2026 0224 - NAIC - LIAIWG - Call - Life Insurance and Annuities Illustrations Working Group - A
- 2026 0224 - NAIC - LIAIWG - Call - Life Insurance and Annuities Illustrations Working Group - A --- [BonkNote]
- LIAIWG - Life Insurance and Annuities Illustrations Working Group - A - NAIC --- [BonkNote]
- 1 - Ben Slutsker (MN), Chair
- Background
- Group Charge - LIAC -
- 1st Topic - Annuity Disclosure
- This Working Group is new, the topic isn't. Similar Efforts over the Years.
- Annuity Disclosure Working Groups - MDL-245
- Life Illustrations Issues Working Group -
- IUL Illustrations Subgroup - LATF - AG49
- [Bonk: ADD: X]
- People with different backgrounds
- Members LATF Subgroup
- [Bonk: ADD: X]
- Charge is larger than Actuarial Issues
- Topics - Actuarial, Market Conduct, Compliance
- 4 - Coordination with LATF
- First Topic- Indexed Annuity Sales Materials and Disclosures
- [Bonk: ADD: X] - What do agents say
- Primary Issue is Annual Returns of 10-25% per year
- Downside protection - 0% Flooor
- Expectations - Frustrations - Lawsuits
- Annuity Related Lawsuits - Disclosure, Agent Presentations
- Quantify what is going on
- Annuity Illustrations Requested from top 25-30 Companies
- Observation - Highest Illustrated Rates
- 1/3 Responses - 10% or Lower for highest rate
- 2/3 Response - Greater than 10%
- half of those - 11-15%
- half of those - 16-27%
- Multiple scales, Guaranteed Scale, Recent History,
- ...
- How the Product Works. Right Balance. Understand what is currently being shown in the market, Reasonable Consumer Expectations.
- 1/4 - RILA Products - SEC Requirements - some had High Illustrated Rates
- Most came from FIAs - 0% Floor - Highest Illustrated Rates - BackCasting - Recently Created Indexes (1-2 years)
- 11 - In Contrast to Life Insurance
- Similar Designs to FIAs, but Life Insurance has a Death Benefit. Cost of Insurance Charges - Lower Returns
- Life Insurance - 5-8% Returns
- Life Insurance Model Regulation - Widely Adopted
- [Bonk: ADD]
- AG49 - IUL - multiple interations - AG49A
- Model 245 - Annuites -
- Only Adopted by 10 States
- Retricts Illustrations for Indexes that have been around for less than 10 years.'
- Not just a few companies - Competition in market - Show higher returns
- monitoring, reset on illustrated rates
- Attempt to address the issue with Regulations
- Concerns that regulators have had
- Collaborative Projects -
- Different Interested Parties
- Different Solutions, Different Perspectives
- Chair Exposure
- High Level
- Guidance Documents
- Revision to the Models
- Looking for Collecting Ideas
- then provide potential paths, Direction to go in
- Hear from different parties, brainstorming
- 17 - Others Thoughts - Working Group Members
- 18 - Danielle Torres (MI) - re: 25-30 Company Illustrations - How prominant was it that there could be years where they could earn 0%?
- Ben - There were guaranteed scales. <more>
- 20 - Tomas (Utah) - 25% not very realistic over 25 years, 0% also not very realistic. Consumer - Investments - Theoretically lose 100% - Not a real warning so to speak.
- 22 - Joshua (OR) - Backtesting Data - Different Philosophies of Backtesting - Different Companies - ? - Where are these numbers really coming from - Historical Data or not? Intentionally misframed?
- Ben - Expose Draft - Add to
- 23 - Nour (MD) - Inflated or realistic. Annuity Model 245 - What are the actual returns if limited to 10 years? Realistic, not inflated, Properly Disclosured. Who looked at 25-30 Company Illustrations? NAIC? Minnesota?
- Ben - Life Side - Not a NAIC Project. Couple of states get together to look at Life Illustrations - 10 per year - Disciplined current scale testing, AG49 - Observations at Regulator only Sessions - This years asked for Annuity Illustrations - Individual State Efforts, not a formal project.
- 26 - Danielle (MI) - SEC - Variable Annuities - 12% - Cap -
- 27 - Tomas (UT) - Variable vs Fixed products. VUL / VA - Allocation - Return. Performance - Illustration - Different - Projected numbers depend on how you allocate. Hypothetical return - 6%.
- Ben - FINRA - 12% - We want to look at Federal Requirements Compared to Statutory / NAIC Requirements, Can some be borrowed from Federal Requirements. Potentional solutions, RILA's vs FIA's. RILA's - Additional Requirements. 12% - Why are RILAs showing 15% or 20% returns? Do RILA's have similar concerns to FIA's?
