Yield Index

  • Yield Index Advisory Committee – NAIC
  • 1989 – SOA – What Will Be The Life Insurance Products Of The Future, Society of Actuaries – 18p
  •  1987 – SOA – Regulatory Update, rsa87v13n216 – Society of Actuaries – 26p
    • The NAIC Yield Index Advisory Committee was started in the middle of 1984 at the behest of the regulatory community; notable among them is John Montgomery (California)
    • The main thing that triggered their interest in having such an advisory committee formed was what our committee came to call the big red 12% ad.
    • We have all seen lots of them.
      • “Buy the new Extravagance Plus policy with the Miller life –12%.”
      • And if there is any other text in the ad it is probably not much and certainly little, if any, of the conditions that pertain to the base on which the 12% is credited. The regulatory community started to become concerned about that advertising then.
    • That concern continues because you still see a lot of the ads.
  • 3. Make Recommendations on Optional Form of the Life Insurance Disclosure Model Regulation with Yield Index
  • Mr. Foley explained that the concept of a yield index was very popular in the 1970s and early 1980s.
    • At that time the NAIC adopted a model regulation with an Optional Form of the Life Insurance Disclosure Model Regulation with Yield Index.
    • California was the only state that adopted the Yield Index and Mr. Summers noted that it has since been repealed.
    • Mr. Foley noted that when the Life Insurance Disclosure Model Regulation was revised at the Summer National Meeting all references to indices were deleted.
    • Mr. Batte moved, and Mr. Hartnedy seconded a motion to delete the Optional Form of Life Insurance Disclosure Model Regulation with Yield Index from the list of official NAIC model laws. The motion passed.

2000-3, NAIC Proceedings

  • 1984-2, NAIC Proceedings

    • 2. Adopted charges of advisory committee which include development of yield index (first priority) and study of test limits in the NAIC Model Life Insurance Disclosure Regulation.

  • 1988-1, NAIC Proceedings
    • Project No. 7a “Disclosure of Interest Yield Index:”
      • Questions had previously been raised as to whether the product rankings would be similar under the interest-adjusted index and the yield index for interest sensitive life insurance products, such as universal life plans.
  • 1991-2A, NAIC Proceedings
    • 5. Ratification of Amendments to the Optional Form of the Life Insurance Disclosure Model Regulation with Yield Index. Mr. Strauss explained that when the Life Insurance Disclosure Mode] Regulation amendments were adopted in December 1990, identical amendments should have been made to the Optional Form of the Life Insurance Disclosure Model Regulation With Yield Index. Upon motion duly made and seconded, the committee directed that the December 1990 amendments be made to the Optional Form of the Disclosure Regulation and directed that any future amendments to either model regulation be automatically made in the other model regulation unless there was specific wording to the contrary (Attachment Five-A).
  • 2000-3, NAIC Proceedings
    • Mr. Batte moved, and Mr. Hartnedy seconded a motion to delete the Optional Form of Life Insurance Disclosure Model Regulation with Yield Index from the list of official NAIC model laws. The motion passed.
  • John MacBain: I think the rationalization we’re seeing in pricing is motivated by a lot of things.
    • But it’s amazing how rational industry became when regulators started concentrating on solvency, and after the federal government started concentrating on our industry, after what happened to the savings and loans.
    • I think that has pushed us into more “rational behavior.”
    • And I, for one, am pleased because it’s brought the actuary much more into focus than a few years ago.
    • But I’m a little concerned that, if interest rates turn around and investment gains start to accrue, perhaps we will become less rational.
    • I’m glad to see that illustrations are becoming rational, although I’m not sure that what California did is rational, in terms of requiring this yield index, which absolutely nobody on the consumer side is going to understand.
    • But I’d be interested in getting a feel for whether the panel feels that, when the economy turns around and investment gains are more amendable, whether the pricing will continue to be as “rational”?

1994 – SOA – The Driving Forces Behind Participating – Universal Life (UL) – Nonguaranteed Element Product Development, Society of Actuaries – 12p

Benefits – NAIC – Regulators

  • 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.  (p11)

—  Susan Mitchell, Wisconsin Insurance Commissioner

1981 0921 –  GOV (House) – Insurance Agent Commission Deregulation – [PDF-109p-GooglePlay, VIDEO-?] ->Not on govinfo.gov, Committee on Small Business – Subcommittee on General Oversight 

  • “future benefit illustrations”

1988-2 NAIC Proc.

  • Current assumptions are critical to interest sensitive products such as Universal Life.
  • When interest rates are high, benefit projections (such as cash value) are also high.
  • When interest rates are low, these projections are not as attractive.

dfs.ny.gov/consumers/life_insurance/types_of_policies

  • “Prospective” implies looking forward from the valuation date to future benefits the insurance company will provide and future premiums to be paid by the policyholder.
  • “Retrospective” implies looking back from the valuation date to benefits already provided and premiums already paid since the contract was issued.
  • Retrospective methods seem to be better suited to certain newer life insurance plans, such as universal life plans, where it is difficult to place a value on future benefits that would be provided.

