1973 0223 - GOV (Senate) - The Life Insurance Industry - Part 3 of 4 - Philip Hart (D-MI)
- 1973 / 1974 - GOV (Senate) - The Life Insurance Industry - Phillip Hart (D-MI) - 4 Parts --- [BonkNote]
- (1518-) - The Problem - The Confused Consumer - The Life Insurance Markets: Competition By Confusion, Statement of Herbert S. Denenberg, Insurance Commissioner, Commonwealth of Pennsylvania
- (1520-1536) - Pennsylvania Insurance Department's Special Mini-Shopper's Guide To Life Insurance - The Lowest and Highest Cost $25,000 Term and $ 10,000 Straight Life Insurance Policies, Prepared by the Pennsylvania Insurance Department, Harrisburg, Pennsylvania
- (p2119-2120) - STATEMENT OF FRANK S.J. MCINTOSH - I am Frank S.J. McIntosh, owner and manager of the National Life Brokers Association, an organization formed for the explicit purpose of merchandising term life insurance to the American public at a fair and reasonable price.
- I am the author of A STUDY OF MUTUAL LIFE INSURANCE DIVIDENDS and various other publications. - <WishList>
- I have been in the life insurance business as agent, general agent, manager and consultant for nineteen years.
- This statement was prepared after conference and communication with the office of Senator Philip A. Hart (D-Mich.).
- PURPOSE - I have long been of the opinion that proper price disclosure has been withheld from the American public. I have long been of the opinion that there is no real price competition among American life insurance carriers. I believe that the American consumer or buyer of life insurance is entitled to adequate disclosure this in order to provide him with a meaningful yard stick of price measurement. He should be entitled to information which will enable him to make an intelligent and informed decision as to the proper purchase of life insurance.
- The purpose of this statement then is two-fold:
- first to pinpoint and explore some of the fallacies and inaccuracies which abound in the present system of life insurance merchandising; and
- second to introduce to this committee a method of cost appraisal which is
- (1) realistic in results
- (2) easy to understand
- (3) simple to apply
- (p2129) - Books In The Insurance Research Service Library Which Primarily Explore And Expose The Fallacy Of Using Life Insurance As An Investment
- (p / 2137) - FALLACY No. 3 - THE THIRD FALLACY LIES IN THE LACK OF A "SAFETY FACTOR".
- Dividends, which are not guaranteed, are usually given in dollars and cents which tend to imply creditability.
- As the only way to judge the future is to look at the past, a quick glance at some dividend history is shown:
- From 1932 to 1952, twenty leading mutual life insurance companies missed their twenty year projection by an average of 35 of cost comparison, to be accurate, honest and sound must consider both; computations must be made on an annual basis, or cover sufficient periods of time to be truly illustrative and the three major fallacies must be eliminated,
- THE NAS SYSTEM - The NAS system was designed to meet these rigid requirements. Chart A indicates the differential in cost should the policy be terminated by death. Chart B indicates the cost differential if surrendered for values. Chart C indicates the cost to the family if excess premiums are used to buy dividends in lieu of life insurance.
- To avoid any possible charge of discrimination, 25 participating and 25 non-participating contracts were selected. Aggregate averages were used. The participating policies are from leading mutual companies, and the non-participating contracts were selected from leading stock companies. $100,000.00 was used as a base policy in order to take full advantage of all the various quantity discounts, and to effect the maximum degree of equality in the comparison.
- CHART A - ISSUE AGE: 35, POLICY: ORDINARY LIFE AMT. $100,000.00 (A) (AVERAGE) - 25 MUTUAL POLICIES (B) (AVERAGE) - 25 NON-PAR POLICIES, GROSS PREMIUM DIFFERENTIAL $2,376.00 1,876.00 - $500.00 Year
- From 1940 to 1960
- Metropolitan paid 54.78% of a twenty year projection.
- Northwestern Mutual paid $5.17 of a projected $23.00 dividend-an error of 345 .
- In 1947, Company N projected a dividend of $14.72 and paid absolutely nothing;
- Prudential projected a $52.31 dividend and paid $4.58-a bad guess amounting to $47.73 or a total error of 1,042.
- The list could be continued endlessly, but these few suffice to make our point.
- No economist would predicate a 20 year result on non-guaranteed figures without making allowance for a margin of error, and no insurance buyer should base ultimate policy costs on the naive assumption that dividends will be paid as projected.
- We automatically provide the client with a 20% safety factor. If, in his considered opinion, this margin seems inadequate a
larger safety factor, of his own choosing is used.
- - The Great Misrepresentation regarding the Cost of Life Insurance, by "A Study of Mutual Life Insurance Dividends", National Analytical Service, Inc". - <WishList>