Murder

  • 2003 – JIR / NAIC – The Murder of the Insured By the Beneficiary: Attempting to Quantify One Moral Hazard Relating to Life Insurance Contracts – 29p
  • 2016 0901 – NP – Yakima Herald – Court denies retrial for man convicted of murdering Vern Holbrook – [link]
    • Prosecutors said Blizzard sought to kill Holbrook after an agreement to buy Holbrook’s Aspen Real Estate fell apart.
    • As part of the business deal, Blizzard had taken out a $1.58 million life insurance policy on Holbrook, which Blizzard continued to make payments on even after the sale fell through.
    • Blizzard was sentenced to 
34½ years in prison for his role in the killing, after a jury found him guilty of first-degree murder

Loads

  • 1984 – SOA – Rear End Loaded Funds, Society of Actuaries – 22p

Change

  • The product revolution, in my mind, began in the 1970s with the introduction of indeterminate premium products.
  • The introduction of universal life in the early 1980s really did create a revolution.
  • We’ve seen more product change and more increasing frequency of product change in the 1980s than ever before.

—  William R. Britton, Jr. 

1988 – SOA – Group Universal Life Product, Society of Actuaries – 22p

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

—  Frank S. Irish, ASB, Actuarial Standards Board

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

  • The Changed Nature of the Insurance Industry
  • “In 1980 the life insurance industry was 150 years old. In 1990 . . . [it] was ten years old.”
    • This is how Gary Schulte (1991, p. 88), a Senior Vice President of Executive Life of California, summarized the impact on the life insurance industry of the growth in investment-oriented products in the 1980s.
  • At the beginning of the decade, investment-oriented products were a promising sideline in an industry whose main product was still insurance against abnormally early or late death.
  • By the end of the decade, the industry was probably generating over half its annual revenue from investment-oriented products, which typically featured high fixed or quasi-fixed rates of return and little or no insurance aspect. (p2)

1992 – FRB Quarterly Review – SPDAs and GICs: Like Money in the Bank?, Richard M. Todd, Neil Wallace – [link]

  • Formation of the Society of Actuaries Nonforfeiture Task Force
    • As a result of the many product changes occurring since 1975, many persons believe that a review of the SNFL is in order.  (p623)

1989-1, NAIC Proceedings

  • This is mostly for historical reasons – because the federal securities laws were adopted when municipal finance was a relatively small and uninteresting corner of the nation’s capital markets.
    • But today’s market bears almost no resemblance to the relatively small and sleepy municipal bond activity of days gone by.

—  Christopher Cox, SEC Chairman, Speech

2007 0718 – SEC – Speech (Christopher Cox, SEC Chairman) – Integrity in the Municipal Market, Securities and Exchange Commissioner – [link]

Shock

  • McFarquhar, Kenneth A., – “Future Shock” [letter to editor], ACT, 3/90, p. 12

  • The flexibility of Universal Life that initially appealed to the policyholder which allowed him to change premium payments, coverages, etc., will make this annual report of the condition of his “account” an unanticipated shock.

—  Dale W. Hotze, is President of Hotze & Associates Inc., Jacksonville, Florida. 

1983 – SOA – Universal Life (rsa83v9n32), Society of Actuaries – 22p

  • I am on this panel principally as Chairman of the ACLI Subcommittee on Cost Comparisons.   
  • Much of our work has dealt with the issue of illustrating Nonguaranteed Elements.
  • As a backdrop, I want to quote from a January 1988 Financial Planning article.
    • The article is entitled “Future Shock” by Harry Lew with the sub-heading: <WishList>
      • “What will happen when a generation of insurance buyers begins comparing unrealistic illustrations with the actual performance of their policies?
      • Industry leaders would prefer not to find out.”

—  Larry R. Robinson, Chairman of the ACLI Subcommittee on Cost Comparisons

1988 – SOA – Actuarial Opinion on Non-Guaranteed Elements, Society of Actuaries – 12p

  • (p5) – 9. UK – The UK policy underscores that, from time to time, disruptions will occur that prevent an insurer from operating as usual and that insurers need to consider a range of severe but plausible disruption scenarios.
    • This approach acknowledges that blind spots can act as a substantial step towards shocks and disruptions becoming reality.

