McCarran-Ferguson Act

  • 1945 – Congress – McCarran-Ferguson Act of 1945
  • Senator Homer Ferguson (R-MI) – 1943-1955
  • Senator Pat McCarran (D-NV) – 1933-1954
  • It is important to note that McCarran is a power-sharing statute that reflects Congress’ judgment to delegate, not abdicate, authority over insurers to States that regulate the business of insurance themselves. (p6)

—  Marc Racicot, Former Governor of Montana, President, American Insurance Association (AIA)

2006 0620 – GOV (Senate) – The Mccarran-Ferguson Act: Implications of Repealing the Insurers’ Antitrust Exemption, S. Hrg. 109-557 – [PDF-160p, VIDEO-?]

  • naic.org/cipr_topics/topic_mccarran_ferguson_act.htm
  • 1977 – DOJ – The Pricing and Marketing of Insurance: A Report of the U.S. Department of Justice to the Task Group on Antitrust Immunities – [401p-GooglePlay]
    • (piv) – The basic question under study was whether continuation of the present exemption of the business of insurance from the federal antitrust laws , by virtue of the McCarran Act and state regulation , is in the public interest. 
  • 1987 – LR – The McCarran-Ferguson Controversy: Should Problems In State Regulatory Departments Trigger Federal Reform?, by Jeffrey L. Schrader – 13p
  • 1945 0125 – Congressional Record – congress.gov/79/crecb/1945/01/25/GPO-CRECB-1945-pt1-15.pdf
    • (p17) – REGULATION OF THE BUSINESS OF INSURANCE
      • The LEGISLATIVE CLERK. A bill (S. 340) in its opinion in the case of United States to express the intent of the Congress with reference to the regulation of the business of insurance.

      • Kenneth McKELLAR (D-TN) – As I understand the bill its purpose and effect will be to establish the law as it was supposed to be prior to the rendering of the recent opinion of the Supreme Court of the United States. Is that correct?

      • Homer FERGUSON (R-MI) – No.

        • …

        • In other words, the bill would establish a moratorium on the application of the provisions of those acts until the date set forth in the bill.

      • Abe MURDOCK (D-UT) – Let us look at that phase of the subject for a minute. We new leave section 2 of the bill and drop down to section 4.
        • Paragraph (a) of section 4 provides for a moratorium, or a suspension of the Sherman and Clayton Acts insofar as they relate to insurance, for a period, respectively, until June 1, 1947, so far as the Sherman Act is concerned, and until January 1, 1948, so far as the Clayton Act is concerned.
      • Homer FERGUSON (R-MI) – The Senator is correct
      • (p483) – Joseph C. O’Mahoney (D-WY) – The Senator puts his finger upon the precise center of this dispute, or misunderstanding.
        • …
        • It is no secret that Senate bill 12, introduced by the Senator from New Mexico [Mr. HATCH] and myself, and Senate Bill 340, the bill which was reported by the committee, are modifications of a measure which was originally drafted by the legislative committee of the National Association of Insurance Commissioners.  [NAIC]
        • So there was an effort to work with those groups. In drafting those two bills we sought to spell out each particular law which might apply to insurance. We referred specifically to the Federal Trade Commission Act, the Robinson-Patman Act, the National Labor Relations Act, and the Fair Labor Standards Act.
          • In other words a good-faith attempt was made to specify every single law which had an application, or might have an application, to insurance. 
  • 1987 0421, 0428, and 0429 – GOV (House) – Current State of the Liability Insurance Crisis
    • [PDF- 313p-GooglePlay, VIDEO-?]
    • Testimony – Daniel Oliver, Chairman of the FTC – p242-260
    • Letter – FTC to GOV – p290-291
      • Chairman La Falce has requested information on the circumstances that led to enactment of the 1980 amendment to the Federal Trade Commission Act that prohibits the Commission from studying the business of insurance .
    • (p288) – Chairman LAFALCE. All right, fine. I would also like you to supply for the record, a statement as to why the FTC believes it lost its authority in 1980, that is, what was the FTC doing in that era?
    • Mr. OLIVER. I am told that it resulted from a study that the Commission did on how good an investment life insurance was, the staff study.
      • I understand that it was a staff study that concluded that buying life insurance was not a good investment.
    • Chairman LAFALCE. The insurance industry did not like that, and therefore they got enough Members of Congress to support their position.
    • Mr. OLIVER. I think that is correct.
  • House – Committee on Small Business
  • (p71) – If you want to do something to help the regulation of insurance and to help the policyholders, then cut through the case law and amend McCarran-Ferguson to precisely state that “the business of insurance ” includes insolvency proceedings.

