Shock

  • The flexibility of Universal Life that initially appealed to the policyholder which allowed him to change premium payments, coverages, etc., will make this annual report of the condition of his "account" an unanticipated shock.

--  Dale W. Hotze, is President of Hotze & Associates Inc., Jacksonville, Florida. 

1983 - SOA - Universal Life (rsa83v9n32), Society of Actuaries - 22p

  • I am on this panel principally as Chairman of the ACLI Subcommittee on Cost Comparisons.   
  • Much of our work has dealt with the issue of illustrating Nonguaranteed Elements.
  • As a backdrop, I want to quote from a January 1988 Financial Planning article.
    • The article is entitled "Future Shock" by Harry Lew with the sub-heading: <WishList>
      • "What will happen when a generation of insurance buyers begins comparing unrealistic illustrations with the actual performance of their policies?
      • Industry leaders would prefer not to find out."

--  Larry R. Robinson, Chairman of the ACLI Subcommittee on Cost Comparisons

1988 - SOA - Actuarial Opinion on Non-Guaranteed Elements, Society of Actuaries - 12p

  • (p5) - 9. UK - The UK policy underscores that, from time to time, disruptions will occur that prevent an insurer from operating as usual and that insurers need to consider a range of severe but plausible disruption scenarios.
    • This approach acknowledges that blind spots can act as a substantial step towards shocks and disruptions becoming reality.

2022 1013 - IAIS - Draft – Issues Paper on Insurance Sector Operational Resilience - 28p

  • (p1) - Opening Statement of Senator Metzenbaum
    • Today the Subcommittee on Antitrust and Monopoly begins its examination of cost disclosure in life insurance.
    • Life insurance is a tremendous business in this country.
      • Americans carry 140 million ordinary life policies, with nearly $1.3 trillion in coverage.
      • Cash-value life insurance accounts for more than 20 percent of total savings in this country-second only to deposits in savings and loan institutions.
    • The business of life insurance is presently exempt from the Federal antitrust laws under the McCarran-Ferguson Act.
      • It is the only major financial business without Federal regulation.
      • This is a unique situation.
    • It is fair to ask how well has the industry operated under this system.
      • Do consumers of insurance enjoy the benefits of competition?
      • Are consumers able without heroic efforts to find the best coverage for their needs at the lowest cost?
      • And are consumers able to readily understand precisely what kind of coverage they are buying?
    • My staff has conducted a major investigation of these issues.
      • I must say today that I was shocked when I saw its findings. 

1979 0524 - GOV (Senate) - Cost Disclosure in Life Insurance, Howard Metzenbaum (D-OH)  ---  [BonkNote]

  • (p37) - Regarding the amount of the emotional distress damages awarded, “[w]hen an appellate court reviews a jury verdict for excessive damages, it can interfere ‘only on the ground that the verdict is so large that, at first blush, it shocks the conscience and suggests passion, prejudice or corruption on the part of the jury.’
    • [Citation.]” (Pearl v. City of Los Angeles (2019) 36 Cal.App.5th 475, 491, quoting Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 507.) 

2022 0304 (Date Filed) - LC - Williams v. National Western Life Insurance - Opinion on Transfer, Appeals Court - 52p

  • (p7) - Dinallo:  I decided that I had enough information, and enough belief in the statutory accounting, which we can talk about. Which is really part of the story. That I was going to go out there and make statements about my confidence in the insurance companies of AIG.
    • Because I did believe that on a statutory accounting basis, they had more than enough assets to match their long-term liabilities on a statutory accounting basis. Not mark to market. Which Geithner to this day …
  • YPFS: Can you talk a little bit more about that?
  • Dinallo: When Geithner heard this, I made this joke. I don't know if I've been quoted.
    • I think he thought I was explaining the Mayan calendar to him. It was so alien and so weird.
    • But basically, life insurance companies have long-term liabilities, and they match it with long-term assets that are going to perform by maturing 20 years from now.
    • That's why so much of the reserves are put towards basically debt, Treasuries, etc., that are highly rated.
      • So that they will almost certainly, hopefully, certainly perform.
      • Which means mature. You're going to get the coupon along the way, albeit a small yield.
      • The volatility before maturation over the 20 years does not count.
    • This is the biggest debate in insurance right now.
      • Between Europe, the feds, and the United States.
        • That the inter-period where there's volatility, and this is what I mean by, back with Shelby.
        • They were like, "Oh my god, they're insolvent."
        • I'm like, "They're not insolvent. They may be, on some reporting basis, marginally insolvent."