1996-2, NAIC Proc.

• p646 - Report of the Buyer's Guide Subgroup (Attachment Five-A) 695
• (646) Draft of Life Insurance Buyer's Guide (Attachment Five-Al) 696
• (693) 1. Report of the Buyer's Guide Subgroup
  Lester Dunlap (La.) reported that the Buyer's Guide Subgroup discussed the comments they received on the revised Buyer's Guide for Life Insurance in a conference call and at a meeting in New York City. The purpose of the revision is to update the information contained in the Guide and to present it in a more readable, consumer-friendly format. The only real issue remaining before the group is to determine the value of retaining information on cost indices in the document. He said most respondents said that the cost indices section was of little value and so the current draft does not contain cost indices information. James Hunt (Consumer Federation of America) suggested this be replaced with information on yield indices, and the group was considering that option. Mr. Dunlap said the group plans an additional conference call after comments have been received on the current draft and the group may participate in an interim meeting to be held in Kansas City in July. Tom Foley (N.D.) asked what the time frame was for completion of this project. Mr. Dunlap responded that, with an opportunity to meet before the Fall National Meeting, the group should be able to complete its project and have the Buyer's Guide ready for adoption at the Fall National Meeting.
  Upon motion duly made and seconded, the report of the Buyer's Guide Subgroup was received (Attachment Five-A)
• (695) ATTACHMENT FIVE-A - Report of Buyer's Guide Subgroup of the Life Disclosure (A) Working Group
  The Buyer's Guide Subgroup of the Life Disclosure (A) Working Group met by conference call on May 23, 1996, and in New York, N.Y., on June 1, 1996. Lester Dunlap (La.) chaired the meeting. The following subgroup members or their representatives participated: Don Koch (Alaska); and Tony Higgins (N.C.). During the conference call the Buyer's Guide Subgroup went through the draft of the Life Insurance Buyer's Guide section by section and reviewed the comments that have been received to date and made changes to each section as appropriate. When the group met in New York City, Lester Dunlap (La.) called on James Hunt (Consumer Federation of America) to comment on the earlier letter he had sent the working group. Mr. Hunt said that he had favored for many years the idea of rate of return disclosure, because he considered the indices in current use to be flawed and not useful. Mr. Dunlap said the consensus of those who had commented to the working group was that the indices were of little value to consumers. The working group decided to delete the section of the Buyer's Guide that explained the cost indices. Mr. Hunt suggested that this be replaced with a yield index description. He said consumers do not get much helpful information on how to decide what to buy or whether to replace a policy, and he thought the yield index information would be a helpful tool. Mr. Dunlap asked him to write a section for the Buyer's Guide that the working group could consider as a substitute. Mr. Hunt agreed to provide that information by early July. Mr. Hunt opined that the most important warning to include in the Buyer's Guide was that an individual would lose if he did retain a cash value policy for 15-20 years. He suggested a warning that would jump out at people. He asked if the Buyer's Guide was intended to cover term insurance also, and suggested that replacing term insurance might be appropriate in many instances. Mr. Dunlap responded that the Buyer's Guide was intended to provide information about all types of insurance. Mr. Hunt referred the members of the working group to the section on replacing the current policy entitled "What About the Policy You Have Now?" He suggested that the phrase "it is seldom in your interest to replace a policy" is not true of term insurance. Tom Foley (N.D.) suggested that perhaps the working group needed a broader discussion of whether to consider only cash value insurance in the Buyer's Guide or whether to consider all types. Mr. Hunt responded that the problem was that advice for cash value insurance was different than that for term insurance. Mr. Hunt said that it was important to make clear that term insurance might not be renewable at the end of the term, and he suggested adding information on insurability. Several more comments were received on the issue of replacement of life insurance and Mr. Dunlap clarified that the purpose of the paragraph was not to say "do not replace life insurance," but rather to suggest the purchaser find out more information before replacing a policy. The group discussed the section entitled "How Much Do You Need?" Mr. Hunt said that the section was not very helpful and suggested replacing it with a statement that it was appropriate to purchase six to eight times gross income in life insurance.
  Mr. Dunlap asked whether this was a generally accepted parameter. Mr. Hunt responded that he did not know whether the guideline was always appropriate but he suggested the group stay away from fancy formulas in calculating a suggested amount of insurance.
• Life Insurance Committee
  696 NAIC Proceedings 1996 2nd Quarter
  The working group agreed to make several other amendments to the Buyer's Guide to improve readability and to clarify language that had been identified as ambiguous. Brenda Cude (University of Illinois) suggested a number of amendments to improve readability and to eliminate complex language from the draft. The draft is attached in both a clean version and one showing changes from the existing buyer's guide. (Attachment Five A-l).  Mr. Dunlap suggested the working group hold a conference call sometime during the first two weeks of July to consider additional comments and he projected adoption of the model by the group at the NAIC Fall National Meeting.
  ATTACHMENT FIVE-1A
  LIFE INSURANCE BUYER'S GUIDE
  Draft: 6/3/96