MCAS – Market Conduct Annual Statement – NAIC

  • Market Conduct Annual Statement Life & Annuities Data Call & Definitions
    • Cash Value Product – A life insurance policy that generates a cash value element. Term life policies with cash value are considered cash value products.
    • Lawsuits Closed During the Period with Consideration for the Consumer-A lawsuit closed during the reporting period in which a court order, jury verdict, or settlement resulted in payment, benefits, or other thing of value, i.e., consideration, to the applicant, policyholder, or beneficiary in an amount greater than offered by the reporting insurer before the lawsuit was brought.
    • Life Insurance Premiums – Funds used to purchase life insurance products issued by the company. Exclude Group Life and Credit Life premiums. For the purpose of this statement, life insurance premiums should be determined in the same manner used for the state pages of the company’s financial annual statement.
    • Universal Life Insurance – A form of whole life insurance that is characterized by flexible premiums, flexible face amounts and flexible death benefit amounts and its unbundling of the pricing factor.
    • Variable Life Insurance – A form of whole life insurance under which the death benefit and the cash value of the policy fluctuate according to the investment performance of a separate account.
    • Variable Universal Life Insurance – A form of whole life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance.
    • Whole Life Insurance – Life insurance that provides lifetime insurance coverage. Whole life insurance policies generally build cash value and cover a person for as long as he or she lives if premiums are paid as required. It would include life insurance policies that start accumulating cash value once the insured reaches a certain age as specified in the terms of the policy.
  • 2010 – NAIC – THE PATH TO MCAS, The NAIC, Regulators, Industry and Consumers Working Together to Build a Better Market Conduct Annual Statement System. Updated 10/28/2010 – 2p
  • MCAS Best Practices Guide
    • MCAS Best Practices Guide – 14p
      • The Market Conduct Annual Statement (MCAS) was developed with the input of state insurance regulators and representatives from the insurance industry to provide an analysis tool for certain key market data elements. Some of the states collected private passenger auto data as early as the 1990s. In 2003, the NAIC Market Regulation and Consumer Affairs (D) Committee established an
        annual statement pilot program for life and annuity and property/casualty companies. Today, the vast majority of the states participate in MCAS and the NAIC collects the data on behalf of the states.
      • (2) – Other line-specific indicators are used to determine, for example, the number of policy exchanges and resisted claims for life insurance policies.
      • Complaints
        • The efficient use of a complaint analysis system allows an insurance department to create an effective and immediate surveillance program by detecting potential problems on both individual company and industry-wide levels. This complaint information is used by the states as an early warning system to detect problems and to provide a basis for further market conduct review. However, despite the obvious correlations between consumer complaints and market conduct concerns, regulators must be careful not to jump to conclusions purely on the basis of complaint data, nor should they conclude that the absence of complaints means an absence of market problems. There are a number of reasons why an exclusive focus on consumer complaints cannot be used as a substitute for a more thorough inquiry into the company’s activities, including:
          • Some markets are inherently more prone to complaints than others. For example, this is likely to be true for the higher risk or non-standard sector within any line of insurance. Such differences must be taken into account before trying to compare the performance of different companies serving different markets. When there are problems with life insurance products, they are less likely to become visible through the consumer complaint process. Similarly, complaints are more likely in lines of business where consumers have more frequent interactions with their insurer, such as health or private passenger auto, regardless of how serious the potential problems might be.
          • ⇒  Nevertheless, complaint information is still the single most useful source of currently available data for market analysis. Complaints provide a great deal of information about the industry, individual insurers, and real-time consumer concerns, including emerging issues in the marketplace.
        • Life Insurance
          • The coverage structure and company finances for life insurers are notably different from other types of insurance. Proportionately, market conduct problems with life companies are more likely to arise on the sales side and less likely to arise on the claims side than in other lines of insurance. In life insurance, there is significantly less interaction between the company and the consumer over the course of a customer relationship than with other lines of insurance. Market conduct problems are often less likely to surface promptly in the form of a consumer complaint.
    • 2021 0319 – NAIC – MAPWG – Market Analysis Procedures (D) Working Group – Virtual Meeting (in lieu of meeting at the 2021 Fall National Meeting) – 3p
      • 2. Adopted Revisions to the MCAS Best Practices Guide Ms. Rebholz said during the Working Group’s last meeting, it discussed the completion of the MCAS Best Practices Guide…
  • 2017 0105 – Presentation – CEJ, Birny Birnbaum / FACI to – ? – 45p
  • 2017 0811 – Letter – ACLI to NAIC (MCASWG) – 4p
    • 6. [There is] a problem with CEJ categories. [Some companies] sell whole life
      insurance and market it as final expense. [Others] file policies as individual whole
      life with the corresponding mortality table. How [a company] markets product
      should be irrelevant.
  • 2017 1113 – Letter – ACLI to NAIC (MCASWG) – 4p
  • [] – 2017 0413 – CEJ – 4/13/17 re 16 New Life & Annuity Categories
  • [] – 2017 0927 – CEJ – See Center for Economic Justice (CEJ) Response Letter 9/27/17 
  • 2017 1020 – MCAS – NAIC – Letter – ACLI – NAIC Market Conduct Annual Statement Blanks (D) Working Group – RE: Center for Economic Justice Proposal 4/13/17 re 16 New Life & Annuity Categories – 4p
  • [  ]  – 2017 1108 – MCAS – NAIC – Letter – ACLI – NAIC Market Conduct Annual Statement Blanks (D) Working Group
  • 2017 1117 – MCAS – NAIC – Letter – ACLI (ML) – NAIC Market Conduct Annual Statement Blanks (D) Working Group – 4p
    • 3. MCAS data is only one component regulators can use to identify potential
