SandBox

Complaints

• (p33) – Bob CORKER (R-TN) – You know, there are very few complaints.
  • I mean, life insurance is not what drives complaints at your State Insurance Commissioner’s officer, really, is it? It is just a small percentage, is it not?

2009 0317 – GOV (Senate) – Perspectives on Modernizing Insurance Regulation, Chris Dodd (D-CT)  —  [BonkNote]

• 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, Illinois Insurance Department – Actuary

1996 – SOA – Nonforfeiture Law Developments, Society of Actuaries – 23p

• (p8) – An increase in the number or type of complaints filed by policyholders, claimants, employees, agents or third parties which could indicate liquidity or internal control problems (consumer affairs).

1998 – NAIC – Financial Analysis Handbook – 349p

• The Financial Analysis Handbook (the Handbook) was developed under the direction of the NAIC Financial Analysis Handbook Working Group.

• (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.

1996 – Report of The Multi-State Life Insurance Task Force and Multi-State Market Conduct Examination of The Prudential Insurance Company of America – By the Examiners of The Multi-state Life Insurance Task Force From Several State Departments of Insurance and other State Regulatory Agencies – 270p  —  [BonkNote] 

• Teresa Winer (GA) – asked if it would be useful to ask states whether they have received consumer complaints about the summaries.
• Richard Wicka – Chair (WI) – said that it would be helpful to have that kind of information but that he is not sure it would be possible to track down complaints to that level of detail.

2016-2, NAIC Proceedings – LIIIWG – Life Insurance Illustrations Working Group

• 1966-2. NAIC Proceedings
  • (p605) – Advertising of Insurance (H) Committee
  • The Honorable S. Roy Woodall, Jr., of Kentucky presented the report of the NAIC-FTC Resolution (H1) Subcommittee for consideration by the parent Committee.
  • (p607) – Report of the Results Obtained from Questionnaire Forwarded to Individual Members of the NAIC by the (H1) Subcommittee – To Study NAIC-FTC Resolution
    • 27 States answered that complaints were primarily involving LIFE INSURANCE CARRIERS.
    • 7 States answered that complaints were primarily involving LIFE and ACCIDENT and HEALTH carriers.
    • 6 States answered that complaints were primarily involving ACCIDENT AND HEALTH carriers ONLY.
    • 5 States answered that complaints were involving BOTH life and property companies.
    • 1 State answered that complaints involved LIFE, PROPERTY and ACCIDENT AND HEALTH COMPANIES.
    • 7 States answered that they had received NO complaints.
  • NAIC-FTC Resolution adopted in 1963

• 2022 0929 – icae.com – Session Topic: Complaint Topics & Trends – 11p
  • Facilitator: Becca Donegan, Erie Insurance
  • Panelists: Andy Case, Mississippi DOI; Dusty Smith, Alabama DOI; Deidre Backues, Shelter Insurance and Matt Stiles, EquiTrust
  • Universal Life Insurance:
    • There is a lot going on this this space. Confusion about coverage because it is a product that needs to be managed and many complaints center on the interest rate return.
    • Diminishing values linked to stock market performance and universal life illustrations are difficult to read/confusing.
    • Most consumers don’t understand that it is a blended product.

• 12. Section 11: Participation in National Market Conduct Databases Administrator said the terms “confirmed” and “unconfirmed” should be retained since the concept of “confirmed complaints” is used for the NAIC’s Consumer Information Source (CIS) and the NAIC’s Market Analysis Handbook.
  • Both the CIS and the Market Analysis Handbook define the phrase “confirmed complaints” through the NAIC’s Complaint Database System (CDS) complaint disposition codes.  p1024

 2004-2 – NAIC Proceedings

• Senator Howard Metzenbaum (D-OH):
  • Mr. Rips,** you testified that last year the largest group of complaints that you received about life insurance came from people whose policies didn’t have the amount of cash value that they had been told and were shown.
  • l am talking about illustrations like those on the charts in this room.

** Geoff Rips, public information director, Texas Office of Public Insurance Counsel

1992 0623 – GOV (Senate) – Consumer Disclosure of Insurance, Howard Metzenbaum (D-OH)  —  [BonkNote]

• (p8) –  Our job is to follow those complaints and address them in our marketplace and make that marketplace work for consumers at the local level.

