Cal. Code Regs. tit. 10, § 2315 – Specific Standards for Morbidity, Interest and Mortality.

(a) Morbidity
1. (1) Minimum morbidity standards for valuation of specified individual contract benefits:
  1. (A) Disability Income Benefits Due to Accident or Sickness.
    1. 1. Contract Reserves For contracts issued on or after January 1, 1965 and prior to January 1, 1995: use either the 1964 Commissioners Disability Table or the 1985 Tables described below.
      For contracts issued on or after January 1, 1995: The 1985 Commissioners Individual Disability Tables A (85CIDA); or The 1985 Commissioners Individual Disability Tables B (85CIDB). 85 CIDA, also called the Basic Valuation Table, is found in Transactions of the Society of Actuaries, Volume XXXVII, pages 449-460. 85CIDB, also called the “83c Table”, is found in Proceedings of the NAIC, 1985, Volume 1, pages 494-540.
      Each insurer shall elect, with respect to all individual contracts issued in any one statement year, either Tables A or Tables B as the minimum standard. The insurer may elect to use the other tables with respect to any subsequent statement year.
    2. 2. Claim Reserves
      1. (i) For claims incurred on or after January 1, 2005:
        The 1985 Commissioners Individual Disability Tables A (85CIDA) in 1985 Transactions of the Society of Actuaries, Volume XXXVII, pages 455-463, incorporated by reference herein, with claim termination rates multiplied by the following adjustment factors:
        Duration
        Adjustment Factor
        Adjusted Termination Rates^*
        Week 1
        0.366
        0.04831
        2
        0.366
        0.04172
        3
        0.366
        0.04063
        4
        0.366
        0.04355
        5
        0.365
        0.04088
        6
        0.365
        0.04271
        7
        0.365
        0.04380
        8
        0.365
        0.04344
        9
        0.370
        0.04292
        10
        0.370
        0.04107
        11
        0.370
        0.03848
        12
        0.370
        0.03478
        13
        0.370
        0.03034
        Month 4
        0.391
        0.08758
        5
        0.371
        0.07346
        6
        0.435
        0.07531
        7
        0.500
        0.07245
        8
        0.564
        0.06655
        9
        0.613
        0.05520
        10
        0.663
        0.04705
        11
        0.712
        0.04486
        12
        0.756
        0.04309
        13
        0.800
        0.04080
        14
        0.844
        0.03882
        15
        0.888
        0.03730
        16
        0.932
        0.03448
        17
        0.976
        0.03026
        18
        1.020
        0.02856
        19
        1.049
        0.02518
        20
        1.078
        0.02264
        21
        1.107
        0.02104
        22
        1.136
        0.01932
        23
        1.165
        0.01865
        24
        1.195
        0.01792
        Year 3
        1.369
        0.16839
        4
        1.204
        0.10114
        5
        1.199
        0.07434
        6 and later
        1.000
        ^**
        * The adjusted termination rates derived from the application of the adjustment factors to the DTS Valuation Table termination rates shown in exhibits 3a, 3b, 3c, 4, and 5 (1985 Transactions of the Society of Actuaries (TSA), Volume XXXVII, pp. 457-463, 465, incorporated by reference herein, are displayed. The adjustment factors for age, elimination period, class, sex, and cause displayed in exhibits 3a, 3b, 3c, and 4 should be applied to the adjusted termination rates shown in this table.
        ** Applicable DTS Valuation Table duration rate from exhibits 3c and 4 (1985 TSA Volume XXXVII, pp. 462-463), incorporated by reference herein.
        The 85CIDA tables so adjusted for the computation of claim reserves shall be known as 85CIDC (The 1985 Commissioners Individual Disability Tables C, which is the 85CIDA tables in 1985 Transactions of the Society of Actuaries, Volume XXXVII, pp. 455-463, so adjusted, incorporated by reference herein.).
      2. (ii) For claims incurred prior to January 1, 2005:
        (I) The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred, or
        (II) The standard as defined in Item (i), applied to all open claims.
        (III) Once an insurer elects to calculate reserves for all open claims on the standard defined in Item (i), all future valuations must be on that basis.
        Each insurer may elect which of the following to use as the minimum standard for claims incurred prior to January 1, 2005:
  2. (B) Hospital Benefits, Surgical Benefits and Maternity Benefits (Scheduled benefits or fixed time period benefits only).
    1. 1. Contract Reserves
      For contracts issued on or after January 1, 1955, and before January 1, 1982: The 1956 Intercompany Hospital-Surgical Tables.
