Appeal from the Order of the Insurance Commissioner in case of In Re: Crown Life Insurance Company Policy Form K 6005, Docket No. P76-7-5.
Alfred G. Gillis, with him Butera, Bresnan, Beausang & Moyer, for petitioner.
John H. Isom, Assistant Attorney General, with him Robert P. Kane, Attorney General, for respondent.
President Judge Bowman and Judges Crumlish, Jr., Mencer, Rogers, Blatt, DiSalle and Craig. Judges Wilkinson, Jr. and MacPhail did not participate. Opinion by Judge Craig.
Section 354 of The Insurance Company Law of 1921, Act of May 17, 1921, P.L. 62, as amended, 40 P.S. § 477b empowers the Insurance Commissioner of Pennsylvania (Commissioner) to screen life insurance policy forms and reject or approve them for sale in the Commonwealth.
Accordingly, Crown Life Insurance Company (Crown) submitted its policy form K6005 for approval. The Department of Insurance (Department) denied approval. After a hearing, the Commissioner issued an Order and Adjudication affirming the Department's rejection. Crown now petitions this Court to review that order.
There is no disagreement over what the policy says or purports to do. The controversy arises over possible consumer misunderstanding of it.
The policy is basically a hybrid of the two traditional whole life insurance modes, participating and non-participating.*fn1
In policy form K6005, Crown sets the initial premium by making a very close assumption for bad experience, similar to the way a rate would be computed for non-participating policies. That approach results in a relatively low, immutable premium charge for the first three years.
However, beginning in the fourth year of coverage, the maximum premium rate is fixed under an assumption that takes into account a "contingency margin" for possible very bad future experience, similar to the way insurers calculate a participating policy rate. This feature could produce a significant jump in the premium amount charged after the initial three years.
Importantly, these computations are made in advance, and therefore the policy clearly reveals that there will be an increased ...