Replacements
Replacements
Policyholder l–“I’m dropping my whole life policy with yourcompany and replacing it with company x’s universal l_fe
policy.”
Agent l–“Universal life is not right for you, and I recommend
retaining your present policy.”
Policyholder 2–“I’m dropping my whole life policy with your
company and replacing it with company x’s universal life
policy.”
Agent 2–“Universal life is not right for you, and I recommend
retaining your present policy.” (Sounds familiar,
so far!) “But if universal life is what you really want,
I will sell you our company’s product.”
1983, Universal Life, Society of Actuaries
Life Insurance and Annuities Replacement Model Regulation (MDL-613)
“4. Another recent marketplace phenomenon has been a sharp increase in replacement activity, with indications that perhaps half of all lapses involve replacement situations. The revised NAIC Life Insurance Replacement Model Regulation adopted in 1978 is based on a recognition that a replacement is not necessarily disadvantageous to a policyholder, i.e., some replacements are well-justified and definitely in the consumer’s interest.” ACLI Letter1982-2 NAIC Proceedings
Historically, companies were reluctant to replace life insurance because
they might be in violation of the “twisting” laws. Times have changed. In
1969, the National Association of Insurance commissioners developed the
1970 Model Life Insurance Replacement Regulation. This removed most of the “twisting” fears. WILLIAM T. TOZER <ACLI>
1981, INDIVIDUAL LIFE INSURANCE COST DISCLOSURE ISSUES, Society of Actuaries
Senator METZENBAUM.Mr. Hunt, you made a statement that concerns me greatly. You
said in the 1980’s, replacement life insurance policies began to proliferate.
Insurance companies are encouraging their policyholders
to cash in their life insurance to buy new and often less secure
products with the proceeds. Why are so many policyholders cashing in their life insurance
and buying new products? 1992 GOV Consumer Disclosure of Insurance – 323p
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