      trends. A key resource already exists with the regulators’ handling of
      consumer complaints-often the fastest way to learn of potential market
      conduct concerns while also gaining detailed insight regarding the specific
      nature of such concerns.
    • For the reasons and supporting information provided above and in the ACLI letters of 8/11/17, 10/20/17 and 11/8/17, the ACLI opposes the proposed expansion of product categories for which data elements would be collected for the Life & Annuity Market Conduct Annual Statement
  • 2018 – NAIC-?- Survey  –  Life and Annuity MCAS Usage Survey – 23p
  • 2019 0822 – MAPWG – NAIC – ACLI – RE: Consider Adoption of Disability Insurance MCAS Proposed Scorecard Ratios – 4p
    • To: NAIC – John Haworth, Chair (WA)
    • From: ACLI – Michael Lovendusky
  • 2019 0826 – Letter – CEJ, Birny to NAIC (MCASWG) – 6p
  • 2019 0830 – NAIC – LIIIWG, Life Insurance Illustrations Issues Working Group – Letter – Birny Birnbaum (CEJ) – 12p – BN
  • 2020 0304 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 2p
  • 2020 0512 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – RE: MCAS New Life Insurance & Annuities Lines – 3p
    • To: NAIC – Rebecca Rebholz, WI, Chairwoman, October Nickel, ID, Vice Chairwoman
      Market Conduct Annual Statement Blanks (D) Working Group
    • From: ACLI – David Leifer, Rikki Pelta
  • 2020 0518 – Letter – CEJ, Birny Birnbaum to NAIC – Market Conduct Annual Statement Blanks Working Group – re: Proposed Revisions to Life, Annuity, Auto and Homeowners MCAS Reporting – 7p
  • 2020 0525 – Letter – CEJ, Birny Birnbaum to NAIC – Market Conduct Annual Statement Blanks Working Group – 7p
  • 2020 0821 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 3p
  • 2020 0824 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – 4p
    • CEJ writes to respond to industry comments – the 8/19/21 NAMIC/APCIA letter
      regarding the new data element “Closed Claim Without Payment Below the Deductible” and the ACLI 8/21/20 letter regarding additional reporting of accelerated underwriting and TPAs/MGAs.
  • 2020 0924 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 3p
  • 2020 1020 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 7p
  • 2021 0421 – CEJ, Birny Birnbaum – Review of NAIC Market Conduct Analysis Statement Data in April 2, 2021 Letter from FLOIR to Chairman Ingoglia – 7p
  • 2021 0527 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – Regarding the proposed Digital Claims Settlement Additions for Private Passenger Auto and Homeowners MCASs and Accelerated Underwriting Additions for Life MCAS – 5p
  • 2021 0526 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – Regarding the proposed Digital Claims Settlement Additions for Private Passenger Auto and Homeowners MCASs and Accelerated Underwriting Additions for Life MCAS – 3p
  • 2021 0811 –  Letter – CEJ, Birny Birnbaum to NAIC (LIAC) – Response to Questions Regarding the Work of the Life Insurance Illustrations WG – 16p
  • 2009 – GAO – Insurance Reciprocity and Uniformity: NAIC and State Regulators Have Made Progress in Producer Licensing, Product Approval, and Market Conduct Regulation, but Challenges Remain – gao.gov/products/gao-09-372  – Full Report – 57p
  • 2017 0105 – Presentation – CEJ, Birny Birnbaum / FACI to – ? – 45p
  • 2017 0811 – Letter – ACLI to NAIC (MCASWG) – 4p
  • 2017 1113 – Letter – ACLI to NAIC (MCASWG) – 4p
  • [] –  CEJ – 4/13/17 re 16 New Life & Annuity Categories
  • [] – CEJ – See Center for Economic Justice (CEJ) Response Letter 9/27/17 
  • 2017 1020 – Letter – ACLI to NAIC – NAIC Market Conduct Annual Statement Blanks (D) Working Group – RE: Center for Economic Justice Proposal 4/13/17 re 16 New Life & Annuity Categories – 4p
  • 2018 – Survey – NAIC-? –  Life and Annuity MCAS Usage Survey – 23p
  • 2019 0822 – Letter – ACLI to NAIC, MAPWG – RE: Consider Adoption of Disability Insurance MCAS Proposed Scorecard Ratios – 4p
    • To: NAIC – John Haworth, Chair (WA)
    • From: ACLI – Michael Lovendusky
  • 2019 0826 – Letter – CEJ, Birny to NAIC (MCASWG) – 6p
  • 2019 0830 – NAIC – LIIIWG, Life Insurance Illustrations Issues Working Group – Letter – Birny Birnbaum (CEJ) – 12p – BN
  • 2020 0304 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 2p
  • 2020 0512 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – RE: MCAS New Life Insurance & Annuities Lines – 3p
    • To: NAIC – Rebecca Rebholz, WI, Chairwoman, October Nickel, ID, Vice Chairwoman
      Market Conduct Annual Statement Blanks (D) Working Group
    • From: ACLI – David Leifer, Rikki Pelta
  • 2020 0518 – Letter – CEJ, Birny Birnbaum to NAIC – Market Conduct Annual Statement Blanks Working Group – re: Proposed Revisions to Life, Annuity, Auto and Homeowners MCAS Reporting – 7p
  • 2020 0525 – Letter – CEJ, Birny Birnbaum to NAIC – Market Conduct Annual Statement Blanks Working Group – 7p
  • 2020 0821 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 3p
  • 2020 0824 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – 4p
    • CEJ writes to respond to industry comments – the 8/19/21 NAMIC/APCIA letter
      regarding the new data element “Closed Claim Without Payment Below the Deductible” and the ACLI 8/21/20 letter regarding additional reporting of accelerated underwriting and TPAs/MGAs.
  • 2020 0924 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 3p
  • 2020 1020 – Letter – ACLI to NAIC (MCAS) – Market Conduct Annual Statement Blanks (D) Working Group – 7p
  • 2021 0527 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – Regarding the proposed Digital Claims Settlement Additions for Private Passenger Auto and Homeowners MCASs and Accelerated Underwriting Additions for Life MCAS – 5p
  • 2021 0526 – Letter – CEJ, Birny Birnbaum to NAIC – NAIC Market Conduct Annual Statement Blanks Working Group – Regarding the proposed Digital Claims Settlement Additions for Private Passenger Auto and Homeowners MCASs and Accelerated Underwriting Additions for Life MCAS – 3p
  • 2021 0811 –  Letter – CEJ, Birny Birnbaum to NAIC (LIAC) – Response to Questions Regarding the Work of the Life Insurance Illustrations WG – 16p
  • NAIC has created market conduct data collection and analysis tools, but efforts to collect market conduct data from insurers face challenges. ‘
    • To improve data collection, NAIC developed the Market Conduct Annual Statement (MCAS), which began first as a pilot project in 2002 and became permanent in 2004.
    • MCAS is a data collection instrument designed to help state insurance regulators better understand insurers’ conduct in the marketplace, identify problem areas, and use information to target market conduct responses and examinations.
    • The information collected includes….
  • p49 – Individual and Group Life Product Data Elements

