NAIC to DOL

  • 2023 1101 – NAIC to DOL – State Insurance Regulators Work to Protect Consumers Who Buy Annuities; NAIC Releases Statement on DOL Fiduciary Rule Proposal – [link]
    • “We fundamentally disagree with the White House’s characterization of state consumer protections for annuity products. The White House press statement that oversight of these products ‘varies state by state’ and provides ‘inadequate protections and misaligned incentives’ suggests either ignorance of, or willful disregard for, the hard work of the 40 states and counting that have worked diligently to enhance protections for consumers by adopting the NAIC’s Suitability in Annuity Transactions Model Regulation.”
  • 2024 0423 – NAIC to DOL – NAIC Releases Statement on the Final DOL Fiduciary Rule – [link]
    • “We continue to have significant concerns about the potential impact of the Department of Labor’s (DOL) final fiduciary rule on access and choice for American retirees to certain life insurance and annuity products. These products have been recognized by multiple Administrations of both political parties as an important option for retirees to manage their risk of outliving their savings. The final rule, which was rushed through the administrative process at DOL and the Office of Management and Budget with virtually no coordination with state insurance regulators, also discounts the work of 45 states and counting to enhance consumer protections for these products by adopting the NAIC’s Suitability in Annuity Transactions Model Regulation, which extends a level playing field to products sold within and outside a retirement plan.“

2022 0603 - Retirement Income Journal - NAIC Reassures Congress on Private Equity-Led Insurers, By Kerry Pechter

2022 0603 - Retirement Income Journal - NAIC Reassures Congress on Private Equity-Led Insurers, By Kerry Pechter  ---  [BonkNote]  ---  [link]

  • In the 14 years since the Great Financial Crisis, there's been a surge of capital from powerful investment companies like Blackstone, Apollo, and KKR into the annuity business-all eager to manage the tens of billions of dollars in Americans' savings that life/annuity companies hold.
  • News of those concerns recently reached the Senate Banking, Housing and Urban Affairs Committee, which Brown chairs.
    • In March, he sent letters to the NAIC and the Federal Insurance Office asking to be briefed on the matter. The NAIC's response arrived on May 31, the deadline requested by Brown.
  • "State insurance regulators are fully capable of assessing and managing the risks of these insurers, and there is nothing PE firms add to the playing field that changes this fact.
    • It should provide you and the public comfort to know the state insurance regulatory system has already been working on many of the concerns that you and others have highlighted, and we possess the tools and resources to address these issues," the letter said.
    • NAIC CEO Michael F. Consedine, president Dean L. Cameron of Idaho and three NAIC officials signed the letter.
      • It focuses on life/annuity company solvency as the core issue.
  • The risky assets include collateralized loan obligations (CLOs), which resemble the collateralized debt obligations (CDOs) at the center of the 2008 financial crisis.
  • But the NAIC sees no cause for alarm.
    • "However, while the relative size of this asset class for the sector has been growing, it represents only 2.6% of total cash and invested assets at year-end 2020, and most of the investments held by the industry are of a higher quality.
    • The NAIC has performed multi-scenario stress tests on industry CLO portfolios and closely monitors their performance."
  • But some followers of these matters were rankled by what they perceived as the letter's "nothing to see here" tone.
    • "The response is certainly no surprise," said Tom Gober, a Virginia-based forensic accountant who has documented the tens of billions of dollars of annuity liabilities that a handful of PE-led annuity issuers have reinsured offshore, often with affiliated reinsurers.
      • "The NAIC's leaders apparently huddled around and threw a bunch of points at Brown that, in a vacuum, sound fine.
        • But when you are familiar with the details, the letter is mainly fluff, and grossly inadequate.

1996 – Report of The Multi-State Life Insurance Task Force and Multi-State Market Conduct Examination of The Prudential Insurance Company of America – 270p

  • 1996 – Report of The Multi-State Life Insurance Task Force and Multi-State Market Conduct Examination of The Prudential Insurance Company of America  —  [BonkNote]  —  270p
  • (p8) – 33 percent of the sales complaints concerned misrepresentation by agents in the course of a sale.
    • (p12) – Such complaints were not new, but due to recent media attention and other factors, have been received and handled in large numbers. 
  • (p) – There is ample evidence to suggest that many of the practices at Prudential are, or were, present at other life insurers.

NAIC – Amicus Briefs

2000s

  • 2001– LC – Berry v. Federal Kemper Life Assur. Co.
    • 1st Judicial Dist of Santa Fe NM
    • Amicus brief filed in opposition to motion for class certification. Issue briefed is the nationwide class action certification would be inappropriate because state laws governing disclosure of model premium rates as well as policyholder right to remedies differ from state to state; certification would defeat regulators’ ability to regulate according to respective state laws. Motion for leave to file brief denied.
  • 2008 – LC – Dixie National Life v. Martha Ward – NAIC – Amicus Brief – 23p
    • 5. The proper interpretation of the term “actual charges” stated in an insurance policy is within the area of expertise of the South Carolina Department of Insurance, which is Congressionally delegated broad authority to regulate the business of insurance and statutorily mandated to review and approve insurance policies, identify and resolve any ambiguity, respond to consumer inquiries and investigate disputes between insurers and insureds.

