Project – NAIC – Snippets – 2019

Project - NAIC - Snippets - 2019

2019 0310 - Letter - AXA Equitable, Brian R. Lessing, to NAIC (IULISG) - Indexed Universal Life Illustrations Subgroup - 2019-3, NAIC Proceedings - (p6-844)
- In considering the specific questions posed by the Subgroup, we found it helpful to take a step back, and to first consider two more fundamental questions:
- (A) What is the purpose of illustrations? (p6-844)
- Although illustrations can be used for many purposes, the following seem primary to us:
  - To help consumers understand the mechanics of products, that is, their features and how they will operate, as opposed to how they will perform, which can’t be predicted or estimated;
2019 0312 - 2019-1, NAIC Proc. - IUL Illustration (A) Subgroup, Conference Call
- Donna Megregian (American Academy of Actuaries—Academy) discussed the Academy’s comment letter (Attachment FiftySeven-A) and the accompanying sample illustration (Attachment Fifty-Seven-B). She said the sample illustration provides a high-level overview of current illustration requirements.
- Fred Andersen (Chair - MN) provided an overview of the comment letters (Attachment Fifty-Seven-C) received in response to the questions exposed for public comment through March 8.
  - He said there was a general consensus that the risk/reward tradeoff should be reflected appropriately.
  - He said there was also a general sentiment that product innovation should not be hampered and that expansion of consumer choice is desirable, as long as consumers are properly educated on the risks and rewards associated
    with those choices.
  - Pacific Life - Range of Returns
  - Mr. Regalbuto said there should be a discussion about the role of the illustration. He said an indexed universal life (IUL) policy is not an investment product.
    - [Bonk: GMP - Guaranteed Maturity Premium-?] - Therefore, the purpose of the illustration should be to show the consumer how the product works, which should include how much money is required to keep the policy in force under conservative assumptions
  - Mr. Tsang said the illustration should be used to manage policyholder expectations and should show the volatility of returns, so the policyholder has a realistic picture of the risks.
  - Mr. Robinson noted that the value of the illustration is shaped by the presentation of the life insurance agent. He said if an agent does not think the illustration meets the consumer’s expectations, the illustration will not be shown.
  - Mr. Hippen said care must be taken to ensure that the information provided on the illustration does not lead agents to compare the product with an investment product, which may violate securities laws.
  - Birny Birnbaum (Center for Economic Justice—CEJ) said deluging consumers with tables of numbers does not necessarily foster understanding because of consumer biases and their limited knowledge. He said the current structure of the illustration presents the IUL policy as an investment.
    - He said the CEJ comment letter suggested a way to change the structure.
  - Mr. Andersen said the illustrations for IUL products with index return multipliers (IRMs) that he has seen all seem to exceed the minimum illustration requirements of AG 49. He noted that those illustrations may be a source of best practices. Pacific Life agreed to share their illustration with the Subgroup for distribution to anyone who is interested.
  - Sheryl Moore (Wink) said that while the discussion has focused on the range of returns, there are a number of other factors, such as leverage charges, that could result in internal policy costs that are different from what is illustrated.
  - Brian Lessing (AXA) said it is difficult to illustrate the volatility, which is why in-force illustrations are so important.
    - Brian Lessing (AXA Equitable): difficulties…. Inforce Illustrations become a critical tool, not only for IUL, but for all …. They would be very helpful….adjusting premiums for example. [Bonk: Not in Proceedings]
  - Mr. Andersen said the second exposed question is whether a higher risk/higher reward IUL product should be illustrated with higher credited rates than a vanilla IUL product would be.
    - He said earlier discussions on using a range of returns could effectively address this question.
    - He noted that making that change to the structure would require a change to the illustration
      model, which currently calls for a single scale.
  - Mr. Regalbuto said the question ignores the more important issue of how to include all the elements of policy features, such as bonuses and IRMs, into the AG 49 formula.