2009 – GAO – Insurance Reciprocity and Uniformity: NAIC and State Regulators Have Made Progress in Producer Licensing, Product Approval, and Market Conduct Regulation, but Challenges Remain – gao.gov/products/gao-09-372  – Full Report – 57p

  • 2018 – Survey – NAIC-? –  Life and Annuity MCAS Usage Survey – 23p
    • Q2;
      • Universal Life – 14, Individual Equity Indexed Life Insurance  – 11 – [Bonk: ]
      • We recommend further discussion. We see value in being able to separate preneed contracts and other types of life insurance contracts. We would point out that these categories are not mutually exclusive. For instance, equity indexed universal life insurance is likely a subset of universal life insurance and could be reported under both lines. We need to make sure these are defined so that there is no double counting.
        • [Bonk: Who is “We?”]
    • Q7 – Do you supplement the Life MCAS analysis with any internal
      information or data, such as consumer complaints, market share reports,
      etc.?
    • Q8 – Do you supplement your Life MCAS analysis with any external information/data, such as data calls made by the department? Note: the reference to data calls does not include data calls or requests for information that are submitted during a market conduct examination.
      • 3 –  yes, we will look at external complaint bulletin boards, producer blogs, class action litigation bulletin boards and other info
      • 9 – A.M. Best reports, company websites, news articles
    •  
  • 2020 0518 – Letter – CEJ, Birny Birnbaum to NAIC – Market Conduct Annual Statement Blanks Working Group – re: Proposed Revisions to Life, Annuity, Auto and Homeowners MCAS Reporting – 7p
    • p3 – More Granular Lines of Business for Life Insurance and Annuities 
    • p4 – ACLI Proposal Not Serious or Useful – The ACLI proposes, in its May 12, 2020 letter that…
      • p5 – Third, ACLI convenient leaves out other product markets that have been the source of market problems, including indexed universal life, fails to distinguish products within the stated groups and fails to identify new, complex products like buffered annuities. 
    • p6 – Additional Data Elements – Lawsuits – Auto, Home, Life and Annuity
      • The most recent MCAS lines of business – private flood, disability, long-term care,
        lender-placed – include five data elements for suits:
        • 1. Number of lawsuits open at beginning of the period
        • 2. Number of lawsuits opened during the period
        • 3. Number of lawsuits closed during the period
        • 4. Number of lawsuits closed during the period with consideration for the consumer
        • 5. Number of lawsuits open at end of period
      • The current private passenger auto and homeowners MCASs include data elements 1, 2, 3 and 5, but not data element 4.
      • ⇒  The current life and annuity MCAS s contain no data elements for lawsuits.
  • I just sat in on the MCAS review of recent changes, I didn’t post a question because I was afraid of going down a rabbit hole.
    • I have a lot of questions about the lawsuit considerations, especially for the life line of business.  (p6)
  • As a regulator I would like to gain a better understanding as to what we are attempting to gather and accomplish. (p6)

—  Tennessee Department of Commerce and Insurance –  Shelli Isiminger, Insurance Examiner 3

2020 0930 – NAIC – MARKET CONDUCT ANNUAL STATEMENT BLANKS (D) WORKING GROUP – 14p

  • 2019 0822 – MAPWG – NAIC – Letter – ACLI – RE: Consider Adoption of Disability Insurance MCAS Proposed Scorecard Ratios – 4p
    • ACLI – Michael Lovendusky
    • RE: Consider Adoption of Disability Insurance MCAS Proposed Scorecard Ratios
    • Insight regarding the NAIC process in this area is welcomed.
    • Ratio #7: The percentage of lawsuits closed with consideration for the consumer. More insight regarding this ratio is desired. What will this ratio measure and what value or insight will be derived? The “number of lawsuits closed with consideration for consumer” is not a measure of wrong-doing or fault on the part of insurer. On the contrary, some litigation efforts result in a good-will settlement to limit a company’s exposure to negative publicity even when the carrier had no wrong-doing. Other litigation matters may be settled due to economic interests-a balancing of the cost of continued litigation with the cost of settling the claim (with payment in whole or in part). Litigation that results in consideration for the consumer does not equate to, nor correlate with, carrier malfeasance. For this reason, any data obtained from such a ratio would be both misleading and irrelevant in ascertaining a carrier’s level of compliance with insurance regulations or its adherence to contract provisions. Such erroneous information could lead to increased frivolous litigation. This ratio should be omitted.
    • The ACLI respectfully observes that proceeding in a manner where evaluation of the Ratios has illuminated errors in the Definitions but then marched in combination to market, likely will lead to data collections and analyses which might be useless at best, and possibly even misleading.
    • The new system created a mechanism automatically spotting company practices anomalous to generally acceptable market conduct. Regulators could then efficiently focus examination upon the anomalous company practices.
    • The MCAS was first built to collect and analyze data on lines of insurance business which are mandated by law to be purchased by consumers.
      • Mandated insurances have heightened consumer protection considerations because they are mandated.
      • Mandated insurance coverages have statutory requirements standardizing the coverage for all consumers enabling meaningful data collection, analyses and identification of anomalous behavior by MCAS.
    • The ACLI is concerned that non-mandated, lines of insurance, such as life and disability income, may not fit within the MCAS mechanism.
      • Because these lines are sold, not bought, the products and product management are not standardized.
      • Data collection about them might be useful or it might generate numerous false positives.
      • If numerous false positives are generated from MCAS data elements, definitions or ratios, they will mislead regulators to examine companies for statistical anomalies which are anomalous because they relate to non-standardized products or product managements.
      • At some point the wisdom of cost-benefit analysis of including the life insurance line in MCAS arises.

