration for purposes of this chapter, but all information provided must be consistent with the illustrated scale. A basic illustration must be provided at delivery of the certificate to enrollees for nonterm group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer must make a basic illustration available to any non-term group life enrollee who requests it.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:04. Information required in illustration. An illustration used in the sale of a life insurance policy must satisfy the applicable requirements of this chapter, be clearly labeled “life insurance illustration,” and contain the following basic information:
(1) The name of the insurer;
(2) The name and business address of the agent or the insurer’s authorized representative, if any;
(3) The name, age, and sex of the proposed insured, unless a composite illustration is permitted under this chapter;
(4) The underwriting or rating classification on which the illustration is based;
(5) The generic name of the policy, the company product name, if different, and the form number;
(6) The initial death benefit; and
(7) The dividend option election or application of nonguaranteed elements, if applicable.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:05. Prohibited practices. When using an illustration in the sale of a life insurance policy, an insurer or its agents or other authorized representatives may not do any of the following:
(1) Represent the policy as anything other than a life insurance policy;
(2) Use or describe nonguaranteed elements in a manner that is misleading or has the capacity or tendency to mislead;
(3) State or imply that the payment or amount of nonguaranteed elements is guaranteed;
(4) Use an illustration that does not comply with the requirements of this chapter;
(5) Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated;
(6) Provide an applicant with an incomplete illustration;
(7) Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact;
(8) Use the term “vanish” or “vanishing premium,” or a similar term that implies the policy becomes paid up, to describe a plan for using nonguaranteed elements to pay a portion of future premiums;
(9) Except for policies that can never develop nonforfeiture values, use an illustration that is lapse-supported; or
(10) Use an illustration that is not self-supporting.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
20:06:38:06. Interest rate illustrations. If an interest rate used to determine the illustrated non-guaranteed elements is shown, it may not be greater than the earned interest rate underlying the disciplined current scale.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:07. Standards for basic illustrations -- Format. A basic illustration must conform with the following requirements:
(1) The illustration must be labeled with the date on which it was prepared;
(2) Each page, including any explanatory notes or pages, must be numbered and show its relationship to the total number of pages in the illustration (e.g., the fourth page of a seven-page illustration must be labeled, "page 4 of 7 pages");
(3) The assumed dates of payment receipt and benefit payout within a policy year must be clearly identified;
(4) If the age of the proposed insured is shown as a component of the tabular detail, it must be the issue age plus the numbers of years the policy is assumed to have been in force;
(5) The assumed payments on which the illustrated benefits and values are based must be identified as premium outlay or contract premium, as applicable. For policies that do not require a specific contract premium, the illustrated payments must be identified as premium outlay;
(6) Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium must be shown and clearly labeled guaranteed;
(7) If the illustration shows any nonguaranteed elements, they may not be based on a scale more favorable to the policy owner than the insurer’s illustrated scale at any duration. These elements must be clearly labeled nonguaranteed;
(8) The guaranteed elements, if any, must be shown before corresponding non-guaranteed elements and must be specifically referred to on any page of an illustration that shows or describes only the non-guaranteed elements (e.g., "see page one for guaranteed elements");
(9) The account or accumulation value of a policy, if shown, must be identified by the name this value is given in the policy being illustrated and shown in close proximity to the corresponding value available upon surrender;
(10) The value available upon surrender must be identified by the name this value is given in the policy being illustrated and must be the amount available to the policy owner in a lump sum after deduction of surrender charges, policy loans, and policy loan interest, as applicable;
(11) Illustrations may show policy benefits and values in graphic or chart form in addition to the tabular form;
(12) Any illustration of nonguaranteed elements must be accompanied by a statement indicating the following:
(a) The benefits and values are not guaranteed;
(b) The assumptions on which they are based are subject to change by the insurer; and
(c) Actual results may be more or less favorable;
(13) If the illustration shows that the premium payer has the option to allow policy charges to be paid using nonguaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays. Similar disclosure must be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the premium outlay display may not be left blank or show zero unless it is accompanied by an asterisk or similar mark to draw attention to the fact that the policy is not paid up;
(14) If the applicant plans to use dividends or policy values, guaranteed or nonguaranteed, to pay all or a portion of the contract premium or policy charges, or for any other purpose, the illustration may reflect those plans and the impact on future policy benefits and values.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:08. Standards for basic illustrations -- Narrative summary. A basic illustration must include the following in the narrative summary:
(1) A brief description of the policy being illustrated, including a statement that it is a life insurance policy;
(2) A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration must show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of § 7702 of the Internal Revenue Code as in effect on June 1, 1997;
(3) A brief description of any policy features, riders, or options, guaranteed or nonguaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy;
(4) Identification and a brief definition of column headings and key terms used in the illustration; and
(5) A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown."