—  NAIC – Joel S. Ario, Insurance Administrator, Oregon Insurance Division, Secretary Treasurer, National Association of Insurance Commissioners

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

• Over the last five years, DFS has received almost 1,400 complaints from New York consumers about universal life insurance policies.
• Many consumer groups and media organizations have also reported consumer issues with universal life insurance.

2019-? – New York – Department of Financial Services – Consumer Alert – [link]

⊃  2019 – ThinkAdvisor – New York Financial Superintendent Lacewell Warns of Hidden Costs in Universal Life Policies, By Elizabeth Festa – [link]

• 2000 06 – NAIC – Consumer Complaints White Paper, Consumer Complaint White Paper Working Group was appointed by the Market Conduct and Consumer Affairs (EX3) Subcommittee – 66p

• Monitoring of litigation may alert regulators to issues that the regulatory system has not yet addressed.

2008-3, NAIC Proc. 

• He said the consumer complaint analysts in a state are a “focus group” that each state should rely on.

2009-3, NAIC Proceedings

⇒ He = Joel Ario – Pennsylvania Insurance Commissioner

• One problem area in a lot of policies has been interest rates.
  • A slow cumulative, very large decline in interest rates has affected everything.
• Why are we getting so many complaints?
  • Did the policyholder expect rates to stay the same forever?
  • Did the agent or the company mislead?
  • Did the policyholder think we were promising?
    • He shouldn’t have, I hope he didn’t.

—  Bruce E. Booker, Life of Virginia, a member of the American Council of Life Insurance (ACLI) Task Force on Cost Disclosure and the National Association of Insurance Commissioners (NAIC) Advisory Group on Illustrations

1993 – SOA – Sales Illustrations – We Can’t Life With Them, But We Can’t Live Without Them!, Society of Actuaries – 20p

• Most state insurance regulators generally only conduct investigations of insurance company sales practices when they receive customer complaints.
  • Although some state insurance regulators review insurance companies’ product sales practices as part of market conduct reviews, few insurance products are subject to any suitability or appropriateness standards.  (p11)

2005 11 – GAO – Financial Product Sales: Actions Needed to Better Protect Military Members, Government Accountability Office – 88p

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

2018 – Wisconsin Insurance Report – 219p

• (p187) – 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]

• (p130) – 1980 0130 – Letter – ACLI to GOV (Senate) Howard Cannon (D-NV) – American Council of Life Insurance
  • DEAR SENATOR CANNON: Enclosed is a copy of the response of the American Council of Life Insurance to the comments by the Federal Trade Commission on the Council’s testimony on the Commission’s life insurance cost disclosure report which was issued on July 10, 1979. Sincerely, Robert Bland Smith, Jr.
    • The staff of the Federal Trade Commission has chosen to respond to eight of the criticisms of the staff report made by representatives of the life insurance business at the October 17, 1979 hearing of the Senate Committee on Commerce, Science and Transportation. These responses merely repeat the erroneous ideas and conclusions that were set out at length in the FTC staff report.
    • We should like to offer a few comments pointing out what we see as flaws in the responses of the FTC staff in order to clarify some of the matters under dispute.
      • Our comments will follow the same sequence used by the FTC staff.
  • 8. The Federal Trade Commission should not be involved in the life insurance area because it has not received a sufficient number of consumer complaints.
    • Predictably, the FTC staff responds that “consumer complaints do not always provide an accurate gauge of consumer problems.”

1979 0710 and 1017 – GOV (Senate) – FTC Study of Life Insurance Cost Disclosure, Senator Howard Cannon (D-NV)   —  [BonkNote]  —   [PDF-592p]

• 2000 – LR – The Filed Rate Doctrine and Insurance Fraud Litigation, by Allan Kanner – 33p
  • (p) – As these cases illustrate, insurers are often sued for fraud and bad faith.
  • (p31) – 169. This is also the view of other states. See, e.g., In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) (illustrating that private litigation is the primary watchdog that wakes up state regulators).
  • The Prudential court observed that Prudential’s illegal activities first came to light through private lawsuits filed in early 1994, which triggered a front-page news article.
    • <WishList> – See Leslie Schism, Fine Print Victims: Some Agents ‘Churn’ Life Insurance Policies, Hurt Their Customers, WALL ST. J., Jan. 3, 1995, at 1. In April 1995, more than a year after the first private suit, the Multi-State Life Insurance Task Force was formed. Id.
      • ⇒  Prudential shows that private claims for relief are absolutely crucial to ensure that victims of insurance fraud receive restitution. Id.

