Stockbrokers

  • More than 150 life insurers now own brokerage or investment firms, according to the National Association of Securities Dealers.
  • ”The franchise value of a major securities firm is something that is clearly established,” said George L. Ball, chairman of Prudential-Bache Securities. ”Insurance is a steady parent for the more volatile investment arm, making a very nice link.”

1986 1227 – NYT – Why Insurers Covet Brokers, New York Times – [link]

  • The product is likely to be sold by sophisticated agents and financial planners.
  • Many of these agents and planners are accustomed to similar investment features in annuities and will be the first to make the transition to variable universal life.
  • Another distribution source for the product is stockbrokers. 

—  Zafar Rashid

1985 – SOA – Variable Universal Life Insurance, Society of Actuaries – 22p

  • The Proposal is premised upon the Department’s rejection of the dichotomy under the law between a sales recommendation to a consumer on the one hand, and advice provided for a fee on the other.
    • The Department’s Proposal seeks to define the term “investment advice fiduciary” to include anyone who is in the business of making routine sales recommendations by persons engaged in commonplace sales and marketing efforts.
    • The Fifth Circuit disagreed with the Department’s conflation of sales activity and fee-based investment advisory activities back in 2018, observing that “when enacting ERISA, Congress was well aware of the distinction … between investment advisers, who were considered fiduciaries, and stockbrokers and insurance agents, who generally assumed no such status in selling products to their clients.”
  • The court found that the Department’s interpretation of ERISA:
    • conjoins “advice” with a “fee or other compensation, direct or indirect,” but it ignores the preposition “for,” which indicates that the purpose of the fee is not “sales” but “advice.”
    • Therefore, taken at face value, the provision rejects “any advice” in favor of the activity of “render[ing] investment advice for a fee.”
    • Stockbrokers and insurance agents are compensated only for completed sales (“directly or indirectly”), not on the basis of their pitch to the client. Investment advisers, on the other hand, are paid fees because they “render advice.”
    • The statutory language preserves this important distinction.

2024 0102 – Letter – ACLI to GOV-DOL / EBSA – Subjects: Retirement Security Rule: Definition of an Investment Advice Fiduciary (RIN 1210-AC02); Proposed Amendment to Prohibited Transaction Exemption PTE 84-24 (Application No. D-12060); Proposed Amendment to Prohibited Transaction Exemption PTE 2020-02 (Application No. D-12057)  —  [BonkNote] 

  • (p151) – Written Statement of the Connecticut Mutual Life Insurance Company
    • Single premium sales grew from 1984 through 1987 from just over $1 billion of premium to just under $10 billion, approximately doubling the sales for each preceding year.
      • More astounding, perhaps, is the fact that single premium sales from a small fraction of new premium for all forms of insurance to virtually rival sales of all other forms of insurance combined – which approximated $10 billion in 1987.
    • More important, perhaps, are the facts cited in the GAO testimony indicating that more than half of single premium sales during 1986 were attributable to stockbrokers.  

1988 0325 – GOV (Senate) – Tax Treatment of Single-Premium Life Insurance, Max Baucus (D-MT)  —  [BonkNote]

  • I’d like to go through a bit of history and cover some of the challenges that are coming up and see what we might be able to do with them.
    • Let’s start with October 1987, which, in my mind, started a nifty period for the annuities — the “golden age,” as I would call it.
    • There was a period of time, 1985 through most of 1987, when single premium fixed life insurance and single premium variable life insurance were really coming on strong.
      • These products were offering the potential for tax-free income through wash loan features, and the indication was that the SPDA product was going to be left behind. Things changed rather abruptly – within a two-week period.
      • There was a 500-point Dow Jones decline in October of that year, and a big challenge emerged on the tax front with Stark and Rostenkowski. Ultimately, a year later, the tax laws were changed to preclude tax-free income through use of the loan feature.
  • So it was back to basics for agents and stockbrokers. The good, old tax-deferred annuity concept wasn’t that bad after all, so they got re-energized.

