4-Snippets

2013

2013/13/2013 – 2013-1A – (6-32) – LIAC

24. Discussed Inconsistencies in Index-linked Universal Life Policy Illustrations
John Bruins (ACLI) discussed the inconsistencies, across a number of companies, in the illustration of index-linked universal
life policies. He said they would like the Task Force to consider an actuarial guideline or a change to a model regulation to
address the matter.

2014

8/12/2014
Letter to LATF –
IULWG

{Metropolitan Life Insurance Company, New York Life Insurance Company and Northwestern Mutual Life Insurance Company}

“We believe current illustrated rates are much higher than what is reasonably expected over the course of the policy and may lead to consumer disappointment, which could negatively impact the entire industry.

11/14-15/2014

“He (John Bruins – ACLI) said overall guidance will produce better education for consumers, highlight the nonguaranteed nature and provide consistency for contracts….”

11/14-15/2014		Mr. Ehren (Securian) said it is in the industry’s best interests to provide additional disclosures for IUL illustrations. He said that, in the midst of developing the compromise, the question of how to estimate and illustrate the risk premium emerged as a new issue. He said that issue should be handled separately from the issue of developing a guideline for IUL illustrations.

11/14-15/2014 6-63		seven guidelines provided by Mr. Andersen (Attachment Twenty-Seven)

11/14-15/2014 6-63		Anthony Ferraro (New York Life) said that one of the goals of the Life Insurance Illustrations Model Regulation (#582) is to make sure that illustrations do not mislead consumers. He said a major aspect of consumer protection is the concept of supportability of illustrations. He said it is important that supportability is included in the proposed guideline. He emphasized that it is important that the accumulated cash flows that the customer sees in the illustration are supportable by the company.

11/14-15/2014 6-63		Greg Gurlick (Northwestern Mutual Life) said that if consumers are not satisfied with results of their IUL policies, it will not only impact the reputations of the companies selling the products but also the entire industry will be painted with a broad brush.

11/14-15/2014 6-63		Mr. Birdsall asked if the agent compensation structure for IUL products provide greater incentives for agents than is provided by the compensation structure of traditional universal life (UL) products. Mr. Samuelson (MetLife) said that a compensation study he had previously conducted found that, on average, IUL policies have a target premium 80% higher than the average target premium for UL products.

2015

2/19/2015
LATF CC

2.? Voted to Expose IUL Illustration AG Proposal
He <Mr. Andersen> said his goals for developing the guideline were to:
3) have understandable illustrations that foster education of the consumer without misleading; and
4) avoid clamping down on IUL illustrations to a greater extent than has been applied to other product illustrations.

2/19/2015
LATF CC

He <American Council of Life Insurers—ACLI> also asked if the guideline would be applicable to inforce illustrations. He <Fred Andersen> said the guideline was intended to be applicable to inforce illustrations, but
he is willing to have further discussions on that point.

4/16/2015
LATF CC

1. Adopted the Proposed Actuarial Guideline for IUL Illustration

4/16/2015
LATF CC

Mr. Andersen reviewed a comment (Attachment Eleven-C) from Brian Lessing (AXA) related to a product for which additional charges led to a higher investment return.

He <Andersen> noted the issue was vetted earlier by regulators and the industry. He said it would be nearly impossible to create a standard that would treat different products equally without causing other problems.

11/13/2015
IUL WG

Letter – Mike Yanacheak

It is my recollection and understanding that AG 49 was created in part due to a problem with ‘gamesmanship’ in IUL illustrations.

2016

4/ 2016
LATF

He (ACLI – John Bruins) said the ACLI is concerned about the reaction that may be received from consumers when their policy illustration changes, even though no changes have been made to the product being illustrated.
He noted that several companies have indicated receiving negative reactions from policyowners when their policy illustration changed.

2016/5/17
LIIIWG
2016-2

Emily Micale (ACLI) said that the companies have only shared the sample summaries on a limited basis with Wisconsin, NAIC staff and consumer representatives, with the understanding they would not be shared more broadly at this time. She said they are working on getting the companies comfortable with sharing the summaries more broadly, but only if the use of the summaries is limited to aiding the Working Group in the completion of its 2016 charge.