2022 1013 – IAIS – Draft – Issues Paper on Insurance Sector Operational Resilience – 28p

  • (p1) – Opening Statement of Senator Metzenbaum
    • Today the Subcommittee on Antitrust and Monopoly begins its examination of cost disclosure in life insurance.
    • Life insurance is a tremendous business in this country.
      • Americans carry 140 million ordinary life policies, with nearly $1.3 trillion in coverage.
      • Cash-value life insurance accounts for more than 20 percent of total savings in this country-second only to deposits in savings and loan institutions.
    • The business of life insurance is presently exempt from the Federal antitrust laws under the McCarran-Ferguson Act.
      • It is the only major financial business without Federal regulation.
      • This is a unique situation.
    • It is fair to ask how well has the industry operated under this system.
      • Do consumers of insurance enjoy the benefits of competition?
      • Are consumers able without heroic efforts to find the best coverage for their needs at the lowest cost?
      • And are consumers able to readily understand precisely what kind of coverage they are buying?
    • My staff has conducted a major investigation of these issues.
      • I must say today that I was shocked when I saw its findings. 

1979 0524 – GOV (Senate) – Cost Disclosure in Life Insurance, Howard Metzenbaum (D-OH)  —  [BonkNote]

  • (p37) – Regarding the amount of the emotional distress damages awarded, “[w]hen an appellate court reviews a jury verdict for excessive damages, it can interfere ‘only on the ground that the verdict is so large that, at first blush, it shocks the conscience and suggests passion, prejudice or corruption on the part of the jury.’
    • [Citation.]” (Pearl v. City of Los Angeles (2019) 36 Cal.App.5th 475, 491, quoting Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 507.) 

2022 0304 (Date Filed) – LC – Williams v. National Western Life Insurance – Opinion on Transfer, Appeals Court – 52p

  • (p7) – Dinallo:  I decided that I had enough information, and enough belief in the statutory accounting, which we can talk about. Which is really part of the story. That I was going to go out there and make statements about my confidence in the insurance companies of AIG.
    • Because I did believe that on a statutory accounting basis, they had more than enough assets to match their long-term liabilities on a statutory accounting basis. Not mark to market. Which Geithner to this day …
  • YPFS: Can you talk a little bit more about that?
  • Dinallo: When Geithner heard this, I made this joke. I don’t know if I’ve been quoted.
    • I think he thought I was explaining the Mayan calendar to him. It was so alien and so weird.
    • But basically, life insurance companies have long-term liabilities, and they match it with long-term assets that are going to perform by maturing 20 years from now.
    • That’s why so much of the reserves are put towards basically debt, Treasuries, etc., that are highly rated.
      • So that they will almost certainly, hopefully, certainly perform.
      • Which means mature. You’re going to get the coupon along the way, albeit a small yield.
      • The volatility before maturation over the 20 years does not count.
    • This is the biggest debate in insurance right now.
      • Between Europe, the feds, and the United States.
        • That the inter-period where there’s volatility, and this is what I mean by, back with Shelby.
        • They were like, “Oh my god, they’re insolvent.”
        • I’m like, “They’re not insolvent. They may be, on some reporting basis, marginally insolvent.”

Knowledge

  • Many years ago I was sitting in my class at Harvard Law School, next to Ralph Nader who was a member of my class. Who knows how your paths will cross again.
    • Thirty years later, I am not sure I understand the insurance business even after having spent 30 years in it.
    • Nader, having spent no years in it, understands it fully.
  • Some parts of our knowledge base, I think, we should exchange.

—  Larry A. Brossman, Duff & Phelps

1990 – SOA – Rating Agencies And Asset/Liability Matching, Society of Actuaries – 18p

  • When there is so much to be known, when there are so many fields of knowledge in which the same words are used with different meanings, when everyone knows a little about a great many things, it becomes increasingly difficult for anyone to know whether he knows what he is talking about or not.

T.S. Eliot, “The Perfect Critic,” The Sacred Wood

2000 – LR – After Fabe: Applying the Pireno Definition of “Business of Insurance” in First-Clause McCarran-Ferguson Act Cases, by Peter B. Steffen – 27p

  • The downside of having only a few people involved is that the company is relying on these few people who are experts, and at some point that knowledge must be passed on to others.

—  Phillip J. Grigg, PRUCO Life / Prudential

1987 – SOA – Product Development Process — Bringing New Products To Market Quickly And Efficiently, Society of Actuaries – 22p

Absurd

  • An insured has no right to rely upon an agent’s patently absurd interpretation of a policy.
  • He ordinarily may rightfully rely, however, upon an agent’s interpretation that is plausible and not in patent conflict with the printed policy although legally untenable.
  • 1963 0424 – LC – Mutual Ben. Life Ins. Co. of Newark, N.J. *403 v. Bailey, 5 Storey 215, 55 Del. 215, 190 A.2d 757, Supreme Court of Delaware – [link]

1969 1128 – LC – Bayer v. Lutheran Mutual Life Insurance Company – 172 N.W.2d 400 – 184 Neb. 826 – No. 37329. – Supreme Court of Nebraska. – [link-Justia]

  • “does not involve an absurdity” “life insurance”
  • 1871-1, NAIC Proceedings – 233p – Absurd – 11 times
  • 1871-2, NAIC Proceedings – 657p – Absurd – 15 times
  • Speaking before state insurance commissioners at the Washington Hilton Hotel or what each called the “Equity Fundings fiasco,” Fred A. Mauck, Illinois’ newly named director of insurance, said that because of the “hard work” of state regulators Equity Funding was “not a tragedy but an absurdity.”
    • “Quite frankly,” he said, “it raises a troublesome, but entirely proper, question as to the effectiveness of insurance regulation.” 