2010s

  • 2015-2016 – bonknote.com/metlife-v-fsoc-amici-curiae-briefs/
    • 2015 0626 – 15-cv-45 – NAIC – D43 – Consent Motion of the National Association of Insurance Commissioners for Leave to File Brief as Amicus Curiae in Support of Plaintiff Metlife – 32p
    • 2016 0822 – 16-5086 – NAIC – D1631439 – Brief of Amicus Curiae the National Association of Insurance Commissioners in Support of Plaintiff Appellee [MetLife] – MetLife v FSOC – 40p

2020s

  • 2023 – LC –  Delaware Department of Insurance v. United States  —  [BonkNote]
    • 2023 1018 – NAIC – Brief for the National Association of Insurance Commissioners as Amicus Curiae in Support of Petitioner – 21p

1991 0729 – GOV (House) – Regulation of Insurance Companies and the Role of The National Association of Insurance Commissioners – NAIC – Ben Erdreich (D-AL)

  • 1991 0729 – GOV (House) – Regulation of Insurance Companies and the Role of The National Association of Insurance Commissioners, Ben Erdreich (D-AL)  —  [BonkNote]
    • [PDF-286p-GooglePlay], VIDEO-?] ->Not on govinfo.gov – R
    • GAO – 1991 0729 – GAO – Insurance Regulation: Assessment of the National Association of Insurance Commissioners, Statement of Richard L. Fogel, Assistant Comptroller General General Government Programs, Before the Subcommittee on Policy Research and Insurance Committee on Banking, Finance, and Urban Affairs, U.S. House of Representatives – 57p
    • ⇒ NAIC – Statement of Mike Weaver, Commissioner, State of Alabama – 8p
    • House – Committee on Banking, Finance and Urban Affairs – Subcommittee on Policy Research and Insurance
  • (p10) – Statement of Mike Weaver (Commissioner, State of Alabama) – A very recent example of that would be the Mutual Benefit situation where over $1 billion was withdrawn over a 2-week period of time. There are not many insurance companies nationwide that can withstand that thrust.
    • The public has to have confidence in what is going on out there in all financial institutions, insurance being one of the major ones. 
  • (p13) – NAIC – William McCartney, Director of Insurance, State of Nebraska and Vice President, National Association of Insurance Commissioners 
    • We are seeing a real crisis in confidence:
    • That, in my mind, is probably the worst thing that could happen.
    • There is not a company in the country that can stand runs that Commissioner Weaver was talking about, where people ask for $1 billion in policy loans and surrenders in a 2-week period.  

State Government - Snippets

  • Sen. Hackett (R-OH) -  stated that one of the problems that the life insurance industry has been experiencing for several years is that when universal life was sold years ago interest rates were so much higher and these policies are really going to blow up much earlier.  (p165)

2020 12 - NCOIL - 30 Day Materials and Tentative General Schedule, NCOIL Annual Meeting, December 9 - 12, 2020 - 220p 

  • Regarding the NAIC role in this proposal, NCOIL believes that giving the NAIC a primary role in the Office of Insurance Information allows the tail to wag the dog.

    • State regulators, four-fifths of which are gubernatorial appointees, are authorized by legislators to interpret and enforce the statutes that we develop. H.R. 5840 would dramatically enhance the authority of the NAIC at the expense of the State officials to whom they, as insurance regulators, are accountable.

  • It is unprecedented that the Federal Government would give  such power to a private trade association-I repeat, a private trade association-or to what NAIC immediate past resident Walter Bell of Alabama in an April 9, 2007, letter called: ''a 501(c)(3) nonprofit corporation with voluntary membership and not a State government entity.''

    • This NAIC president went on to say that: ''When individual insurance commissioners gather as members of the NAIC, they are not considered a governmental entity or a public body as defined by the various open meeting laws, but rather are a private group. As an organization, the NAIC does not have any regulatory authority.''

--  (p14) - NCOIL - Brian P. Kennedy, Representative, Rhode Island House of Representatives, and President, National Conference of Insurance Legislator.

2008 0610 - GOV (House) - H.R. 5840, The Insurance Information Act of 2008, Paul Kanjorski (D-PA)  --- [BonkNote]

  • REGULATION FROM A LEGISLATOR'S PERSPECTIVE

  • I hope to give you some insight into state government regulation and the way we feel about the life insurance industry.

  • As a state legislator, I have never had any serious problem with the life insurance industry.

    • One reason for this is because life insurance is strictly voluntary.

      • This is quite different from casualty insurance which has mandated coverages.

      • If a person buys a life insurance policy, he does it on his own free will and this takes us off the hook.

    • Second of all, life insurance has always served a very important purpose in this country. 

--  Warren D. Arthur, IV. (not a member of the Society, is a state representative in the South Carolina legislature.)

1981 - SOA - Changes in Life Insurance Laws and Regulations: What Do We Need and How Can We Get It?, Society of Actuaries - 18p

NAIC - Insurance Commissioners - Snippets - 2010s

  • If a study is necessary, we urge the Senate to request the study from an objective body, such as the Government Accountability Office (GAO).

2010 0410 - Letter - NAIC to GOV (Senators) - re:  NAIC letter to Senators on the Restoring American Financial Stability Act of 2010 (RAFSA) - 4p

  • Writing in our pages in February, former New York Insurance Superintendent Eric Dinallo said that "policyholders would have been protected" in the event of an AIG bankruptcy.

    • That seemed clear enough, but then Mr. Dinallo immediately added that an AIG bankruptcy "would have been bad for those same policyholders."

      • 2010 0202 - WSJ - What I Learned at the AIG Meltdown: State Insurance Regulation Wasn't the Problem, by Eric Dinallo - [link]  

  • ⇒  So which was it?

    • State insurance regulators and industry analysts have since told us that Mr. Dinallo was wrong when he suggested that policyholders would have suffered.

2010 0910 - WSJ - 'Systemic Risk' Stonewall: Some bailout questions the Fed still hasn't answered  ---  [BonkNote]  ---  [link]

⇒  [Bonk: Who authored this article?]

  • (p17) - John Huff, NAIC / Missouri Insurance Commissioner

    • I agree with your conclusion that insurance is not included in the agency's jurisdiction. [Bonk: Agency = CFPB) 

    • And to be fair to insurers, not all of those queries are complaints.

      • They are really an opportunity for us to have an education process.