• (p521) – Mr. Weber suggested that the illustration show … how the policy values are paying the premium.
• Mr. Morgan said that this issue needs specific attention because many complaints were received in the state insurance departments on this issue.  

* Richard Weber, Merrill Lynch Life

1994-3, NAIC Proceedings – Life Disclosure Working Group – NAIC

• An increase in the number or type of complaints filed by policyholders, claimants, employees, agents or third parties which could indicate liquidity or internal control problems (consumer affairs).  (p8)

1998 – NAIC – Financial Analysis Handbook – 349p

• The Financial Analysis Handbook (the Handbook) was developed under the direction of the NAIC Financial Analysis Handbook Working Group.

• Teresa Winer (GA): I’m guessing that, perhaps, this came out of the fact that Illustrations were not as clear.
  • Maybe there’s been complaints.
  • And the purpose of this entire committee was to provide some kind of summary to make it a little bit more clear.

2019 0903 – NAIC – LIIIWG –  Life Insurance Illustrations Working Group, Conference Call – [Bonk: Not in Proceedings]

• Complaint Index is a measure which can be used, along with other measures, to evaluate how well a company does in the
  marketplace compared to other companies. (p277)

1995-4, NAIC Proceedings – Market Conduct and Consumer Affairs Subcommittee

• John PEARSON (ACLI) –  Our records say less than 10 percent of complaints are life insurance and life insurance-related.
  • Having said that, however, we frankly think the current network does a very good job of handling consumer complaints.
  • We would prefer for more uniformity across States with some of these model laws that have passed
  • But, frankly, we look at it as something that we could build upon as through the Federal bill that we would expect nothing less than an exemplar customer complaint and recourse.  (p29)

2008 0729 – GOV (Senate) – The State of the Insurance Industry: Examining the Current Regulatory and Oversight Structure – The Current State of Insurance Regulation, Oversight and Ways to Enhance Consumer Protection, Promote Competition and Efficiency, and to Address What Role, if any, the Federal Government should play – [PDF-472p, VIDEO-Senate-Error] 

• Judy Faucett: We contacted a number of regulators during the course of our research.
  • The California department was gracious enough to pull 80 complaints that they had received from consumers in the last year, a random 80 complaints.
    • Out of those 80 complaints on life insurance, they determined that 35 of them were illustration-related.
    • Fifty-five percent were for reasons you would have expected; that is, the premium didn’t vanish when it was supposed to, or the dividends that were paid weren’t as high as what was illustrated.
    • The other 45% believed that they had bought an annuity product and didn’t even know that they had life insurance?
  • Maybe there is something that we’re not communicating to buyers out there.
    • We may think that our illustrations are straightforward, but somehow the people who aren’t actuaries or agents or who just don’t understand insurance, are missing the point.
  • Admittedly, not everybody complains, but the number was a lot higher than we had expected, and it was a very different type of complaint than we had expected.  (p10)

1991 – SOA – Illustrations, Society of Actuaries – 20p

• 2000 – NAIC – Suitability of Sales of Life Insurance and Annuities – 33p

• Information available from the NAIC, including the following, should be reviewed:
  • Examination Jumpstart Reports;
  • Special Activities Database (SAD)
  • Regulatory Information Retrieval System (RIRS);
  • Complaints Database System (CDS) and Complaint Index Report;
  • Examination Tracking System (ETS); and
  • Financial Analysis and Solvency Tracking System (FAST).

2009-3, NAIC Proceedings

• Commissioner Tyler said that because one consumer complaint often means that other consumers are also harmed by a particular practice, he would like to know the relationship between consumer complaints and proper market regulation.
  • He said market regulators should leverage consumer-complaint data to ensure that what happens to one consumer is not happening to others.

2009-3, NAIC Proceedings

• (p8) – Insurance is a different kind of product than either banking or securities or really any of the other financial products out there.
• It is a more complex kind of product.
  • What kind of policy will be offered to the consumer? What will be the price of the policy? What are the specific policy terms and conditions? What is included, what is excluded from the policy? What does the fine print say? Is a claim valid when it is filed? If it is valid, how much is it worth? These are all questions that are very complicated 
• They often lead to misunderstandings between consumers and insurers
  and they often lead to consumer complaints to our offices.
• …
• Our job is to follow those complaints and address them in our marketplace and make that marketplace work for consumers at the local level.