NAIC – Press Releases

2000s

  • 2008 0916 – NAIC – Press Release – Insurance Consumers Protected by Solvency Standards – West Virginia – 3p
    • 66 Insurance Consumers Protected by Solvency Standards, NAIC press Release September 16 2008
    • 2014 1008 –  Starr International Company, Inc. v. The United States – Case 1:11-cv-00779-TCW –  Trial Volume 8 – Geithner – 254p – (p1679)
    • 67 AIG Regulatory FAQs, published by the National Association of Insurance Commissioners
    • actuaries.asn.au/library/events/sum/2013/ferrisaigproducts.pdf
  • 2008 0917 – NAIC – Press Release – “State Regulators: AIG Insurers Able To Pay Claims – State Solvency Standards Protect Policyholders” – 2p
    • President Sandy Praeger: “If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims.
  • 2008 0917 – Press Release – Missouri – Chaney Joins NAIC AIG Oversight Group State Regulators Assure Policy Holders AIG Insurers Able to Pay Claims – 2p
  • 2008 0918 – NAIC – Press Release (Mississippi) – AIG: Conversation Should Stay Focused on the Facts – Sandy Praeger – 3p
    •  is available at http://www.naic.org/Releases/2008_docs/AIG_facts.htm.-<BadLink>-<WishList>
    • 2008 0926 – CEI – Facts About the AIG Collapse: A Response to the NAIC: An Optional Federal Charter Might Have Impacted AIG’s Situation, by Eli Lehrer – 3p
  •  2008 0924 – NAIC – Press Release – AIG Policyholders Should Be Careful If Approached To Replace Policies
    • Missouri – [Bad-Link]
    • 2008 0922 – Press Release – New York – AIG Policyholders Should Be Careful If Approached To Replace Policies – Eric Dinallo – 4p
    • 2008 0924 – Press Release – Oregon – AIG policyholders should be careful if approached to replace policies Insurance companies are financially sound; switching may have hidden costs – 1p
  • 2009 0120 – NAIC – Press Release – NAIC Still in Opposition to Federal Regulation – <WishList>
    • 2009 – LR – Differential Compensation and the “Race to the Bottom” in Consumer Insurance Markets, by Daniel Schwarcz – 33p

2010s

  • 2012 0104 – Press Release – NAIC – Life Insurance May Be Untapped Resource In Tough Economic Times: New survey finds more than half of Americans don’t think of life insurance as an emergency financial asset – News provided by National Association of Insurance Commissioners – [link] – prnewswire.com/news-releases/life-insurance-may-be-untapped-resource-in-tough-economic-times-136651913.html]
    • 2025 (as of) – Nevada Division of Insurance – Understanding Life Insurance – [link]
      • Permanent life insurance, the type of policy that offers investment features, combines the death benefit coverage of a term policy with an investment component that can build cash value over time. 

2007 1129 - Report - NAIC to Congress - Life Insurance Sales to Members of the Armed Forces Report to Congress - 50p

  • 2007 0329 - Report - NAIC to Congress - Life Insurance Sales to Members of the Armed Forces - Report to Congress  --- [BonkNote]  ---  50p   
  • 2007 0928 - Report - NAIC to Congress - Life Insurance Sales to Members of the Armed Forces - Second Report to Congress - 22p
  • In July of 2004, state regulators initiated a coordinated multi-state investigation into allegations of illegal sales practices involving the sale of life insurance products to members of the United States Armed Forces ("Armed Forces").
  • The investigation was coordinated by an NAIC working group and was co-chaired by the States of Georgia and Texas.

Valuation Manual – NAIC

  • The National Association of Insurance Commissioners (NAIC) initially adopted the Valuation Manual on Dec. 2, 2012
    • 2022 – NAIC – Valuation Manual – 338p
    • 2021 – NAIC – Valuation Manual – 330p
  • Reserves
  • Universal Life Plans (Other than Variable), issued without a Secondary Guarantee:
    • 061 = Single premium universal life
    • 062 = Universal life (decreasing risk amount)
    • 063 = Universal life (level risk amount)
    • 064 = Universal life – unknown whether code 062 or 063
  • The term “net premium reserve” (NPR) means the amount determined in Section 3 of VM-20.

2021 – NAIC – Valuation Manual – 330p

  • 2022 – NAIC – Valuation Manual – 338p
    • Categories for Products – p51-12, p302

  • 2012 02 – Report – Milliman for ACLI – VM-20 Impact Study Compendium – 148p
  • Section 3: Interest
  • A. The nonforfeiture interest rate for any life insurance policy issued in a particular calendar year beginning on and after the operative date of the Valuation Manual shall be equal to 125% of the calendar year statutory valuation interest rate defined for the NPR in the Valuation Manual for a life insurance policy with nonforfeiture values, whether or not such sections apply to such policy for valuation purposes, rounded to the nearer one-quarter of 1%, provided, however, that the nonforfeiture interest rate shall not be less than the applicable interest rate prescribed to meet the definition of life insurance in the Cash Value Accumulation Test under Section 7702 (Life Insurance Contract Defined) of the U.S. Internal Revenue Code.

