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  #1  
Old 10-26-2017, 02:58 PM
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Default cash value rate table

This might be a stupid question but I thought cash surrender values were determined simply by whatever the accumulated fund value was in the policy as calculated by the administration system at the time of surrender, less any applicable surrender charge.

Fund value would be calculated as (premium - expenses - coi) and accumulated with interest. The cash value calculation seems straight-forward enough to not need a table of cash value rates.

Why would an actual cash value rate table be needed for a life insurance product as opposed to just programming the fund components into a system that will do the fund calculation for you automatically? Is it from the pre-computer era?
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Old 10-26-2017, 03:09 PM
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This might be a stupid question but I thought cash surrender values were determined simply by whatever the accumulated fund value was in the policy as calculated by the administration system at the time of surrender, less any applicable surrender charge.

Fund value would be calculated as (premium - expenses - coi) and accumulated with interest. The cash value calculation seems straight-forward enough to not need a table of cash value rates.

Why would an actual cash value rate table be needed for a life insurance product as opposed to just programming the fund components into a system that will do the fund calculation for you automatically? Is it from the pre-computer era?
The mechanism you've described where AV = (premium - expenses - coi) accumulated with interest, and cash value is AV less surrender charges, applies to UL-type policies.

Whole life type policies don't work this way. The cash value growth pattern is locked in at issue. Premiums aren't flexible - either you pay the premium and your cash value grows according to the table, or you don't pay the premium and your policy lapses (this is a bit of a simplification but is generally how it works).

These products don't have a surrender charge schedule or other explicit charges... all the charges are baked into the cash value table.

Yes this is a bit of a throwback to the pre-computer era where products were priced using commutation functions and so it was necessary to have fixed cash flows for the commutation functions to work.
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Old 10-26-2017, 05:20 PM
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In theory, you could calculate non-UL life cash values "somewhat" like UL policies (with modifications for rounding, per unit calcs, implied "unusual" expense factors, and annual vs monthly calcs/interpolation not related to the exact timing of when premiums are paid, etc), but it actually would not be very efficient to do so administratively based on the way these cash values are contractually defined (creating many redundant calculations on a large inforce block of business).
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Old 10-26-2017, 08:14 PM
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Commutation functions??? CSV tables??? Now I feel oooooooooold!!!!
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Old 10-26-2017, 08:27 PM
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Commutation functions??? CSV tables??? Now I feel oooooooooold!!!!
I'm under 40, but having worked for insurance companies that have been around for a century plus, you get exposed to some pretty ancient stuff.

As recently as the late 2000s, I worked with Job Control Language in which statements start with /, a throwback to when punch cards were used in programming.

A few times when I needed access to the system as of a prior date, they had to physically restore it FROM TAPE.
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Old 10-26-2017, 08:49 PM
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Life insurance policies can stay in effect for a very long time. Companies are forced to keep a lot of obsolete methodology in place - it's the nature of the business.
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Old 10-26-2017, 09:46 PM
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I'm under 40, but having worked for insurance companies that have been around for a century plus, you get exposed to some pretty ancient stuff.

As recently as the late 2000s, I worked with Job Control Language in which statements start with /, a throwback to when punch cards were used in programming.

A few times when I needed access to the system as of a prior date, they had to physically restore it FROM TAPE.




I remember having to teach myself some COBOL!!!
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Old 10-27-2017, 08:56 AM
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Thank you everyone for your comments and explanations. They've all been incredibly helpful to me in understanding more about the tables.

Many times when I ask the AO a question I get so many helpful responses. So glad to have the members of the AO around
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Old 10-27-2017, 11:23 PM
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There's also the tabular cash values to consider. If your guarantees are always in excess of what is required in the Standard Nonforfeiture Law, then it's not a concern, but I would imagine you have to demonstrate that by going through the process and determining the tabular cash values, based on the SNFL.
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