Academic – Snippets

  • The Subject of Life Insurance is one that everyone will discuss sooner or later.
  • Fortunately, nearly everybody knows something about it, but unfortunately many who buy it and some who sell it have only a superficial  knowledge.
  • Even those who legislate controls or propose reforms for the  business are not always sufficiently informed.  (p1)

1961 – Book – Modern Life Insurance, by Robert I. Mehr

  • Transparency is a concept imported by Spencer Kimball. Hart Hearings, supra 28, at 1086·1237, 1087·1088 – (testimony of Spencer Kimball);
    • [Bonk: Hart Hearings = 1973 / 1974 – GOV (Senate) – The Life Insurance Industry – Phillip Hart (D-MI) – 4 Parts  —  [BonkNote]]

1980-2, NAIC Proceedings

  • Task Force on Life Insurance Disclosure System – LIDS – NAIC  —  [BonkNote]
  • I am William C. Scheel, Associate Professor of Finance and insurance, University of Connecticut, Storrs, Connecticut.
  • My remarks today are my own; they are uncompensated and may only coincidentally be views shared by anyone else.
  • Introduction
    • During my last encounter with this task force, I questioned whether the group was just playing another game of Dungeons and Dragons.
    • The Chairman assured me that; indeed, pink worms, gnomes, Merlin and ghouls were not on the Committee’s agenda and that we would soon be witnessing the claims of what has proven to be the best D&D game in town for the last decade.
    • Never in my wildest imagination did I think we would be handed by this task force the single most important regulatory proposal in life insurance and annuities — ever!
    • The Life Insurance Cost Disclosure System (LIDS) is, indeed, a crowning achievement. It breathes new life into this creaky mechanism we call state insurance regulation.
      • Some of us who have lost the faith can only humble ourselves and marvel at this reinstatement of independence and new found strength of state insurance regulation.
  • LIDS clearly heralds a re-emergence of bold initiative and is an historical turning point. In the words of a well-known celebrity: “How sweet it is.”

1981-4, NAIC Proceedings

  • After the introduction of indexation, this was no longer a problem except for some “tricks”
  • e.g.,  At one point, indexation was only semi-annual and not monthly, so people took policy loans one day after the indexation day and repaid the loan prior to the next indexation day.
    • They made a lot of money out of these transactions.

—  Dr. Kahane, not a member of the Society, is Associate Professor and director of the insurance center at Tel Aviv University.

1982 – SOA – The Experience of Living Under Sustained Inflation, rsa82v8n19 – Society of Actuaries – 18p

  • The Mechanics of Universal Life Policies
  • Once the policy is activated, the term policy and the accumulation account each operate independently.

1985 – AP – Universal / Variable Life Insurance Policy Purchase Decisions, by Stephen P. D’Arcy and Keun Chang Lee – 58p

  • The interest rate sensitivity of UL policy cash values, amplified by the corresponding cost of insurance sensitivity with declining interest income, suggests UL has always been a simple question of Duration.

2011 – AP – Universal Life Insurance Duration Measures, by David Lange, Peter Alonzi and Betty J. Simkins – 14p

  • 2020 – AP – Exploring Universal Life Insurance – Actuarial – 47p
    • digital.wpi.edu/concern/student_works/p2676z121?locale=en
      • Exploring_UL_Policy_Example.xlsx
      • Universal_Life_Lesson_Plan_.pptx
    • Abstract
    • This project focused on exploring Universal Life insurance by learning about its history, components, and process of reserving.
    • To conduct our research, we read several textbooks, study notes and a Valuation Manual.
    • We then created an Excel deliverable of a theoretical UL policy, created a Lesson plan about UL to teach to actuarial students, and a paper that explains the ins and outs of UL from a consumer standpoint and how the mechanics of a UL policy would work for a potential policyholder.
  • (p4-5) – 2.1 Substantial Lapsing
  • LIMRA, a large life insurer trade association, and the Society of Actuaries define an insurance policy lapse as “termination for nonpayment of premium, insufficient cash value or full surrender of a policy, transfer to reduced paid-up or extended term status, and in most cases, terminations for unknown reason” (LIMRA 2011A, P. 7).
  • As Figure 1(a) shows, 29% of permanent insurance policyholders lapse within just three years of first purchasing the policies; within 10 years, 57% have lapsed.
    • In particular, nearly 88% of universal  life policies, a popular type of permanent insurance, do not terminate with a death benefit claim.

2021 (Update) – AP – Lapse-Based Insurance – American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters – 101p