LIBG – Life Insurance Buyer’s Guide

  • 1981-12 – Journal – American Academy of Actuaries – Statement to NAIC,  RE: Dividends, Life Insurance Buyer’s Guide – 12p
    • EXHIBIT C:  POSSIBLE CHANGES IN SOME SECTIONS OF THE LIFE INSURANCE BUYER’S GUIDE – p151-153
  • 1981-2 NAIC Proc. – POSSIBLE CHANGES IN SOME SECTIONS OF THE LIFE INSURANCE BUYER’S GUIDE
    • The suggested changes to the buyer’s guide (Attachment One-B2) incorporate several new ideas. 
    • Since that time, the Academy committee has been developing improved versions of its suggestions to the NAIC.  ATTACHMENT ONE-B2 
  • 1982-2, NAIC Proc. – A new exposure draft of a revised model regulation has been prepared by the staff of the American Council of Life Insurance [ACLI]
    • The following are among the principal features incorporated in the revised draft:
      • The introduction of the concept of a nonguaranteed element to measure the extent to which policy costs can be affected by premiums, benefits, or other items that are subject to change by the company without the consent of the policyholder.
      •  A special plans section to accommodate the unique features of nontraditional plans such as universal life insurance.
  • 1988-2, NAIC Proceedings
    • 6. Reaffirmation of Life Insurance Buyer’s Guide
      • Commissioner Yancey reported on the Life Insurance Buyer’s Guide which is attached as Appendix A to the Life Insurance Disclosure Model Regulation.
      • He said a review of the NAIC Proceedings had  determined that the amendments to the Buyer’s Guide adopted in 1984 were inadvertently omitted, so there is no permanent record of the current correct version.
      • He further commented that many insurance companies may be using the incorrect version from the model laws.
  • 1996-1 NAC Proceedings – 6. Discuss Amendments to Life Insurance Buyer’s Guide
    • Mr. Dunlap said that a small group consisting of Tony Higgins [North Caroline – Senior Deputy Commissioner], Brenda Cude (University of Illinois Cooperative Extension Service), and Chris Kite (FIPSCO) and himself had rewritten the buyer’s guide (Attachment One-C).
    • 1996 – NAIC Draft redlined Life Insurance Buyer’s Guide – Draft 1996-3B 931 – 6p 
  • 1996-3, NAIC Proceedings – Mr. Dunlap said, with this last change, the Buyer’s Guide Subgroup considers its task to be complete.
    • He said the primary reason for revision of the Buyer’s Guide was to make changes required by the illustrations regulation.
    • In addition, the subgroup took the opportunity to improve the wording of the Buyer’s Guide to make it more readable.
    • Upon motion duly made and seconded the Life Insurance Buyer’s Guide was adopted (Attachment Three-B1a).
  • Actuarial
  • 1976, COST COMPARISONS AND POLICY LANGUAGE, Society of Actuaries
  • 1979, Cost Disclosure, Society of Actuaries
  • 1981 – Academy Journal – STATEMENT 1981-12 – EXHIBIT C – POSSIBLE CHANGES IN SOME SECTIONS OF THE LIFE INSURANCE BUYER ‘ S GUIDE – (p151)
  • (p43) – Dan Andersen, NAIC / Iowa:  ….so we developed a buyer’s guide concept where we want to explain how you use the index.
    • Well, if you explain how to use the index, you ought to explain what the policy is and what choices a buyer has,
    • … and we became convinced that the worst decisions that were made weren’t necessary because the buyer bought a high cost policy but that he bought an inappropriate policy for his needs and for his budget.
  • Senator Stone (D-FL).  In other words, what we’re looking for is not relative cost so much as relevance.
  • Dan Andersen.  Right, relevance to the buyer’s needs and abilities to pay.

