Timing of Disclosures / Information to Consumers

Timing of Disclosures / Information to Consumers

Marvin Van Cleave (Wisconsin) expressed concern that the proposed regulation did not  provide for disclosure at the point of sale.
1984-1, NAIC Proc.

Much of the information required in the draft disclosure forms simply cannot be provided at time of application….”

In doing so, it should also recognize the limits to the type and amount of information that agents can reasonably be
expected to produce on their own at time of application.
1989-2, NAIC Proc.

 

disclosure statement,

“It had been the desire of the working group to require delivery at the time of application, but small insurance companies would have a great deal of trouble complying with that requirement due to lack of computer resources, so the extra period

is allowed by way of compromise.”

1989-2

C. Timing of disclosure
Finally, the Commission was concerned about the timing of the
disclosure. Under the NAIC model regulation, consumers generally
received the buyer’s guide and policy summary only when the
policy is actually delivered, often a week to 10 days after purchase.
Our experience indicates that if cost disclosure is to be effective, it
must take place before the purchase decision. Consumers are very
unlikely to read and use a disclosure package provided after the
transaction has been completed. For this reason, we recommend that a buyer’s guide be given at
the beginning of the sales presentation and that a preliminary
policy summary be given prior to the time prospective purchasers
are provided an application for a policy. The preliminary policy
summary would contain the basic information concerning the
policy, such as the policy type, premium, surrender index and the
rate of return. The proposed preliminary policy summary contains
only those limited items of information essential to an informed
purchase decision. It would not be impractical for agents to have
all of the information needed to fill out the preliminary policy
summary with them during the sales presentation. However, we concur in the NAIC’s recommendation that a full
policy summary be delivered with the policy. That summary contains
more detailed information concerning the cash flow elements
of the policy. The Commission believes that this information is
important and useful to the consumer. Because the information is
more detailed it may not be readily available to the agent during
the sales presentation, but it can easily be provided with the policy,
as is currently the practice of companies which comply with the
NAIC model. STATEMENT OF HON. MICHAEL PERTSCHUK, CHAIRMAN, FEDERAL
TRADE COMMISSION; ACCOMPANIED BY ALBERT H.
KRAMER, DIRECTOR, BUREAU OF CONSUMER PROTECTION;
AND MICHAEL LYNCH, BUREAU OF ECONOMICS

1979 GOV FTC STUDY OF LIFE INSURANCE COST DISCLOSURE Cannon – 592p

NOW

NAIC Working Groups
Information (Policy Overview) before/ at application: Birney Birnbaum, Lois Lerner
Information (Policy Overview) at Delivery: ACLI 

 

c. Life Insurance Illustration Issues (A) Working Group
<Ms. Stegall> explained that the Working  Group originally was working on revisions to both the Life Insurance Disclosure Model Regulation (#580) the Life Insurance Illustrations Model Regulation (#582). However, under the new approach, revisions only under Model #580 equired. She said the policy overview document would be distributed along with the Buyer’s Guide with all life insurance policies.

2018-3, 6-4

ACADEMIC

Inappropriate Timing of Message
Dissemination of the message at an inappropriate time also reduces effective exposure.

For example, the life insurance cost disclosure package adopted by the National Association of Insurance Commissioners (NAIC) suffers from a serious timing problem.

Purchasers receive a disclosure package containing several cost indices for comparing policies, but the information comes only after the policy is delivered, usually a week to 10 days after purchase.

Once the purchase decision has been made, however, “the buyer becomes psychologically committed to it and is very unlikely to read and use a disclosure package” [Kramer 1978, pp. 12-13].

1982 – Using Information-Processing Principles in Public Policymaking, Michael B. Mazis and Richard Staelin