Principle Based Reserving (PBR) and 2017 Commissioner Standard Ordinary (CSO) Compliant Product Deadlines are quickly approaching!The PBR and 2017 CSO mortality tables phase-in and transition period ends on December 31, 2019. Beginning January 1, 2020, any new life insurance policy that is issued MUST use the new mortality table and the new way of calculating reserves to pay future claims. This week’s ONEIdea will help you identify what these changes are, what they mean to your clients, and why the December 31, 2019 deadline is so important.
- insurers are required to hold a certain amount of money in reserve based on the specific product and product feature chosen;
- insurers will have better solvency control which enables regulators to ensure that carriers abide by their written contracts;
- product pricing alignment has been established which ensures that the premiums clients pay really reflect the specific insurance coverage being provided; and
- investment performance and financial strength of the related insurance companies are reported and available to you and your clients.
Second, what is the 2017 Commissioner Standard Ordinary mortality table?
This is an actuarial table that is used by insurance companies to compute the minimum non-forfeiture values of ordinary life insurance policies. The CSO mortality table reflects the probability that people in various age groups will die each year. See the data table below showing how much more information is available on the 2017 CSO Table than the previous versions from 1980 and 2001.
- As of January 1, 2020, ALL carriers’ insurance products will be updated to become PBR/CSO 2017 compliant (please note that some less “attractive” products will be discontinued all together if the changes negatively impact their functionality/pricing, etc.). It is very important that you review ALL your cases currently “in process” to make sure that they are either using a “compliant” product or confirm that they will be placed and paid and in the hands of the insurance carrier by December 31, 2019.
- Mortality rates will be updated in the 2017 table. Please note that these rates are only one of several factors used in product pricing, so the overall impact on premium rates may or may not result in a premium increase.
- Policies designed to maximize cash value growth are likely to be less efficient in the long run because the maximum premium that can be paid per dollar of death benefit will be lower as a result of the changes.
- When considering insurance products for your clients, it is important to determine whether the products have been updated to include the new requirements.
- Manage the transition window to ensure that IF you have a non PBR compliant policy, it is placed and paid and in the hands of the insurance carrier prior to the December 31, 2019 deadline. If you are unsure whether you can meet this deadline, it is recommended you select a product that is already compliant.
ALL insurance carriers are required to modify their products to become compliant with both the PBR and the 2017 CSO table. Many carriers have already rolled out their new products in anticipation of this deadline. You MUST watch for end of year transition rules since a non PBR product must be placed inforce with premium paid no later December 31,2019.
THROUGHOUT THE INDUSTRY, THERE WILL NO EXCEPTIONS MADE ON THIS REQUIREMENT! AgencyONE is keeping track of the PBR and 2017 CSO carrier compliance transition rules.
Please call AgencyONE‘s Case Design Department at 301.803.7500 for more information or to discuss a case.