By Christine Dugas
USA TODAY

The term life insurance industry is bracing for the arrival of Rule XXX next year.

The rule, moving through the states' regulatory processes, would require insurers to increase the amount of money they set aside as a cushion against losses on policies with long-term premium guarantees.

The upshot is likely to be higher premiums on those policies, experts say. In fact, Rule XXX could raise rates 10% to 40%, depending on the age of the policyholder and the length of the guarantee, says Ken Sapp, president of the agency division at Zurich Kemper Life.

Another outcome might be 20-year, level-premium policies that guarantee the premium rate for only five years.

"There will still be cheap term insurance available, but the guarantees won't be as long," says consulting actuary James Van Elsen. Currently, New York is the only state with a similar rule, and its rates tend to be higher than the rest of the nation.

For example, a 40-year-old male nonsmoker could get a 20-year, guaranteed-premium policy for $440 a year in most states, says Byron Udell, president of AccuQuote. But that same person in New York would have to pay $775 - or $570 to get a 20-year level term policy that isn't fully guaranteed.

The National Association of Insurance Commissioners is finishing details on a model Rule XXX for the states. Several have plans to adopt a XXX rule. Once that happens, the rest will follow.

February 5, 1999 Edition of USA Today