—  Michael Winterfield, partner with Ernst & Young in New York City

1991 – SOA – Annuity Product Development Update, Moderator: Philip Polkinghorn, rsa91v17n218 – Society of Actuaries – 22p 

Mormons

  • 1939-0 , NAIC Proc. - 1939 0622, THURSDAY AFTERNOON SESSION
  • p107-117 - At this time the convention will listen to an address by Commissioner C. Clarence Neslen, Insurance Commissioner of Utah, on the subject, "Insurance and the Mormon Church." The Commissioner of Utah. (Applause).
    • p107 -  Our friend, Bill Sullivan, asked me, before I proceeded to say anything about my own church, to make some reference to the Catholic Church.
      • I heard of a story of a Catholic who had been here and there, accomplishing very little in his life. He had been away from home for a long while. He met his Priest upon his return, and the Priest proceeded to tell Dennis what a failure he had been, how he had accomplished nothing for his family, nothing for the Church, nothing for anyone.'' ''Have you done any good at all, Dennis."
      • p108 - "Yes, Father, I have. I was in the navy. While at sea a little Jewish boy fell overboard."
  • p108-117 - Commissioner Neslen then read his prepared paper as follows: INSURANCE AND THE MORMON CHURCH
    • p108 - Perhaps the Committee, knowing how unacquainted insurance men generally are with spiritual matters, and how foreign the Church is to them felt it might be well to bring the Church to them, for a brief introduction at least. 
    • p108 - " In earlier days, I have been told, and have a vague personal recollection, the L. D. S. Church, which is commonly known as the 'Mormon' Church, was not particularly friendly to insurance, at least to that kind of insurance which was, in early days, offered by the few companies operating in the country.
      • p108 - In recent years, in my own time, there has been a change of feeling, 
      • p109 - In the present President of the 'Mormon' Church, we have a pioneer in the insurance profession. President Heber J. Grant's earlier days were spent in insurance offices. 
      • https://en.wikipedia.org/wiki/Heber_J._Grant
        • After the death of Joseph F. Smith in late 1918, Grant served as LDS Church  president until his death. [b1918-d1845]
      • p109 - President Heber J. Grant's earlier days were spent in insurance offices. He is a student of insurance. He organized a fire insurance company over fifty years ago, which is still a thriving institution. He is the president of a very large life insurance company and is much interested in the profession generally.
        • [Bonk: What Insurance Company?]
      • All three of the members of the first presidency, who constitute the highest officers in the 'Mormon' Church are directors of at least one insurance company.
      • Several of the quorum of Twelve Apostles are insurance company directors, and the Church itself today is very friendly, and I may say enthusiastic in its support of plans under which its members and others may provide in times of plenty against the time of need.
  • 1986 0112 - NYT - The Mormons: Growth, Prosperity and Controvery, By Robert Lindsey - [link]
    • When he died on Nov. 5, at the age of 90, Spencer Kimball had presided over the church for almost 12 years.
    • Like most top Mormon elders, he had risen to power after a successful business career.
    • Although he was seriously ill and little more than the titular head of the church in the last four years of his life, the former insurance man presided over the church during a period of phenomenal growth.
    • Among the major Mormon interests are the following. Insurance - The Beneficial Life Insurance Company, The Continental Western Life Insurance Company, The Western American Life Insurance Company, The Utah Home Fire Insurance Company