- 30 - Bill Carmello (NY) - Other states are ahead of this on this. We haven't looked at Illustrations for Annuities. I've been an outlier on the Life Side. one year approach. Long-term - Whatever has been going on has been misleading for many years. There should be a limit on what has been going on with Derivatives on the Life Side. <More>.
- 32 - Interested Parties
- Bonnie Burns (Consumer Representative) - Outside of Expertise. Gives me a headache. LTC Benefits. 101G Products. Underlying Insurance Products - How do people understand them when they buy them? Disclosure. How are they being sold? How will they work throughout their lifetime?
- Ben - Guaranteed Living Benefits - How we approach those.
- 34 - Dick Weber (Consumer Representative) - Interested Party in 1994-1995 - Model Regulation 582 - Illustration that we came across - in some ways reasonable - but then every 5 years have 36% and 57%. Consumers Expectations that Illustrations create. Specialty on the Life Side. Reasonableness, agent - Projection, Works, impossible scenario, helping bring the consumer point of view to this issue.
- [Bonk: ADD]
- Ben - Great to have context / Perspective leading up to Model Regulation 582. Similarities and Differences will be helpful.
- 36 - Larry Rybka (Valmark) - Big believers in Life Insurance and Annuties. We call them Fake Indexes - Marketers would call them Proprietary Indexes - Back-Testing = Cherry Picked - Actual Returns - Real Money - Bobby Samuelson has quantified some of these Indexes - Averaged about 2-3% ove the last 3 years when the S&P is up considerably. 0%. Talk about a Bait and Switch for Consumers. Actual returns from inception. Deceptive, there's no other way to frame it.
- Ben - Great Point. Illustrative returns and describing them. History of returns versus initial Illustrations. What are we trying to solve here?
- 39 - Birny Birnbaum - Broad Principles - Show a consumer how the product operates in a manner that a consumer can understand. Bill Carmello. 20 pages of small font tables what they are going to look for is that their 200K investment is going to be worth 200 Million dollars in 30 years - The type of thing we want to avoid. Show History in terms of Changing Caps, Floors and others related to Investment Returns. Systematic reduction in Caps, Best practices of other products, projections, FINRA Rule vs Others, Fiduciary Standard, 12% Rule - Subject to constraints that don't apply to Annuities. Issue has been talked about for many years. Presentations - LATF - LIAC - Summer 2023 (Birny and Brenda Cude - Specialty Consumer Understanding). Start with Guiding Principles vs Tweaking current Model Regulations, etc.
- Ben - High Level, Principles, not limiting anything at this point, Any ideas the Working Group could benefit from
- Bobby Samuelson - Not an Investment, be thoughful, Expectations -
- What is the Role of Illustration?
- How it relates to other insurance products vs Investments
- Way more complex than it seems - AG49, DCS (Disciplined Current Scale), Marketing Piece
- Exposure Frames the issue in a very particular way
- FIA - Accumulation - 37%, Clients won't lose money. Income / LTC Benefits - Replacements
- Exchange - Suitability - Based on Illustrations
- Life Insurance - Teaser Rates - Supportability
- Ben - Reframe the Exposure - What are parts that are not covered here - What is the Universe of the issue? Thinking about this more philosophically.
- 48 - Sandy (?) - What percentage of Annuities get filed with an Illustration?
- Ben - I don't know. Varies by state.
- Sandy (?) - Which do and don't speaks to the scope of the issue.
- Ben - Compact - Illustrations aren't part of their review. I'd be interested to hear from the Compact.
- 50 - Mike Yanachek (IA) - Requirement for Life Products - MDL- 582. Not sure about Annuities
- Noura (MD) - No, applies to Life, excludes Variable Life and policies under $10,000. Model 582 has the restrictions.
- 51 - Joshua Blakely (OR) - Oregons process around Illustrations. Compact for Illustrations. Requires all Ads to be filed for all illustrations. We send objections pretty regularly. So, I'm glad that we look at them.
- 53 - Jason Robbins (The Standard) - RILAs, FIAs, Indices, BackCasting, returns are oftentimes excessive, Bobby Samuelson - Benefits. VA World, 12% Limit. Indices seldom meet those numbers. Primary drive is probably these new indices.
- 55 - Brenda Cude (Consumer Representative) - Happy to lend my expertise to the work of this group. But, I feel at a real disadvantaged because of lack of research based information. What do Consumers want / look at when they are considering Annuities. Disclosures - with Agents or without Agents. So, many things I don't know. I can't find any research from the consumer perspective. What consumers need and want when considering annuities. If anybody has that type of information that they can share with us that would be tremendously helpful.
- Joshua Blakely (OR) - Agents vs Online Tool - Company Disclosure - Traditionally explained with Agents present, but now online without agents. Drop downs, Premium Deposit, spits out illustration.
- Brenda Cude - Agents vs Online Tool - Different -