Joseph Peiffer

  • [David McFadden]
  • 2006 0829 – WSJ – A Star Broker, ‘Virtually Unsupervised,’ Puts Ameriprise Arm Under Scrutiny, by Susanne Craig – [link]
    • David McFadden is one of the top brokers at Securities America. How he achieved this feat is now the focus of a National Association of Securities Dealers investigation and recently contributed to a $22 million arbitration award against the firm, a brokerage arm of Ameriprise Financial Inc.
      • For years Mr. McFadden courted employees of oil giant Exxon Mobil Corp. He boasted that he was a certified public accountant and told many of the employees they were set for retirement and promised impressive returns, according to documents filed in a 2003 arbitration claim.
    • Joe Peiffer and Jim Swanson, lawyers with the New Orleans law firm Correro Fishman Haygood Phelps Walmsley & Casteix LLP, say many of their clients have been forced back into the work force and in some cases have had to sell their homes to make ends meet.
  • 2010 0127 – InvestmentNews.com / AssociatedPress – Scammed Exxon Mobil retirees applaud sentencing of ex-Securities America rep – [link]
    • An Alabama man who ran a financial services company in Baton Rouge was sentenced Thursday to five years in prison for a securities fraud scheme in which more than 150 clients lost tens of millions of dollars after they retired.
  • 2010 – LC – USA v. David McFadden, No. 10-30095 (5th Cir.)
  • Adams v. Securities America and David McFadden
  • finra.org/sites/default/files/DisciplinaryAction/p017654.pdf

David Lyons

  • 1990-1994 – Iowa Insurance Commissioner
  • But for now, Mr. Lyons said, “the public’s and the politicians’ perceptions of sales abuses have been so raised that people are ready to accept more radical approaches.”

1994 0308 – NYT – Regulators Seek Limits on Insurer Sales Pitches, by Michael Quint  —  [BonkNote]  —  [link]

  • Commissioner David Lyons (Iowa) asked Ms. Faucett to describe the quotation by her that had recently appeared in the New York Times.
    • She said she was quoted as saying that if you put 10 actuaries in a room you would get 40 conclusions about what the numbers they were examining meant. 
    • She thought it was important for buyers to see how the policy would work but the current approach of the working group would not allow that to happen.
    • Ms. Faucet responded that people spend more time buying a microwave than they do an insurance policy.
    • [Bonk: Ms. Faucett = Judy Faucett, Actuarial Consultant to the NAIC] 
    • <WishList – New York Times Article – ” 10 actuaries in a room”>

1994-1, NAIC Proceedings

  • (p187) – Senator Chuck GRASSLEY (R-IA) – Generally speaking, what has been the experience in the State of Iowa with regard to the problems of consumer disclosure of life insurance?
  • David Lyons, NAIC / Iowa Insurance Commissioner –  If I can be generic, we have had two major problems.
    • The first is a very specific problem, and that is the changing in the interest rates.
    • We have seen a large upsweep in the number of complaints exactly on point to the testimony that we have heard here today relating to the change in dividends and interest structures.
    • So we have had a lot of work to do in the area of determining whether there were intentional misstatements.
      • In that case, there are civil and administrative actions taken by us and criminal prosecutions referred on.
      • If there is an unintentional, yet identifiable, misleading statement made to consumers, then there is administrative action taken to put the consumer into the position they should have been under the information that was disclosed to them. 

1993 0525 – GOV (Senate) – When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  —  [BonkNote]

Bob Wright

  • ?-Years-? – Virginia Insurance Commission
  • Chair of the LDWG – Life Disclosure Working Group – (A) – NAIC  —  [BonkNote] 
  • Bob Wright (Virginia) said the Society of Actuaries report referred to the fact that companies said they had no control over what agents did.
  • Chair of the LDWG – Life Disclosure Working Group – (A) – NAIC  —  [BonkNote] 

1994-4, NAIC Proceedings

⇒  1991-1992 – SOA – Final Report* of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries  —  [BonkNote]  —  142p

  • 2. Standardized Assumptions
  • Tony Higgins (N.C.) asked the working group to consider projections into the future for only a few years of the non-guaranteed elements, and then projections further into the future of standardized assumptions or guarantees.
  • Bob Wright said this allows a company to show how its policy works without the problem of projections of non-guaranteed elements far into the future.
  • Lester Dunlap (La.) also expressed interest in the idea of standardized assumptions to show how the policy works.
    • He said projections far into the future can border on misrepresentation.

1994-3, NAIC Proc. 

  • John Montgomery [California] asked how companies would control brokers who were selling insurance.

