AAA - Journal of the American Academy of Actuaries

  • Statement 1981-12 - Journal of the American Academy of Actuaries re: Manipulation, Dividends, Life Insurance Buyer's Guide -12p
  • To: NAIC Life Insurance (C3) Subcommittee
  • From: American Academy of Actuaries
  • Date : June 2, 1981
    • Background: This statement was presented at a meeting of the Task Force on Manipulation, Lapsation, Dividend Practices and Annuity Disclosure of NAIC Life Insurance (C3) Subcommittee as a status report of the activities of the Committee on Dividend Principles and Practices.
    • This statement follows previous submissions on this subject to the NAIC ( see statements 1979-14, 1960-18, and 1980-32).
    • Letter - TO: NAIC, From: John Harding (AAA)
  • Statement 1984-32
  • During the last several years many life insurance products have been introduced which incorporate policy provisions and design features and characteristics which differ significantly from traditional permanent and term life insurance contracts.
    • d. Performance under the Universal Life contract is best measured by investment functions, mortality risk spreading, the assumption of expense risks, and sales efforts.
    • Hence, matching of costs to an unpredictable premium stream would be distortive and not an appropriate measure of performance under the contract.
  • (p218) - RECOMMENDATIONS REGARDING THE BASIC ACCOUNTING ISSUE
    • By itself, premium income does not represent a good and reasonable measure of performance for contracts with undefined premium and benefit structures, which are offered through varying marketing methods to widely differing markets to satisfy virtually any combination of financial and insurance needs.
    • The absence of significant guarantees as to the contract's ultimate cost, in conjunction with its basic flexibility, suggests that procedures appropriate for long-term contract accounting for guaranteed cost policies is not appropriate for Universal Life.
  • Study Guide
    • "Summary of Statements" - "provides background information, including any cross-references to previous Statements.
      • For purposes of cross-referencing and indexing , Statements have been assigned numbers by calendar year and by order of release in that year, e .g., 1979-1 was the first statement released during 1979.
      • The summary also gives the  page number on which the full text begins.
      • Statements made before 1977 were not compiled, but copies of such  statements may be requested..."
      • "Statements of the Academy" - are not expressions of official positions embraced by the membership as a whole. Rather, they are intended as relevant responses to situations which appear to require a professional statement on actuarial...."