WSR 14-18-067
[Insurance Commissioner Matter No. R 2013-26Filed August 29, 2014, 4:27 p.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 13-22-065.
Title of Rule and Other Identifying Information: Amendment of WAC 284-23-550.
Hearing Location(s): Insurance Commissioner's Office, TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on October 9, 2014, at 10:00 a.m.
Date of Intended Adoption: October 10, 2014.
Submit Written Comments to: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, e-mail, fax (360) 586-3109, by October 8, 2014.
Assistance for Persons with Disabilities: Contact Lori [Lorie] Villaflores by October 8, 2014, TTY (360) 586-0241 or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rule will amend WAC 284-23-550 to provide for variable interest rate to be paid by the insurer based upon current interest rates, rather then [than] a set rate. The proposed rule will also amend WAC 284-23-550 to provide that the rule does not apply to policies with a death benefit of more than $5,000 rather than $25,000.
Reasons Supporting Proposal: Since this rule was originally adopted the interest rates that consumers could obtain on investments, e.g. savings accounts, has varied widely. Therefore, a change to the rule permitting a variable interest rate to be paid will be more in line with the market rate that consumers could earn if they were to invest the premiums in a different type of investment.
Statutory Authority for Adoption: RCW 48.02.060 and 48.30.010.
Statute Being Implemented: RCW 48.30.010.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7036; Implementation: Molly Nollette, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: AnnaLisa Gellermann, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.
No small business economic impact statement has been prepared under chapter 19.85 RCW. This proposed rule does not require a small business economic impact statement under the provisions of RCW 19.85.025(3). The proposed rule does not impose any costs on a business. It allows life insurers to offer more products than are currently allowed.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7036, fax (360) 586-3109, e-mail
August 29, 2014
Mike Kreidler
Insurance Commissioner
AMENDATORY SECTION (Amending WSR 89-21-004, filed 10/5/89, effective 11/5/89)
WAC 284-23-550 Relationship of death benefits to premiumsUnfair practice defined.
(1) It is an unfair practice for any insurer or fraternal benefit society to provide life insurance coverage on any person through a policy or certificate of coverage delivered on or after July 1, 1989, to or on behalf of such person in this state, unless the benefit payable at death under such policy or certificate will equal or exceed the cumulative premiums, as defined in subsection (4) of this section, paid for the policy or certificate, plus interest thereon at the rate of ((five percent per annum)) the monthly average of the five-year Constant Maturity Treasury rate reported by the Federal Reserve for the calendar month in which application for the policy is made compounded annually to the tenth anniversary of the effective date of coverage.
(2) This section applies to death benefits in relation to premiums, subject to the following provisions:
(a) When determining the relationship between benefits and premiums as set forth in subsection (1) of this section, neither premiums nor death benefits shall be adjusted for maturity benefits, surrender benefits, or policy loans.
(b) Annuity benefits, including annuity death benefits, and the premiums therefor shall be disregarded in applying this section.
(c) The following benefits, but not the premiums therefor, shall be disregarded in applying this section:
(i) Accidental death benefits;
(ii) Permanent disability benefits; and
(iii) Any benefit similar to (c)(i) or (ii) of this subsection.
(3) For coverage which varies by duration, including coverage provided through dividends, the "benefit payable at death" for purposes of this section is the sum of the least death benefit during each policy year, for the lesser of ten years or the term of the coverage, including renewals, divided by the number of death benefits included in said sum.
(4) "Cumulative premiums," for purposes of this section, means all sums paid as consideration, net of dividends paid in cash in an orderly progression, for the coverage during the first ten years of the coverage, excluding amounts which are designated in the policy or certificate as providing for annuity benefits.
(5) The benefits required by this section shall be provided contractually.
(6) This section does not apply to:
(a) Life insurance where the minimum death benefit is ((twenty-five)) five thousand dollars or more; or
(b) Coverage under group life insurance policies unless the insured pays all or substantially all of the premium and coverage under individual conversions from such excluded policies; or
(c) Limited payment whole life insurance where the premiums are level at all times, if the least death benefit payable at any time equals or exceeds the total of all premiums which, in the absence of death, would have been paid over the entire limited payment period.
(7) This section does not apply with respect to optional additional contributions paid to the insurer or fraternal benefit society under the terms of a universal life policy, which policy:
(a) Provides a guaranteed plan of insurance of at least ten years' duration on the basis of specified premiums and complies with subsections (1) through (5) of this section; and
(b) Contains a carefully expressed provision which clearly, fairly, and fully discloses the optional plan and the choice to participate therein; and
(c) Is designed so that the charges for, and the benefits to be derived from, the optional contributions are no less favorable to the insured than those which are applicable to the guaranteed plan required by (a) of this subsection.
(8) Approval of policy forms which do not comply with this section is withdrawn.