Expense Allowance

Initial Expense Allowance

1977-1, NAIC Proceedings

    Linkage of Nonforfeiture Values With Valuation Reserves -
    Prepared By The Society of Actuaries Special Committee on
    Nonforfeiture Values
  • 6. Recommendation. Base excess initial expense allowances on levelized net premiums rather than first year adjusted premium. Reason. To produce identical excess initial expense allowances for policies with identical benefits and identical premium paying periods. Arguments and Positions. NAIC recognizes the need for special treatment of unusual products both good and bad. NAIC feels further testing of such products is needed with provision for approval or disapproval under some other section of the law such as the Fair Trade Act and disclosure legislation. Change Law Section. Section S-c.
  • 8. Recommendation. Basic excess initial expense allowance on the automatic track for multi-track policies. Allow for
    additional initial expense allowance on increase in premium at point of increase. Reason. It would be unfair to force all
    companies into lowest possible expense posture to control a limited number of abuses. At time of premium increase there
    are additional sales and underwriting expenses. Arguments and Positions. NAIC will test examples of multi-track policies
    using conclusions 5 and 6. Change Law Section. Section 5-c.
  • 9A. Recommendation. Base excess initial expense allowance for life-cycle and open policies on similar approach to that
    used for multi-track policies with additional allowances on increases. Reason. See 8 above. Arguments and
    Positions. NAIC notes that individual policy pension trust and key man insurance are-otQ.er kinds of policies to be
    considered in the open category. Change Law Section. Section 5-c.

1977-1 (p660) - ATTACHMENT 4 - Statement by Industry Advisory
Committee on Art. VI, Sec. 21 - August 6, 1973 <7?>

  • At age 25, for example, on the whole life plan the initial
    expense allowance provided under the Standard Nonforfeiture Law is $28 per $1,000 of coverage.