    • Many times, they are more inquiries of how a product works, what did I buy?

2011 0728 and 1025 - GOV (House) - Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs - Part 1 (2011 0728), Part 2 (2011 1025) - [PDF-285p, VIDEO-?] 

  • (p14) - Terri Vaughan - (NAIC- CEO): So what we try to do is educate consumers about the critical importance of this issue.

    • We spend a lot of money on consumer education.

    • We created a Web site, Insure U Web site, for consumers to go to to get information so that they can make some decisions on-they have some understanding of how to look at these issues.

    • We provide some very basic financial information on companies.

    • I think it is a tough one.  ---- There are not any real answers.

      • But educating consumers about the kinds of questions that they can ask, I think, is a start. 

2011 0914 - GOV (Senate-Banking/SII) - Emerging Issues in Insurance Regulation, Jack Reed (D-RI)  ---  [BonkNote]

  • G. Criteria for Collaboration

    • The following questions are designed to assist states with the determination of whether an issue is appropriate for collaboration.

    • Regulators are encouraged to review these questions whenever there is an issue of concern raised that involves a regulated entity that does business in many states.

  • ^^If there is not a reference available from the NAIC Research Library or NAIC Market Regulation Department, your concern is not likely going to impact other states.

2011 1207 - NAIC/FIO Meeting on Market Conduct, (Documents shared with FIO to facilitate discussion are attached) - Federal Insurance Office - 83p

  • The analyst should have a firm understanding of the following risk classifications:

    • Reputational-Negative publicity, whether true or not, causes a decline in the customer base, costly litigation and/or revenue reductions.  (p37)

  • Procedure #17 guides the analyst through the assessment of any legal risk the insurer or group may have.

    • The analyst should ensure that a thorough understanding of the litigation and potential financial impact is documented.

    • Further, the analyst should communicate with the insurer's management regarding the impact of reputation risk on continuing operations.

    • The analyst should understand the insurer's plan to address the reputational risk and track the progress.  (p113)

2012 - NAIC - NAIC Financial Analysis Solvency Tools, Financial Analysis Handbook: Life/A&H/Fraternal Edition. 2012 Annual/2013 Quarterly - 398p

  • "We have met the enemy and he is us!"

    • This famous line from the comic strip Pogo aptly describes the current state of governance at the National Association of Insurance Commissioners.

2013 1211 - Letter - Tom Leonardi (Connecticut Insurance Commissioner) to NAIC etc, re: Corporate Governance - 3p

  • 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.  (p11)

2013 01 - NAIC / CIPR Newsletter, By Reggie Mazyck, NAIC Life Actuary - 33p

  • It is my recollection and understanding that AG 49 was created in part due to a problem with 'gamesmanship' in IUL illustrations.

--  Letter - Mike Yanacheak (IA)

2014 1113, NAIC - IULISG - IUL Illustration Subgroup

  • 2014 12 - Woodall / Adam Hamm - re: FSOC MetLife Designation - Views of the Council's Independent Member Having Insurance Expertise - 13p

    • Adam Hamm (NAIC President and State Insurance Commissioner Representative - North Dakota): Finally, I would be remiss if I did not mention that, despite the sheer volume of arguments (no matter how far-fetched) contained in the Basis, the Council fails to identify the specific set of legitimate issues of concern that has led to the company's designation.  (p12)

  • NAIC - Kevin M. Mccarty, Commissioner, Florida Office of Insurance Regulation, On Behalf of the National Association of Insurance Commissioners

    • (p22-23) - The U.S. system is complicated, and a lot different than the rest of the world. And it is very difficult for the IMF and others to really understand the complexity of the U.S. system and the different parts that are involved.

2015 0429 - GOV (House) - The Impact of International Regulatory Standards, Blaine Luetkemeyer (R-IA)  ---  [BonkNote]

  • IAIS Question 83:

  • NAIC Response: Lapse risk is an example of an overall important category of policyholder behavior, which is an important risk in a number of products such as universal life and variable annuities.  (p11)

2015 0213 -  Letter - NAIC to IAIS - IAIS Insurance Capital Standard Public Consultation Document - Final NAIC comments or Draft? - 18p

  • The vast majority of the Department of Insurance's cases are brought in an administrative as opposed to judicial forum.

    • The Department's administrative authority to obtain remedies for individual consumers is more limited than that of a plaintiff in a UCL lawsuit with respect to monetary and injunctive relief.

  • Further, the existence of private plaintiffs' lawsuits helps forward the course of the law more effectively than would be the case if the only adjudications were those proceedings, largely administrative, initiated by the Commissioner.

2015 - LC - Brief of the State of California and the California Insurance  Commissioner as Amicus Curiae in Support of Plaintiffs, Walker vs Life Insurance Company of the Southwest. Case: 15-55809, 12/16/2015, ID: 9795445, DktEntry: 24, p27-28

  • Mr. Reyna {TX] said the policy overview should help consumers understand how cash value accumulates and can work to their advantage over time.

  • Mr. Wicka [Chair - LIIIWG - WI] acknowledged that the issue is complicated because a lot depends on how the policy is funded; however, just the knowledge that the policy has cash value could be helpful information for a consumer comparing a term policy to a whole life policy.

2017-3V1, NAIC Proceeding - 2017 1116, LIIIWG - Life Insurance Illustration Issues (A) Working Group - Conference Call 

  • 2017 0914, NAIC  - LIIIWG  - CC

    • Richard Wicka [Chair - WI] - said he had some concerns about Mr. Birnbaum's revised introduction to the policy overview, where it says,

      • "If you have questions about this life insurance product, contact the state insurance department as well as your agent, broker, advisor, or contact a company representative."

    • Richard Wicka ...explained that state insurance departments do not give advice and should not be a place where consumers call with questions about how a specific policy works.

