• I’ll talk about the complications.
  • The typical policy that runs into this issue is a policy with a 3% interest guarantee where the guideline level premium requires a 4% interest guarantee.
  • Therefore, under the policy guarantees, and by paying the guideline level premium year by year, the policy will expire at age 68 without value. --- It’ll be term to 68.
  • Your guideline level premium is less than the premium that would be theoretically required to mature the policy at age 100 or 95.
  • Therein lies the problem.
  • If you were to use that interpretation, it makes the reserving calculation extremely complex.
• Let me give an example. I’m going to contradict what I just said in this example.
  • The policy doesn’t really expire at age 68 because there’s a provision in 7702 that enables you to pay YRT premiums if the policy would otherwise lapse.
    

  --  Edward L. Robbins

1999 - SOA - 1999 Valuation Actuary Symposium - Session 44, Society of Actuaries - 28p