1983-2, NAIC Proceedings

  • Death Benefit Patterns
    • This has become a complicated subject under the more flexible types of “non-traditional” policy designs which are appearing in greater numbers.
  • Premium Payment Patterns
    • Under non-traditional policies such as universal life and other flexible premium designs, a wide variety of premium payment patterns is available…

1986-1, NAIC Proceedings

Regulators – Time in Office

  • 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

  • Senator NELSON. Now, let me ask a couple of questions here. First of all, I’m concerned, Mr. Csiszar, that the National Association of Insurance Commissioners, which had performed a magnificent service in the past, I’m concerned that it has lessened, because of the duration of an insurance commissioner’s term, its ability to represent the best interest of consumers. Let me ask you, what is the average time that an insurance commissioner in a state is in office?
  • Mr. CSISZAR. I think you need to talk to George Dale, Mr. Nelson, I think George is the longest-serving commissioner–
  • Senator NELSON. That’s not the question. The question is, what is the average time?
  • Mr. CSISZAR. Probably one Governor’s term.
  • Senator NELSON. To the contrary. It’s less than one year, the average time. And where does that insurance commissioner usually come from, Mr. Csiszar?
  • Mr. CSISZAR. Not always from the industry or with the experience from the industry. Oftentimes from a political or a legal environment.
  • Senator NELSON. Usually that insurance commissioner is appointed because that insurance commissioner has knowledge of insurance and he comes from the insurance industry, and at the end of his term, in less than an average of 1 year, where does that insurance commissioner, when he or she leaves public service, where do they go?
  • Mr. CSISZAR. I think the record there is that they do tend to go back to the industry or, in some shape or form, go to the industry.
  • Senator NELSON. And that’s my concern. (p97)

—  Ernst Csiszar, Vice President, NAIC ,National Association of Insurance Commissioners, 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]

State vs. Federal Regulation

  • 2005 0211 – CRS – Insurance Regulation: History, Background, and Recent Congressional Oversight (RL31982) – 32p
    • (p2-Summary) – This report provides the historical background for examining the arguments in this debate. It shows that state regulation of insurance is largely a historical artifact,…
  • Now, consumers don’t care who regulates insurance.
    • We really don’t care if it is Federal or State.
    • But we do care if it is any good, and it isn’t good today.

—  Statement of J. Robert Hunter, Director of Insurance, Consumer Federation of America

2007 1030 – GOV (House) – Additional Perspectives on the Need for Insurance Regulatory Reform, Paul Kanjorski (D-PA)  —  [BonkNote]

  • There are many company people as well as regulators who will privately tell you that federal regulation is coming in five years or 10 years.

—  Robert J. Callahan

1990 – SOA – Surplus Management, rsa90v16n25 – Society of Actuaries – 28p

  • 1905 08 – LR – The Federal Regulation of Life-Insurance, by James M. Beck, The North American Review, Vol. 181, No. 585, pp. 191-201 – 11p
  • 1905 – AP – Federal Supervision and Regulation of Insurance, by Solomon S. Huebner – [link-jstor-28p]
  • 1927 – AP – Federal Versus State Jurisdiction in American Life The Annals of the American Academy of Political and Social Science, Vol. 129 – 7p
  • 1981 – SOA – Insurance Regulation Policy Issue — Federal vs. State, rsa81v7n211 – Society of Actuaries – 14p
  • 1987 – LR – The McCarran-Ferguson Controversy: Should Problems In State Regulatory Departments Trigger Federal Reform?, by Jeffrey L. Schrader – 13p
    • 1977 – DOJ – The Pricing and Marketing of Insurance: A Report of the U.S. Department of Justice to the Task Group on Antitrust Immunities – [PDF-372p-GooglePlay]
  • 1991 – AP – Going National: The Life Insurance Industry’s Campaign for Federal Regulation after the Civil War, by Philip L. Merkel, The Business History Review, Vol. 65, No. 3, Financial Services (Autumn, 1991), pp. 528-553 (28 pages), Published By: The President and Fellows of Harvard College – JSTOR
  • 1995 – JIR / NAIC – Diversity of State Valuation Laws and Regulations, by Kenneth W. Faig, Jr, Polysystems – 22p
  • 1999 – SOA – Small Companies & Federal vs. State Regulation, stn-1999-iss14-hill – Society of Actuaries – 3p
  • 2006 08 – AP – Benefits of Multi-Jurisdictional Regulation of the Life Insurance Industry: Fact or Fiction? •American Risk and Insurance Association (ARIA) Annual Meeting Washington, DC, McShane, M. K. and Cox, L – 56p
    • Debates about state versus federal regulation of the insurance industry are as active and cogent today as ever. Few researchers have rigorously investigated whether the current state-based regulatory system provides benefits that offset the high costs of multi-state compliance.
  • 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)

—  1986 0225 – Letter – Michael A. Hatch, State of Minnesota, Department of Commerce

1985 1986 – GOV (Senate) – The Cost and Availability of Liability Insurance for Small Business – [PDF-1163p-GooglePlay-link]

  • On state vs. federal regulation in the U.S., I have no position.
    • I am an insurance professor, not a political scientist.
    • State regulation has serious shortcomings, but I do not know if federal regulation would be any better.