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

1988 0914 and 0915 – GOV (House) – Insurance Company Failures – [PDF-4xxp-GooglePlay, VIDEO-?]  —  [BonkNote]

  • 1991 – CQ Almanac – Insurance Industry Kept Exemptions – library.cqpress.com/cqalmanac/document.php?id=cqal91-1110263
    • Document Outline – House Subcommittee Action – House Committee Action
    • A bill to roll back some of the insurance industry’s exemptions from federal antitrust laws advanced through the House Judiciary Committee too late in the session to be considered on the House floor. A companion measure was introduced in the Senate.
    • Insurers had been exempt for 46 years under the McCarran-Ferguson Act, but critics led by Rep. Jack Brooks, D-Texas said the industry did not deserve special legal protection.
      • Brooks advanced his assault on the insurance industry Nov. 19 when the Judiciary Committee he chaired voted 19-14 to report HR 9, which would end many longstanding insurance industry exemptions from antitrust laws under the 1945 law.
  • 2006 0626 – GOV (House) – The McCarran-Ferguson Act: Implications Of Repealing The Insurers’ Antitrust Exemption, S. Hrg. 109-557 – [PDF-160p, VIDEO-?]
    • J. Robert Hunter, Insurance Director, Consumer Federation of America, Washington, D.C
    • Michael McRaith, as Illinois Director of Insurance, Chair, Broker Activities Task Force
    • (p23) – Hunter:  I would like to comment on one thing.
      • There were huge life insurance market conduct violations with billions of dollars paid by MET Life, Prudential and others a few years ago.
      • I do not think there were any criminal charges brought in any of that.
      • I really do think that that Chairman Specter’s idea of calling for what has happened in terms of actual numbers of criminal charges is very important information, and I hope the NAIC would help with that as well.

NARAB – National Association of Registered Agents and Brokers

2000s

  • 2000 0412 – Testimony – NAIC to GOV (Senate) – State Implementation of the NARAB Subtitle in the Gramm-Leach-Bliley Act,  Testimony of the Financial Services Modernization NARAB Working Group, Terri Vaughan (IA) – 19p
    • Senate – Committee on Banking, Housing, and Urban Affairs – Securities Subcommittee
      • [Bonk: Find / <WishList> – Hearing]
  • 2000 0720 – GOV (House) – Improving Insurance for Consumers-Increasing Uniformity and Efficiency in Insurance Regulation
    • [PDF-47p, VIDEO-?]
    • House – Commerce on Commerce – Subcommittee on Finance and Hazardous Materials
  • 2001 0516 – GOV (House) – NARAB And Beyond
    • [PDF-79p, VIDEO-?]
    • House – Committee on Financial Services – Subcommittee on Capital Markets, Inurance and Government Sponsored Enterprises
  • 2008 0708 – Letter – NAIC to GOV (House-Kanjorski) – regarding Manager’s Amendment to H.R. 5611, the National Association of Registered Agents and Brokers (NARAB) Reform Act of 2008 (S. 558) – 3p

2010s

  • 2013 0308 – Letter – NAIC to GOV (Senate) – NAIC letter to Congress in support of NARAB II – 1p
  • 2013 0906 – Letter – NAIC to GOV (House) – NAIC letter to House in support of the National Association of Registered Agents and Brokers (NARAB) Reform Act of 2013 (H.R. 1155) – 1p
  • 2015 0327 – Letter – NAIC to GOV – NAIC NARAB Board Recommendations – 2p
  • 2015 0108 – Press Release – NAIC applauds passage of TRIA & NARAB II – 2p
  • 2According to GLBA, the purpose of NARAB shall be to:
    • (1) provide a mechanism through which uniform licensing, appointment, continuing education, and other insurance producer sales qualification requirements and conditions can be adopted and applied on a multistate basis, while preserving the right of states to license, supervise, and discipline insurance producers and
    • (2) prescribe and enforce laws and regulations with regard to insurance-related consumer protection and unfair trade practice.

2001 08 – GAO – Regulatory Initiatives of the National Association of Insurance Commissioners – 31p

  • (p2) – Sue W. Kelly (R-NY): Far too often, we have seen State legislatures fail to act upon good ideas of organizations such as the NAIC and NCOIL.
    • It is only when Congress pressures the States, for example, with the NARAB provisions that I fought to include in Gramm-Leach-Bliley, that consumers finally get to see results.
    • There must also be considerable coordination between States, as the varying nature of market conduct regulation from State to State is quite problematic. 

2003 0506 – GOV (House) – Increasing the Effectiveness of State Consumer Protection, Sue W. Kelly (R-NY)  —  [BonkNote]   —   [PDF-123p, VIDEO-?] 