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:09. Standards for basic illustrations -- Numeric summary. Following the narrative summary, a basic illustration must include a numeric summary of the death benefits and values and the premium outlay and contract premium, as applicable. For a policy that provides for a contract premium, the guaranteed death benefits and values must be based on the contract premium. This summary must be shown for at least policy years 5, 10 and 20 and at age 70, if applicable, on the three bases listed in this section. For multiple life policies the summary must show policy years 5, 10, 20 and 30. The three bases are as follows:
(1) Policy guarantees;
(2) Insurer’s illustrated scale;
(3) Insurer’s illustrated scale used but with the nonguaranteed elements reduced as follows:
(a) Dividends at 50 percent of the dividends contained in the illustrated scale used;
(b) Nonguaranteed credited interest at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used; and
(c) All nonguaranteed charges, including charges for term insurance, mortality, and expenses, at rates that are the average of the guaranteed rates and the rates contained in the illustrated scale used.
In addition, if coverage would cease prior to policy maturity or age 100, the year in which coverage ceases must be identified for each of the three bases.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:10. Standards for basic illustrations -- Statements. Statements substantially similar to the following must be included on the same page as the numeric summary and signed by the applicant, or the policy owner in the case of an illustration provided at time of delivery, as required in this chapter:
(1) A statement to be signed and dated by the applicant or policy owner reading as follows: "I have received a copy of this illustration and understand that any nonguaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed."; and
(2) A statement to be signed and dated by the insurance agent or other authorized representative of the insurer reading as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any nonguaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:11. Standards for basic illustrations -- Tabular detail. A basic illustration must include the following tabular detail for at least each policy year from one to ten and for every fifth policy year thereafter ending at age 100, policy maturity, or final expiration and, except for term insurance beyond the twentieth year, for any year in which the premium outlay and contract premium, if applicable, is to change:
(1) The premium outlay and mode the applicant plans to pay and the contract premium, as applicable;
(2) The corresponding guaranteed death benefit, as provided in the policy; and
(3) The corresponding guaranteed value available upon surrender, as provided in the policy.
For a policy that provides for a contract premium, the guaranteed death benefit and value available upon surrender must correspond to the contract premium. Nonguaranteed elements may be shown if described in the contract. In the case of an illustration for a policy on which the insurer intends to credit terminal dividends, they may be shown if the insurer’s current practice is to pay terminal dividends. If any nonguaranteed elements are shown, they must be shown at the same durations as the corresponding guaranteed elements, if any. If no guaranteed benefit or value is available at any duration for which a nonguaranteed benefit or value is shown, a zero must be displayed in the guaranteed column.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:12. Standards for supplemental illustrations. The supplemental illustration must include a notice referring to the basic illustration for guaranteed elements and other important information. A supplemental illustration may be provided as long as:
(1) It is appended to, accompanied by, or preceded by a basic illustration that complies with this chapter;
(2) The nonguaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration;
(3) It contains the same statement required of a basic illustration that nonguaranteed elements are not guaranteed; and
(4) For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration. For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration must be equal to the premium outlay shown in the basic illustration.
The supplemental illustration may be presented in a format differing from the basic illustration, but may only depict a scale of nonguaranteed elements that is permitted in a basic illustration.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:13. Basic illustration -- Use in sale of policy. If a basic illustration is used by an insurance agent or other authorized representative of the insurer in the sale of a life insurance policy and the policy is applied for as illustrated, a copy of that illustration, signed in accordance with this chapter, must be submitted to the insurer at the time of policy application. A printed copy also must be delivered to the applicant no later than at the time the application is submitted to the insurer.
However, if the illustration is displayed on a computer screen, the insurance agent or other representative of the insurer may provide the applicant with an acknowledgment in lieu of the illustration. The acknowledgment must meet the following requirements:
(1) The acknowledgment must be signed by the applicant and the agent;
(2) One copy of the signed acknowledgment must be left with the applicant, and one copy must be submitted with the application. However, if the acknowledgement is presented electronically, the replacing insurer shall mail the applicant a copy of the acknowledgement within five business days after the application is submitted to the replacing insurer;
(3) The personal and policy information on which the computer screen illustration was based must be itemized in accordance with § 20:06:38:04;
(4) The acknowledgment must list the guaranteed and nonguaranteed interest rates illustrated;
(5) The acknowledgment must include the generic name of any rider illustrated, the company product name, if different, and the form number;
(6) The acknowledgment must contain a certification by the agent that the illustration used conforms to the information in the acknowledgment; and
(7) The acknowledgment must state that an illustration conforming to the policy as issued will be prepared and personally delivered by the agent on or before delivery of the policy.
A sample acknowledgment is contained in Appendix B at the end of this chapter. If an acknowledgment is used, an illustration conforming to the policy as issued must be sent with the policy.