—  Dan Andersen, director of the Life and Health Insurance Division and chief actuary of the Iowa Insurance Department and chairman of the Cost Disclosure Task Force of the NAIC

1975 1203 and 1204 – GOV (Senate) – Veterans Insurance Information Disclosure, Richard Stone (D-FL)  —  [BonkNote]  —  [PDF-989p-GooglePlay] 

NAIC (Draft and Final)

2018 – NAIC Life Insurance Buyer’s Guide – 8p

2007 – NAIC Life Insurance Buyer’s Guide  – 10p

2000 – NAIC Draft Life Insurance Buyers Guide  – PROC-2000-4Q_1 – 4p 

1996 – NAIC Draft redlined Life Insurance Buyer’s Guide  – Draft 1996-3B 931 – 6p 

1993 – NAIC Life Insurance Buyers Guide – 5p 

1983 – ACLI Revised Draft Life Insurance Buyer’s Guide only  – 1983-1 595 – 10p

1983 – ACLI Revised Draft Life Insurance Buyers Guide, letter and Disclosure Model Regulation  – 1983-1 523 – 27p 

1976 – NAIC Life Insurance Buyers Guide 1976-2 549 – 5p 

1973 – Interim NAIC Life Insurance Buyer’s Guide – WishList

  • Other Versions
  • <WishList> – 1973 Interim Version of the NAIC Life Insurance Buyer’s Guide
  • 1978 – Federal Trade Commission (FTC) – Life Insurance Buyer’s Guide – 12p
  • 1993 – Wisconsin – Life Insurance Buyer’s Guide – 10p “Adapted from the 1983 Life  Insurance Buyer’s Guide prepared by the National Association of Insurance Commissioners” 
  • <Wishlist> – 1983 Life  Insurance Buyer’s Guide prepared by the National Association of Insurance Commissioners

LIBG - Life Insurance Buyer's Guide - Index

65 or older

  • 2022 0304 (Date Filed) – LC – Williams v. National Western Life Insurance – Opinion on Transfer, Appeals Court – 52p
    • (p7) – 5 Section 785, subdivision (a) provides: “All insurers, brokers, agents, and others engaged in the transaction of insurance owe a prospective insured who is 65 years of age or older, a duty of honesty, good faith, and fair dealing. This duty is in addition to any other duty, whether express or implied, that may exist.” 

MDL-585 - NAIC  - Universal Life Insurance Model Regulation

 

  • This model began its development when an interested party* gave a brief description of the background and concern of the new so-called "Universal Life" products to the NAIC Life Insurance (A) Committee.  

 --  [Bonk: interested party* = Jim Jackson of Transamerica / Occidental Life]

1982-2, NAIC Proceedings 

  • 1984 - SOA - NAIC Update, Society of Actuaries - 24p
  • 1988 - SOA - Update on Universal Life Reserves and Non-Forfeiture Values, Society of Actuaries - 36p
  • MDL-585 - NAIC - Universal Life Insurance Model Regulation
    • ULMR - Universal Life Insurance Model Regulation - MDL-585 -NAIC - 22p
    • ULMR - Universal Life Insurance Model Regulation - MDL-585 - NAIC - Citations
    • ULMR - Universal Life Insurance Model Regulation - MDL-585 - NAIC - Snippets
  • GMP - Guaranteed Maturity Premium
    • "Every universal life insurance policy of which the drafters are aware has a "net level premium" that could be computed which would guarantee permanent protection."
      • As a result, it is expected that most universal life insurance policies will be sold as permanent plans."
  • GMF - Guaranteed Maturity Fund
    • The guaranteed maturity fund at any duration is that amount which, together with future guaranteed maturity premiums, will mature the policy based on all policy guarantees at issue.
  • r-ratio
    • "The letter "r" is equal to one, unless the policy is a flexible premium policy and the policy value is less than the guaranteed maturity fund, in which case "r" is the ratio of the policy value to the guaranteed maturity fund." 
  • Chronological Summary of Actions
    • 1984 Proc. I 6, 31, 376, 514, 515-526 (adopted).
    • 1988 Proc. I 9, 19-20, 494, 599-600, 627 (adopted change to footnote 3).
    • 1989 Proc. II 13, 23, 414-415, 428-429, 431-442 (amended to include consumer disclosure requirement).
    • 1990 Proc. I 6, 27, 438-439, 450-451, 453-463 (amended).
    • 2000 Proc. 3rd Quarter 13, 14, 88, 116, 119-135 (amended and reprinted).
  • Sample GMP Nonforfeiture Test Calculation
    • This section gives 22 examples of GMP nonforfeiture test calculations
    • The front side of each example gives the product specifications, the nonforfeiture basis, and calculated guaranteed maturity cash values compared with SNFL minimum values.
    • The back side of each example shows the month-by-month calculations for one year of the universal life cash values.

