Nonguaranteed Premium (Policy)

  • 3. What considerations (including state requirements) are involved in setting the premium rates?
    • a. At issue-maximum and illustrated premiums.

1980 - SOA - Nonparticipating Life Products with Nonguaranteed Premiums (rsa80v6n22), Society of Actuaries - 18p

  • Nonguaranteed Premium Policies
    • Cash values and death benefits under these policies are guaranteed, but their premiums are not.
    • These policies contain a guaranteed "maximum premium", but the company anticipates charging a lower premium.
    • The company will illustrate the cost based on the premium it currently expects to charge.
    • Your actual cost will be lower or higher than this, depending on the premiums you are actually charged.  (p151)

1981 - Academy Journal - Statement 1981-12 - Exhibit C - Possible Changes In Some Sections Of The Life Insurance Buyer's Guide  

  • In viewing old Transactions, it appears that the concept was first used by Occidental in the early 1960's.
  • A non-guaranteed premium policy was also introduced in 1972 by Crown Life.
    • However, this type of policy did not receive a great deal of attention until 1979, when Aetna Life introduced their Aeconomaster policy.
  • Because of an extensive filing effort, Aetna was successful in obtaining approval in almost every state for this policy form. Within the past year, a large number of stock life insurance companies have developed similar products.
  • The products introduced by Crown and Aetna were whole life plans.
  • More recently, companies have been utilizing the concept for all forms of nonpar insurance, both permanent and term. New ratebooks have been developed with all or most of the products being non-guaranteed premium plans.
  • Concept
    • The non-guaranteed premium concept is not complicated. Non-guaranteed premium life insurance products are very similar to traditional nonparticipating plans.
    • The major difference involves the ability of a life insurance company to change premium rates in the future.

--  Richard A. Swift

1980 - SOA - Nonparticipating Life Products with Nonguaranteed Premiums (rsa80v6n22), Society of Actuaries - 18p

  • Non-guaranteed Premium
    • On the other hand, at Transamerica Life Insurance and Annuity Company, our pension affiliate, the current premiums are priced using a level interest assumption, rather than the more normal assumptions that interest rates will decline.   [Bonk: grading]
    • For most of the products on the market, the current premiums are guaranteed not to be raised for a period of any where from one to six years from issue.
    • During this period when the current premiums are guaranteed, deficiency reserves would have to be set up based on the current premiums. 

--  Denise F. Roeder, Occidental, Transamerica

1980 - SOA - Nonparticipating Life Products with Nonguaranteed Premiums (rsa80v6n22), Society of Actuaries - 18p