NAIC

• Drafting Note:  Although highly flexible, Universal Life insurance is generally considered a permanent life insurance plan.
  • Most companies encourage a premium level which will provide lifetime insurance protection.
  • Every Universal Life insurance policy of which the drafters are aware has a “net level premium” that could be computed which would guarantee permanent protection.
  • As a result, it is expected that most Universal Life insurance policies will be sold as permanent plans.

NAIC - Universal Life Model Regulation

Consumer Representative / Academic

• Comment [BJC2]: Permanent insurance is a term used only by the industry – not by consumer educators.
• We would prefer – Life insurance comes in two basic types: Term and whole life (also referred to as permanent insurance).

--  Dr. Brenda Cude, Professor Emeritus - University of Georgia, NAIC Funded Consumer Representative, DSEF - Direct Selling Education Foundation - Academic Advisory Council - [link] 

2017 1120-?? - NAIC - LIBG, Life Insurance Buyer's Guide Working Group - Brenda Cude to NAIC - re: 08-18-2017 Draft Life Insurance Buyer’s Guide - 5p - - 6p - [cmte_a_libg_wg_171120_karrol_kitt_brenda_cude_buyers_guide_comments

ACTUARIAL

• Adjustable Policy
  • The old distinction between term and permanent is usually not appropriate for an adjustable life policy.
  • ⇒  In every sense an adjustable life policy should be a permanent policy regardless of what the current static plan may be.
  • Its flexibility means that it can be the only policy a person ever owns even if the initial version corresponds to a ten-year term plan.
  • It seems better to look at it in terms of what it can adjust to in the future rather than to concentrate on whatever plan today's premium/face amount relationship requires for defining values and dividends. 
  • The emphasis should be on the basic permanent result that flows from the adjustability.
  • It is necessary that those with experience in individual life insurance adjust their thinking to adjustable life.
  • Traditional attitudes and approaches are not always appropriate.  (p282)

--  Charles E. Rohm 

1976 - SOA - Toward Adjustable Individual Life Products, Society of Actuaries, Walter L. Chapin - 50p

• The Model Regulation specifies that the expense allowance shall be that for level premium, level death benefit endowment insurance at the maturity date.
  • The rationale for choosing a "whole life" expense allowance of this sort was thought out carefully.
  • It was felt that most of these plans were sold as a substitute for traditional forms of permanent insurance.
  • In addition, the expenses incurred in putting one of these policies on the books is comparable to plans where the whole life expense allowance is permitted.
  • Any expense allowance smaller than that for whole life would leave universal life plans at an unfair disadvantage in comparison to traditional plans of insurance.

--  Shane Chalke

1984 - SOA - NAIC Update, Society of Actuaries - 24p

• Universal Life
  • Unlike adjustable life, where a current plan is defined, but is subject to change, a universal life policy at any time has only a "minimum" and a "maximum' plan....
  • The adoption in 1983 of the Model Regulation for Universal Life provided recognition that these policies could be configured as whole life policies. (p622)

• (p612-) - Attachment One-B, To: Members of The Society of Actuaries, Date: October 1988 - Re: (SOA) Task Force On Nonforfeiture Principles Interim Report-Tentative Conclusions

1989-1, NAIC Proceedings

INDUSTRY

• This approach treats flexible life as a continuous level premium, level death benefit whole life policy.
• This is the type of program that most people think about when life insurance is discussed.
• Second, this approach emphasizes that the payments made by the applicant are the premiums --not the expense loads or monthly mortality charges. 

-- William T. Tozer

1981 - SOA - Individual Life Insurance Cost Disclosure Issues, Society of Actuaries - 22p

ACADEMIC

• Persons seeking life insurance for their entire lives have several choices:  they may
  • (1) buy a one-year renewable term contract and renew it annually, paying the full insurance cost for each year.  (p37)

1987 - Textbook - Life Insurance: Theory and Practice, Mehr and Gustavson

GOVERNMENT

• There are two main types of life insurance policies:
  • Whole (or universal) life insurance policies are considered permanent.
  • As long as you pay the premium, the policy is in effect.  (p32)

Consumer Action Handbook, published by USAGov, part of the U.S. General Services Administration’s (GSA) Office of Citizen Services and Innovative Technologies - 152p 

• Life insurance is available in two basic types:
  1. term and
  2. permanent (which includes whole life, universal life, variable life, and variable universal life). ²⁰⁵
• Permanent (cash value) life insurance pays the beneficiary whenever the insured dies, as long as premiums have been paid. (p38)
• Life insurance is available in two basic types: term and permanent (which includes whole life, universal life, variable life, and variable universal life). ²⁰⁵  - ACLI 

2016 11 - FIO (Federal Insurance Office) - Report on Protection of Insurance Consumers and Access to Insurance - 58p

Lawsuits

• Mr. Affleck states that using the term "permanent" is "deceptive" with regard to universal life insurance.
  • [Bonk: Mr. Affleck = Plaintiff Expert Witness]
• Universal life is considered "permanent insurance" in the industry.
• For example, a governmental website for seniors, maintained by the Social Security Administration, has the following definition
  • "Permanent Insurance -- including whole, ordinary, universal, adjustable and variable life -- is  protection that can be kept in force for as long as you live"⁸

2003 - LC - Rebuttal Report of Mr. Affleck by Donna R Claire re: William L. Fay, et. al. v. Aetna Life Insurance and Annuity Company et. al.

• 21. Aetna does not dispute this paragraph, but adds that Plaintiffs never asked what the term "permanent insurance" means.

2003 - LC - Fay v. Aetna - Document 65 - Defendant Aetna Life Insurance And Annuity Company's Response To Plaintiffs' Separate Statement of Additional Undisputed Material Facts - Filed 06/02/03 Page 6 of 32 - Case 1:01-cv-10846-RGS

IRS (Internal Revenue Service)

• The 818(c) election is another issue that is being looked at by the Service. In the Hutton ruling, the Service specifically took a caveat indicating that they were saying nothing with respect to this issue.
  • One question that was discussed briefly was what was the plan of insurance?
  • How do you know whether you have a permanent policy that qualifies for $21 per thousand, or a term policy that qualifies for $5, or perhaps some that qualifies for nothing.
  • That is an unanswered question."

--  William B. Harman, Jr.

1981 - SOA - Universal Life, (RSA81V7N412), Moderator: Samuel H. Turner, Ben H. Mitchell, Society of Actuaries - 16p