1988-1, NAIC Proc.

  • 1998-1, NAIC Proceedings
    • American Academy of Actuaries Universal Life Task Force Preliminary Report Concerning Valuation and Nonforfeiture Provisions of Universal Life Insurance Model Regulation, ATTACHMENT TWO-B
  • 2000-3, NAIC Proceedings
    • Universal Life Insurance Model Regulation (#585) - Draft: Sept. 9, 2000 - Adopted by the Life Insurance & Annuities (A) Committee - ATTACHMENT TWO-B (p119-134)
    • <Section 8: Disclosure deleted, relies on Illustrations Model Regulation>
    • Deleted "Disclosure Form"

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.

MDL-582 - NAIC - LIIMR - Life Illustration Model Regulation - Comments

  • Walker v. LSW - Judge - Video
  • NAIC Proc - 1990s - end of Working Group  - Good Job
  • One of the first things that a serious reader of the NAIC Life Insurance Illustrations Model Regulation will realize is that it is not a tightly written document.

--  Thomas L. Bakos, Guardian, will speak as the appointed illustration actuary of a life insurance company

1996 - SOA - Implementing the Illustration Regulation: The Clock Is Ticking, Society of Actuaries - 25p

  • Commissioner Wilcox said that he admitted that the working group [Life Disclosure Working Group] had gotten a little sloppy on its terminology, but it had been clear all along that the working group was focusing on sales.

--  Robert E. Wilcox, Utah Insurance Commissioner and Chairman of the Life Disclosure Working Group (NAIC)

1996-4V2, NAIC Proceedings

  • I'm a member of the NAIC working group that developed this regulation and I am terribly disappointed.
  • I have been interested in the illustration issue for probably 15 or 20 years, and some of you may know that when I became President of the SOA, the first thing I did was establish the task force that developed the report on sales illustrations.
  • Tragically, what's come out of this process doesn't do the job.

--  Daphne D. Bartlett

1995 - SOA - Sales Illustrations, Society of Actuaries - 14p

1991-1992 - SOA - Final Report* of the Task Force for Research on Life Insurance Sales Illustrations: Under the Auspices of the Commitee for Research on Social Concerns - Judy Faucett (Chairperson), tsr917 - Society of Actuaries  ---  [BonkNote]  ---  142p

Valuation and Non-forfeiture

  • EXHIBIT ONE – History of the Standard Valuation and Nonforfeiture Laws Since NAIC Adoption in 1942, by Dan Case and Grace Dillingham, ALIA

1975-1, NAIC Proceedings

  • SOA – Trowbridge Committee on Valuation and Related Matters
  • 1980 – SOA – New and Proposed Valuation and Nonforfeiture Standards for Individual Insurance, Society of Actuaries – 16p
  • 1981 – SOA – Effective Use of Capital, Society of Actuaries – 24p
    • .. referred to the Report of the Committee on Valuation and Related Problems.
    • In that report, the Trowbridge Committee identified three categories of hazards which may impair the financial health of the insurance enterprise. [C1, C2, C3]
    • The report of the committee can be read by the members in Volume 5, Number 1 of the Record of the Society of Actuaries.
  • 14.4 Universal Life Insurance Model Regulation
    • Flexible premium products introduce special valuation problems using traditional methods in that some assumption as to future premiums is required.
    • The typical “present value of future benefits less the present value of future net premiums” formula is challenging to apply to flexible premium universal life policies, since neither “future premiums” nor “future benefits” are known for any particular policy.  (p323)

2018 – Book – Statutory Valuation of Individual Life and Annuity Contracts | 5th Edition — Claire, Lombardi and Summers

  • APPENDIX B – AN ARGUMENT AGAINST REGULATION OF NONFORFEITURE VALUES
    • The opinion that nonforfeiture benefits should be mandated was not completely unanimous among the Task Force.
    • Following is a presentation by Shane Chalke to a group of economists at The Institute For Humane Studies at George Mason University on June 29, which presents the opposing view.