Guidance Note: For flexible premium universal life insurance policies as defined in Section 3.D of the Universal Life Insurance Model Regulation (#585), this is not intended to prevent an interest rate guarantee less than the nonforfeiture interest rate.

  • D. NPR Calculation and Cash Surrender Value Floor
  • 1. For policies other than universal life policies, the NPR shall not be less than the greater of:
    • a. The cost of insurance to the next paid to date.
      • The cost of insurance for this purpose shall be based on the policy year in which the valuation date falls, using the mortality tables for the policy prescribed in Section 3.C
    • b. The policy cash surrender value calculated as of the Valuation date and in a manner that is consistent with that used in calculating the NPR on the valuation date.
  • 2. For a universal life policy, the NPR shall not be less than the greater of:
    • a. The amount needed to cover the cost of insurance to the next processing date on which cost of insurance charges are deducted with respect to the policy.
      • The cost of insurance for this purpose shall be based on the policy year in which the valuation date falls, using the mortality tables for the policy prescribed in Section 3.C, and it shall be based upon the net amount at risk. 
      • “Cost of insurance,” as used here, refers to the valuation mortality rate, not the UL policy’s contractual cost of insurance or expense charges.
    • b. The policy cash surrender value calculated as of the valuation date and in a manner that is consistent with that used in calculating the NPR on the valuation date.
  • The term “universal life insurance policy” means a life insurance policy where separately identified interest credits (other than in connection with dividend accumulations, premium deposit funds or other supplementary accounts) and mortality and expense charges are made to the policy.
  • For purposes of determining the guaranteed gross premiums used in the demonstration in Section 6.B.2
    • a. For universal life policies, the guaranteed gross premium shall be the premium specified in the contract, inclusive of any applicable policy fee, or if no premium is specified, then the level annual gross premium at issue that would keep the policy in force for the entire period coverage is to be provided based on the policy guarantees of mortality, interest and expenses; and
    • b. For policies other than universal life policies, the guaranteed gross premium shall be the guaranteed premium specified in the contract, inclusive of any applicable policy fee.

Consumer Information Source (CIS) – NAIC

  • 5. Receive Brief Update on Consumer Information Source (CIS)
    • Suggested Wording Mr. Lisson said regulators from Colorado, New York and North Carolina and Dr. Brenda Cude are currently working on recommendations for simplification of the wording on the NAIC Consumer Information Source (CIS) Web page.
    • He added that the recommendations will also include revisions to some of the statistics and how they are calculated. He said a draft document is currently circulating among the individuals working on this issue.
    • Ms. Baker said her concern is that the language used on the CIS Web page does not match the content of the market analysis-related sections of the Market Regulation Handbook.
    • Mr. Belo said this issue is not yet final and will continue to be analyzed by the individuals charged with this project.

2009-3, NAIC Proc.

  • The state insurance regulators also have launched an interactive tool to allow consumers to research company complaint and financial data using the NAIC Web site.
  • Called the Consumer Information Source, this web-based tool allows consumers to file a complaint, report suspected fraud and access key financial and market regulatory information about insurers.
  • NAIC Consumer Information Source (CIS) provides information about insurance companies consumers can use before purchasing insurance.
  • Through the CIS consumers can access information about insurance companies, including closed insurance complaints, licensing information and key financial data. (p9)

2011 1207 – NAIC/FIO Meeting on Market Conduct – (Documents shared with FIO to facilitate discussion are attached) – 83p

NAIC - Documents

1950s

  • 1958 - NAIC - Insurance Regulation in the Public Interest "A BETTER N.A.I.C.", by Robert E. Dineen - 122p

1970s

  • 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>

1980s

  • 1981 - NAIC - Background Paper on the Status of the Regulation of Market Conduct in the Insurance Industry - 17p
  • 1981 1001 - NAIC -  Report by the task force on life insurance replacement

1990s

  • 1992 - NAIC - Issues Concerning Insurance Guaranty Funds, by Robert Klein - 317p
  • 1994 - NAIC - Annual Report - 28p
  • 1997 0319 - NAIC - Questions & Answers: Life Illustrations Model Regulation - 22p
  • 1998 - NAIC - Alternative Approaches To Insurance Regulation - 216p
  • 1998 - NAIC - Financial Analysis Handbook - 349p

