• Rodney C. Wilton: We cannot stop people trying to sell or design gold bricks.
  • As actuaries, all we can do is make it so people have a better chance of knowing what they are buying. The simpler a product, the more chance the prospective policyholder has to know it is a gold brick.
    • For instance, if it is a single premium deferred annuity, illustrated on a nonguaranteed basis at 15%, the policyholder has a good chance of knowing it may be a gold brick. What he needs is a benchmark.
    • People have a benchmark for interest rates.
    • In that respect, universal life is better than participating whole life since dividend scales do not have an interest rate attached to them. You can show a dividend scale that cannot be met and the buyer has no way of knowing that.
    • A simple set of assumptions could be established and a simplistic product could be defined.
    • If actuaries put that out, it would be a benchmark.
    • If somebody is trying to sell something a lot better, he can say, "Which of these assumptions are you bettering?
      • Do you have less expenses than are here?
      • Are you going to make more interest?
      • Are you assuming fewer are going to die, or are you trying to fool me?"
• William TOZER: The ACLI Cost Disclosure Committee has not looked at this issue, but in the area of cost disclosure, it has tried to establish an industry benchmark and has had problems.
  • One is a mortality standard. The mortality standard varies considerably between salary savings market and the select underwriter market.
  • Expense standards would vary between smaller policies and larger policies. Is it more dangerous for a company to illustrate an average interest rate when it is earning a lower interest rate than someone illustrating an above average interest rate and earning that rate?
• Rodney C. Wilton: I am not talking about mandating illustrations.
  • The company would be able to put out any illustration.
  • But if the illustration looked too good compared to an industry vanilla product, the client would have warning.

1988 - SOA - Actuarial Opinion on Non-Guaranteed Elements, Society of Actuaries - 12p