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

• House – Committee on Financial Services – Subcommittee on Oversight and Investigations 

• Examples include:
  • Complainants were sold a whole life policy that provided no short-term liquidity except through loans or surrender.
  • The complainants were in their sixties at the time that the policy was sold.
  • Their stated purpose for purchasing the policy was to provide an income stream upon retirement.
  • The whole life product did not meet these needs and the Department (Vermont) was able to reverse the transaction.  (p125)

2000-1, NAIC Proceedings

• Once the companies, producers and products are in the marketplace, state consumer service personnel monitor the way in which the marketplace operates by handling consumer inquiries and consumer complaints.
• The consumer service representatives in state insurance departments are truly the “front line” regulators, as they interact with consumers on a daily basis.
• In addition to responding to specific consumer concerns, state consumer service representatives also conduct educational outreach efforts.

2012 – NAIC – Existing U.S. Corporate Governance Requirements – 22p

• Some vague idea of the quality of service to policyholders can be gained from the number of policyholder complaints received, but this is a crude measure at best and represents a measure more of the total breakdown of service than of its quality.

—  Kenneth R. MacGregor

1971 – SOA – Mutual Life Insurance Companies–Their Objectives and Operating Philosophy, Society of Actuaries – 250p

• (3) A task force of the Unfair Trade Practices (B4) Subcommittee is considering uniform complaint procedures for state insurance departments.
  • Under a pilot project, several departments have reported complaints by company, type, line, Reason, disposition, etc. on a uniform format to the Central Office. 
  • This information will be fed into a computer and reports generated for the departments so as to identify and document problem companies, evaluate complaint handling procedures, identify unfair trade practice problems, etc.

1974-1, NAIC Proc,

ATTACHMENT ONE-A1

TO: NAIC Members

FROM: Robert E. Wilcox, Chair, Life Disclosure Working Group

DATE: January 21, 1996

RE: Life Insurance Illustrations Model Regulation

• In December the NAIC membership adopted a new Life Insurance Illustrations Model Regulation to address some of the problems we have all been experiencing as consumers complain that their “vanishing” premiums haven’t vanished and the high returns they expected haven’t materialized.

1996-1, NAIC Proc. 

• …..system of monitoring to assure consumer satisfaction should be designed.
• He asked members of the working group to consider an appropriate mechanism to achieve effective monitoring.

1991-1A – NAIC Proceedings, Life Marketing Practices to Senior Citizens Working Group

• After a great deal of discussion, it was pointed out that the Data/Systems Management (EX4)Task Force specifically rejected any priority development within the next two years for an NAIC complaint data base system.
• Mr. Connor noted that he has stressed for a number of years that a complaint data base system was important and needed to be given priority attention by the NAIC.
• As was pointed out to the Data Systems Management Task Force, a data base was discussed 10 years ago after criticism was leveled at the NAIC by the General Accounting Office.
• In his report to the Data/Systems Management Task Force in June in Cincinnati, Mr. Connor pointed out that there was mounting pressure in Congress for the NAIC to collect complaint data for Medicare supplement coverages.
• It was the consensus of the subgroup then, as it is today, that it would be very short sighted to develop a system for a nationwide complaint system for merely one line of business when the problem crosses all lines.
• The Data/Systems Management Task Force was reminded that the background work on such a system had been completed and that a modified NAIC Uniform Complaint Filing Form is in place awaiting to be computerized onto an on-line system.
• In summary, it was the consensus of the subgroup that they are in wholehearted agreement and support of the concept behind the collection of complaint information as requested by the Medicare Supplement Working Group.
• However, a decision to proceed on the development of a complaint data base merely for Medicare supplement insurance would be tantamount to building a large jetliner merely for the purpose of carrying one passenger.
• The development of an on-line complaint data base on all lines of insurance readily accessible to the states, is a sine-qua-non for the competent scheduling of market conduct examinations.
•  If the states are to adequately monitor the marketplace and sales abuses such as are seen in the Medicare supplement markets, the NAIC must give high priority to the implementation of such a data base.
• Such a data base is as essential to market conduct needs as the Insurance Regulatory Information System (IRIS) is to financial examinations. (166)

