1991-1A

  • 5. Adopt November 21 and December 1 Minutes to Life Marketing Practices to Senior Citizens - Working Group and Amendments to Life Insurance Disclosure Model Regulation and Disclo­sure
    Form
  • Commissioner David Lyons (Iowa) commended David Rodgers (Wash.), Jim Swenson (Ore.), Dean Gallagher (Okla.), Bob Wright (Va.), Roger Strauss (Iowa) and NAIC staff for their participation in development of the work product of this group.
    • He said there are three forms to be considered by the committee: the amendments to the Life Insurance Disclosure Model Regulation, a new disclosure form for consumers entitled "Financial Review of this Policy" and a resolution to the Executive Committee pertaining to the Rules Governing the Advertising of Life Insurance.
    • He asked that consideration be given by the parent committee to the continuation of a working group to address the remaining issues on these life products.
      • The first issue is the actuarial review of the value of the products which will be conducted by an NAIC life and health staff actuary.
      • The second item is a review being conducted by Jim Swenson of the individual industry marketing practices to enable identification of those methodologies which would allow for delivery of the disclosure form to the consumer at the point of sale.
    • Commissioner Lyons indicated that there is one further technical correction to two sections of the Life Insurance Disclosure Model Regulation.
      • He assured the committee that working group members are in agreement with this amendment to Section 6E(2)(0 and Section SI. The language as proposed by industry would delete inconsistent language in those two sections which require that this disclosure form alternately be "attached to the policy'' and "delivered to the insured."
      • He said the suggested amendment provides for "simultaneous delivery'' and provides the prominence and timeliness required for the disclosure form. As originally drafted, the language "attached to the policy" connotes that the form is a part of the policy and subject to the Entire Contract Clause. 
      • Commissioner Lyons noted that the company is still responsible for the information contained on the disclosure form and that this amendment in no way reduces the ability of the insurance department or the applicant to take action on any misrepresentations of an agent.
  • Ed Zimmerman (ACLI) said the disclosure form is not a part of the policy, but that does not mean an insurance department or an applicant would not have a cause of action if there were misrepresentations by an agent.
    • He reminded the committee that this disclosure form was intended to be a simple, straight forward form to facilitate consumer understanding.
  • Neil Rector (Ohio) suggested language for a drafting note.
  • Upon motion duly made and seconded, the committee adopted language for a drafting note to clarify that the amended language does not diminish the insurer's responsibility for the actions of an agent in any misrepresentations on the disclosure form.
  • Upon further motion duly made and seconded, the Life Insurance Disclosure Model Regulation, as amended, and the Financial Review of This Policy disclosure form were adopted (Attachments Three and Four respectively).

1991-1A, NAIC Proceedings

  • LIFE INSURANCE DISCLOSURE MODEL REGULATION
    ADOPTED DRAFT 12/5/90 - (p549)
  • The third issue pertains to the column on the disclosure form which shows premiums accumulated at 5% and the alleged comparison of the accumulated figure to savings accounts.
  • Commissioner Lyons reported that he anticipates additional input from the advisory committee on this issue. 
  • The advisory committee stated that it is philosophically opposed to comparing the accumulated premiums to anything that is not an insurance product and added that this comparison was
    illegal.
  • Commissioner Lyons said all references to savings accounts were removed from the disclosure form.
  • Commissioner Lyons reported that the working group feels strongly that the disclosure form should recognize the time value of money.
  • The advisory committee requested that if the time value of money is shown, they would like the cost of insurance to be disclosed to the consumer as well

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

  • Suprintendent 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.  (p563)

1991-1A, NAIC Proceedings

  • Ed Zimmerman, American Council of Life Insurers, expressed his concern about meaningful disclosures stating that the ACLI did not believe the proposed amendments to the Rules Governing the Advertising of Life Insurance and the Life Insurance Disclosure Model Regulation provide meaningful disclosure.
    • Specifically regarding the advertising rule, Mr. Zimmerman said it would not be possible to determine which policies fall within the parameters of this proposed language.
    • He questioned how institutional advertising should be dealt with.
  • Mr. Zimmerman offered to have the ACLI subcommittee
    focus on cost disclosure issues to find an appropriate way of addressing them.

    • He expressed a need for the working group to more clearly define the objectives of its work product. (p600)

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

  • Interrogatory 13 - Non-guaranteed Elements
  • This question related to the redetermination of non-guaranteed elements in individual life insurance and annuity contracts which provide for the adjustment of benefits, premiums or charges from time to time. For purposes of this question, the term "determination" shall mean both determination at issue and subsequent redetermination.
  • The specific types of business encompassed by this question include, but are not limited to, the following types of contracts if they contain non-guaranteed elements:
    1. Single and periodic premium deferred annuities.
    2. Universal Life contracts providing for fixed and/or flexible premiums.
    3. Adjustable periodic premium life contracts, also known as indeterminate premium life contracts.
    4. Single and periodic premium life contracts.
    5. Renewable and convertible term insurance contracts which do not guarantee the premiums payable upon renewal, or which provide for renewal on the then current premium basis. (p361/396)

1991-1A, NAIC Proceedings