2000s

  • 2000 - NAIC - The Statement of Intent: The Future of Insurance Regulation - 5p
  • 2000 06 - NAIC - Suitability of Sales of Life Insurance and Annuities, LIAC - Life Insurance and Annuities (A) Committee - 33p
  • 2000 06 - NAIC - Consumer Complaints White Paper, Consumer Complaint White Paper Working Group was appointed by the Market Conduct and Consumer Affairs (EX3) Subcommittee - 66p
  • 2003 0610 - NAIC / FRB - Report of the National Association of Insurance Commissioners (NAIC) and the Federal Reserve System - Joint Subgroup on Financial Issues - 51p
  • 2003 0914 - NAIC - A reinforced commitment: insurance regulatory modernization action plan - 9p
  • 2004 - NAIC - Best Practices Organizations White Paper - 50p
  • 2004 - NAIC - Market Analysis Handbook - 92p
    • Ceased publication in 2004; incorporated into the Market regulation handbook.
    • Supported by: Market Analysis Working Group (MAWG)
  • 2005 - NAIC - Market Analysis Handbook, Supported by Market Analysis Working Group (MAWG) - 96p
  • 2005 0419 - NAIC / FRB - Report of the NAIC and the Federal Reserve System Joint Troubled Company Subgroup: a comparison of the insurance and banking regulatory frameworks for identifying and supervising companies in weakened financial condition - 44p
  • 2005 - NAIC - A Regulator's Introduction to the Insurance Industry 2ed - by Robert W. Klein - 266p
    • 1999 - NAIC - A Regulator's Introduction to the Insurance Industry - 1ed - by Robert W. Klein - 252p
  • 2007 0329 - Report - NAIC to Congress - Life Insurance Sales to Members of the Armed Forces - Report to Congress  --- [BonkNote]  ---  50p   
  • 2007 0928 - Report - NAIC to Congress - Life Insurance Sales to Members of the Armed Forces - Second Report to Congress - 22p
  • 2009 0731 - Letter - NAIC to NYT (New York Times) - re: The New York Times July 30 article, "After Rescue, New Weakness Seen at A.I.G" by Mary Williams Walsh - 1p
    • 2009 0731 - NYT - After Rescue, New Weakness Seen at A.I.G., by Mary Williams Walsh - [link]
      • 2009 0803 - InsuranceJournal.com - States Dispute Article Questioning AIG Insurance Units' Finances - [link]

2010s

  • 2011 1207 - NAIC/FIO Meeting on Market Conduct, (Documents shared with FIO to facilitate discussion are attached) - 83p
  • 2012 - NAIC - Existing U.S. Corporate Governance Requirements - 22p
  • 2013 - NAIC - Annual Report - State-Based Insurance Regulation: The System at Work - 37p
  • 2013 - NAIC / CIPR - State of the Life Insurance Industry: Implications of Industry Trends - 220p
  • 2013 - NAIC - The U.S. National State-Based System of Insurance Financial Regulation and the Solvency Modernization Initiative - 76p
  • Date-? - NAIC - Capital Markets Bureau Special Report - Securities Lending in the Insurance Industry - 9p

2020s

  • 2020 05 - NAIC - Historical context of NAIC conversations surrounding disease outbreaks: A retrospective from the NAIC Proceedings - 22p
  • 2021 - NAIC - Legislative Priorities -  <1p - ,Bad Link>
  • 2022 - NAIC - Directory of Receivership and Run-off Resources - 97p
  • 2022 10 - NAIC Research Library - Part I: History of the NAIC Consumer Participation Program - 18p
  • 2022 - NAIC - Valuation Manual - 338p
  • 2022 0531 - Letter - NAIC Response to Senator Senator Sherrod Brown (D-OH) regarding Private Equity - 11p
  • 2022 1024 - Letter - NAIC - To: NAIC Members, From: Director Judith L. French, Chair (LIAC) - RE: Survey Inquiry about Enhanced Cash Value Offers on Universal Life Insurance Policies - 8p
    • 1983 - Book - Why Universal Life, by Buechner, Eason & Manzler, The National Underwriting Company, (2nd ed.) - <WishList>
  • 2025 08 - NAIC / CIPR - Modeling Behavioral and Attitudinal Drivers of Life Insurance Selection and Premiums - 22p
  • 2021 0811 - LIAC - NAIC - Summer National Meeting, Proceedings - 43p
    • (p8) - 2021 0811 -  LIIIWG Next Steps Summary Comment Chart
  • 2021 1216 - LIAC - NAIC - Executive (EX) Committee and Plenary - Attachment Four -
    • 4. The Life Insurance Online Guide (A) Working Group will:
      • A. Develop an online resource on life insurance, including the evaluation of existing content on the NAIC website, to be published digitally for the benefit of the public.
  • 2021 1231 - LIAC - NAIC - 2021 Fall National Meeting - 62p
    • 7. Consider Adoption of its 2022 Proposed Charges-Commissioner Glen Mulready (OK)
      • A. Discuss the Life Insurance Illustration Issues (A) Working Group "Chair Report"
        • CEJ - Birnbaum - He said this is the only effort that remains at the NAIC that is seeking to improve life insurance disclosures for consumers.
      • B. Discuss the Life Insurance Online Guide (A) Working Group

2024

Bulletin on Illustrated Interest Projections – NAIC

  • Projected Interest Earnings Working Group – NAIC
  • 1990-2 – Projected Interest Earnings Working Group April 1 7, 1990 Report (Attachment Three‐Bl) … 578
  • 1991-1A – Bulletin on Illustrated Interest Projections Amended Exposure Draft (Attachment Eight-A) … 561
  • 1994-1A, NAIC Proceedings – 7. Adopt Illustrated Interest Projections Bulletin
    • Commissioner Mike Weaver (Ala.) said that he, Commissioner Doug Green (La.) and Neil Rector had drafted a bulletin to assist insurers in conforming with the NAIC model on the Rules Governing the Advertising of Life Insurance, the Life Insurance Disclosure Model Regulation and the Unfair Trade Practices Act.
      • He said two industry suggestions for amendment were considered by the working group in its conference call of Nov. 5, 1990 (Attachment Eight).
    • Mr. Swenson questioned whether it was the intent of the group that an illustration was included within the term “advertising” for the purposes of this bulletin.
      • Commissioner Yancey responded affirmatively.
  • 1990-2 NAIC Proc. – BULLETIN ON ILLUSTRATED INTEREST PROJECTIONS –  ATTACHMENT THREE-A – EXPOSURE DRAFT 6/4/90

    • SUBJECT: (Recital of applicable authority if needed and purpose of bulletin. Issuance of bulletin is to assist insurers in conforming with the Rules Governing the Advertising of Life Insurance adopted by the NAIC in 1975, the Life Insurance Disclosure Regulation adopted by the NAIC in 1975 and the Unfair Trade Practices Act adopted by the NAIC in 1947.)