2019 0407 - 2019-1, NAIC Proceedings - LIAC, Life Insurance and Annuities Committee
- (p6-2) -
- c. LIIIWG - Richard Wicka (Chair-WI) - said the Life Insurance Illustration Issues (A) Working Group met Dec. 18, 2018. He said the Working Group continues to develop a simplified one- to-two-page consumer-oriented policy overview document to complete its charge.
  - He explained that the Working Group was initially working on revisions to both the Life Insurance Disclosure Model Regulation (#580) and the Life Insurance Illustrations Model Regulation (#582).
  - However, the Working Group agreed to take a more simplified approach, revising only Model #580 to require a policy overview document to be distributed along with the Life Insurance Buyer’s Guide (Buyer’s Guide) and all life insurance policies.
  - He said draft revisions incorporating this new 6-2 NAIC Proceedings - Spring 2019 approach dated Oct. 9, 2018, were exposed for a public comment period ending Dec. 10, 2018. He explained that during its Dec. 18, 2018, conference call, the Working Group discussed comments that had been received and agreed to revise the Oct.
    9, 2018, draft based on discussions during the Dec. 18, 2018, call.
  - He said the Working Group agreed to begin working on a sample policy summary next.
  - Additionally, he requested an extension of the Request for NAIC Model Law Development so the Working Group can continue its work.
- LIOGWG - d. Life Insurance Online Guide (A) Working Group Ms. Neil said the Life Insurance Online Guide (A) Working Group met March 18.
  - The Working Group reviewed its charge to “develop an online resource on life insurance, including the evaluation of existing content on the NAIC website, to be published digitally for the benefit of the public.”
  - The Working Group reviewed an alternative “chart” format for presenting information that was submitted by the American Academy of Actuaries (Academy).
    - She said the Working Group liked the Academy’s chart but agreed to focus first on the content of the guide before moving on to the best way to organize and present the information in an online format.
    - To that end, the Working Group discussed a list of topics to include, and several volunteers agreed to draft language for the Working Group to review.

2019 0824 - NAIC - LIAC, Life Insurance and Annuities Committee National Meeting - Summer
- Mr. Gendron said the Center for Insurance Policy and Research (CIPR) is looking to facilitate communication with academics on consumer issues, from both a risk management perspective and a consumer understanding perspective; it could also inform the disclosures contemplated in Model #245. -p1>6
2019 0830 - Letter - CEJ / Birny Birnbaum to LIIIWG, Life Insurance Illustrations Issues Working Group - (A) - NAIC - 12p
- re: Policy Overview - The personalized information in the Policy Overview is the premium for the policy – based on information known to the producer or insurer at the time and subject to change based on additional or revised information – and that information can be provided prior to purchase.
  - If an insurer can produce an illustration for a complex, investment type life insurance product prior to the consumer purchase, it is clearly possible for an insurer to provide the premium for a policy prior to purchase.
- re: ACLI - For anyone following the working group 's efforts, the observer might be surprised at the blatant contradiction and abject hypocrisy shown by Mr. Lovendusky in asking the working group to ignore its charge after routinely taking up the working group's time with diatribes and false accusations against others for recommendations allegedly exceeding the working group's charge.
  - Yet, now, as the working group is finalizing its work, Mr. Lovendusky shows neither embarrassment nor shame for engaging in precisely the same offensive act of which he has accused others.¹
- re: NAIFA - Despite no participation to date in the working group’s efforts over the past four years, NAIFA decides it needs to now weigh in on the important role of agents in the life insurance sales process and that without an agent to interpret these documents for consumers, the consumers will be lost at sea.
  - Mr. Sanders’s drive-by comments to the working group are based on false assertions and misunderstanding of the working group’s efforts.
  - His comments have no relevance for the current efforts of the working group.