    • Ms. Winer said that she understands wanting to help consumers, but state insurance departments do not do analysis or endorse particular products. She cautioned against equating state insurance departments with insurance agents relative to the process of shopping for insurance.

    • Mr. Reyna and Mr. Struk agreed with Mr. Wicka and Ms. Winer.

    • Ms. Lerner said she agrees as well but thinks consumers should be able to contact the state insurance department if they are not getting a satisfactory explanation.

    • Mr. Birnbaum said he is trying to provide an objective source where consumers could obtain unbiased information.

  • Complaints and inquiries related to life insurance and annuity products ... generally concerned consumer dissatisfaction with, or confusion regarding, universal life insurance policies.  (p90)

2018 - Wisconsin OCI - Wisconsin Insurance Report - 219p

NAIC - Insurance Commissioners - Snippets - 2000s

  • (p81) - Thomas Foley said the working group had been charged to make amendments to the Life Insurance Disclosure Model Regulation - (Attachment Three-A) to be consistent with the Life Insurance Illustrations Model Regulation adopted in 1995.

  • (p83) - Thomas Foley said that for a variable product, if the 12% illustration is used, it can show a very low premium for coverage.

    • If the policy does not attain the 12% return it will not be a permanent policy.

    • He opined that consumers are misled if the 12% is not a reasonable amount over time and consumers are in the same position as they were in the 1980s when "vanishing premiums" were touted.

2000-1, NAIC Proceedings - 2000 0314

  • A survey last year by the National Association of Insurance Commissioners found that only 28 percent of people with insurance -- life, auto, home, health or disability -- really understood the details of their coverage.  

    • <WishList - NAIC Survey>

2003 0313 - NP - The Washington Post - The Trick to Insurance Is Grasping the Details - [link]

  • And criticism you will get, but polite criticism it will be. (p91)

--  Ernst Csiszar, Vice President, National Association of Insurance Commissioners (NAIC), - South Carolina

2003 1022 - GOV (Senate) - Federal Involvement in the Regulation of the Insurance Industry, (CSPAN) - Insurance Industry Regulation, John McCain (R-AZ) - [PDF-147, VIDEO-CSPAN] 

  • (p51) - Gregory SERIO. NAIC /  Superintendent, New York Department of Insurance -  Price is a factor. Price should not be the leading factor on it. It should be a factor. I will go to this issue.

    • Just a few years ago, we had this thing called vanishing premiums, where people were given a promise that their premiums were going to go away, and they were going to have this insurance coverage forever or for as long as they were told they were going to have it.

      • That did not pan out, because those interest assumptions were wrong, because those other investment income assumptions were wrong over the duration of that policy.

    • And we had to go back and rethink how it is that the companies are not only structuring these products but how they are selling them.

    • And I think what has been happening is that this notion that the public is going to save money a little bit here, a little bit there is a hard thing to do when you are talking about a product that you need to have guaranteed at the end of the day

2004 0922 - GOV (Senate) - Examination and Oversight of the Condition and Regulation of the Insurance Industry, Richard Shelby (R-AL)  ---  [BonkNote]

  • (p28) - John Oxendine, NAIC / Georgia Insurance Commissioner

    • The problem, of course, is that some agents are not trustworthy.

      • Sometimes they sell unsuitable products.

    • Most soldiers already purchased the affordable SGLI and may not need supplemental life products.

    • These supplemental policies are often sold to soldiers as investments rather than as insurance.

    • While it is true that an insurance policy can be one component of an individual's investment strategy, the investment portion of the policy is, in some cases, being overemphasized and/or misrepresented.

    • Some soldiers have testified that they did not even realize that they had purchased life insurance. Some also testified they thought they were opening a savings account. 

2005 1117 - GOV (Senate) - A Review of the GAO Report on the Sale of Financial Products to Military Personnel, Richard Shelby (R-AL)

  • Terri Vaughan, NAIC-CEO-IA

    • I will tell you, the insurance regulators have had failures also.

    • We have been the recipient of several GAO studies, thank you very much, that pointed to problems in our system, and that we then went and fixed.  (p28), (Part 1 of 2)

2009 0305 - GOV (House) - Perspectives on Systemic Risk, Paul Kanjorski (D-PA)  ---  [BonkNote]

  • Carolyn MALONEY (D-NY)  How are the insurance businesses of AIG segregated from the AIG Financial Products?

  • Joel ARIO (NAIC /PA - Insurance Commissioner).  Within insurance regulation, there is the strong principle that the assets that are there for the benefit of policyholders are walled off from all other creditors of the company, including the holding company upstream.

    • So we believe that the assets of the insurance companies are there for the policyholders and they are protected against all other creditors, including the holding company upstream.

  • Mrs. MALONEY. So in other words, the risk of default in the life insurance business of AIG is separate from the cross-linked risk of being associated with and dragged down by AIG Financial Products, is that correct?

  • Mr. ARIO. It is a slightly different question.

    • If there are problems at the holding company level, particularly in terms of the rating of the companies, that can create rating issues for the downstream insurance companies, and that is a particularly important issue in the property and casualty side.

    • If we are going below the A minus level that we are at now into the Bs, it would have very negative impacts on the insurance company.

      • So there is that linkage.

  • Mrs. MALONEY. But the linkage is only with the rating companies.

    • In other words, they are walled off, they are separate.

    • So what would happen if AIG Financial Products was allowed to fail?

      • Would that have an impact on the insurance properties and the insurance assets of AIG?

  • Mr. ARIO. Not directly on the assets.

    • That is more a question for how the rating agencies would look at that issue for the insurance companies.

  • Mrs. MALONEY. The rating agencies do not have a lot of credibility at this point, so I would rather ask the insurance commissioner. It is my question.

    • So if Financial Products was walled off and allowed to fail, the insurance portion would be safe and sound, and going forward, is that correct?

