Annual adjustment -- maximum benefits for discretionary group life insurance

Issued and entered February 11, 1983 by Nancy A. Baerwaldt, Commissioner of Insurance

Section 4424(6) of the Insurance Code of 1956, as amended, MCLA Section 500.4424(6); MSA Section 24.14424(6), increased the maximum life insurance available to any member of a discretionary group authorized under Section 4424 from $75,000 to $80,000, effective March 9, 1982. It also required that the maximum be adjusted beginning July 1, 1982, and annually thereafter, to reflect changes in the cost of living under rules prescribed by the Commissioner of Insurance.

As prescribed by Administrative Rule 500.616, the maximum shall be adjusted by the ratio of the national consumer price index for all urban consumers as calculated by the United States Department of Labor for all items for March of each year to the corresponding consumer price index one year earlier, rounded to the nearest dollar. The effective date of the adjustment shall be July 1 of each year.

Therefore, using this formula, the maximum amount of life insurance which can be sold to any member of an authorized discretionary group as of July 1, 1982 through July 1, 1983 is $85,424, calculated as follows:

CPI for all urban consumers in March 1982 = 283.1

CPI for all urban consumers in March 1981 = 265.1
18.0 = Difference

Difference / CPI for one year earlier = percentage change

OR

For July 1982, 18.0 / 265.1 = .068 or 6.8 percentage change

Current maximum = $80,000

Percentage change = X1.068

ADJUSTED MAXIMUM

As of July 1, 1982 = $85,440

Insurers will be responsible for calculating the adjusted maximum, using the above formula, for the year beginning July 1, 1983 and each July 1 thereafter. The CPI for all urban consumers for March of each year can be obtained about mid-April by contacting the United States Department of Labor, Bureau of Labor Statistics, Washington, D.C., 20212, phone (202) 523-1208, or (313) 226-7558 (Detroit, Michigan).