2019 0903 - 2019-3, NAIC Life Insurance Illustration Issues (A) Working Group (LIIIWG) - Conference Call - [Plan of Insurance]
- Michael Lovendusky, ACLI ... said assisting consumers to compare products is outside the scope of the Working Group’s charge, and it would limit innovation and harm consumers.
- Birny Birnbaum, CEJ ... said the Working Group’s charge specifically includes how the summaries are “designed, formatted and accessed” by consumers, and the stated purpose of Model #580 is to “require insurers to deliver to purchasers of life insurance information that will improve the buyer’s ability to select the most appropriate plan of life insurance for the buyer’s needs.”
2019 0903, NAIC - LIIIWG, Life Insurance Illustrations Working Group [Bonk: Not in NAIC Proceedings]
- Michael Lovendusky, ACLI: We stood back and thought, how can we somehow deliver a respectable work product to the A Committee that will in fact meet the charge of this Working Group, which is to Improve the Readability and Understandability of the policies that are discussed in the 2 models of the charge for this working group.
  - By aligning to the work of the Online Buyer's Guide Work Group and then the ACLI is willing to participate by advertising the Online Buyer's Guide at an earlier date.
  - We might rename the Online Buyer's Guide to the Online Consumer's Guide and get it out to consumers who have not yet bought a policy to help with the basic understanding of the different types of policies and how different features of policies might operate to the consumers interest.
- Richard Wicka (Chair - WI)
  - My hope and my goal is this completed by the fall national meeting.
  - Should we do something else or continue with the Policy Overview.
- Birny Birnbaum (CEJ)
  - 2016, April …. ACLI suggestion re: stop policy overview and put info into Online Buyer's Guide.
  - Should be a policy overview for different types…..
  - ⇒ Thinks the product overview templates will be easy once the template for term is completed as well as the model itself.
2019 0906 - NAIC - LATF - Pacific Life to NAIC LATF (Fred Anderson), 2019-3 (p6-319)
- With respect to guardrails, Pacific Life believes that it is critical that any proposed limit on the illustration of benefits be derived from sound principles and reasonable assumptions.
- This methodology will help regulators best target changes to AG 49.
2019 0917 - NAIC - LIIIWG - Life Insurance Illustrations Issues Working Group - Proceedings (Fall, 6-77) - [Cost of Insurance] --- [BonkNote]
- Versions
  - NAIC Proceedings Version
  - [Bonk: Not in NAIC Proceedings]
2019 0917 - NAIC - LIIIWG - Life Insurance Illustrations Issues Working Group - Proceedings (Fall, 6-77) - Cost of Insurance - [Bonk: Not in NAIC Proceedings]
- Teresa Winer (GA) - I feel like a lot of these policies had good intentions and came out of Buy Term and Invest the Difference to compete with that so people wanted more disclosure of all the components.
  - What I've found is people just can't, for some reason, put all the components together and get so frustrated.
  - In my experience very smart people don't really know what all the components mean. I mean I feel like it does lead to confusion.
  - So, I think if you can refer to the eventual illustration and just show the cash value.
  - Teresa Winer (GA) - point them to the illustration / policy
    - Birney Birnbaum: Referring to the policy defeats the purpose of the Policy Overview
- Birny Birnbaum: How to lower your premiums, join a gym.

2019 1109 - NAIC - LIIIWG (Life Insurance Illustrations Working Group), Conference Call - [Bonk: Not in Proceedings]
- Michael Lovendusky, ACLI - ...completely Dynamic services and policy opportunities for their customers to purchase and to elect a variety of options.
2019 1115, NAIC - IULISG – Indexed Universal Life Illustrations Subgroup, Conference Call - [Bonk: Not in NAIC Proceedings]
- Rachel (Texas): We can see why it would be confusing and difficult to explain… without eroding some confidence on the consumer's part.
- Scott Harrison (Harrison Law) - Representing-?
  - First thing that I want to say is that there have been some references to Misleading Illustrations.
  - I'm certainly not aware of the Regulators have not found that Illustrations are misleading.
  - That seems to be just an allegation that is left hanging in the air, which is inaccurate.
  - The Illustration is not misleading.
  - The policy is performing according to policy mechanics.
- Gary Sanders, NAIFA
  - And that leads to my second concern which is that consumer confusion I think, and we fear, in large part is going to be translated into a lack of confidence or a lack of trust in their advisor.
  - And in some way or another, the consumer is going to end up with the feeling that the advisor did some form of misrepresentation initially to the consumer and now the truth is coming out.
  - And I think that is a very big concern and not only would it harm the consumer's confidence in the producer, but it could have a lot of reputational damage to producer's as well.