1973 0605 – NYT – Insurance Commissioners Plan Surveillance Study – Equity Funding Corporation of America, by Robert J. Cole, Special to The New York Times – [link]

  • (p16) – Willis B. Howard, Jr. (NOLHGA – National Organization of Life and Health Insurance Guaranty Associations):
    • I’d like to respond briefly to my honorable friend, Commissioner Bartlett.
    • Dwight, the guarantee association system works, and it works well.
  • Dwight K. Bartlett III, Maryland Insurance Commissioner:
    • Are you going to tell me, Bill, in all honesty that you really believe that the policyholders of Executive Life and Mutual Benefit Life have been well-served?
    • For example, with Mutual Benefit, if you opted out of that rehabilitation plan you get, as I recall, 55 cents on the dollar of your account value.
      • If you opt into the plan, you agreed to subject yourself to a moratorium period, which means you do not get full access to the cash values of your policy until the next century.
    • Are you going to say that’s meaningful coverage for those policyholders?
    • ⇒  I think that’s ridiculous.

1994 – SOA – VASP – Introduction and Overview: Current Activities of NAIC’s Life and Health Actuarial Task Force, VASP941 – Society of Actuaries – 110p

  • 2008 0809 – NYT – Naked Came the Speculators, By Gretchen Morgenson – [link]
    • Still, Mr. Dinallo said, the valuations of C.D.S.’s remain absurdly optimistic on both the books of the bond insurers who wrote them and the companies who bought them.
      • As regulator in this particular poker game, he gets to see both parties’ hands.
  • (p528-529) – Senator Howard METZENBAUM (D-OH) – The NAIC proposal also requires that policyholders be given the names, addresses, and phone numbers of the company that will be assuming the business.
    • We have heard testimony here about the financial health of LACOP when Security Benefit transferred to them.
    • Do you think that giving policyholders phone numbers and addresses of the insurers gives them enough tools to make a knowledgeable decision about a transfer? 
  • Joeseph BELTH (Professor, Indiana University) Hardly.
  • Senator METZENBAUM. You pick up the phone and you call.
    • Mr. Company, are you in sound financial condition?
      • You get some secretary who answers the phone.
    • Do you think that really gives them much protection?
  • Mr. BELTH. No, no, sir.
  • Senator METZENBAUM. It is rather absurd, isn’t it?
  • Mr. Belth. I was going to say absurd, but I would rather just say no.
  • Senator METZENBAUM. I will say absurd.

[Both Dates PDF-629p-GooglePlay, 0428-VIDEO-? / 0505-VIDEO-CSPAN-Insurance Policy Transfers]

Conspiracy

  • As has been said by the chairman and several of the members in opening statements, the taxation of life insurance companies are some of the most complex and least logical provisions in the tax law today.
  • The present provisions were adopted in 1959, and we quote I think a very apt statement by Judge Fletcher in our testimony, Judge Fletcher of the U.S. Court of Claims…

“These complex and obscure provisions bear all the earmarks of a conspiracy in restraint of understanding.”

We share that view.

—  John E. Chapoton, Assistant Secretary for Tax Policy, Department of the Treasury (DOTT)

1983 0510, 0511 and 0728 – GOV (House) – Tax Treatment of Life Insurance – [PDF-991p-GooglePlay,

  • Subcommittee on Select Revenue Measures of the Committee on Ways and Means

Surprises

  • UL, by its nature, tends to have bigger and later surprises.

— Daniel F. Byrne, M Financial Group

1999 – SOA – The Next Generation Universal Life, Society of Actuaries – 30p

  • (p14) – Baird WEBEL (CRS-Congressional Research Service). I was actually struck in that New York Times article when they talked about the insurance companies themselves setting up captives because that is not what you typically think of.
  • Chairman Jack REED (D-RI). Right.

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

  • The sale of par business on a vanishing-premium basis has been well established in the last few years.
  • Dividend reductions can lead to unpleasant surprises, to the extent that policyholders and agents have relied on a continuation of the current dividend scale to fund the vanish year.
    • Prudence and recent history suggest that vanish years should be carefully explained, and perhaps illustrated, with some margin for dividend reduction.
  • Companies and agents that are service-oriented will find ways to communicate to policyholders changes in their vanish year before the arrival of a surprise announcement that more money is necessary or that the insurance program will either pay less than expected or terminate prematurely.

