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May 2017  Volume 10, Number 5        
 

This Just In ...

New State Regs Could Lower New Life Insurance Policy Premiums

Insurance premiums for term and universal life policies may drop as insurers switch to a new system to help them determine how much money they should keep in reserve.

The new system is called principle-based reserving (PBR). It’s a formula that uses simulation models to estimate how much reserve an insurance company needs to pay claims.

Fifty years ago, most life insurance products were similar. It wasn’t difficult to use the standard formula required by state regulators to determine how much money an insurance company should collect and hold in reserve. Now the industry offers many variations, such as whole and universal policies, and a less rigid system was needed.

Various insurers approached the National Association of Insurance Commissioners and requested a new formula to allow for variations. After a decade of development a new formula was implemented on Jan. 1, 2017. Insurers have three years to transition to the new system in the 46 states where it was adopted.

Only premiums for new policies are expected to be affected. In particular, insurers could drop premiums for term life if they are able to reduce their reserves from 38 to 64 percent.

 

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In this issue:

This Just In...

What Republican Changes to the Affordable Care Act Mean to You

How Long-Term Care Insurance Can Help You Avoid a Nursing Home Stay

How Likely Is Prescription Drug Price Reform?

How to Make Dental Coverage More Accessible to Older Americans

 


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