Policy Loans

  • Chris H. McElvaine: ...I heard another policyholder at the annual meeting mention that he has taken advantage of his 6% policy loan provision.
    • He has reinvested that money with the same company in an RRSP five-year interest certificate bearing a phenomenal rate of interest. Apparently he has been doing this for 4 or 5 years.
    • My question to Mr. McLeod as President of the organization is "Why has he not informed me as a policyholder that I could do this?"
  • Charles C. McCleod, Actuarial Vice-President with Manufacturers Life - This question has been asked of many insurance companies over the last few years.
    • The reason, of course, is that the companies cannot afford to do so. 

1981 - SOA - Current Topics: Canadian Insurance, Society of Actuaries - 26p

  • 1976 - SOA - Policy Loans, Society of Actuaries - 26p
    • 1. The Problems.
    • 2. Legal Considerations.
    • 3. Allocation of Investment Income.
    • 4. Basic Pricing Options.
    • 5. Sales Problems.
    • 6. Policyholder Considerations.
  • Q Well, the focus on income payments, what he would get after retirement --
  • A You mean policy loans is what we’re talking about.
  • Q All right. The letter refers to income payments, correct?
  • A Um hum. Yes.
  • Q Is there any reference there to policy loans?
  • A No. But that’s what they were.

--  Transcript of Testimony of James Barrett, Agent

2009 - LC - National Security Systems  vs. Robert L. Iola, Jr. - Case 3:00-cv-06293-AET-TJB, Document 375, Filed 12/03/09 Page 91 of 117

  • 1965 - AP - Life Insurance Policy Loans: The Emergency Fund Concept, by Glenn L. Wood, The Journal of Risk and Insurance, Vol. 31, No. 3 (Sep., 1964), pp. 411-420 (10 pages), Published By: American Risk and Insurance Association - <JSTOR> 
  • 1976 - SOA - Policy Loans, Society of Actuaries - 26p
  • 1977 - SOA - Policy Loans and Equity, Society of Actuaries - 120p
  • 1984 0131 - GOV (Senate) - Tax Treatment of Life Insurance Products and Policyholders
  • 2009 - AP - The Demand for Life Insurance Policy Loans, by Liebenberg, Carson, Hoyt - 25p
  • Life insurance companies are also in danger of a major acceleration of loans on outstanding policies at well below market cost of funds if short-term interest rates, especially for money market funds, continue at approximately twice the rate at which most individual policy loan contracts are written.

(p11) - Statement of Alan Greenspan, Townsend-Greenspan & Co., Inc., New York, N.Y.,  [Bonk: Alan Greenspan = 1987-2006 - Chair of the Federal Reserve]

1981 - GOV (JEC) - The 1981 Economic Report of the President, Part 1 - [PDF-215p]

  •  1977 - SOA - Policy Loans and Equity, Society of Actuaries - 120p
    • The purpose of this paper is to bring up to date the actuarial literature on policy loans.
    • A brief history of policy loans is given, followed by a description of the "policy loan problem" as it is being experienced by many companies today.
    • The third section lists a variety of possible solutions, with varying degrees of feasibility and effectiveness.
    • Two of those solutions are then explored in greater depth, illustrating how the dividend distribution formulas might be modified to meet the problem.
  • In drawing a line between insurance policy loans and consumer finance, the NAIC argued that whole life policy loans do not make insurance companies ECOA "creditors."
  • The insurance companies do not extend, renew, or continue credit; nor do they arrange for such transactions.
  • Rather, despite the use of the word "loan," a policy loan is in substance an advance payment of the policy's cash surrender value.
  • It more closely resembles a structured temporary conversion from one type of asset into cash, particularly because if a policyholder does not repay the loan, the insurance company's recourse is simply to reduce the policy benefits by the outstanding balance of the loan.

mondaq.com/unitedstates/insurance-laws-and-products/557644/naic-draws-line-in-cfpb-sandbox

  • 1982 0612 - Omaha World-Herald - Plan Uses Life Insurance Loans - Called 'Idle Assets', by By Linda Brenners-Stulberg, The Chicago Sun-Times  ---  [BonkNote]
  • Dr. LUBIN. May I just raise a question before you continue? It is quite evident that for the year 1938 the most profitable investment an insurance company could make was a loan to a policyholder.
  • Mr. Howe. With respect to the gross rate; yes.
  • Dr. LUBIN. And these funds that were loaned to the policyholders, I take it, are part of the reserves that were set apart, and in a sense is his own money?
  • Mr. Howe. There is an argument about whether it is his own money.
  • Dr. LUBIN. Although legally it may be not his, in a sense it is a sum set aside against his policy?
  • Mr. Howe. It is money which he paid in originally as premiums, less expense.
  • Dr. LUBIN. And which in the event he does not pay the loan is deducted from the policy?
  • Mr. Howe. That is right.  (p14808)

PART 28 - Life Insurance - Operating Results and Investments - [1072p-archive.org]

  • 1938-1941 – GOV (Senate) – TNEC – Temporary National Economic Committee, Joseph C. O’Mahoney (D-WY)  ---  [BonkNote]
  • Policy loans secured against the cash surrender values of the contract followed the more general adoption of cash values, and were, like the extended insurance provisions, greatly deprecated by many on the theory that loans would tend to promote lapses.
  • Col. Jacob Green, late president of the Connecticut Mutual, remembered for a lifetime spent in untiring attacks upon the deferred or tontine dividend system, was a bitter opponent of the policy-loan idea. 

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