McKinsey

  • 1973 – Report – McKinsey – Strengthening the system for exercising surveillance over insurance companies – HG 8536 M34 S78 – WishList>
  • 1973 – Report – McKinsey – Improving the efficiency and effectiveness of the system for exercising surveillance over insurance companies – HG 8536 M34 S77 – <WishList>
  • 1974 – Report – McKinsey – Strengthening the surveillance system : Phase 1 report –  HG 8536 M34 S79 1973 – <WishList>
  • 1974 – Report – McKinsey – Strengthening the surveillance system : final report – Electronic resource – 126p – naic.soutronglobal
  • 1974 – Report – McKinsey – Improving the property/liability early warning system McKinsey & Company, Inc 1974 HG 8535 M34 S81
  • 1974 – Report – McKinsey –  Improving the life and health early warning system McKinsey & Company, Inc 1974 HG 8535 M34 S80 – – <WishList>
  • 1975 – SOA – Examining Department Examinations – Strengthening The Surveillance System, Final Report to the NAIC – McKinsey Co. Inc., New York, by George Brummer, The Actuary – act-1975-vol09-iss01-brummer – Society of Actuaries – 5p
  • 1977 – SOA – NAIC Examiner’s Handbook, by Lewis P. Roth, The Actuary, act-1977-vol11-iss02-roth – 3p
    • At the June NAIC meeting, the Executive Committee adopted the Financial Condition Examination Handbook and the Market Conduct Examination Handbook, both of which became effective on January 1, 1977. The purpose of the book is to update and simplify the examination process for all insurance companies. Such examinations were recommended in the McKinsey & Company Report to the NAIC on Strengthening the Surveilance System 
  • 1981 – NAIC – Background Paper on the Status of the Regulation of Market Conduct in the Insurance Industry, NAIC Market Conduct and Trade Practices (B1) Subcommittee Attachment Five – 17p
    • This paper describes the history of the examination process, summarizes the 1974 McKinsey evaluation of the examination system, outlines market conduct developments since the McKinsey study and identifies current market conduct issues.

Grant Taggart Symposium

  • taggart.ce.byu.edu/
  • taggart.ce.byu.edu/continuing
    • The Grant Taggart Symposium is cosponsored by the Society of Financial Services Professionals (FSP), the Utah Chapter of the National Association of Insurance and Financial Advisors (NAIFA), and Brigham Young University.
  • 2017 1019 - Van Mueller's thoughts on "The Power of Zero", by David McKnight - powerofzero.com/blog/van-mueller-thoughts-on-power-of-zero
    • I had the privilege of speaking at the Taggart Symposium at Brigham Young University in Provo, UT a few weeks ago and during my stay I got to rub elbows with one of this industry's legends Van Mueller.  
    • Van's made Court or Top of the Table for 26 straight years and has spoken at countless MDRT, Top of the Table, and NAIFA National meetings.  
    • While Van is from Wisconsin like me, I've never had the chance to sit down and chat with him.  
    • When I did so I discovered, to my great surprise, that he is a huge fan of The Power of Zero and has been handing it out to his clients for years.

Consumerists

  • The consumerists are having a fine time these days with the life insurance industry about which it seems there is nothing favorable to be said.
  • A distinguished member of the Senate* is agitating for a "truth in life insurance" law and this provoked the following comment from one newspaper:  <WishList>
    • "Probably what most insurance policies could use is a terse and lucid summary of precise coverage and options, enabling the purchaser to understand the benefits and recognize the limitations. . . .
    • (Senator) Hart* speaks of a possible 'truth in life insurance' law.
      • Our hunch is that the problem isn't so much truth as clarity."
    • Another doughty** champion*** of the consumer is reported to have said: " . . . . it should surprise no one that the standard family auto policy is substantially less readable than Einstein's basic work on relativity."
      • The speaker*** is a lawyer and an insurance commissioner and he should be well aware that it is the lawyers and the insurance commissioners who have made the insurance policies what they are today.....
    • *Senator Philip Hart (D-MI)
    • **doughty = brave and persistent
    • *** Herb Denenberg, Pennsylvania Insurance Commissioner

1973 02 - SOA - The Actuary - Editorial by ACW (Andrew C. Webster), p2 - 8p

FRBNY – Federal Reserve Bank of New York

IRI – Insured Retirement Institute

  • Formerly known as: National Association for Variable Annuities – 1991-2009
  • 2004 0610 – The Washington Post – Regulators See Pattern Of Abuse In Annuities: Most Vulnerable Often Targeted, They Allege, By Brooke A. Masters – [link]

Duff & Phelps Rating Agency

  • Many years ago I was sitting in my class at Harvard Law School, next to Ralph Nader who was a member of my class. Who knows how your paths will cross again.
    • Thirty years later, I am not sure I understand the insurance business even after having spent 30 years in it.
    • Nader, having spent no years in it, understands it fully.
  • Some parts of our knowledge base, I think, we should exchange.

—  Larry A. Brossman, Duff & Phelps

1990 – SOA – Rating Agencies And Asset/Liability Matching, Society of Actuaries – 18p