Variable Life Insurance Task Force - NAIC

  • In December 1981 the NAIC created a special Variable Life Insurance Task Force, which also reports to the Life Insurance(A) Committee.
  • There is a Variable Products Advisory Committee, which reports directly to the group. Jerome S. Golden, of Monarch Resources Inc., in New York, New York, is the Chairman of this Variable Products Advisory Committee.

1983-1, NAIC Proceedings

  • Group Name Change  - Variable Life Insurance Task Force be renamed the Registered Life Products Task Force 
    • In light of this, Commissioner Wigen moved that the name of the Variable Life Insurance Task Force be renamed the Registered Life Products Task Force with Universal to remain as is.
    • The motion was seconded and passed.

1983-2, NAIC Proc. - [Bonk: I don't think the name ever actually changed.]

  • Variable Life Insurance (A) Task Force
    • 1982-2, NAIC Proc - LIAC - The report of the Life Insurance (A) Committee was adopted following an amendment to clarify that the ACLI study on variable life insurance regulation was received as an exposure draft by the Variable Life Insurance Task Force and not adopted. - <WishList>
    • 1983-2. NAIC Proc. - Variable Life Insurance (A) Task Force
    • 1983-4. NAIC Proc. - Variable Life Insurance Regulation (A6) Task Force
    • 1986-2, NAIC Proc. - Illustration Guidelines for Variable Life Insurance adopted as a model

⇒1986-1, NAIC Proc.

  1. Report of the Life and Health Actuarial (EX5) Task Force

The Life and Health Actuarial (EX5) Task Force presented eight recommendations.

  • (Attached to the Life and Health Actuarial (EX5) Task Force report.)
  • Recommendations 1, 2 and 4 were received as presented by the task force.
  • Recommendations 5, 6 and 8 were adopted as presented.

Recommendation 3 is concerned with changes in the actuarial opinion that accompanies life and health annual statements. Tony Spano (American Council of Life Insurance) reported that an ACLI survey shows that small companies cannot afford the costs of preparing tests of cash flow that would be required under the proposed change. He also stated that implementing this new requirement would be premature because the actuarial profession has not created standards for performing cash flow analysis. Others also expressed their concern that implementing the task force recommendation at this time would be premature.

Two amendments to task force Recommendation 3 were adopted by the committee. Upon motion duly made and seconded, the implementation date was changed to 1987 and the recommendation will be referred to both the Blanks and the Examination Oversight (EX4) Task Forces to consider its inclusion in the Annual Statement and [A> Examiners Handbook <A].

Recommendation 7 was amended to receive an update of the instructions to Schedule M of the Life and Health Annual Statement Blank for exposure purposes only.

⇒1986-1, NAIC Proc.

  1. Adoption, for disclosure purposes only, these guidelines related to variable life insurance.

Minimum Nonforfeiture Values (Attachment Three-E)

Separate Account Investments (Attachment Three-F)

Illustrations Furnished with Sales of Variable Life Insurance (Attachment Three-G)  

⇒1986-2, NAIC Proc. 

  1. Adopted report of the Universal and Other New Plans Task Force, recommending the model modified Guaranteed Life Insurance Regulation and Illustration Guidelines for Variable Life Insurance for adoption.

Chairman - Jerry Golden ? , Monarch

SEC, 12%

  • 1996 - NAIC - Variable Life Illustrations Subgroup of the Life Disclosure (A) Working Group - June 2, 1996
    • Mr. Morse reported that under the current rules, a personalized illustration may be prepared using 0% and 12%.
    • The 12% includes the current morality and expenses and the 0% illustration uses the maximum mortality and expenses allowed in the contract.
    • Mr. Morse opined that this approach does not do consumers the best service.
      • He saw two problems with this approach:
        1. it does not do a good job of showing a consumer what the risks and results might be. The risks in a variable life product include:
          investment risks, a risk that the cost of insurance charges may go up, and a risk that the mortality costs may go up as time passes;
        2. not all purchasers invest in an aggressive stock investment option.
      • If 50% of the investment goes into treasury bills and 50% in stocks, the return shown should be 8% or 9% rather than 12%.
    • James Hunt (Consumer Federation of America) said that the illustrations of variable life that he had seen had been relatively cleaner than those illustrations of nonvariable life.
      • He was unaware of the reason why the SEC chose 12%, because the highest average return he had seen for historical returns on stock funds was approximately 10%.
  •