1989-1, NAIC Proceedings

  • 10.3.1.2.2 U.S. GAAP Example – Valuation of life and other long-term insurance liabilities
    • 234. For insurance liabilities that are measured under U.S. GAAP as the net present value of cash flows using current or updated assumptions, the valuation of these items should be based on the Volunteer IAIG’s reported U.S. GAAP valuations.
    • 235. For insurance liabilities that are valued using historical, locked-in assumptions (e.g. long-term insurance contracts measured according to ASC 944-30-7, formerly SFAS 60) or valued under a retrospective deposit method approach (e.g. universal life insurance contracts measured according to ASC 944-30-16, formerly SFAS 97) it will be necessary to adjust the liability utilizing the Gross Premium Valuation (GPV) approach as defined in loss recognition (premium deficiency) testing under U.S. GAAP ASC Topic 944-60.
    • 236. The GPV is calculated by estimating the present value of future payments for benefits and related settlement and maintenance expenses less the present value of future gross premiums based on actual and anticipated experience.
      • Projections may be based on a single best estimate scenario and may also include the impact of management actions, e.g., the current estimate of future premium rate increases (see section 6.3.12 on management actions).
      • Any overhead expenses would be excluded.
      • The discount rate applied would be based on a current portfolio yield and expected reinvestment asset yields and cash flows. Gross rates would be reduced for expected defaults and investment expenses.

2015 – IAIS –  Field Testing – Public Technical Specifications Page 54 of 230

  • … referred to the Report of the Committee on Valuation and Related Problems. In that report, the Trowbridge Committee identified three categories of hazards which may impair the financial health of the insurance enterprise. [C1, C2, C3]
    • The report of the committee can be read by the members in Volume 5, Number 1 of the Record of the Society of Actuaries.

1981 – SOA – Effective Use of Capital, Society of Actuaries – 24p

ULMR - Universal Life Model Regulation - MDL-585 - NAIC - Snippets

PAGE 1

Drafting Note: It is the position of the drafters of this regulation that universal life insurance is simply another competing type of life insurance which should be treated, to the extent possible, in the same regulatory manner as other life insurance products. 

This regulation is designed to address those areas where universal life insurance does not "fit" into the existing regulatory framework.  This regulation does not supersede existing requirements relating to filing, solicitation, advertising, etc., but is supplementary to them.

D. "Flexible premium universal life insurance policy" means a universal life insurance policy which permits the policyowner to vary, independently of each other, the amount or timing of one or more premium payments or the amount of insurance. 

PAGE 2

G. "Policy value" means the amount to which separately identified interest credits and mortality, expense, or other charges are made under a universal life insurance policy."

Drafting Note:  Care should be taken not to place undue emphasis on the policy or "account" value. Very often the policy value is not directly available to the policyowner.

Instead, the policy value is an intermediate step used to determine benefits actually available to the policyowner such as cash surrender values, net cash surrender values, death benefits, or maturity values. The benefits actually provided the policyowner should be considered in establishing valuation and nonforfeiture standards.

H. "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.  A universal life insurance policy may provide for other credits and charges, such as charges for the cost of benefits provided by rider.

  • <Bonk: Broken down to its simplest basis, Universal Life has eliminated the concept of "plan of insurance".....  -- Christian J. DesRochers, 1983 - Universal Life, Society of Actuaries - 24p>

  • <Bonk:  Its <Universal Life> fundamental "mechanics" are indistinguishable from those underlying traditional life insurance products. --Samuel H. Turner, President - The Life Insurance Company of Virginia, -- 1982 - Journal of Insurance Medicine - 1p

Drafting Note: Unlike the unitary nature of traditional whole life insurance, a distinguishing feature of universal life insurance is the existence of an indeterminate policy

value from which specified periodic charges are deducted and to which specified periodic interest is credited at a rate not determined at issue. This indeterminate policy value feature with separately identified charges and credits may or may not have a premium pattern predetermined by the insurer at issue. Valuation and nonforfeiture treatment of these products varies depending upon the nature of the premium pattern. To distinguish these treatments, a definitional distinction has been made between "flexible" and "fixed" premium policy forms.

