Free Look / Cooling Off Period

  • NAIC - CIPR-Knowledgebase - Model Regulation 582: Life Insurance Illustrations - [link]
    • Question:  .... if the regulation includes a 10 day free look provision, would staff also provide me with minutes and other official notes on the purpose of the free look period?
    • Answer: ... the "10 day free look provision"... was never a part of this model.
  • Gregory S. Strong: I am rather curious as to how Allstate came up with the ten-day period.
    • Was it some kind of actuarial magic, or is there some reason for that figure?
    • It does seem awfully fast, with the mail delay these days and the inherent communication problems.
    • Perhaps with a company of your size you do not have the problems other companies have.
  • Paul Overberg: The ten days is an arbitrary number.
    • It is picked up from the personal health insurance regulations which are effective in about thirty or more states; I believe there has been talk in the industry of ten days and, of course, State Mutual adopted the ten-day free look.
    • In our case we say that it is ten days from the date the customer receives the policy.

1973 - SOA - Price Disclosure and Cost Comparison, Society of Actuaries - 186p

  • (p57) - Statement of Leslie V. Dix, Director for Legislative Affairs, President's Committee on Consumer Interests - The precedent for giving the consumer 3 days or even longer to reconsider and to cancel has been voluntarily set by some segments of the door-to-door and mail order sales industry itself.
    • According to advices from the Office of the Superintendent of Insurance for the District of Columbia, insurers selling industrial insurance door to door allow a 10-day acceptance period, and accident and health insurance sold by mail generally follows the same concept.

1968 0304, 05, 20, and 21- GOV (Senate) - Door-to-Door Sales Regulation, Warren G. Magnuson (D-WA) - [PDF-p-GooglePlay]

  • 2017 1115 - Letter - ACLI to NAIC - LIBGWG, Redlined Draft - Life Insurance Buyer's Guide - 12p    
    • Member Comment: I think the last sentence is too broad of a statement.
      • If the free look period ends, the amount you get back on the 11th day is far different than the amount you would get back 5 years down the road.
  • (p464) - Jay Shaffer, Subcommittee Counsel - Well, the FTC's problem is that, once the person signs the application and pays his premium deposit, if he does not get any of the cost disclosure material until after that, he is probably not going to look at it or act on it in any way, because he has already made a psychological commitment to a particular product. Human nature being what it is, he is just not going to do anything about it.
    • Mr. Minck said yesterday that he thought that the percentage of sales that were reversed by the customer under the 10-day free look was 1 or 2 or 3 percent perhaps.
    • It is not very much. I just wonder what your reaction is to the FTC's claim that the 10-day free look really is not very effective.
  • Joel Shapiro, NALU, chairman, Committee on Federal Law and Legislation. National Association of Life Underwriters - I can understand their reaction. I do not subscribe to it. I think it would inhibit the sales process and not be in the interest of the public.

1978 0807, 0814 and 0815 - GOV (House) - Life Insurance Marketing and Cost Disclosure, John Moss (D-CA)  ---  [BonkNote]

  • (p1503) - John Durkin, New Hampshire Insurance Commissioner
    • The free look should be at least 3 days, or even 10 days, but there should be a cooling off period of at least 3 days.

1973 0221 and 0222 - GOV (Senate) - The Life Insurance Industry - Philip Hart (D-MI)  ---  [BonkNote-Part 2 of 4]  ---  [PDF-733p-GooglePlay] 

  • Superintendent Stokes concurred, stating that she has serious problems with providing the disclosure form after the consumer has made a decision to purchase the policy.
    • She did not feel the free-look period was an acceptable substitute for giving the disclosure information at an earlier time.

1991-1A, NAIC Proc. - Life Marketing Practices to Senior Citizens Working Group 

  • Without the ten day free look provision the company must give the agent a supply of Buyer's Guides and the ratebook must also  contain information needed to complete the Policy Summary.
    • This will indeed be time consuming for the agent to compute in front of the prospect.
  • The time required to do the arithmetic could distract from the real purpose of the sales interview, which is to convince the prospect that he needs insurance and that now is the time to fill this need.
    • Since supplying this information can interfere with the sales process, it would appear much better to give the customer a ten day free look and supply the required information at time of delivery.

--  Paul J. Overberg

1976 - SOA - Cost Comparisons and Policy Language, Society of Actuaries - 16p

  • (p315) - In a June 13, 1978 letter to the NAIC, the ACLI opposed the 20-day "cooling-off" period option on the following ground:
    • Once a replacement sale has been consumated and the existing policy, insurer or agent have been discredited in the eyes of the policyholder, a reversal of that action will be extremely difficult, even if replacement is shown to be  disadvantageous to the policyholder.125
    • Reprinted in Moss Subcommittee· Hearings, supra n. 4, at 409.
  • In testimony before the Moss Subcommittee, Mr. Julius Vogel, Vice President and Chief Actuary of Prudential Insurance Company, testifying on behalf of the ACLI, readily admitted that the industry has taken inconsistent positions on the timing of disclosure in initial sales and replacements.
    • Mr. SHAFFER (Subcommittee counsel): My obvious question is, isn't this inconsistent with your position on timing for the model solicitation rule?
    • Julius VOGEL (ACLI / Prudential ): Yes, it is.

1979 0710 and 1017 - GOV (Senate) - FTC Study of Life Insurance Cost Disclosure,  Howard Cannon (D-NV)  ---  [BonkNote]