Numeric Summary

  • Illustrations and Premium Limits
    • The NAIC Life Insurance Illustrations Model Regulation requires a basic illustration to consist of a numeric summary of the death benefits and values on three bases:
  • Here is an example.
    • The policy illustrated below is $100,000 specified amount with a $60 policy load, assessed monthly.
    • The guaranteed interest rate is 6% in the first year, 4% in renewal years.
    • The issue age is 45 and four risk classes are examined.
    • The two numbers listed under 1980 CSO and 2001 CSO are (i) the guaranteed maturity premium or GMP, i.e. that level premium paid at issue and annually thereafter which matures the policy for the specified amount (at attained age 95 in this case) based on contractual guarantees of mortality, interest, loads and charges and (ii) the 20th year cash value, i.e. the cash value at attained age 65.
GMP / Cash Value PY 20
Risk 1980 CSO 2001 CSO Reduction
45 MNS $1,904/$37,954 $1,559/$33,056 18%/13%
45 MS $2,504/$41,017 $2,022/$36,433 19%/11%
45 FNS $1,597/$32,579 $1,279/$26,384 20%/19%
45 FS $1,875/$33,770 $1,761/$32,117 6%/ 5%

2002 06 – SOA – A New Platform for Universal Life, stn0206 – Society of Actuaries – 16p

  • Normally the format for these illustrations are left pretty much to the discretion of the company, but on the numeric summary, there also are two signed acknowledgments.
  • One is signed by the client stating that he has been told that these values are not guaranteed and can change any time, and another acknowledgment is signed by the agent saying that he has not presented any values that differ from or are in violation of the disciplined current scale.  (p36)

—  THADDEUS W. TRENTON

1996 – SOA – VASP – Session 2, Life and Annuity Valuation Issues, VASP962 – Society of Actuaries – 32p

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

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]

Confusion

  • After receiving these notices, John (Policyowner) contacted Glasgow (Agent) who had retired in 2000, to inquire why his policies would be terminating, even though he had timely paid the premiums on the policies for approximately 18 years. (p5)

2010 – LC – Maloof v John Hancock – 60 So. 3d 263 – Ala: Supreme Court – Alabama Supreme Court Opinion – 39p

  • He (Michael Lovendusky – ACLI) said consumers are mostly confused about options, guarantees and riders.
    • The ACLI work group was considering asking the Life Insurance and Annuities (A) Committee to narrow the charge to look at only products with options, guarantees and riders, but Ms. Cude said she thinks that it is important to consider how the disclosures for all products could be improved.
  • (Mr. Lovendusky – ACLI) said the ACLI work group thinks that most confusion for consumers involves complex products like Universal Life, and not Simple products like term life.

2016 0403, NAIC Proceedings – LIIIWG – Life Insurance Illustrations Working Group 

  • In my experience very smart people don’t really know what all the components mean. 
    • I mean I feel like it does lead to confusion. 
    • So, I think if you can refer to the eventual illustration and just show the cash value.

— Teresa Winer (GA)

2019 0917, NAIC – LIIIWG – Life Insurance Illustrations Working Group, [Bonk]

  • Gary Sanders (NAIFA):
    • And that leads to my second concern which is that consumer confusion I think, and we fear, in large part is going to be translated into a lack of confidence or a lack of trust in their advisor.
    • And in some way or another, the consumer is going to end up with the feeling that the advisor did some form of misrepresentation initially to the consumer and now the truth is coming out.
    • And I think that is a very big concern and not only would it harm the consumer’s confidence in the producer, but it could have a lot of reputational damage to producer’s as well.

2019 1115, NAIC – IULISG – IUL Illustration Subgroup – Conference Call, [Bonk]

  • (p8) – LIIIWG Next Steps Summary Comment Chart
    • Question 1 – Do you support the development of a short policy overview document for the working group to achieve its charge? Yes or No.
    • ACLI – NO – The working group has fulfilled its charge.
      • The Working Group was created from concerns raised when the Indexed Universal Life (IUL) Illustrations (A) Subgroup under the Life Actuarial (A) Task Force was working on guidance for IUL policy illustrations that would result in consumers being better able to understand the product performance and interest variability of IUL products.
      • A review of sample disclosures for all types of life insurance policies revealed that additional disclosures to those now required are likely to confuse consumers, which would be the opposite of the Working Group’s goal.
      • Moreover, the additional disclosures could create liability traps for insurers regarding required versus supplementary disclosures and undermine well respected NAIC models enabling the availability of affordable insurance protection to millions of Americans.

2021 0811 – NAIC Proceedings – LIAC – Life Insurance (A) Committee – Summer National Meeting – 43p

  • Focus Groups / Consumer Testing
  • A great deal of the confusion seems to stem from a lack of understanding of how cash value insurance products work and a lack of understanding of insurance terminology.
  • Also, because most people presume that if you pay your premium continuously, your policy will remain in effect, quite a few people had a hard time understanding how or why the policy would terminate in policy year 31.
    • This was simply foreign to their way of thinking.
  • One person was so confused that he said that the maturity age and endowment benefit were moot points, since the policy was going to end at year 31 anyway.

