Words – Index

Premium Taxes

  • The States feared the loss of large revenues received from taxation of the insurance business.1  (p221)’

1948 – LR – Statutory Regulation of Life Insurance Investment, by W. Page Keeton – 21p 

  • As you may know, Alabama has a $1.3 billion per year insurance business, resulting in $240 million of insurance premium taxes every year.
    • A proposed optional Federal insurance charter not only could reduce this important source of State revenue in an era of tight State budgets and dwindling State income taxes but will also threaten the ability for States to adequately fund their State insurance departments.
    • Issues such as state insurance premium taxes must be addressed as part of any optional Federal insurance charter.  (p6)

—  Senator Spencer Bachus (R-AL)

2003 1105 – GOV (House) – Reforming Insurance Regulation: Making the Marketplace More Competitive for Consumers – [PDF-200p, VIDEO-?] 

  • By the 1940s, taxation of insurers was the single largest source of revenue to the states.
  • Thus, when the Supreme Court reversed itself in 1944, ironically in an antitrust action under the federal Sherman Antitrust Act, and held that the business of insurance was “in or affecting interstate commerce”, the states faced the loss of a significant source of revenue.
  • Utilizing their own trade association, the National Association of Insurance Commissioners (the “NAIC”), the states drafted and the next year with a few modifications Congress enacted legislation, the McCarran-Ferguson Act, exempting the business of insurance from federal antitrust laws to the extent regulated by state law.
  • Since 1945 the states in the United States have continued to be the regulators of insurance even as taxation of insurance has declined as a relative source of revenue to state treasuries.
  • Attached hereto as Appendix A is a summary of the McCarran-Ferguson Act and of recent judicial decisions interpreting the Act.  (p201)

1998 – OECD – Competition and Related Regulation Issues in the Insurance Industry, Organisation for Economic Co-operation and Development –  272p

  • MR. BRONSTEIN: One of the things we noticed, too, was that on 1035 exchanges on life insurance products, we couldn’t identify one of the systems.
    • At least the output couldn’t identify that it was a 1035 exchange, so we were paying premium tax twice.

2001 – SOA – Data Quality, Society of Actuaries – 25p

Semantics

  • Pursuing this thought further brings to light the fact that our nomenclature in this field is not only poor semantics but also far from precise. 

—  Ralph E. Edward

1955 –  SOA – Analysis of Approximate Valuation Methods, Society of Actuaries – 16p
  • Jesse M. Schwartz:  Why are people so reluctant to call Total Life permanent insurance?
  • Myron H. Margolin:  Universal Life type products are, I suppose, permanent.
    • It is a semantic question whether they are permanent life or not, but clearly they are not the traditional cash value products as we have known them…

1981 – SOA – The Future of Permanent Life Insurance (rsa81v7n36), Society of Actuaries – 22p

  • There are semantic problems here.
    • Adjustable life used to apply to the specific product that Bankers of Iowa and Minnesota Mutual had. 
    • That product had many characteristics of the traditional cash value policy.
    • Some use the expression “adjustable life” to apply to Universal Life products.
    • I do not know whether you meant to apply adjustable life to those.

—  Myron H. Margolin

1981 – SOA – The Future of Permanent Life Insurance, Society of Actuaries – 22p

  • THE TOWER OF BABEL REVISITED
  • The individuals involved in drafting the investment law come from a variety of professional backgrounds, with attorneys predominating among industry representatives.
    • In contrast, few regulators have a legal background.
  • Some of the issues have been bitterly disputed.
  • The differences seem to lie mostly in semantics.
    • A clear example of this problem was the continued arguments regarding the use of fiduciary and the directors’ accountability standard.
  • Regulators believed that insurance company directors had a fiduciary responsibility to policyholders, a view that even most participants believed conceptually correct, but industry attorneys were highly concerned about potential legal ramifications that might occur if the actual word was used explicitly in the MIL.  [NAIC Model Investment Law]
  • These linguistic differences compounded the already difficult development process.

—   Arthur Fliegelman (Vice President of the Bond Portfolio Analysis Group for Salomon Brothers in New York, NY.)

