N.J. Admin. Code § 11:4-41.14

Current through Register Vol. 56, No. 24, December 18, 2024

Section 11:4-41.14 - Standards for smoker/nonsmoker and/or tobacco/nontobacco reclassification

(a) The standards set forth in this section shall apply to individual life insurance policies that:

1. Classify insureds explicitly by smoking and/or tobacco use habits, resulting in premium, cost or benefit differences; and

2. Permit a reclassification resulting in a change in premiums, costs or benefits of an in-force policy based upon a change in smoking and/or tobacco use habits.

(b) Any permitted change in premiums, costs or benefits due to smoking and/or tobacco use habits which meets the definition of a "re-entry or requalification feature" as defined at N.J.A.C. 11:4-41.2 shall be subject to the requirements of N.J.A.C. 11:4-41.1 1, Standards for re-entry or requalification features for individual life forms, in addition to the requirements of this section. The requirements of this section shall apply in the case of any conflict.

(c) Any policy subject to these requirements shall contain:

1. A separate provision stating:

i. That reclassification may be applied for upon change in smoking and/or tobacco use habits;

ii. The procedure for requesting reclassification;

iii. That reclassification will be based upon the company's general underwriting rules in effect at the time, and may include criteria other than smoking and/or tobacco use status and include a definition of smoker and/or tobacco use different from that at issue. In the alternative, a disclosure containing a definition of smoking and/or tobacco use status and a statement of underwriting rules that will apply to reclassifications may be used;

iv. Any limits affecting ability to request reclassification, including time limits; and

v. Any potential negative impact of reclassification, including, but not limited to, any immediate or future reduction in cash value scale, any new contestability period, or any temporary or permanent premium increase; and

2. A schedule page that clearly identifies the insured's smoking/ tobacco use classification, using terms that refer to smoking, tobacco use or nicotine.

(d) Insurers electing not to endorse previously-approved forms to include the provision required by (c) above shall provide insureds with the information contained in (c) above in a premium notice or other written notice no later than the next premium due date or December 27, 2002, whichever is later, and shall immediately comply with all other requirements of this section.

(e) The submission for filing of any policy form subject to this section shall specify the mechanism to adjust premiums, any other cost factors and change in benefits if the insured is reclassified. This mechanism shall be applied consistently to all premiums and cost and benefit factors. The permissible mechanisms are:

1. Issue age reclassification.

i. Premium, cost or benefit factors shall be adjusted to reflect the new status, but no adjustment shall be made to the scale of guaranteed cash values or the current non-guaranteed cash value, except a lower scale of guaranteed cash values associated with the new status may be used if the difference between the two guaranteed cash values at the time of reclassification is refunded to the policyowner.

ii. Any guarantee period for premiums shall remain in force and shall run from the original issue date of the policy.

iii. It shall be considered an issue age reclassification if reclassification of an account value policy with cost of insurance charges that vary by both issue age and policy year for some or all policy years uses the cost of insurance charges for the original issue age and policy year.

2. Attained age reclassification.

i. An attained age reclassification shall be limited to those ages that reflect the original issue age range of the form.

ii. Premium, cost or benefit factors shall be adjusted to reflect the new status. Reductions in guaranteed cash values (in accordance with N.J.S.A. 17B:25-19h(iii)) shall be permitted only if the reclassification provides the protections required for a replacement of a policy as defined by N.J.A.C. 11:4-2 or any amendments to or replacement of that subchapter, or by any other requirements of law.

iii. Any guaranteed period for premiums shall begin anew upon reclassification, except that, in the case of flexible premium account value policies, any original minimum guarantee premium period shall either be continued or begun anew.

(f) The standards set forth in this subchapter shall apply separately to the original benefits provided by the policy and any increases in benefits subsequent to the issue date for which the insured was required to provide evidence of smoking and/or tobacco use status.

(g) Upon reclassification, the form shall be endorsed or reissued to specify any new cash values, premiums, cost of insurance charges or other policy cost or benefit factors which change as a result of the reclassification. Such endorsement and any related policy schedule pages shall display the effective date of reclassification.

(h) Contestability based upon evidence of insurability shall be limited as to time and amount as specified in N.J.A.C. 11:4-41.3(b)3 ii(2).

(i) Any evidence of insurability provided in support of reclassification, if used as a basis for contest, shall be attached to and made part of the policy, and the form shall so state.

(j) Insurers shall not assign insureds a less favorable classification as a result of receiving any evidence of insurability provided in support of reclassification.

N.J. Admin. Code § 11:4-41.14

New Rule, R.2002 d.103, effective 4/1/2002.
See: 33 New Jersey Register 3865(a), 34 New Jersey Register 1452(a).