ASOP 2
(NONGUARANTEED ELEMENTS FOR LIFE INSURANCE AND ANNUITY PRODUCTS)
SECTION 2
(DEFINITIONS)

Section 2
Definitions

ASOP 2 | §2.0 | INTRO TO SECTION 2

The terms below are defined for use in this actuarial standard of practice and appear in bold throughout the ASOP.

ASOP 2 | §2.1 | ANTICIPATED EXPERIENCE FACTOR

An assumption of future experience used in the determination of NGEs. Examples of anticipated experience factors include rates of investment income, mortality, morbidity, policy persistency, and expense.

ASOP 2 | §2.2 | DETERMINATION POLICY

The insurer’s principles or objectives for determining NGEs. For example, the determination policy could include the insurer’s governing principles and requirements, profitability objectives, capital objectives, guidelines for drafting policy provisions related to NGEs, principles for addressing illustration requirements, and requirements for and frequency of reviews of NGEs on in-force products.

ASOP 2 | §2.3 | GUARANTEED ELEMENT

A premium, value, charge, or benefit that limits an NGE. Guaranteed elements are specified in the policy. Examples of guaranteed elements include maximum premium charges, maximum expense charges, minimum credited interest rates, maximum cost of insurance charges, maximum gross premiums, minimum index parameters, maximum mortality and expense (M&E) risk charges, and maximum policy loan interest rates.

ASOP 2 | §2.4 | NONGUARANTEED ELEMENT (NGE)

Any premium, charge, or benefit within an insurance policy that 1) affects policy costs or values, 2) is not guaranteed in the policy, and 3) can be changed at the discretion of the insurer. An NGE may provide a more favorable value to the policyholder than a guaranteed element. For the purpose of this ASOP, an NGE reflects expectations of future experience as opposed to, for example, a dividend, which reflects participation in past experience. Examples of premiums, charges, or benefits that can be changed at the discretion of the insurer may include credited interest, cost of insurance (COI) charges, bonuses, indeterminate premiums, index parameters used to determine credited interest, and expense charges.

ASOP 2 | §2.5 | NGE FRAMEWORK

The determination policy, methodology for establishing policy classes, and any additional practices, methods, and criteria used by the insurer to determine NGE scales that might not be part of the determination policy or methodology for establishing policy classes.

ASOP 2 | §2.6 | NGE SCALE

For each NGE, a series of one or more rates or values as determined by the insurer at a point in time. The elements of an NGE scale may vary by one or more parameters or may not vary by any parameter. Examples include the following:

a. COI rates that could vary based on issue age, underwriting class, and duration;

b. an expense load that could vary by duration and be applicable over a limited number of policy years; and

c. an interest rate that does not vary by any parameter.

ASOP 2 | §2.7 | POLICY

An individual life insurance policy, an individual annuity contract, or a group certificate that has NGEs that operate in substantially the same manner as NGEs in an individual life insurance policy or an individual annuity contract. A policy includes any attached rider or endorsement.

ASOP 2 | §2.8 | POLICY CLASS

Policies that are grouped together for the purposes of determining an NGE.

ASOP 2 | §2.9 | PROFITABILITY METRIC

A measurement used to assess a product’s projected level of financial results.