—  Robert J. Smardon, Vice President of Individual Products for the U.S. operations of Sun Life of Canada

1992 – SOA – Life Products, Society of Actuaries – 22p

Secrets

I mean, the law is not a secret….  (p182)

2014 0425 – DOC 813 – Trial Transcript – Day 12 – Walker v LSW – 224p

  • The method of computation of “net premium” is the great insurance secret.
    • We doubt if any legislator or any judge ever solved the problem or guessed the secret. (p66)

1917 – Book – A License to Steal: Life Insurance, the Swindle of Swindles : how Our Laws Rob Our Own People of Billions, by Philander Banister Armstrong – [305p-GooglePlay]

  • Now how could the staff be sure that this M&E charge was not a secret sales load?

— W. Randolph Thompson, with the law firm of Jones & Blouchin Washington, will speak on some SEC issues

1993 – SOA – Variable Products — Product for the 1990s?, Society of Actuaries – 22p

  • You can give me what has happened from the days when the whole business was technically insolvent in the spike during the 1977-82 period when everybody valued bonds at book.
    • The well-kept secret, of course, was that the industry was insolvent, not bankrupt on a cash-flow basis.

—  Larry A. Brossman, Duff & Phelps

1990 – SOA – Rating Agencies And Asset/Liability Matching, Society of Actuaries – 18p

  • Mr. McNeill (Agent) –  To my knowledge, it is always applicable.
    • The insurance companies really try to hide the fact that they are negotiating a transfer for fear, I suppose, that it might alarm policyowners and they would start lapsing their policies and create a run on the bank, so to speak. 
    • So they always, to my knowledge, do this in secret...

[Both Dates PDF-629p-GooglePlay, 0428 – VIDEO-? / 0505-VIDEO-CSPAN- Insurance Policy Transfers]–

  • LC – Walker v Life Insurance Company of the Southwest – LSW
    • The fact that we charge people fees that we have disclosed and that fees reduce the value of your policy, and if your policy keeps reducing in value, it will lapse, is not a fraud.
      • That’s common sense.
      • That’s how life insurance works.  (p171) 
  • 1983 06 – SOA – Editorial – The Actuary – The New South Life Case, EJM (Ernest J Moorhead (Jack)), Society of Actuaries – 2p
    • The New South Life happens to be one of the (mercifully) few life companies in which a major deficit has been directly linked to miscalculation of policy reserves.
      • Two sources from ‘which the underlying facts are readily obtainable are:
        1. “New South Life: A Case Study”, by James L A&earn, in the April 1973 issue (Vol. XIX, No. 5) of Business and Economic Review; published by the Bureau of Business and Economic Research, University of South Carolina;
        2. “Report of the American Academy of Actuaries Committee Regarding The New South Life Insurance Company”, a manuscript dated August 30, 1973.
      • Until recently, the second of these,two documents was kept confidential for reasons associated with the life company’s rehabilitation.
      • We are pleased to learn that secrecy about it is no longer necessary; now the excellent work done ten years ago by an actuarial trio, Messrs. John M. Bragg, Delos H. Christian, and AIlan F. Lebourveau (who died in 1982), can and should belatedly receive our profession’s recognition.

Truth

  • To quote from Josh Billings: " Tis better not to know so much, than to know so much that ain't so."
  • If life insurance truths have not been widely disseminated and assimilated, life-insurance untruths have.
  • Lack of knowledge as to what is so about life insurance has been offset by excess information coined and circulated by a sensational press as to what is not so.
    • It is a case, therefore, of knowing both too little and too much at the same time.  (p29)

1909 - Book - The Romance of Life Insurance Its Past, Present and Future, with Particular Reference to the Epochal Investigation Era of 1905-1908, by William Joseph Graham - [PDF-313p-GooglePlay]

  • Truth in Lending
  • TILI - Truth In Life Insurance
    • SOA - Committee on Truth in Life Insurance of the Society of Actuaries - Bartley Munson, Chairman
    • 1973 / 1974 - GOV (Senate) - The Life Insurance Industry - Phillip Hart (D-MI) - 4 Parts  ---  [BonkNote]
  • Truth in Savings
  • "Truth in Testimony" Disclosure Form
  • 1979 0720 - NYT - The Whole Truth About Life Insurance - [link]
  • 1992 0807 - The Telegraph-? - Uncovering Truth in Life Insurance - Jane Bryant Quinn
    • [BonkNote: Can't find a link, originally found on GoogleNews, picture - WishList] - [link]
  • 1993 0525 -  GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  ---  [BonkNote]