1985-1, NAIC Proceedings

  • Reserve Factor Files – Life and Health Actuarial (EX5) Task Force Directed to study reserve factor files … 85-I-552
  • PROPOSED TO THE MARKET CONDUCT OF CONSUMER AFFAIRS (EX3) SUBCOMMITTEE BY THE IOWA DEPARTMENT OF INSURANCE
  • RE:  LIFE INSURANCE/ANNUITIES PROPOSED MODEL AMENDMENT TO BE CIRCULATED PRIOR to the DECEMBER, 1984 NAIC MEETING
  • Introduction
    • The Iowa Department of Insurance submits the attached proposed Model Amendment to the Life Insurance Companies Act as a preventive response to the problems which have arisen in regard the sale of life insurance policies combined with annuities.
  • Background and Definition
    • Within the  past five years, a growing number of concerned state insurance departments have undertaken investigations of life insurance companies involved in the sale of various types of life insurance  policies couple with annuities.
    • These companies have marketed a product under the spurious name, “Estate Conservation  Plan,” or similar variations.
    • The plans were represented as a means to shelter money from federal estate taxes and to provide immediately available funds, at the time of the purchaser’s death, for estate preservation and burial expenses.
    • The major target group for the purchase of these plans were farmers, in particular, elderly rural people.
    • The investigations revealed that the agents who sold these plans underwent extensive sales training prior to the marketing of the product.
    • In the sales presentation of these “Estate  Conservation Plans,” emphasis was placed on the annuity portion of the package.
    • The life insurance aspect of the product was underscored as an incidental “Death Benefit,” when, in fact, the first year’s premium was applied entirely for the establishment of the life policy.
    • The fact that it was not until the second year that a portion of the annual premium paid would be placed in the interest-bearing annuity was not highlighted.
    • Additionally, unless one-third to one-half of the original investment was paid annually, the policy would not be maintained, the entire first year’s premium would be lost and the value of the life insurance benefit would be substantially reduced.
    • In a nutshell, the investigations of these plans revealed that factually they provided no particular tax advantages and, generally, they were blatantly misrepresented to consumers.

—  Iowa Department of Insurance

1985-1, NAIC Proc.