1995 – SOA – NAIC Model Investment Law, Society of Actuaries – 20p

  • 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

Witness

Panic

  • Panic of 1907

  • Panic of 1857

  • Insurance Panic
  • 2013 0621 – AP – The Failures that Ignited America’s Financial Panics: A Clinical Survey, by Hugh Rockoff – 52p
  • FCIC – Geithner – 50p
  • 2009 1210 – COP – Hearing – Hearing With Treasury Secretary Timothy Geithner, Congressional Oversight Panel  —  [BonkNote]  —  [PDF-98p,  VIDEO-CSPAN]  
    • (p78) – Tim Geithner – And doubts about the value of AIG life insurance products could have generated doubts about similar products provided by other life insurance companies, feeding the panic that was crippling the economy. 
  • Our fear is this: By failing to disclose these facts, the insurance industry is undermining public confidence in the industry and ultimately risking the possibility of panic.  (p158)

— Statement of Martin D. Weiss, President, Weiss Research, Inc.

1991 0227, 0507/09/23 – GOV – Insurance Company Solvency, aka Insurance Company Insolvencies – [PDF-369p-GooglePlay]

  • In 1907, following the Armstrong investigation and as a result of the panic of that year, the N.A.I.C. adopted a resolution to set the stage to obtain uniformity in valuing securities.

1958 0211 – Insurance Regulation in the Public Interest: “A BETTER N.A.I.C.” – by Robert E. Dineen – 122p

Repricing

  • 1988 – SOA – Repricing Considerations — InForce Blocks of Business, Society of Actuaries – 20p
  • 1992 – SOA – Repricing the In-Force Book of Business, Society of Actuaries – 16p
    • ALBERT E. EASTON: I want to begin discussing repricing of traditional life insurance by making some general comments about pricing, not just repricing but all kinds of pricing.
      • I believe very strongly that while the actuary plays an important role in pricing, pricing is a management’s responsibility.
      • The actuary must communicate with the other members of management on pricing.

Nonguaranteed Guarantees

  • Next is the topic of nonguaranteed guarantees.
  • The ploy here is how to persuade your agents and your prospective policyholders that you probably won’t increase premium rates, but be sure that they understand that you retain the right to increase rates.

—  James N. Van Elsen

1999 – SOA – Impact of Regulatory Uncertainty on Product Innovation, rsa99v25n163pd – Society of Actuaries – 19p

Interest Rate Guarantees

  • Many insurance products offer minimum interest rate guarantees for the life of the contract.
    • In fact, some of these guarantees are mandated by statutory nonforfeiture laws.
  • Although guarantees of 3-5% were once considered minimus, the current low interest rate environment renders them problematic.
  • This session will explore the product design,pricing and investment risk-management strategies to mitigate this risk.

1994 – SOA – Long-Term Minimum Interest Rate Guarantees, Society of Actuaries – 18p

  • However, while we favor SAFE, we are concerned with that 5 percent guarantee. We feel there should be a reasonable range of 3 to 5 percent.
  • If the basis for the guarantee is 5 percent, insurers will need to make long-term investments that have yields higher than 5 percent in today’s very low interest rate environment.
  • If interest rates drop further, 5 percent causes financial difficulties.
  • The trend is down and 5 percent could put insurers at long-term risk.
  • We are conservative investors-investing mainly in high-quality bonds and mortgages. The interest earned on the investments is competitive.
  • Therefore, to guarantee an interest rate for the long term of 5 percent-when long-term rates are currently hovering at less than 6 percent and where they could decrease to less than 5 percent, raises serious concerns.
  • If rates are declining, this may tempt insurers to take more credit risks.  (p43-44)

—  Statement of Ron E. Merolli, Director, Pension Legislative and Technical Services, National Life Insurance Co., Montpelier, Vermont; On Behalf of American Council of Life Insurance (ACLI)

1998 0310 – GOV (House) – Oversight of Pension Issues – [PDF-109p]

Material

  • It’s amazing what plaintiffs’ lawyers deem to be material for purposes of the sale.
    • Was it material that an agent received 95% of the first year’s premium?
    • Was it material that the agent could have sold you essentially the same policy, particularly in a universal life scenario, and received only 40%?
    • Those are things that you see in these lawsuits.

—  James F. Jorden, senior managing partner of Jorden, Burt, Berenson & Johnson LLP in Miami

1996 – SOA – Legal Issues Affecting Nontraditional Products, Society of Actuaries – 14p

  • “The test for whether a statement is materially misleading under Section 12(a)(2) is identical to that under Section 10(b) and Section 11: whether representations, viewed as a whole, would have misled a reasonable investor.” Rombach v. Chang, 355 F.3d 164, 178, n. 11 (2d Cir.2004).

WestLaw – Slip Copy, 2010 WL 3768146 (S.D.N.Y.) – 24p