—  Joseph Belth

1981 – SOA – The Life Insurance Business–The View of Consumerists, Daniel F. Case, Moderator, Society of Actuaries (rsa81v7n38) – 18p

  • While insurance should remain state regulated, there is certainly a role for the Federal Government to play in concert with the State insurance departments and the NAIC.
    • The NAIC proposed this statute because the Federal Government has unequaled clout, reach, and investigatory and law enforcement resources.
    • The State insurance departments are ready and willing to investigate and prosecute insurance fraud, often in cooperation with Federal law enforcement agencies.

—  Earl Pomeroy, NAIC / North Dakota Insurance Commissioner

1994 0421 – GOV – Insurance Fraud – Congressional Record (Volume 140, Number 45) – [link]

  • 3. H.R. 1290
    • Bob Mackin (NCOIL) expressed concerns about the various industry and related groups that have publicly supported H.R. 1290.
    • Assemblyman Lasher said that NCOIL and NAIC should present a coordinated effort to oppose the legislation for the best interest of insurance consumers.
    • Director McCartney noted that consumer groups generally agree that H.R. 1290 does not offer any consumer protection.
    • The members agreed to continue to coordinate their efforts to defeat the federal legislation that would preempt state regulation of insurance.

1993-2, NAIC Proceedings

H.R.1290 – Federal Insurance Solvency Act of 1993103rd Congress (1993-1994) – congress.gov/bill/103rd-congress/house-bill – [link]

1970 – Joint Special Committee of Life Insurance Costs

  • 1970 – Report of the Joint Special Committee on Life Insurance Costs – (p720-748) – 29p
    • Report to American Life Convention, Institute of Life Insurance, Life Insurance Association of America 
    • 1973 – GOV (Senate) – The Life Insurance Industry –  4 parts – Senator Hart – Part 1 – 0220 – PDF-794p
  • My interest in this challenging subject goes back to my membership on the 1970 Joint Special Committee chaired by Jack Moorhead.
  • This Committee proposed what was then known as the interest-adjusted method, which later became the basis of the NAIC approach now in effect in some 2/3 of the states.

—  C.L. Trowbridge

1981 – SOA – Individual Life Insurance Cost Disclosure Issues, Society of Actuaries – 22p

  • 1970 – SOA – Report on the Work of the ALC-ILI-LII Committee on Life Insurance Costs, by E. J. Moorhead, tsa70v22pt2dn62ab2 – Society of Actuaries – 2p
    • E. J. Moorhead explained why this committee was formed and the general tenor of its report, which is now in the draft stage but seems likely to be issued soon. He urged actuaries to give their support to the committee’s work, even if any of them might personally prefer a different approach.
    • He expressed the view that, if the life insurance industry does not exercise its own initiative in this matter, it may have an unpalatable solution imposed upon it.
  • 1972 – AP – An Empirical Investigation of Attitudes Toward the Life Insurance – Marketing, by O. C. Ferrell Jr. – 181p 
  • 1973 – SOA – A Ratio of Interest-Adjusted Cost Indexed for the Comparison of Dissimilar Life Insurance Contracts, by Peter L.J. Ryall, tsa73v25pt1n72ab5 – Society of Actuaries – 28p
  • The Insurance Industry recently appointed a Joint Special Committee of Life Insurance Costs to consider the method or methods that a buyer of life insurance may find most suitable for use in comparing premiums, dividends and cash values of comparable policies that are offered by different life insurance companies.
  • The Joint Special Committee issued a report on May 4, 1970 reviewing a long list of cost indices possibilities.
  • Three major methods were submitted;
    1. Methods that determine an Insurance cost index, having assumed an interest.
    2. Methods that determine an interest yield rate, having assumed a cost of insurance.
    3. Methods that relate the values of amounts paid by the company to amounts paid by the policyholder.  (p4)

—  Senator Roman L Hruska (R-NE) –  Ranking Republican Member, Senate Antitrust and Monopoly Subcommittee