PAGE 3

The guaranteed maturity premium for flexible premium universal life insurance policies shall be that level gross premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid, which will mature the policy on the latest maturity date, if any, permitted under the policy (otherwise at the highest age in the valuation mortality table), for an amount which is in accordance with the policy structure. The guaranteed maturity premium is calculated at issue based on all policy guarantees at issue (excluding guarantees linked to an external referent). 

<R-Ratio> The letter "r" is equal to one, unless the policy is a flexible premium policy and the policy value is less than the guaranteed maturity fund, in which case "r" is the ratio of the policy value to the guaranteed maturity fund. The guaranteed maturity fund at any duration is that amount which, together with future guaranteed maturity premiums, will mature the policy based on all policy guarantees at issue.

The benefit charges shall include the charges made for mortality and any charges made for riders or supplementary benefits for which premiums are not paid separately.

The administrative expense charges shall include charges per premium payment, charges per dollar of premium paid, periodic charges per thousand dollars of insurance, periodic per policy charges, and any other charges permitted by the policy to be imposed without regard to the policyowner's request for services.

The initial acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in the first policy year over the averaged administrative expense charges for that year. Additional acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in an insurance-increase year over the averaged administrative expense charges for that year. An insurance-increase year shall be the year beginning on the date of increase in the amount of insurance by policyowner request (or by the terms of the policy).

Service charges shall include charges permitted by the policy to be imposed as the result of a policyowner's request for a service by the insurer (such as the furnishing of future benefit illustrations) or of special transactions.

PAGE 5

Drafting Note: The drafters chose a whole life initial expense allowance for several reasons. Although highly flexible, universal life insurance is generally considered a permanent life insurance plan. Most companies encourage a premium level which will provide lifetime insurance protection. Every universal life insurance policy of which the drafters are aware has a "net level premium" that could be computed which would guarantee permanent protection. As a result, it is expected that most universal life insurance policies will be sold as permanent plans.

The alternative of basing the initial expense allowance on a policyowner's "planned premium" was considered but rejected as artificial and subject to substantial manipulation by agents and/or insurers.

PAGE 7

Section 7. Mandatory Policy Provisions

A. Periodic Disclosure to Policyowner

The policy shall provide that the policyowner will be sent, without charge, at least annually, a report which will serve to keep such policyowner advised as to the status of the policy. 

Drafting Note: Fixed premium universal life insurance policies may be required to contain a table of cash surrender or nonforfeiture values, by law. Such a table of values is of little use for a flexible premium policy, since the premiums cannot be determined, and therefore, such table should not be required to be included in the policy. Periodic disclosure to the policyowner is designed to fulfill the purpose of such a table of values, which, because of the nature of universal life insurance, cannot be determined at issue for a flexible premium policy.

B. Current Illustrations

The annual report shall provide notice that the policyholder may request an illustration of current and future benefits and values.

C. Policy Guarantees

The policy shall provide guarantees of minimum interest credits and maximum mortality and expense charges. All values and data shown in the policy shall be based on guarantees. No figures based on nonguarantees shall be included in the policy.

PAGE 8

F. Grace Period and Lapse

The policy shall provide for written notice to be sent to the policyowner's last known address at least thirty (30) days prior to termination of coverage.

A flexible premium policy shall provide for a grace period of at least thirty (30) days (or as required by state statute) after lapse. Unless otherwise defined in the policy, lapse shall occur on that date on which the net cash surrender value first equals zero.

H. Maturity Date

If a policy provides for a "maturity date," "end date," or similar date, then the policy shall also contain a statement, in close proximity to that date, that it is possible that coverage may not continue to the maturity date even if scheduled premiums are paid in a timely manner, if such is the case.

PAGE 9

Section 9. Periodic Disclosure to Policyowner

(8) For flexible premium policies:

If, assuming guaranteed interest, mortality and expense loads, the policy's net cash surrender value will not maintain insurance in force until the end of the next reporting period unless further premium payments are made, a notice to this effect shall be included in the report.