1990-1A, NAIC Proceedings – NAIC / LIMRA – Universal Life Disclosure Form Focus Group Summary, Consumer Issues Disclosure Working Group – NAIC  —   [BonkNote]  —  10p

  • 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

  • William Albus (National Association of Life Underwriters – NALU) commented that:
    • …the requirement for disclosing sales commissions is unnecessary because it is superfluous and would only confuse consumers.
    • …the purpose of disclosure is to provide information for making an informed decision and the disclosure of sales commissions has nothing to do with making this decision.

1988-2, NAIC Proc.

Meaningful Disclosure

  • Teresa Winer (GA) said that disclosure is helpful, but only if it is meaningful.

2019 0917 –  NAIC Proceedings (Fall, 6-77) – LIIIWG – Life Insurance Illustrations Working Group

  • …. would they know what that really means in terms of the risk to them and how it would interact with……

—  Brian Brosnahan, Plaintiff Attorney

LC – Walker v LSW – Case 2:10-cv-09198-JVS-JDE Document 813 Filed 07/06/15 Page 84 of 224

  • Ed Zimmerman, American Council of Life Insurers, expressed his concern about meaningful disclosures
    • stating that the ACLI did not believe the proposed amendments to the Rules Governing the Advertising of Life Insurance and the Life Insurance Disclosure Model Regulation provide meaningful disclosure.

1991-1A, NAIC Proceedings

  • Another key issue is something that we’re calling real disclosure.
    • I would like you to think in terms of a friend or a cousin or someone who is not in this business but who reads our disclosure document.

—  Thomas C. Foley (State Regulator)  

1997 – SOA – Keeping Current on Fixed Annuities, rsa97v23n255pd – Society of Actuaries – 12p

  • Section 10B(1). George T. Coleman (Prudential) asked for modification to this subparagraph to accommodate both additional premium and actuarial discount designs.
    • He said that the words “benefits accelerated” are susceptible to two different interpretations and the correct interpretation would be that they mean the gross amount accelerated to produce the actual accelerated benefit

1991-1A, NAIC Proceedings – Accelerated Benefits Working Group of the Life Insurance (A) Committee – Life Insurance Committee

  • First, he will find that the usual notions of lapse, select mortality, maintenance expenses and the like begin to lose their meaning when applied to the ALI “class.”
    • Is reduction of premium a partial lapse?
    • What about reduction of face amount, or reduction of the coverage period? 
    • ⇒ [Bonk: ALI = Adjustable Life Insurance]

—  J. Peter Duran

1979 – SOA – The Adjustable Life Decisions, Society of Actuaries – 18p

Persistency

  • 1981 – SOA – Patterns in Persistency, tsa81v3310 – Society of Actuaries – 18p
  • 1995 12 – SOA – 1994-1995 Year in Review, The Actuary, act-1995-vol29-iss10-year-review – Society of Actuaries – 6p
    • SOA Research and the Life Insurance Marketing and Research Association (LIMRA) completed a report on universal life persistency results that have never before been published on an industry basis. Results are shown for several different policy, agent, insured, and product characteristics.
  • U.S. Individual Life Persistency
      • 2005 – SOA / LIMRA – U.S. Individual Life Persistency, us-indiv-life-persistency-report-final – Society of Actuaries – 49p
      • 2007 [Bonk: The  – SOA / LIMRA – U.S. Individual Life Persistency, research-2003-us-life-update – Society of Actuaries – 85p
      • 2009 – SOA / LIMRA – U.S. Individual Life Persistency, 2009-us-life-persistency-report – Society of Actuaries – 84p
      • 2009 – SOA / LIMRA – U.S. Individual Life Persistency, 2009-13-us-ind-life-persistency-update-report – Society of Actuaries – 119p
  • Policies which were sold on a “vanishing premium” basis are expected to exhibit a different payment pattern than those sold on other bases.
    • Thus, although a company can measure persistency, the appropriate standard to which this experience should be compared would be very difficult to determine.
    • The measurement of the persistency itself, however, will also present problems.
    • My company credits premiums as they are received, rather than on the subsequent policy monthaversary.
    • We send bills 15 days prior to the scheduled due date. If a policyholder receives a bill and pays prior to an anniversary due date, the premium will be recorded as received in the prior year.
    • Thus, measuring premium persistency by policy year for annually billed contracts will be very touchy.
    • A better approach may be to measure cumulative payment persistency.
    • This amount, however, is subject to guideline premium limits which must be anticipated.

—  James M. Robinson, Financial Actuary–Domestic Life and Health with Sentry Life Insurance Company

1983 – SOA – Universal Life (RSA83V9N212), Society of Actuaries – 24p

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