If the policy is issued other than as applied for, a revised basic illustration conforming to the policy as issued must be sent with the policy. The revised illustration must conform to the requirements of this chapter, must be labeled "Revised Illustration" and must be signed and dated by the applicant or policy owner and agent or another authorized representative of the insurer no later than the time the policy is delivered. A printed copy must be delivered to the insurer and the policy owner.
Source: 23 SDR 228, effective July 1, 1997; 24 SDR 33, effective September 22, 1997; 31 SDR 214, effective July 6, 2005.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:14. Basic illustration -- Not used in sale of policy. If no illustration is used by an insurance agent or other authorized representative in the sale of a life insurance policy or if the policy is applied for other than as illustrated, the agent or representative must certify to that effect in writing on a form provided by the insurer. On the same form, the applicant must acknowledge that no illustration conforming to the policy applied for was delivered and must further acknowledge an understanding that an illustration conforming to the policy as issued will be delivered no later than at the time of policy delivery. This form must be submitted to the insurer at the time of policy application.
If the policy is issued, a basic illustration conforming to the policy as issued shall be sent with the policy and signed no later than the time the policy is delivered. A copy must be delivered to the insurer and the policy owner.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:15. Basic illustration -- Delivery by mail. If the basic illustration or revised illustration is sent to the applicant or policy owner by mail from the insurer, it must include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration for the policy issued and return the signed copy to the insurer. The insurer’s obligation under this section is satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort is satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:16. Basic illustration -- Retention by insurer. A copy of the basic illustration and a revised basic illustration, if any, signed as applicable, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, must be retained by the insurer until three years after the policy is no longer in force. A copy need not be retained if no policy is issued.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:17. Annual report -- Requirement. If a policy is designated as one for which illustrations will be used, the insurer must provide each policy owner with an annual report on the status of the policy.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:18. Annual report -- Content for universal life policies. The annual report for universal life policies must include the following:
(1) The beginning and end date of the current report period;
(2) The policy value at the end of the previous report period and at the end of the current report period;
(3) The total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense, and riders);
(4) The current death benefit at the end of the current report period on each life covered by the policy;
(5) The net cash surrender value of the policy as of the end of the current report period;
(6) The amount of outstanding loans, if any, as of the end of the current report period; and
(7) For fixed premium policies, assuming guaranteed interest, mortality, and expense loads and continued scheduled premium payments, the policy’s net cash surrender value is such that it would not maintain insurance in force until the end of the next reporting period, a notice to this effect must be included in the report; or
(8) For flexible premium policies, assuming guaranteed interest, mortality, and expense loads, the policy’s net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect must be included in the report.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:19. Annual report -- Content for all other policies. The annual report for policies other than universal life must include the following:
(1) The current death benefit;
(2) The annual contract premium;
(3) The current cash surrender value;
(4) The current dividend;
(5) The application of current dividend; and
(6) The amount of outstanding loan.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:20. Annual report -- Policies without nonforfeiture values. Insurers writing life insurance policies that do not build nonforfeiture values must provide an annual report on these policies only for those years when a change has been made to nonguaranteed policy elements by the insurer.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:21. Annual report -- Notice if in-force illustration not included. If the annual report does not include an in-force illustration, it must contain the following notice displayed prominently: "IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer’s phone number], writing to [insurer’s name] at [insurer’s address], or contacting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department." The insurer may vary the sequential order of the methods for obtaining an in-force illustration.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:22. Annual report -- Notice of change in nonguaranteed elements. If an adverse change in nonguaranteed elements that could affect the policy has been made by the insurer since the last annual report, the annual report must contain a notice of that fact and the nature of the change prominently displayed.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:23. In-force illustration -- Furnished at policy owner’s request. Upon the request of the policy owner, the insurer must furnish an in-force illustration of current and future benefits and values based on the insurer’s present illustrated scale. This illustration must comply with the requirements of §§ 20:06:38:04, 20:06:38:05, 20:06:38:07, and 20:06:38:11. No signature or other acknowledgment of receipt of this illustration may be required.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:24. Annual certification -- Disciplined current scale and illustrated scales. The board of directors of each insurer shall appoint one or more illustration actuaries to certify the following:
(1) The disciplined current scale used in illustrations is in conformity with standards contained in the Actuarial Standard of Practice No. 24 - Compliance with the NAIC Life Insurance Illustrations Model Regulation, effective March 31, 1996, to the extent that those standards are consistent with provisions of this chapter; and
(2) The illustrated scales used in insurer-authorized illustrations meet the requirements of this chapter.
Source: 23 SDR 228, effective July 1, 1997; 26 SDR 26, effective September 1, 1999; 27 SDR 54, effective December 4, 2000; 30 SDR 39, effective September 28, 2003.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
Reference: Actuarial Standards of Practice, American Academy of Actuaries. Copies may be obtained free of charge on the website: http://www.actuarialstandardsboard.org/asops.htm.