      • I. Propositions Regarding Projected Interest Earnings A. An insurance company cannot advertise any interest rate for a product unless the rate actually then being paid by the company for that product is at least as high as the rate advertised;

      • B. A policy must clearly state for each interest rate advertised whether that rate is or is not guaranteed; and

  • 1991-1A, NAIC Proceedings – p561
  • 7. Adopt Illustrated Interest Projections Bulletin
    • Commissioner Mike Weaver (Ala.) said that he, Commissioner Doug Green (La.) and Neil Rector had drafted a bulletin to assist insurers in conforming with the NAIC model on the Rules Governing the Advertising of Life Insurance, the Life Insurance Disclosure Model Regulation and the Unfair Trade Practices Act.
      • He said two industry suggestions for amendment were considered by the working group in its conference call of Nov. 5, 1990 (Attachment Eight).
    • Tony Spano (ACLI) said that he agrees fully with the intent of the bulletin.
      • He pointed out a potential drafting problem in Section IB and C.
      • He said the original intent of the language of the amendment he submitted for the working group’s consideration was that an advertisement must clearly state for each interest rate advertised, whether that rate is guaranteed.
    • The language as currently stated requires that interest rates be stated in the policy if guaranteed.
    • Jack States (State Farm Life Insurance Co.) reiterated that the policy contains only the guaranteed rate and does not speak to any other rates of interest the company may pay.
      • He said the purpose of the bulletin is to expand on the advertising rules which state what an advertisement must contain.
    • Neil Rector clarified that the intent of the working group was to require full disclosure of guaranteed rates in both the advertisements and the policy.
    • Commissioner Yancey recommended tabling this discussion until appropriate amendatory language could be drafted.
    • Mr. Swenson questioned whether it was the intent of the group that an illustration was included within the term “advertising” for the purposes of this bulletin.
      • Commissioner Yancey responded affirmatively.

1994-1A, NAIC Proceedings

Policy Information for Applicant – Universal Life – NAIC

  • 1990-1A, NAIC Proceedings – NAIC / LIMRA – Universal Life Disclosure Form Focus Group Summary,   —   [BonkNote]  —  10p
  • 1993 – NAIC – Policy Information for Applicant – Universal Life Policy – 3p
    • Life Insurance Disclosure Model Regulation – Appendix D
    • Located in:  1993 0525 – GOV (Senate) – When Will Policyholders Be Given The Truth About Life Insurance?, Senator Howard Metzenbaum (D-OH) – p63-65  —  [BonkNote]
  • To date, no state has adopted these forms.
    • Why this complete lack of action after all the effort in developing the forms?
  • One possible reason is that, during the early part of the year, state insurance departments are generally busy dealing with the  legislatures, which customarily are in session then.
  • Also, it takes a few months for new NAIC regulations to be officially published, distributed, and adapted for individual state use.
  • Many states also have been occupied with more urgent concerns, such as automobile and health insurance rates and solvency questions.

—  Tony Spano (ACLI)

1990 – SOA – Quality of Life Insurance Sales Illustrations, Society of Actuaries – 16p

  • 1990 – SOA – Quality of Life Insurance Sales Illustrations, Society of Actuaries – 16p
    • Tony Spano, ACLI: Norm has covered a good bit of history, describing activity over a number of years. Very modestly, he did not mention that during this time he was very much at the cutting edge of developments.
    • I’m going to discuss what Norm referred to as consumer disclosure forms.
      • They’re also known as policy information forms.
      • I’ll first cover some background, then describe the forms and the major issues that arose during their development, and finish with a few words about the next step in the process.
    • BACKGROUND
      • The policy information forms were developed by the NAIC over a period of a year and a half. The impetus for the effort came from some of the state regulators, particularly William Hager, then insurance commissioner of Iowa. Some of you may remember Mr. Hager from a few years back when he was general counsel of the AAA.
      • The first word about this project came at the June 1988 NAIC meeting, when a report was presented summarizing the results of a survey of the different state insurance departments on consumer disclosure concerns. The report cited a number of alleged abuses regarding sales illustrations for interest-sensitive products, including the following:
        • Illustrations with “outrageous” interest rate assumptions.
        • Current rate illustrations based on a different rate than the one currently being paid.
        • Nonguaranteed elements built into the calculations. (I assume this meant that nonguaranteed items were being blended with guaranteed items in some of the calculations.)
        • Unrealistic assumptions, such as increasing interest and decreasing mortality.
        • Illustrations which include items not in the contract.
      • A regulatory working group was appointed to help remedy these abuses and enable the consumer to make more meaningful comparisons of different policies.

1990-1A, NAIC Proceedings – NAIC / LIMRA – Universal Life Disclosure Form Focus Group Summary – 10p