1994-3, NAIC Proceedings

  • Bob Wright said the Society of Actuaries report referred to the fact that companies said they had no control over what agents did.
    • [Bonk: Bob Wright = Chair of the LDWG – Life Disclosure Working Group – (A) – NAIC  —  [BonkNote]]

1994-4, NAIC Proceedings

1991-1992 – SOA – Final Report* of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries  —  [BonkNote]  —  142p

2024 0408 – WinkIntel – And Yes, Life Insurance Illustrations are Broken for All Types of Life Insurance, by Sheryl J. Moore

  • 2024 0408 – WinkIntel – And Yes, Life Insurance Illustrations are Broken for All Types of Life Insurance, by Sheryl J. Moore  —   [BonkNote]   —  [link]
    • Given this experience, I take issue with Elan Moas’ position on UL.  Click HERE to read 2024 0408 – ThinkAdvisor.com – Clients With Universal Life Need Performance Updates: Elan Moas, By Allison Bell
    • I also take issue with a few points in this article.
    • More than anything, I SERIOUSLY take issue with the citation that “ninety percent of these policies will never pay a death benefit.” WTH did that statistic come from? – SJM
  • LinkedIn – Sheryl J. Moore – [link] 
    • re: 2024 0408 – ThinkAdvisor.com – Clients With Universal Life Need Performance Updates: Elan Moas, By Allison Bell – [link]
    • Comment: Philip Polkinghorn – If you adjust premium at each change in credited rates you should not crash. Insurance is for low frequency and high severity events. If only 10% of houses burned down , would you not insure your house?
  • [Bonk: Connect:  Richard Weber, Adam Sosnick, Daniel Gottlieb and Kent Smetters, and 1871-1, NAIC Proceedings and 1871-2, NAIC Proceedings]
  • 2023 0524 – Michael Sartain – 86. Adam Sosnick – The Michael Sartain Podcast – [VIDEO-YouTube-03:47:13]
    • 54:04-57:15 – Adam Sosnick – The Dirty Little Secret of Life Insurance is that 90% of Life Insurance Policies never pay out.
        • Okay… we are in Las Vegas, so you will get this analogy: The House Always Wins.”
  • 2023 1130 – NAIC Proceedings – NAIC/Consumer Liaison Committee – 21p
    • 9. Heard a Presentation on How Much Life Insurance Purchased in the U.S. Becomes a Death Claim
      • Richard Weber (Consumer Representative) provided a presentation based on the paper Lapse-Based Insurance, published in 2016 and updated in 2021.
        • The paper was written by David Gottlieb (London School of Economics and Wharton School, University of Pennsylvania) and Kent Smetters (Wharton School, University of Pennsylvania).
        • 2016 – AP – Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters – 83p
        • 2021 (Update) – AP – Lapse-Based Insurance.  American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters – 101p
      • Weber said most individual life insurance policies lapse before expiration.
        • Weber said over 70% of U.S. families own life insurance, and annual premiums exceed $110 billion.
        • Weber said between 1990 and 2010, there were $30.8 trillion in life insurance issued and $24 trillion in life insurance lapses.
        • Weber said 25% of permanent insurance policyholders lapse within just three years of first purchasing their policies, and 40% lapse within 10 years.
        • Weber said nearly 88% of universal life policies ultimately do not terminate with a death-benefit claim, and almost 85% of term policies fail to pay a death claim.
  • 1871-1, NAIC Proceedings, (fka National Insurance Convention)  —  [BonkNote]  —  233p
    • E. W. Peet, Secretary of the National Life Insurance Company of the United States – The experience of most companies shows that about  one half of the policies lapse within ten years from the date of their issue; and probably not more than one-quarter of the policies issued in any year will be in force at the end of twenty years.
  • 1871-2, NAIC Proceedings (fka National Insurance Convention)  —  [BonkNote]  —  657p
    • Julius L. Clarke, Insurance Commissioner, of Massachusetts –: I don’t know as to that. I know that the managers of four or five New York companies, have stated that their hope of success and profit, rested in the number of lapses which would accrue in a given year.
    • George W. Miller, Superintendent of the New York Insurance Department – Then there must be something vicious behind the lapses.

Interest Rate – We Won’t Have To Pay It

  • (p174-175) – And even if interest should fall, in the distant future, below six percent, the premiums charged will undoubtedly enable the company to fulfil the contract with those few policyholders who continue, as the expenses upon these old policies being very small, the excess of margin over expenses will make up any possible deficiency.

1871-1, NAIC Proceedings, (fka National Insurance Convention)  —  [BonkNote]  —  233p

  • (p21) – Paul SARBANES (D-MD). Is there not information from the companies, like internal memos and so forth, where they are relying in fact on these sales items not being carried through to get the benefit in the later years? It is all part of their calculation as to how to make a much larger profit out of what they are doing; is that not correct?
    • GAO – Cody J. Goebel. Yes, Senator, in our report we quote from some of the internal memos that were obtained through depositions in a previous court case, where one of the company officials was attempting to overcome objections within his own company as how can their firm could sell this and promise this high rate of return that is not feasible. And he told them: ”No, no, do not worry about it, we won’t really ever have to pay that amount out, 40 percent will drop out in the first year.” And so the products, the way they were structured and designed seemed almost deceptive to us.
    • Chairman Richard Shelby (R-AL) – I personally believe that companies that are doing business this way, as you describe, exploiting our soldiers, should be banned or something. You know, I do not know exactly how we are going to do it, but we are going to look seriously, Senator Sarbanes and I working with Senator Enzi and others, Senator Allard, on legislation. 

