DOC 264 - Declaration of Elizabeth MacGowan - Walker v LSW

  • Attachments:
    • # 1 Exhibit A - (p13) - 37. ...optional "sales presentation pages."
    • x - DOC 264-2 - # 2 Exhibit B -  (p15) - 41. An example of an illustration that was generated with all of these additional reports is attached hereto as Exhibit B.  
    • # 3 Exhibit C - (p15) - An example of an illustration that was provided to a policyholder during the class period which includes some of this information is attached hereto as Exhibit C.
    • OO - DOC 264-4 (Filed Under Seal) - # 4 Exhibit D - (p18-19) - 53. An example of one such Quick-Calc report that was apparently given to a policyholder (one of the named Plaintiffs) is attached hereto as Exhibit D.
  • 07/13/2012 - DOC 264 - DECLARATION of Elizabeth MacGowan in Opposition to MOTION to Certify Class 225 filed by Defendant Life Insurance Company Of The Southwest. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(Shapiro, Jonathan) (Entered: 07/13/2012)
    • (p6) - An agent can select a given death benefit (a sum certain amount) and
      calculate the amount and frequency of premium payments necessary to support such a death benefit. Conversely, an agent can take a given target premium and calculate the amount of death benefit that can be purchased assuming the client pays that premium amount and does so on an also-selected frequency.
    • (p7) - ICS can generate illustrations that reflect anything from a single premium
      payment to monthly premium payments for the rest of the policyholder's life. The agent can also determine the amount of premium payments, reflecting either the minimum necessary premium, the target premium, the maximum allowable premium, or any value in between. An agent may also illustrate premium amounts that change over time.
    • (p8) - 22. All of these customized inputs have a substantial effect on the ultimate output of the ICS software. Because almost every value in an illustration is linked together in some way, changing one variable will cause the entire output to change.
    • (p9) - Flexible Distributions
    • (p11) - 31. Although the ICS software assumes that Current Basis B will be the amount set forth in the disciplined current scale, LSW provides independent agents with discretion to revise the accumulation rate set forth for each strategy (indexed or fixed) to any rate between the maximum disciplined current scale and the minimum guarantee set forth in the policy. So, if an agent desires to generate illustrations that reflect an accumulation rate lower than the historic average achieved by the S&P 500, they are able to do so.
    • (p11) - <Grading> - 32. In addition, an agent may change the specified accumulation rate up to four times, at whatever future intervals he or she selects, to reflect possible future changes in the S&P 500. So, for example, an agent may choose to generate an illustration showing what would happen if a policy grew at 6% for 10 years, then grew at 2% for the next 10 years, and can compare that outcome with a policy that grew at 4% for 20 years (i.e., the level average between the two values).
    • (p12) - Optional Output
      • 35. This report also includes the phrase "One Policy. One Policy Fee. One Premium. One Company." If an agent does not elect to include these cover pages, theillustration will not include the words "One Policy Fee."
    • (p14) - 40. ICS also permits agents to generate additional tables of values, which are included at the back of the illustration. For example, an agent is able to generate all, or some, of the following reports:
      • A report called "Cost of Insurance & Expenses," which sets forth the annual amount charged under the policy for the premium expense charge, the cost of insurance, and other deductions, and includes another column with the total expenses and deductions incurred. This report specifies that these values are "not guaranteed" and the "assumptions on which they are based are subject to change by the insurer" so that
      "[a]ctual results may be more or less favorable." If this report is generated, definitions for "Premium Expense Charge," "Cost of Insurance," "Other Deductions," and "Total Expense and Deductions" are included in the illustration's definitions section.
      A report called "Premium," which presents an annual list of the dollar amounts for various premium measurements, including the "Base Policy Current Premium," "Contract Premium," "Net Premium," "Cumulative
      Net Premium," "Total Premium," "MEC Total 7 Pay Premium," "Total Level Guideline Premium," "Total Single Guideline Premium," and "Total Maximum Guideline Premium."
    • A report called "Cash Value," which specifies the values associated with the "Base Policy Guaranteed Cash Value," "End Year Guaranteed Cash Value," "End Year Non-Guaranteed Cash Value," "End Year Net Cash
      Value," and the "End Year Net Cash Value Increase."
    • A report called "Death Benefit," which  specifies the dollar amounts of various types of death benefits by policy year. The types of death benefits specified are "Base Policy Death Benefit," "Guaranteed Death Benefit," "End Year Total Death Benefit," and "End Year Net Death Benefit."
    • A report called "Internal Rate of Return," which specifies the internal rates of return assumed by the illustration for the death benefit and the cash value.
    • (p15) - 41. An example of an illustration that was generated with all of these additional
      reports is attached hereto as Exhibit B. It is important to note that agents do not need to
      generate all of these optional reports, they are free to select any combination of them. An example of an illustration that was provided to a policyholder during the class period which includes some of this information is attached hereto as Exhibit C.
    • (p16) - Additional Concepts
      • 43. In addition to the "Basic Illustration" concept discussed above, ICS enables
        agents to illustrate several other concepts as well.
      • 44. Of these additional concepts, four, "Key Person," "Executive Bonus,"
        "Leveraged Asset Transfer" and "Buy Sell Analysis," involve the potential to use the policy loan feature to provide some measure of income.
    • (p16-17) - 46. These additional optional concepts also enable agents to generate still more additional optional reports at the back end of an illustration, including graphs and diagrams of the possible future values that may be associated with the policy. Where these concepts involve such illustrations of potential future values, it describes the non-guaranteed nature of these illustrated values.
    • (p17-18) - Quick-Cale Functionality
      50. The ICS software can also generate what is referred to as a "Quick-Calc report. A Quick-Calc report is intended for independent agents to use in helping them customize illustrations to suit their clients' needs by allowing the agent to see, at a glance, how changing various variables effect the ultimate values under the policy.
    • (p19) - 51. ....the Quick-Calc is for the most part a table listing values over various periods of time based on the agent's inputs.
    • (p18) - So, for example, an agent may generate a Quick-Calc that includes the annual amount of cost of insurance charges, premium expense charges, policy fees, and the total amount of charges and fees deducted.
    • (p18-19) - 53. Although independent agents are not authorized to provide Quick-Calc reports to policyholders, the information these reports include may be passed along to policyholders in any number of ways. First, agents may internalize the information that the obtain from a Quick-Calc and report that information to policyholders (either reading it off of the screen or conveying it in some other form or fashion). Second, agents may be generating an illustration in collaboration with their policyholder during an in-person illustration, and may generate a Quick-Calc report and review it with policyholders on a
      computer screen. Finally, although the Quick-Calc report is intended to be for agent use
      only and not provided to policyholders, the reality is that certain agents have evidently
      given these documents to their policyholders, alongside more complete illustrations. An example of one such Quick-Calc report that was apparently given to a policyholder (one of the named Plaintiffs) is attached hereto as Exhibit D.
    • (p19) - InsMark
      • (p19) - 55. If an agent wishes to run InsMark to generate these materials, they click a link within the ICS program, which downloads the InsMark program to their computer.
      • (p20) - 56. InsMark offers dozens of different sales presentations that agents may use in discussing Paragon and Provider with their clients.
    • (p20) - No Way to Track Illustrations
      • (p20) - 57. LSW has no way of knowing which variables an independent agent chooses when running an illustration in the field. LSW knows which customizable options the agent may choose from, but does not track what options the agent chooses or in what combination he chooses them. LSW does not know when an agent runs an illustration. LSW does not know to whom the agents shows the illustration(s).