  • Mr. ARIO. Yes, the assets would be there and would be protected.  (p48)

  • Mrs. MALONEY. Thank you. 

2009 0318 - GOV (House) - American International Group's Impact On The Global Economy: Before, During, And After Federal Intervention, Federal Aid to AIG Insurance, Regulators Panel (CSPAN), Paul Kanjorski (D-PA)  ---  [BonkNote]

  • "As public officials, it is the responsibility of the NAIC and state regulators to correct any misinformation that is being circulated,"  said Therese M. (Terri) Vaughan, NAIC chief executive officer.

    • "Consumer protection is our first and foremost concern. The 71 state-regulated insurance entities within AIG are financially sound and are fully able to pay claims.

2009 0803 - InsuranceJournal.com - States Dispute Article Questioning AIG Insurance Units' Finances - [link]

NAIC - Insurance Commissioners - Snippets - 1990s

  • 1990-1B, NAIC Proceedings - Presentation By James P. Corcoran, Superintendent of Insurance, State of New York - Before the Insurance Committee of the Organization for Economic Cooperation and Development (OECD) - Paris, France - October 27, 1989 - (p868)

    • Until recently, Life insurance was regarded as a stable industry where little change took place, either in the policies offered to the public or in the regulatory environment in which insurers operated.

      • Investments, subject to strict qualitative and quantitative standards, were generally made for the long term in traditional vehicles such as bonds, stocks and mortgages.

    • Over the past decade, however, many revolutionary changes have taken place. Life insurers are now competing with banks and brokerage firms for a piece of the financial services pie.

      • Each player contends that it wants a "level playing field," but in fact seeks to gain some competitive advantage over the other.

      • Life insurers have been placing greater emphasis on financial services and educating their agents to be financial planners as well as life insurance experts.

    • Competition in financial services has resulted in the introduction of new products which offer a variety of investment incentives coupled with an insurance component.

      • Sophisticated consumers are bypassing the traditional life products for these new "interest-sensitive" products, many of which are backed by vehicles other than the traditional bonds, stocks and mortgages.

      • High risk-high yield obligations, leased securities and futures contracts are now common components of the portfolios of our life companies.

    • All of these changes have, of course, added increased strains on the life insurance community

  • 1991 0717 - NAIC Testimony - Terence Lennon, New York Department of Insurance - 17p

    • (p4) - Individual Products

      • The most important feature of the new individual products was the unbundling or separation of the fund accumulation from the mortality function.

      • In this way the consumer could be shown his or her fund and the earnings credited to it as a separate element.

      • Universal life and a variety of variable life and annuity products were the chief vehicles in this effort.

    • (p5) - The key risks for these products were the spread risk and the potential disintermediation risk in the event they were surrendered in response to interest rate changes.

      • Traditional life company management structures were not well suited to managing these risks. (p5)

1991 0717 and 0724 - GOV (House) - Life Insurance Solvency Issues, (CSPAN) - Insurance Insolvencies, (NAIC) - The Impact of Junk Bonds, Real Estate and Mortgages on the Life Insurance Industry, Cardiss Collins (D-IL)  ---   [BonkNote]

  • (p10) - Statement of Mike Weaver (Commissioner, State of Alabama) - A very recent example of that would be the Mutual Benefit situation where over $1 billion was withdrawn over a 2-week period of time. There are not many insurance companies nationwide that can withstand that thrust.

    • The public has to have confidence in what is going on out there in all financial institutions, insurance being one of the major ones. 

  • (p13) - NAIC - William McCartney, Director of Insurance, State of Nebraska and Vice President, National Association of Insurance Commissioners 

    • We are seeing a real crisis in confidence:

    • That, in my mind, is probably the worst thing that could happen.

    • There is not a company in the country that can stand runs that Commissioner Weaver was talking about, where people ask for $1 billion in policy loans and surrenders in a 2-week period.  

1991 0729 - GOV (House) - Regulation of Insurance Companies and the Role of The National Association of Insurance Commissioners, Ben Erdreich (D-AL)  ---  [BonkNote]

  • As Steve mentioned, I've had the privilege of serving as Director of the Illinois Department of Insurance for just less than two years and given the history of tenure of commissioners..... I  may be becoming an endangered species.

--  Stephen Selcke, Director of the Illinois Department of Insurance

1993-2, NAIC Proceedings

  • (p33) And, Mr. Chairman, as they say in baseball-and I understand you have an interest in baseball these days-you cannot tell the players without a scorecard?

    • Well, it is far too easy for consumers these days to lose track of balls and strikes on how their insurance product works for them, and that is leading to the type of problems we have heard about this morning.

--  NAIC - Statement of David J. Lyons, Commissioner, Iowa Insurance Department, And Chairman, Disclosure Task Force, National Association of Insurance Commissioners

1993 0525 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  ---  [BonkNote]

  • (p187) - Senator Chuck GRASSLEY (R-IA) - Generally speaking, what has been the experience in the State of Iowa with regard to the problems of consumer disclosure of life insurance?

  • David Lyons, NAIC / Iowa Insurance Commissioner -  If I can be generic, we have had two major problems.

    • The first is a very specific problem, and that is the changing in the interest rates.

    • We have seen a large upsweep in the number of complaints exactly on point to the testimony that we have heard here today relating to the change in dividends and interest structures.

    • So we have had a lot of work to do in the area of determining whether there were intentional misstatements.

      • In that case, there are civil and administrative actions taken by us and criminal prosecutions referred on.

      • If there is an unintentional, yet identifiable, misleading statement made to consumers, then there is administrative action taken to put the consumer into the position they should have been under the information that was disclosed to them. 