      For contracts issued on or after January 1, 1982: The 1974 Medical Expense Tables, Table A, Transactions of the Society of Actuaries, Volume XXX, pg. 63. Refer to the paper (in the same volume, pg. 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: “Development of the 1974 Medical Expense Benefits,” Houghton and Wolf.
    2. 2. Claim Reserves: No specific standard. See paragraph (E).
  3. (C) Cancer Expense Benefits (Scheduled benefits or fixed time period benefits only).
    1. 1. Contract Reserves
      For contracts issued on or after January 1, 1986: The 1985 NAIC Cancer Claim Cost Tables.
    2. 2. Claim Reserves: No specific standard. See paragraph (E).
  4. (D) Accidental Death Benefits
    1. 1. Contract Reserves
      For contracts issued on or after January 1, 1965: The 1959 Accidental Death Benefits Table.
    2. 2. Claim Reserves: Actual amount incurred.
  5. (E) Other Individual Contract Benefits
    1. 1. Contract Reserves
      For all other individual contract benefits, morbidity assumptions are to be determined as provided in this article.
    2. 2. Claim Reserves
      For all benefits other than disability income, claim reserves are to be determined as provided in this article.
2. (2) Minimum morbidity standards for valuation of specified group contract benefits:
  1. (A) Disability Income Benefits Due to Accident or Sickness.
    1. 1. Contract Reserves
      For contracts issued prior to January 1, 1995: The same basis, if any, as that employed by the insurer as of January 1, 1995
      For contracts issued on or after January 1, 1995: The 1987 Commissioners Group Disability Income Table (87CGDT; Transactions of the Society of Actuaries, Volume XXXIX, pages 393-458).
    2. 2. Claim Reserves
      For claims incurred on or after January 1, 1995: The 1987 Commissioners Group Disability Income Table (87CGDT; Transactions of the Society of Actuaries, Volume XXXIX, pages 393-458).
      For claims incurred prior to January 1, 1995: Use of the 87CGDT is optional.
  2. (B) Other Group Contract Benefits
    1. 1. Contract Reserves
      For all other group contract benefits, morbidity assumptions shall be determined as provided in this article.
    2. 2. Claim Reserves
      For all benefits other than disability income, claim reserves shall be determined as provided in this article.
(b) Interest
1. (1) For contract reserves the maximum interest rate shall be the maximum rate permitted by Insurance Code § 10489.4 in the valuation of whole life insurance issued on the same date as the disability insurance contract.
2. (2) For claim reserves on policies that require contract reserves, the maximum interest rate shall be the maximum rate permitted by Insurance Code § 10489.4 in the valuation of whole life insurance issued on the same date as the claim incurral date.
3. (3) For claim reserves on policies not requiring contract reserves, the maximum interest rate shall be the maximum rate permitted by Insurance Code § 10489.4 in the valuation of single premium immediate annuities issued on the same date as the claim incurral date, reduced by one hundred basis points.
(c) Mortality
1. (1) Except as provided in paragraph (3), the mortality basis used for all policies, except long-term care individual policies and group certificates issued on or after January 1, 2005, shall be:
  1. (i) for active lives according to a table (but without use of select factors) permitted by Insurance Code § 10489.2(a) for the valuation of whole life insurance issued on the same date as the disability insurance contract;
  2. (ii) for disabled lives the mortality basis, if any, shall be according to a table (but without select factors) permitted by Insurance Code § 10489.2(a) for the valuation of whole life insurance issued on the same date as the claim incurred date.
2. (2) For long-term care insurance individual policies or group certificates issued on or after January 1, 2005, the morbidity basis used shall be the 1994 Group Annuity Mortality Static Table, which is Table 18 in 1995 Transactions of the Society of Actuaries, Volume 47, pp. 898-899, incorporated by reference herein.
3. (3) Other mortality rates may be used in the calculation of the minimum reserves, if appropriate for the type of benefits and if approved by the Commissioner. The request for such approval must include the proposed mortality basis and the reason that the standard specified in paragraph (1) or (2) is inappropriate.

Note: Authority cited: Sections 997(a) and 10489.95, Insurance Code. Reference: Sections 985, 997 and 10489.15(a), Insurance Code.

History

1. New section filed 11-4-94; operative 12-5-94 (Register 94, No. 44).

2. Amendment filed 12-13-2005; operative 12-13-2005 pursuant to Government Code section 11343.4 (Register 2005, No. 50).