1990-1A, NAIC Proceedings

• (p7) – There were 6,118 insurers in the U.S. (including territories) in 2014, including 2,583 P-C insurers, 1,752 life-health (L-H) insurers, and 1,783 other insurers and related agencies.⁴
• Given the objective to gauge the service quality of insurers by using the volume of consumer complaints, our analysis focuses on the P-C insurers.
  • Consumer complaints within the L-H industry may correlate only weakly with consumer experience, due to the obvious disconnect between purchasers and beneficiaries of these insurance policies-under life insurance policies claimants typically are not the policy buyer…

2016 – AP – Financial Intermediaries and Consumer Complaints – 61p

• Commissioner Tyler said that because one consumer complaint often means that other consumers are also harmed by a particular practice, he would like to know the relationship between consumer complaints and proper market regulation.
  • He said market regulators should leverage consumer-complaint data to ensure that what happens to one consumer is not happening to others.
• Mr. Mealer said complaints are included in the adopted market analysis process.
• Ms. Baker said the Market Regulation Handbook includes the use of consumer-complaint data in the market analysis process.
• Commissioner Ario said there are two methods of analyzing consumer complaints.
  • He said the first method is to perform statistical analysis of the complaint data and the second method is to have ongoing discussions with a state’s complaint analysts.
  • He said the consumer complaint analysts in a state are a “focus group” that each state should rely on.
• Mr. Narcini said that because the adopted processes included the use of consumer complaints, they are not specifically mentioned in the proposal.
• Commissioner Tyler said the requirement in the proposal that a state hold certain items confidential should be eliminated.

2009-3, NAIC Proceedings

• 4. Discuss Complaint Reconciliation Survey – Next Steps
• Mr. Belo said the survey is a compilation of all states that have responded to the survey question whether a complaint reconciliation process is in place in their state.
  • He said the question put before the Working Group is whether a best practice regarding complaint reconciliation should be developed.
• Ms. Brown said the survey shows that there is quite a range among state insurance departments of complaint reconciliation processes.
  • She offered to present Colorado’s complaint reconciliation process as a model for other states to follow.
• Mr. Ewen said this issue is in the current market regulation accreditation proposal being reviewed by the Special Accreditation Standards Working Group.
  • He said the Working Group needs to determine the best place for discussion of this issue.
• Ms. Krier said this issue is not currently on the Market Analysis Procedures Working Group’s agenda, and suggested that this issue be forwarded up to the D Committee for review and to determine what Working Group is the appropriate venue for discussion.
• Commissioner Ario said that since complaints are a part of market analysis, guidance needs to be provided by the D Committee with regard to which Working Group will work on this issue.
  • He said the same group that is reviewing the ICAE paper needs to review the complaint reconciliation survey as well.
  • Commissioner Ario said that he would bring this up at the Special Accreditations Standards Working Group meeting Sept. 22, as well as to the Market Regulation and Consumer Affairs Committee for their consideration. He will report any discussion on this issue back to the Working Group at the next
    scheduled conference call.
• Mr. Belo said the Working Group can then proceed with how to form best practices with regard to complaint reconciliation.

2009-3, NAIC Proceedings

• But what kinds of things led to the Armstrong investigation?
  • Back at the turn of the century, many companies were illustrating very large 20th-year dividends, with the thought that they wouldn’t really have to pay them because not many people would be around to collect the dividends or to be upset at lower dividends.
• There were at least a couple of problems with this.
  • For one thing, they weren’t setting up liabilities for those deferred dividends.
    • We now have line 8 on page 3 of the NAIC Annual Statement to deal with that.
  • Another problem was that the actual dividends often turned out to be considerably less than illustrated.
    • Yet some of the companies, even as they were paying those lower dividends, were still illustrating the higher ones on new business.
  • In simplest terms, people were paying for insurance on the strength of quasi-promises, the details of which they didn’t fully understand.
  • Ultimately the regulators intervened and stopped such products from being sold at all, at least in New York.
• The question, of course, is whether that sort of thing could happen again.
  • There are more recent parallels as well.
  • One of my coworkers recently mentioned to me that back in the late 1940s and early 1950s, it was a common assignment for fledgling actuarial students to compose explanatory letters to policyholders who had written in to complain that the dividends on the 20- or 30-year endowments they had bought had not materialized.
    • This was, of course, due to the low interest rates of the 1930s and 1940s.

—  Benjamin J. Bock, Transamerica Occidental

1992 – SOA – Life Insurance Sales Illustrations, Society of Actuaries – 16p