1993 0525 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  ---  [BonkNote]

  • One regulator [W. Harold Phillips (Hal), Senior Life Actuary - CA) summarized the problem in his department - Attachment Two-A:

    • Misleading illustrations are structured as inducements to buy rather than helpful tools to understand the workings of the product or as a comparison between products of competing companies. 

    • In addition, many purchasers as well as agents do not understand what an illustration is and what it is not.

    • Most agents, companies and actuaries agree that there is a problem and that something needs to be done.

    • The industry appears to be in gridlock on the matter.

    • Current regulation of illustrations is very weak.

    • Companies and agents can do pretty much as they please.

1993 Proc. IB 789. - Life Insurance Illustrations Model Regulation - Proceeding Citations

  • "People are buying the wrong things," said J. Robert Hunter, the president of the National Insurance Consumer Organization, who is about to become the Texas Insurance Commissioner.

    • "That's because the disclosures are incredibly arcane and easy to manipulate."

1993 1030 - NYT - Insurance; Confusion Over Policies Leads to Talk of Change, by Leonard Sloane - [link]

The working group's concern was how to bring about a change without damage to the market place.

1993-4, NAIC Proceedings -  LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote]

  • Chapter 1, Life Insurance and the Question of Solvency Salvatore R. Curiale, Superintendent of Insurance, New York State Insurance Department

  • I am not sure there are any serious issues confronting the life insurance industry these days, unless of course you consider solvency, liquidity, junk bonds, deteriorating mortgage and real estate portfolios, risk-based capital requirements, asset mix, separate accounts, credit risk, Congressional inquiries, shrinking surplus, demutualization and more.

  • ⇒  What happened?

  • ⇒  How did a boring, straight-forward business become so interesting and so difficult to regulate?

  • During the past decade the life insurance industry has undergone dramatic changes.

    • A business that was  previously characterized by stable risks and generous profits has been transformed into one marked by instability of risk and evaporating profit margins.

  • The change was precipitated by the dramatic rise in interest rates in the late 1970s and early 1980s.

    • The relatively high rates offered by money market funds, Certificates of Deposit and other similar products prompted insurers to develop insurance alternatives that shifted the marketing emphasis from security to, at least partially, rate of return.

1993 - Book - Financial Management of Life Insurance Companies, edited by J. David Cummins

  • But for now, Mr. Lyons said, "the public's and the politicians' perceptions of sales abuses have been so raised that people are ready to accept more radical approaches."

    • [Bonk: David Lyons = 1990-1994 - Iowa Insurance Commissioner

1994 0308 - NYT - Regulators Seek Limits on Insurer Sales Pitches, by Michael Quint  ---  [BonkNote]  ---  [link]

  • Commissioner Willis (DC) said the trouble with disclosing that the premium might at some point "resume" is that the premium never stopped.

    • It is misleading to make a consumer think the premium is not being paid.

    • [Bonk: Vanishing Premium, Policy Mechanics, Cash Flow, Work)

1994-3, NAIC Proceedings

  • Let's go back to the question of understandability.

    • With no standardized format being utilized, many of the illustrations currently in use are far too complex for the average consumer or applicant to understand.

    • In many cases the selling agent does not understand what he is presenting, and this needs to be addressed.

--  Robert E. Wilcox, Utah Insurance Commissioner and Chair of the LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote]

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

  • Bob Wright (Virginia) said the Society of Actuaries report referred to the fact that companies said they had no control over what agents did.

  • Chair of the LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote] 

1994-4, NAIC Proceedings

⇒  1991-1992 - SOA - Final Report* of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries  ---  [BonkNote]  ---  142p

  • The working group did not come to a conclusion on whether to include the sensitivity analysis and decided that discussion at the next meeting would be helpful.

  • Commissioner Wilcox said he was impressed** by the comments of those on the working group who were not actuaries that sensitivity adds more confusion than enlightenment.

    • He said as an actuary, if he were buying a policy, he would want to see what 1% less interest produced.

    • He said variations other than interest would be more difficult. (p674)

1994-4, NAIC Proceedings

--  Robert E. Wilcox, Utah Insurance Commissioner and Chair of the LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote]

**[Bonk: I was curious about use of the word "impressed."  I looked it up on thesaurus.com and found that it is related to "affected" and "distressed" --  which would make sense in that sentence.  Thoughts?]

  • If we are going to have a group of consumers of our products who are satisfied with what they get, we have to meet their expectations.

  • Obviously, there are two adjustment points whereby that can be accomplished.

    • One is that you can change the outcome to match the expectations.

    • The other is to change the expectation to match the outcome

--  Robert E. Wilcox, Utah Insurance Commissioner and Chair of the LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote]

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

  • Daphne Bartlett - California Actuary:

    • ... suggested grading in the interest rate over a period of time to standardized assumptions.

    • ... said that this would be an appropriate substitute for the sensitivity index. 

    • ... saw several advantages.

      • It eliminated the portfolio versus new money problem because one could grade down, and the other might need to grade up.

    • ...said the numbers generated by the illustration would be more realistic...

    • ...said this would minimize the need for in-force illustrations.

1995-1, NAIC Proceedings

  • Where were the people that wanted to do that when we were going through the process.

  • Folks, we've been talking about this for a year.

    • We have taken input from anyone and everyone.

  • If we had any sense that we could have had ten-year projections only, if we had any sense that we could have graded interest rates and that it would have gotten any support, believe me, we would have done it.

  • ⇒  Where were you people when we were developing the model?

--  Thomas C. Foley, North Dakota, Regulator/ Actuary

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

  • Roger Strauss (Iowa) said a fundamental issue was that the consumer realize that the premium is being paid from someplace. 

    • He said that was the most important issue to him and if it were to be included in the basic illustration then he would want to show the numbers with an asterisk beside them saying that they were being paid from other than the consumer's pocket.

 1995-1, NAIC Proceedings

  • ...a great deal of our problem is caused because the people out there marketing our life insurance products are trying to market it against and like mutual funds.