Section 10. Interest-Indexed Universal Life Insurance Policies

The following information shall be submitted in connection with any filing of interest-indexed universal life insurance policies ("interest-indexed policies"). All such information received shall be treated confidentially to the extent permitted by law.

PAGE 10

Drafting Note: Interest-indexed products present unique aspects....  In requiring the filing and evaluation of the above items, together with an annual actuarial opinion, the drafters have attempted to preserve the basic principle of the valuation laws, which is to maintain the ability of the insurer to meet its future contractual obligations.

It is assumed that the evaluation of the information provided in this Section together with the experience of insurers in writing indexed forms will lead to a more scientific approach to valuation in the future.

The drafters believe that by focusing attention on cash flows and the quality and quantity of assets supporting indexed policy liabilities, most of the risks associated with indexed products can be addressed by insurers and regulators in a manner which will provide adequate protection to the public while permitting experimentation and diversity in minimizing the uncertainty associated with the valuation of these products.

Life Insurance Illustrations Model Regulation – LIIMR – 582 – NAIC

  • Life Insurance Illustrations Model Regulation – LIIMR – 582 – NAIC Proceedings – Citations  —  [BonkNote]
  • George Coleman, Prudential, ACLI, TRG-Technical Resource Group for the NAIC (Industry Advisory Group – Illustrations)
    • Obviously, this isn’t the first time the industry and the regulators have become involved in disclosure and with illustrations.
      • The NAIC models are replete with examples of actions taken to regulate the form of disclosures to consumers, the Model Disclosure Act, Life Disclosure Act, the Advertising Regulation, guidelines on marketing to seniors.
      • There are guidelines on variable products that people aren’t very familiar with, and any number of such proposals.
    • The engine for the current effort at the NAIC, which I was involved in from the start or almost from the start, were hearings conducted by Senator Metzenbaum in the fall of 1992.
      • Those hearings focused on problems that were occasioned by the use of some abbreviated payment plans.
      • The concern was that, with the declining interest rates, policies were failing to abbreviate or vanish, as some people call it.
      • There was an expectation perhaps on the part of some consumers that they would vanish in all events at the end of six years or seven years or whatever, and that wasn’t happening.

1994 – SOA – Problems and Solutions for Product Illustrations, Society of Actuaries – 28p

  • The whole process started in the NAIC, as it had to.
  • If radical changes in the way we illustrate policies were going to be made, they had to start at the NAIC.
    • The NAIC was only too well aware of the fact that sales illustrations were the subject of innumerable abuses and they wanted to correct those abuses.
    • Furthermore, the NAIC was being pushed by Senator Howard Metzenbaum who wanted to accuse the regulatory structure of not doing its job and then to bring regulation up to the federal level.” 

—  Frank S. Irish, ASB, Actuarial Standards Board

1997 – SOA – Professional Standards Affecting Life Actuaries, Society of Actuaries – 18p

  • James D.  ATKINS: The NAIC has proposed a life insurance illustration regulation. The draft I have is dated April 21, that’s fairly recent.  I hope you’ve had a chance to look it over.
    • I’d like to start out by posing a question and that is, what is the impetus behind introducing this illustration regulation?
      • Why are we doing this?
  • Robert Wilcox (Utah Insurance Commissioner and Chairman of the Life Disclosure Working Group – NAIC): Efforts began in the NAIC to look at the quality of the illustrations as the investment market turned steeply downhill and premiums that were supposed to vanish didn’t.
    • That put tremendous pressure on the companies and on the regulators of the companies to look at this particular issue.
    • If you look at last week’s copy of the National Underwriter, there was word of a lawsuit, actually two or three lawsuits, that had been filed over the issue of reappearing or nonvanishing premiums.
      • That points out the initial problem.
    • Whatever we did to illustrate those contracts when they were sold, the policyholders did not understand the contingent nature of that vanish.
      • That’s the underlying reason we got into this.
  • James D. ATKINS: You mean just because they didn’t understand the vanishing premium illustration we have all this regulation being imposed?

1995 – SOA – Current Developments Surrounding Regulations and Standards of Life and Annuity Products, Society of Actuaries – 18p