  • 1990-1A, NAIC Proceedings – NAIC / LIMRA – Universal Life Disclosure Form Test Market Results – Focus Group – CIDWG – Consumer Issues Disclosure Working Group  —  [BonkNote]  —  10p
    • 1993 – NAIC – Policy Information for Applicant – Universal Life Policy – 3p
      • Life Insurance Disclosure Model Regulation – Appendix D
      • Located in: 1993 0525 – GOV (Senate) – When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  —  [BonkNote]
  • (466)  5……….
    • If appropriate, the paragraph might add something like “The amount of premium you have elected to pay, $300 per year, is however insufficient to keep the policy in force to age 95 at the guaranteed minimum interest rate of 4%; the policy would terminate at age 66.
    • To be sure that the policy continues to age 95, even at the minimum interest rate of 4%, you would have to pay  $644.30 per year for the entire life of the policy.”
  • (466) Objective of the Study
    • The objective of this study was to test a universal life policy disclosure form to see if the average consumer could understand it and to see if the layman found the information provided to be useful.
  • (467) FINDINGS – Overall
    • On an overall basis, many people found the disclosure form to be quite confusing, especially the second page.
    • For example, the first section of the form indicates that the policy applied for is a flexible premium policy, but the charts illustrate what appears to the layman to be a “fixed” premium (i.e., a fixed premium was interpreted as being synonymous with a level premium).
    • ….The lack of understanding of cash value products was evidenced by the fact that the majority of people could not understand why, in Chart A, if you continue to pay your premium, the benefit would run out before age 95 and….
  • As far as usefulness is concerned, when they understood what the information was supposed to be telling them, they generally felt that it was useful information to have.
    • However, it should be noted that there was a high correlation between the ratings for usefulness and understandability.
    • What they did not understand, they did not find useful.
  • Another significant factor regarding usefulness is the fact that there seem to be two distinct groups of people.
    • Some people want the form to be kept as simple as  possible. — They only want the basic facts (“Keep it simple, stupid”).
    • Another significant group of people are more analytical in nature and do like getting all the detailed breakdowns.
    • Perhaps the best way to accommodate both groups is to have the basic information up front and the more detailed information, clearly labeled as such, in a separate section at the end of the disclosure form.
  • One further general comment is in order.
    • Many consumers have a generally negative attitude toward insurance companies and think that insurance companies are making excessive profits at their expense.
    • Thus, many people viewed Chart A as disclosing that the insurance company was ripping off the consumer; that is, if he paid his premium every year, his cash values would nonetheless decline after a certain point and he would be without protection after a certain point.
    • (Indeed, one person noted that the policy values go down in the later years, just when you need them most!) Furthermore, they saw the explanation of charges on the second page as being “add-ons” in many cases, rather than as already being included in the premium.
    • Once again, some people saw this as just another opportunity for the insurance company to rip them off.
  • Section I
    • Finally, almost nobody understood the difference between a flexible premium and fixed premium policy.
    • As indicated previously, this confusion was enhanced by the fact that the charts showed a level premium which they interpreted as being a fixed premium.
  • Section III/IV
    • A second major problem concerning Chart A stems from the fact that people do not understand how cash value life insurance works.
      • Thus, focus group participants were clearly thrown by the fact that the surrender value declined after year 20 and by the fact that there was no death benefit at age 95, despite the fact that the annual premium was paid continuously.
      • Furthermore, about half of the people assumed that the policy values shown at age 65 remained constant through age 94
    • Just how to clarify Charts A and B was somewhat more problematic.
      • Another suggestion that was made was to illustrate the two charts in graphical form, but this suggestion did not meet with universal acceptance when it was suggested.
      • Basically, what people seemed to want was simply a clearer explanation, in bold print, that one chart was showing the “worst case scenario” while the other chart was based on what the company was currently paying in today’s environment and assumed that the environment did not significantly change.
      • Furthermore, since few people related the information in Section V (top of page 2) to the charts, a statement should be included to the effect that, in the worst case scenario (i.e., a 4% interest rate being credited), a $300 premium is only sufficient to keep the policy in force until age 66.
      • If the policyholder would like to be guaranteed that the policy would remain in force until age 95, then a premium of $644.30 would need to be paid every year from the date of purchase.
  • Most people found Charts A and B to be quite useful.
    • The more cynical of the focus group members rated Chart B slightly less useful, only because they felt the assumption that the current interest rate would not change to be an unrealistic assumption.
    • Finally, a few people did not notice the statement underneath the charts and, if they were not at a focus group specifically to read the disclosure form, undoubtedly several more would not have noticed that statement.
    • For those who did read it, it raised a natural question in their minds: What other variables might affect the performance of the policy and the illustrations
      shown in Chart B? Are they talking about your health? Investments? Or what?
  • Section V
    • The biggest thorn in this section was the $644.30.
    • Most people had no idea what this figure signified or, if they did think they understood it, they thought that this was the amount that had to be paid after age 65 on the guaranteed basis to keep the policy in force.
    • They did not recognize that this amount would have had to have been paid from the very first year (which is the way I interpret that statement-there is nothing in the instructions to indicate one way or the other).
    • Also, because most people presume that if you pay your premium continuously, your policy will remain in effect, quite a few people had a hard time understanding how or why the policy would terminate in policy year 31.
    • This was simply foreign to their way of thinking.
    • Also, they would prefer that the statement said age 66 rather than policy year 31.
    • People also did not understand what an endowment benefit was and several wanted to know what the endowment benefit would in fact be (i.e., the amount of the benefit).
    • One person was so confused that he said that the maturity age and endowment benefit were moot points, since the policy was going to end at year 31 anyway.
    • While this section was not viewed as important initially, some people felt that it was very important once they understood what it meant.

CIPR – NAIC

  • 2010 – CIPR / NAIC – Systemic Risk and the U.S. Insurance Sector, by Mary A. Weiss, Ph.D., Distinguished Scholar Center for Insurance Policy & Research, National Association of Insurance Commissioners – 40p
  • 2013 01 – CIPR / NAIC –33p
    • The 1980s ushered in the era of universal life policies.
      • While such universal life policy features as flexible premiums, current and guaranteed cost of insurance scales, guaranteed maturity funds and guaranteed maturity premiums added a few wrinkles to the calculation process, the fundamentals of generating policy reserves remained fairly intact.
      • In contrast, today’s products have become much more complex.
  • 2014 01 – CIPR / NAIC – Newsletter
    • naic.org/cipr_newsletter_archive/vol10.pdf
    • (p16) – Life Insurers to Benefit from Rising Interest Rates
    • (p21) – The State of Market Conduct Collaboration
    • (p30) – CIPR Interviews Life Insurance Company Top Executives
2018-3 CIPR explain complex products
  •  2022 06 – CIPR / NAIC – Captives: Back to Basics, Center for Insurance Policy and Research – 12p 
  • 2022 – CIPR / NAIC – The Diffusion of NAIC Model Laws, Center for Insurance Policy and Research – 39p