    • Until we start to market it as life insurance and describe it and teach the consumers about life insurance, they're not in any position to make those kinds of judgment calls

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

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

  • I'd like to take that one step further.

  • What I noticed was there is a requirement for in-force illustrations, and people may have thought they bought one thing and whenever you have to give them an in-force illustration with a current disciplined scale, they're going to realize they bought something else.

    • I think many companies will have serious problems with policyholder retention.

--  Mark J. Greene, FSA. MAAA, Supervising Actuary, New York State Insurance Department

1995 - SOA - Illustrations and Nonforfeiture Values, rsa95v21n123 - Society of Actuaries - 14p

  • (p588) - Len Stillman (Utah) asked why consumers who purchase investment type insurance products should be afforded protection that other investors are not offered.

  • Commissioner Bartlett (Maryland) responded that there is a perception that products offered by life insurers are more secure than other investments.

1995-1, NAIC Proceedings - Guaranty Fund Issues Working Group B of the Insolvency (EX5) Subcommittee - September 11, 1995

  • 1996 0613 - NYT - Insurers Lobby, Quietly, to Alter Consumer Law, By Clifford J. Levy - [link]

    • Agent Commissions, New Law in New York

    • Asked why consumers were not involved, Mr. Muhl said: "I am not sure that you are aware of one of my roles. One of my tasks is to represent the consumer's interests. So the consumer was well represented."

    • Consumer groups scoffed at that.

      • "I don't think it makes sense to override these controls without our side having an opportunity to say, 'Hey, there are some things that we want,'" said Robert Hunter, a former insurance commissioner in Texas who is director of insurance for the Consumer Federation of America, a coalition of 250 consumer groups.

      • "They knew that they could have worked with us," Mr. Hunter said. "They have just come in and tried to slam-dunk this."

    • Edward J. Muhl = Superintendent of the State Insurance Department

  • They are complaints about things that we can't do anything about because the contract might be a Universal Life type product with Nonguaranteed Elements, and there is no regulatory framework to deal with those issues.

  • Those complaints just fall by the wayside because there is nothing that can be done.

--  Larry Gorski, Chief Actuary, Illinois Department of Insurance

1996 - SOA - Nonforfeiture Law Development, Society of Actuaries - 23p

  • I think you're right, Walter, in a significant respect.

  • The fact is that a minority would be inclined to make those overly aggressive assumptions and produce unsupportable illustrations,...

  • ...but every time one company would take that stand and use assumptions for the illustration that don't make sense, there's another company that competes with them and feels compelled to play in the same ball park and then another company that competes with them.

  • In the absence of regulation on those who would be most aggressive, the problem grows, but your point is well taken.

  • [Bonk: Walter = Walter Miller]

--  Robert E. Wilcox, Utah Insurance Commissioner and Chair of the LDWG - Life Disclosure Working Group - (A) - NAIC  ---  [BonkNote]

1996 - SOA - Current Developments Surrounding Regulations and Standards of Life and Annuity Products, Society of Actuaries - 18p

  • Commissioner Wilcox said that he admitted that the 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 - (A) - NAIC

1996-4V2, NAIC Proceedings

  • The actuary cannot and should not attempt to estimate or predict the future.

    • This would reduce actuarial work to guessing.

  • What then are actuarial assumptions?

1998 01 - SOA - Actuarial Futures - Actuarial Assumptions and the Future, by W. Harold Phillips [Hal], Senior Life Actuary at the California Department of Insurance, Society of Actuaries - 4p

  • I'm going to have you listen for a few minutes. 

  • I have a theory that the difficulties the life industry faced with illustrations, including the billions lost in lawsuits, stemmed from the lack of understanding of what a scale of illustrated dividends or nonguaranteed elements is and is not.

  • I have assumed there was consensus, at least within the actuarial profession, on the definition of an illustration. I'm not even sure of that today.

  • A solution to the illustration difficulties lies, first, at getting at the heart of a problem.

    • The problem, in my opinion, is lack of understanding of the definition of an illustration.

    • The solution lies in educating the actuarial profession, companies, sales force, and the public on what an illustration is and what it is not.

  • I place a large share of the blame for the difficulties in the industry with our profession for not initiating and carrying through such education, but it's not too late.

--  Hal Phillips, aka William H. Phillips, a senior life actuary with the California Department of Insurance

1998 - SOA - Current Issues in Sales Illustrations, Society of Actuaries - 26p

  • Mr. Foley:...responded that, if consumers want to compare policies, they have the illustrations to do so.

1999-4,  NAIC Proceedings

NAIC - Insurance Commissioners - Snippets - 1980s

  • The FTC efforts to deter state action on life insurance cost disclosure, under the guise of assisting the states, when in fact, the game plan was to initiate an FTC regulation on the basis that the states failed to act, might be described as a federal fraud.

    • 1979 - FTC - Report - Life Insurance Cost Disclosure, Federal Trade Commission - 460p

1980-1, NAIC Proceedings - 1979 1203 - Wesley J. Kinder, California Insurance Commissioner, Vice-Presidential Address - re: FTC Report - (p8-13) / (p63-68)

  • So I think that the NAIC is going to have to relook at the whole issue of life cost disclosure.

    • It is an issue that will not go away.

    • ⇒  As long as the internal benefits of a policy are not reflected in the premium, people need help in measuring those benefits.

    • ⇒  That is, in a nutshell, what cost disclosure systems have tried to do. (p10-11)

--  Susan Mitchell, Wisconsin Commissioner of Insurance

1981 0921 -  GOV (House) - Insurance Agent Commission Deregulation - [PDF-109p-GooglePlay, VIDEO-?] -

  • As you know, revolutionary changes are taking place in the life insurance business.