8/17/2016 LIIIWG CC Richard Wicka, Chair		Ms. Stegall said that during its June 8 meeting, the group discussed its goals to: 1) better understand the narrative summary required by Section 7B of the Life Insurance Illustrations Model Regulation (#582) and the policy summary required by Section 5A(2) of the Life Insurance Disclosure Model Regulation (#580); and 2) consistent with the Working Group’s charge, decide whether the summaries required enhancement.
8/17/2016 LIIIWG CC Richard Wicka, Chair		She (Stegall) said the ad hoc group also discussed tasks to help it achieve its goal, including: 1) gathering background on how the summaries are used and by whom; and 2) reviewing narrative and policy summary examples for key factors highlighted in the Working Group’s charge, such as readability, understandability, design and format. Ms. Stegall said the ad hoc group learned that, in most cases, the summaries are not intended as direct-to-consumer pieces and are not meant to help a consumer shop around for coverage; they are delivered at the point of sale. She also said that, except from some whole life insurance and term life insurance products, the summaries are explained to the consumer by an agent or broker and really serve as a tool for financial advisors in highlighting the features of a product.

Consumer Expectations – Illustrations
SOA –

2017

2017/2/7, LIBGWG, 2017-1
Ms. Neil expressed concern about some of the terminology in the ACLI guide, in particular the use of “cash value” to describe “permanent insurance,” but agreed there is likely some information that could inform the NAIC’s work.

Gary Sanders (National Association of Insurance and Financial Advisors—NAIFA) agreed that use of the term “cash value” was confusing.
2017/2/7, LIBGWG
He <Brian Fetchel (Breadwinners Insurance)> said consumers don’t understand the different types of insurance policies … 2017/2/27, LIBGWG
He <Birney Birnbaum> said it is critical to include questions about product features and situations
where consumers may need to pay more. 2017/3/27, LIBGWG
He <Mr. Lovendusky – ACLI> suggested that the Working Group consider two things: 1) relieving insurers of the obligation of providing a Buyer’s Guide by creating an NAIC website to which all consumers could be directed…. 2017/5/19, LIAC
Michael Lovendusky (American Council of Life Insurers—ACLI) agreed with exploring having the NAIC as the
destination for information on more sophisticated products. 2017/7/19, LIBGWG – Letter from Brenda Cude and Karroll Kitt
With that in mind, we started by making a list of basic information about life insurance that first-time buyers probably don’t know.
We based this not only on Brenda and Karrol’s years of experience teaching college students (who probably know as little as anyone about life insurance) but also on a search of the Internet.
We didn’t find any scholarly research on the topic but did find references to a number of industry sponsored surveys.
Brenda made the list that follows. 2017/9/14, LIIIWG CC
He <Richard Wicka> explained that state insurance departments do not give advice and should
not be a place where consumers call with questions about how a specific policy works. 2017/10/17, LIBGWG
Non-Guaranteed Elements Work Group of the American Academy of Actuaries, Letter Dated: 9/27/2017 We believe consumers would benefit from the inclusion of a discussion of NGEs in the
buyer’s guide, and think the following points would be helpful:

2017/11/15, LIBGWG, American Academy of Actuaries, Letter

“Universal Life: This type of permanent policy offers some flexibility with premium
payments.” While it is true these policies offer some flexibility, there are circumstances
out of the policyholder’s control, such as decreasing interest credits or increasing policy
charges, where additional premium payments may be required to keep the policy in force.
Universal life also allows for flexibility in policy benefits, not just premium payments. 2017/11/15, LIBGWG, ACLI Redlined Draft
Unlike a term
policy, which can end after a specified number of years, permanent life insurance
will continue to the policy’s maturity age so long as premiums are paid. (Note that
this isn’t exactly accurate for UL, where policies can continue as long as the cash
value is sufficient to pay the policy charges. We may want to make that
distinction.) <<< —-ACLI Wording>>>

11/15/2017
LIBG WG

ACLI Redlined Draft
Binder 4 p118

5. When do I pay for life insurance?
Most people pay their life insurance in scheduled premiums
(annually, quarterly, or monthly).

2018

10.18.2018

BB: “The Policy Overview wouldn’t apply except for when the consumer is shopping for the product.”

RW: “This document is tied to the Narrative Summary”

RW: “Just applies to the Basic Illustration”

2018/11/09 – ACLI – ML <Bonk>

“Neither model was intended to generate Buying Guides or to relieve consumers of their own individual responsibilities to understand the product that they are spending their hard-earned money to buy after all.

…there are examples of companies attempting to develop completely Dynamic services and policies opportunities for their customers to purchase and to elect a variety of options.

And that the options themselves might be changed over time, dynamically, at the will of the purchaser with perhaps his or her financial advisor.

And so, one must I think wonder we’re actually whistling into the winds of change here by attempting to make these summaries and overviews more static and less dynamic.

2019