State authorities have moved forward a new and controversial standard for insurers in the sector.
Life insurance news has been made by state regulators that have now given their approval for a new standard for the way that insurers in the sector will perform their reserves calculations, despite the heavy controversy and claims that it will not work.
Critics say that the economy will face too much of a risk in larger states, and the implementation will be too expensive.
The approval was made by the National Association of Insurance Commissioners (NAIC). It has changed the standard for the life insurance calculations, which is called principles based reserving (PBR). The association is a group that represents the regulators in each of the states and that coordinates both the rules that are put into place across the American industry, as well as their oversight.
Life insurance companies will need to use the PBR to calculate their reserves for making payments.
The change requires the life insurance companies to use their own models in order to perform these calculations. This will include factors such as investment portfolios and their entire product mix, as well as other elements. It is a considerable change from the current method of calculation which is based on a formula that considers mortality and interest rates.
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The officials from NAIC have said that they believe that by performing the calculations this way, it will make it possible to offer less costly life insurance products, which could boost their appeal to many consumers.
According to a statement from the NAIC president, Kevin McCarty, who is also the commissioner for Florida, “The adoption of this manual is a win-win for life insurance consumers, as we expect it will lead to more choices in the marketplace.”
Though the change in regulations was approved, it was not nearly unanimous. California and New York were very open about their opposition to these life insurance industry rule changes. Dave Jones, the commissioner for California, released a statement that said that “I am disappointed that the National Association of Insurance Commissioners decided to move ahead with a dramatic change to the system we use to make sure life insurance companies have adequate reserves, without any fiscal analysis or adopting a complete plan to address capacity and oversight issues.”