    • To a large extent, these changes have passed regulators by, and have left the regulators in a position of trying to catch up.

--  J. Alan Lauer, Pennsylvania, Deputy Insurance Commissioner, Actuary

1983-1, NAIC Proceedings

  • Statement on Behalf of the National Association of Insurance Commissioners - Submitted to the Senate Committee on Banking, Housing and Urban Affairs

    • .....on the Integration of Financial Services, By Bruce W. Foudree Insurance Commissioner of the State of Iowa and Chairman of the NAIC Integrated Financial Services Task Force - (p90-

1983-2, NAIC Proceedings

  • Now we want to make sure that the consumers are treated fairly and reasonably and have sufficient information upon which to make a decision.  (p318)

--  James P. Corcoran, Superintendent of Insurance, State of New York

1984 0411, 0503, 0510, 0628, 0913 - GOV (House) - Competition in the Insurance Industry, Peter W. Rodino, Jr. (D-NJ) - [PDF-755p-GooglePlay]

  • If we want to address the problems in the insurance industry, I strongly urge that a federally chartered insurance corporation be set up, along the same lines of the FDIC, to monitor this industry.

  • Indeed, if you think that the property/casualty crisis is difficult, I can assure you that the same crisis will come home, in spades, with the life insurance industry in approximately three to five years and it is not too late to address that crisis. (p761)

--  Michael A. Hatch, Commissioner, Department of Commerce, State of Minnesota,

1986 0225 - Letter to Senator Dale Bumpers (D-AR), Includes Letter to Governor Perpich, From Michael A. Hatch Commissioner, re: Insurance Unavailability Crisis- (p761-770)

1986 Part 2 0220 and 0221 - GOV (Senate) - The Cost and Availability of Liability Insurance for Small Business, Parts 1, 2, and 3, Jim Sasser (D-TN) - [PDF-1163p-GooglePlay-link]

  • On reinsurance, in 1984 we passed a new act on reinsurance in terms of what has got to be put up from the unauthorized reinsurers to insure that there are some funds available, in case those insurers disappear.

    • We have taken action on reinsurance.  

    • We have taken additional action because we see it as a problem that is starting to emerge, and a problem we would like to get a handle on. 

--  John Washburn - Illinois Insurance Commissioner - 11/1/1983 - 9/1/1989

1986 0618 - NAIC / GOV - Edward Muhl (MD) and John Washburn (IL) - Insurance company solvency [draft] - 53p

  • The life insurance industry is currently facing challenges in many fronts.

    • These challenges, if not properly met, could easily lead to financial problems for many companies.

  • Within the last decade, life insurance companies have increased their sales of products that are sensitive to the interest rate environment.

    • Examples of such products are universal life, single and flexible premium deferred annuities, guaranteed interest products and current assumption life insurance.

      • During rising interest rate environments, policyholder demands for high yields can result in policyholders surrendering their contracts.

      • Life insurance companies which have not adequately positioned themselves for this event might be forced to liquidate their assets and experience capital losses.

  • On the other hand, in declining interest rate environments, insurance companies attempt to maintain their crediting rates on their interest sensitive products.

    • This can lead to companies decreasing and, even in some cases,eliminating their profit margin.  (p4-5)

1986 0619 - NAIC / GOV - Edward Muhl (MD) - Reliability of the Institution of Insurance as to Financial Solidity and Solvency -  20p

  • Sometimes it is the same with insurance departments.

    • If you like the idea, go ahead and do it.

    • I think that is what the New York State Insurance Department did with Regulation 126, and I think that that is what the Department is doing with Regulation 130 regarding investments in high-yield, high-risk obligations by domestic life insurance companies. [Junk Bonds]

--  Robert J. Callahan, Fellow of the Society and has been with the New York State Insurance Department for over 35 years.

1987 - SOA - Quantifying The C-1 Risk (Defaults in Fixed Dollar Investments and Market Value Changes in Equity Investments), Society of Actuaries - 32p

  • Commissioner Hager of the Universal & Other Plans (A) Task Force stated that there appeared to be disclosure problems with universal life plans and that the identification of these items should be placed on the Actuarial Task Force agenda.

    • The members present agreed that the disclosure issues extended to variable life as well as universal life.

    • The main concern was that an unsophisticated buyer purchased a policy and did not know what the coverages, benefits and limitations were.

    • It was suggested that Sections 8 and 9(f) of the Universal Life Insurance Model Regulation needed considerable expansion. It was suggested that disclosure requirements be placed in the illustrations section of the models as well as in the contract itself.

    • Some of the items identified which should be disclosed:

      • (1) what is guaranteed versus what is not;

      • (2) adequate disclosure of the fact that a premium quoted will not support the contract for the whole life if the policy is a universal life policy;

    • (3) disclosure of the guaranteed surrender values on a flexible premium policy.

1988-2 - NAIC Proc.

We cannot play word games with policyholder money. (p74)

--  Karl L. Rubenstein, Special Deputy Insurance Commissioner, State of California

1988 0914 and 0915 - GOV (House) - Insurance Company Failures, John Dingell (D-MI)   ---   [BonkNote]

  • I think the proposals for tort reform currently being debated by Congress misses the point.

    • I frankly think that "tort reform" is an attempt by the insurance industry to finger point the blame for its own mismanagement on the judicial system.

--  Michael A. Hatch, Commissioner, Department of Commerce, State of Minnesota,

1986 0225 - Letter to Senator Dale Bumpers (D-AR), Includes Letter to Governor Perpich, From Michael A. Hatch Commissioner, re: Insurance Unavailability Crisis- (p761-770)

1986 Part 2 0220 and 0221 - GOV (Senate) - The Cost and Availability of Liability Insurance for Small Business, Parts 1, 2, and 3, Jim Sasser (D-TN) - [PDF-1163p-GooglePlay-link]