1973 – GOV (Senate)The Life Insurance Industry – Hart, Part 1 of 4 – 794p

Yardstick

  • Ernest J. MOORHEAD. I guess I would , I hope you’ll not think this is with tongue in cheek, express my happiness at Mr. Matz’s remarks about the yardsticks.
    • When I went before the ACLI committee, of which he was then chairman the adjective applied to the yardstick idea was ludicrous.
    • I’m pleased that he is now so far away from regarding the idea as ludicrous. (p149)

1977 0628 and 0630 – GOV (Senate) – Disclosure of Insurance Policy Information to Veterans, Richard Stone (D-FL) – [PDF-415p-GooglePlay]

  • Mr. SHAFFER. Do you have any position on the yardstick issue?
  • Mr. VOGEL Yes.
  • Mr. SHAFFER. Would you tell us what it is?
  • Mr. VOGEL We don t think that it’s a necessary part of the disclosure or sales process.
  • Mr. SHAFFER. And the reason for that is?
  • Mr. VOGEL. The reason for that is several fold.
    • There are the technical difficulties with the yardstick itself, which have to do with the difficulty of getting up-to-date figure on what various are doing, which an earlier witness testified about.
    • Also, a great deal of insurance in this country is sold on a combination basis with a term insurance part and a permanent insurance part, and there is a question then what do you do with these two separate pieces, which certainly makes the yardstick less attractive? (p412)

1978 0807, 0814 and 0815 – GOV (House) – Life Insurance Marketing and Cost Disclosure, John Moss (D-CA)  —  [BonkNote]

  • 108  This basic approach to providing yardstick information is contained in the buyer’s guide required by the State of Wisconsin, a copy of which is contained in Appendix X.
    • The FTC draft buyer’s guide in Appendix X also contains an example of this type of yardstick. (p155)
  • Another way of providing yardstick information that Offers great promise is the recently implemented “Hotline” in the State of Wisconsin.
    • This system provides a toll-free telephone service that consumers can call to find out whether the policy they are considering is high, average, or low cost compared to other similar policies offered for sale in that state.  (p156)

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

Policyholder Protection

  • The fundamental tenet of our U.S. system is to protect policyholders by ensuring the solvency of the insurer and its ability to pay insurance claims. (p36)

—  Prepared Statement of Kevin M. McCarty, Commissioner Florida Office of Insurance Regulation – On Behalf of the National Association of Insurance 

The State of the Insurance Industry and Insurance Regulation

  • Robert Wilcox – Expert Witness – Thao v Midland
  • vs. Consumer Education
  • Guaranty Associations
  • 2013 10 – IAIS – ISSUES PAPER ON POLICYHOLDER PROTECTION SCHEMES – 42p
  • Solvency
  • 2017 PRA Youtube – son with cancer

Codification

  • One other issue I did want to touch on is the effort of the NAIC on codification.
  • I’m sure that a lot of you have not paid a lot of attention to codification. It seems like an effort that the accountants are making, that we hope won’t effect us too much. The effort on codification is a very serious and broad effort at the NAIC. The people working on it are not just looking at codifying current practice. They’re also looking at changes.

—  CRAIG R. RAYMOND

1995 – SOA – VASP – Valuation Actuary Symposium Proceedings – Session 2 – Life and Annuity Valuation Issues, VASP952 – Society of Actuaries – 18p

NAIC – IAIS

  • 138. Some supervisors publish conduct-related information that can help to mitigate risks to consumers.
    • Example from the United States: Consumer Information and Education
  • The National Association of Insurance Commissioners (NAIC) provides a variety of public information useful for consumers.
  • Information and tools that U.S. state insurance supervisors have found helpful to make available to consumers include:
    • the NAIC’s Consumer Information Source (CIS) which provides key information about insurers consumers can use (for example, before purchasing insurance), including closed insurance complaints, licensing information and key financial data.
    • INSURE U – Get Smart About Insurance, which is a public education program created to assist consumers with information about insurance issues. INSURE U is designed to help insurance consumers as their lives and needs change, and to educate them about how to avoid being scammed.
  • Since its 2006 launch, INSURE U has featured public service announcements (PSA), consumer alerts, news releases, mobile apps along with integrated social media campaigns, in order to help consumers understand difficult topics.  (p31)

2015 0617 – IAIS (Draft) – ISSUES PAPER ON CONDUCT OF BUSINESS RISK AND ITS MANAGEMENT

VAR – Value at Risk

  • Summary: Value-at-risk has received a great deal of attention in recent years as an effective risk management concept.
  • This session examines the basics, including:
    • What is it and how does it work?
    • How much and how is it being used?
    • What are the pros and cons relative to other risk management techniques?
    • What are the likely implications for pension plan funding and investments?

1998 – SOA – Introduction To Value-At-Risk, Society of Actuaries – 26p

  • 1998 – SOA – Subjective Value at Risk, by Glyn Holton, rrn9810 – Society of Actuaries – 32p