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NAIC: Premium Definitions Vary

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State insurance departments use many different, conflicting rules for defining the term “premium.”

Members of the premium survey subgroup, part of the Blanks Working Group at the National Association of Insurance Commissioners, Kansas City, Mo., have published that in a premium survey results summary.

The NAIC’s Financial Condition Committee, the parent of the Blanks Working Group, has posted the summary on its Web site.

All but 4 of the 51 jurisdictions surveyed returned their questionnaires, and 33 of the 47 respondents said the insurance department in their jurisdiction handles life premium tax collection.

Although 46 of the jurisdictions use the annual statutory financial statement to confirm information appearing on the premium tax form, 40 use both Schedule T and the state page, and 5 use either the Schedule T or the state page but not both, premium survey subgroup members write in the survey results summary.

When defining the term “premium” for premium tax purposes, 17 of the states include life premiums paid on risk located in the state; 7 include life premiums collected in the state; 6 include life premiums on contracts issued in the state; and 2 include life premiums on contracts delivered in the state.

In addition, “12 states indicated their definition language used the concept of ‘premium received’ as the basis for the tax calculation, either alone or with other wording, such as ‘all sums charged, received or deposited,’” subgroup members write.

The rules and definitions governing multi-state group life contracts and guaranty fund assessments also vary from jurisdiction to jurisdiction, subgroup members found.

“Due to the varied approaches reported by the states regarding premiums taxes and assessments, the subgroup did not discuss recommendations for either reporting changes or uniform laws,” the subgroup members write.

A copy of the report is available here.