2005 1117 – GOV (Senate) – A Review of the GAO Report on the Sale of Financial Products to Military Personnel, Richard Shelby (R-AL)  —  [BonkNote]

Adam Sosnick

  • 2023 0524 – Michael Sartain – 86. Adam Sosnick – The Michael Sartain Podcast – [VIDEO-YouTube-03:47:13]
    • 54:04 – Adam Sosnick – **The dirty little secret of life insurance – Lapses
    • 1:05:13 ****Believing in astrology
    • 1:08:46 Guys want to be Christopher Columbus for girls
      • [Bonk: Always Marco – women at the gym]
    • Adam Sosnick – Welcome Funds, Inc. (Life Settlements)

2014 – SOA – Modeling of Policyholder Behavior for Life Insurance and Annuity Products: A Survey and Literature Review, Society of Actuaries – 92p

  • 2014 – SOA – Modeling of Policyholder Behavior for Life Insurance and Annuity Products: A Survey and Literature Review, Society of Actuaries   —  [BonkNote]  —  92p
    • Description: This report is a summary based on current actuarial practices around the development and use of policyholder behavior assumptions including the use of dynamic modeling approaches. The research team surveyed and evaluated current practices in the industry; and highlighted current thinking on modeling human behaviors outside the life insurance industry. This project was sponsored by the SOA’s Financial Reporting Section and the Committee on Life Insurance Research.

[BonkNote – OneNote Clips]

Daniel Gottlieb

  • 2012 – AP – Prospect Theory Life Insurance and Annuities, by Daniel Gottlieb – 54p
  • 2012 – NBER – Narrow Framing and Life Insurance, Working Paper 18601 – by Daniel Gottlieb and Kent Smetters – 38p 
  • 2016 – AP – Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters – 83p
    • This paper was previously titled “Narrow Framing and Life Insurance.”
  • 2019 – AP – Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters – 100p
  • 2021 (Update) – AP – Lapse-Based Insurance.  American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters – 101p
  • (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

  • Life insurance is a large yet poorly understood industry.
    • Most policies lapse before they expire.

2012 – NBER – Narrow Framing and Life Insurance, Working Paper 18601 – by Daniel Gottlieb & Kent Smetters – 38p 

  • 2023 1130 – NAIC Proceedings – NAIC/Consumer Liaison Committee – 21p
  • 9. Heard a Presentation on How Much Life Insurance Purchased in the U.S. Becomes a Death Claim
    • Richard Weber (Consumer Representative) provided a presentation based on the paper Lapse-Based Insurance, published in 2016 and updated in 2021. The paper was written by David Gottlieb (London School of Economics and Wharton School, University of Pennsylvania) and Kent Smetters (Wharton School, University of Pennsylvania).
      • 2016 – AP – Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters – 83p
      • 2021 (Update) – AP – Lapse-Based Insurance.  American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters – 101p
    • Weber said most individual life insurance policies lapse before expiration. Weber said over 70% of U.S. families own life insurance, and annual premiums exceed $110 billion. Weber said between 1990 and 2010, there were $30.8 trillion in life insurance issued and $24 trillion in life insurance lapses. Weber said 25% of permanent insurance policyholders lapse within just three years of first purchasing their policies, and 40% lapse within 10 years. Weber said nearly 88% of universal life policies ultimately do not terminate with a death-benefit claim, and almost 85% of term policies fail to pay a death claim.
    • Weber said lapses are more prevalent for smaller policies and are more exposed to background shocks, including unemployment, medical expenses, and new consumption opportunities. Weber said insurance agents receive most of the sales commission in the first or second year and, anecdotally, consumers are more likely to lapse their policies when they are not in contact with their sales agent. When policies are sold primarily based on the illustration, Weber said customer dissatisfaction may result when they see lower results than initially illustrated. Weber said commissions continue to be the driver of sales behavior in a number of cases and lapses often follow a failure to consider the client’s best interests and the suitability of the recommendation.
    • Weber requested state insurance regulators to review how policy illustrations should be prepared under current state regulation and evaluate the experience of the New York Department’s Insurance Regulation 187. Weber said state insurance regulators should move toward requiring insurance carriers and insurance producers to only make policy recommendations that are suitable to the consumer’s circumstances and place the client’s interest above the interest of the producer.