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Old 11-09-2001, 01:41 PM
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1. For those of you who issue term products in NY and calculate reserves using selection factors, how do you feel about NOT using selection factors when testing using NY's cash value reg to get a few higher issue ages (without positive cash values)? In other words I see no restrictions in the cash value reg on not using selection factors (even though I do use them on reserves) but I want to know if this is common practice in the industry.
2. Can anyone explain why I am seeing other companies limit the issue ages for term products in NJ or OR?
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Old 11-09-2001, 03:17 PM
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Using different mortality for cash values and reserves is not common, but there are generally no laws against it. In Florida, where unisex tables are not permitted for reserves, but are allowed for Norris-case CVs, the sex-distinct tables are often used for reserves with unisex-CV products.
I've even seen a rare product with ALB for cash values (consumer-friendly?) and ANB for reserves.
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Old 11-09-2001, 03:44 PM
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Using different mortality for CVs and reserves may not be common for plans that actually have cash values, but I think it is very common for term plans. I think the general rule would be to use whatever basis you need to (as long as it is consistent across all testing for that plan) in order to maximize your issue ages, durations, etc.

I didn't notice any problems in NJ with our recent filings. In Oregon, they actually want certification that you are following Actuarial Guideline XXII "Interpretations Regarding Nonforfeiture Values for Policies with Indeterminate Premiums". The long and short of it is that you need to test cash values using both current and guaranteed premiums. So a 30 year term plan with a 15-year guarantee period needs to pass cash value tests as though it had 30 years of level premium. I think a number of PD actuaries don't realize that Actuarial Guideline is in place. You should, of course, follow the Guidelines in ALL states, but I know Oregon wanted a certification that we had actually tested it under both scenarios.
Washington (state, not district) also has issue age limitations. They have a reg which forces you to test CV's both with and without any one-year-term tail on the policy. for instance, if you're 20 year term plan offers 20 years of level premium (current or guaranteed, doesn't matter) followed by annually increasing rates to age 85, WA requires you to test it as a pure 20-year-and-done plan as well as with the term-to-age-85 rates. That makes it much more difficult to pass the CV tests.
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