20:06:38:25. Illustration actuary requirements. The illustration actuary must meet the following requirements:
(1) Be a member in good standing of the American Academy of Actuaries;
(2) Be familiar with the standard of practice regarding life insurance policy illustrations;
(3) Not have been found by the director, following notice and hearing, to have done any of the following:
(a) Violated any provision of, or any obligation imposed by, SDCL Title 58 or other law in the course of dealings as an illustration actuary;
(b) Been found guilty of fraudulent or dishonest practices;
(c) Demonstrated incompetence, lack of cooperation, or untrustworthiness to act as an illustration actuary; or
(d) Resigned or been removed as an illustration actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of a failure to adhere to generally acceptable actuarial standards;
(4) Not fail to notify the director of any action taken by a commissioner of another state for an action similar to that under subdivision (3) of this section.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
Cross-Reference: Definitions, § 20:06:37:01.
20:06:38:26. Change of illustration actuary. If an insurer changes the illustration actuary responsible for all or a portion of the company’s policy forms, the insurer must notify the director of that fact promptly and disclose the reason for the change.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:27. Annual certification -- Currently payable scale. The illustration actuary must disclose in the annual certification whether, since the last certification, a currently payable scale applicable for business issued within the previous five years and within the scope of the certification has been reduced for reasons other than changes in the experience factors underlying the disciplined current scale. If nonguaranteed elements illustrated for new policies are not consistent with those illustrated for similar in-force policies, this must be disclosed in the annual certification. If nonguaranteed elements illustrated for both new and in-force policies are not consistent with the nonguaranteed elements actually being paid, charged, or credited to the same or similar forms, this must be disclosed in the annual certification.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:28. Annual certification -- Expenses. The illustration actuary must disclose in the annual certification the method used to allocate overhead expenses for all illustrations and the method of determining assumed expenses for all policy forms.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:29. Annual certification -- Additional certifications. The illustration actuary must file a certification with the board and with the director annually for all policy forms for which illustrations are used and before a new policy form is illustrated.
If an error in a previous certification is discovered, the illustration actuary must notify the board of directors of the insurer and the director promptly.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:30. Annual certification -- Inability to certify scale. If an illustration actuary is unable to certify the scale for any policy form illustration the insurer intends to use, the actuary must notify the board of directors of the insurer and the director promptly of the inability to certify.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:31. Annual certification -- Officer of the insurer. A responsible officer of the insurer, other than the illustration actuary, must certify annually that the illustration formats meet the requirements of this chapter and that the scales used in insurer-authorized illustrations are those scales certified by the illustration actuary and that the company has provided its agents with information about the expense allocation method used by the company in its illustrations and disclosed as required in § 20:06:38:28.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:32. Annual certification -- Date due. The annual certification must be provided to the director each year by a date determined by the insurer.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:33. Disciplined current scale. The disciplined current scale is a scale of nonguaranteed elements constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience. The disciplined current scale must meet the following requirements:
(1) Be in conformity with actuarially accepted standards;
(2) Reflect only actions that have already been taken or events that have already occurred;
(3) Not permit a disciplined current scale to include any projected trends of improvements in experience or any assumed improvements in experience beyond the illustration date; and
(4) Not permit assumed expenses to be less than minimum assumed expenses.
Source: 23 SDR 228, effective July 1, 1997; 26 SDR 26, effective September 1, 1999; 27 SDR 54, effective December 4, 2000; 30 SDR 39, effective September 28, 2003; 33 SDR 59, effective October 5, 2006.
General
Authority: SDCL 58-33-5.1.
Law
Implemented: SDCL 58-33-5.1.
20:06:38:34. Expenses. Each year, the insurer shall choose the method used to allocate overhead expenses for all illustrations and the method of determining assumed expenses for all policy forms from the following:
(1) Fully allocated expenses;
(2) Marginal expenses;
(3) The generally recognized expense table in Appendix A at the end of this chapter; or
(4) Another generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies and approved by the director pursuant to § 20:06:38:35.
For the purpose of determining assumed expenses, marginal expenses may be used only if greater than a generally recognized expense table. If no generally recognized expense table is approved, fully allocated expenses must be used.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
20:06:38:35. Generally recognized expense table -- Approval. The director may approve any generally recognized expense table based on fully allocated expenses representing a significant portion of insurance companies if the expense table has been approved by the National Association of Insurance Commissioners and the director determines that the expense table provides adequate protection for the insurance buying public of this state.
Source: 23 SDR 228, effective July 1, 1997.
General Authority: SDCL 58-33-5.1.
Law Implemented: SDCL 58-33-5.1.
