Project - NAIC - Snippets - 2022
- 2022 0407 - 2022-1, NAIC Proceedings - LIAC - Life Insurance (A) Committee
- 2. Adopted the Report of the Accelerated Underwriting (A) Working Group and the March 4 Draft Accelerated Underwriting in Life Insurance Educational Report
- Mr. Birnbaum said he participated, along with Brendan Bridgeland (Center for Insurance Research—CIR) and Peter Kochenburger (University of Connecticut School of Law), and he did not think the Educational Paper was particularly good. He said it did not say anything other than watch out for unfair discrimination, which is so obvious and vague it is almost not worth mentioning.
- 3. Heard a Federal Update on the Implications of the DOL Fiduciary Rule - Brooke Stringer (NAIC)
- Patrick C. Reeder (American Council of Life Insurers—ACLI) said a fiduciary standard is not a bad standard, and it is an appropriate legal standard for situations where there is an ongoing relationship providing financial advice.
- He said the problem with the DOL proposal is that it is a fiduciary-only approach, which would eliminate commission-based sales; i.e., the way that lower and mid-range clients buy products.
- He said the DOL should recognize the changes that have taken place since 2017.
- He said both the SEC’s Regulation Best Interest standard and the NAIC best interest revisions to the Suitability in Annuity Transactions Model Regulation (#275) provide a strong standard of care that is vigorously enforced.
- He said state insurance regulators have a strong story to tell, and the DOL needs to hear from the NAIC.
- Micah Hauptman (Consumer Federation of America—CFA) said there are gaps in the current regulatory framework.
- He said he does not believe consumers’ reasonable expectations are being met.
- He said the DOL should require a fiduciary duty, regardless of what products are being sold or how they are being sold.
- He said consumers all expect and deserve high quality advice without the taint of conflicts of interest.
- 4. Adopted the Report of the Life Actuarial (A) Task Force
- Mr. Birnbaum said indexed universal life (IUL) insurers are using unrealistic crediting rates with unrealistic expectations.
- He said state insurance regulators tried to reign them in, most recently with Actuarial Guideline XLIX—The Application of the Life Illustrations Model Regulation to Policies With Index-Based Interest (AG 49) and then Actuarial Guideline XLIX-A—The Application of the Life Illustrations Model Regulation to Policies with Index-
Based Interest to Policies Sold On or After December 14, 2020 (AG 49-A), but insurers continue to game the system and illustrate unrealistic and deceptive policy accumulations.
- He said these discreet fixes are not solving the problem. He said the problem is the illustrations; they do not show risk. He said annuity illustrations requirements
do not cap crediting rates, so insurers turn to bespoke indexes created by investment banks by data mining historical experience to falsely present potential future earnings. He said some illustrations show investment returns higher than the cost of a loan, which falsely suggest that it makes sense for people to borrow money to
invest in life insurance products. He said insurance producers become de facto investment advisors. He said the Committee needs to address illustrations and engage experts in consumer disclosures to address these issues.
- 2022 Summer
- 2022 0726 - 5-1260 - Equitable - Brian Lessing - Finally, we feel that we would need to gain a better understanding of option (d) in order to provide any evaluation of it (for example, what illustration metrics would be subjected to a hard cap, how would such a hard cap be applied, and how would this affect the accuracy of depictions of how IUL policies work?).
- 2022 0726 - 5-1272 - Transamerica - Andrew DeMarco
Head of Life Solutions - Transamerica is a leading provider of IUL and had the top-selling individual IUL product across all channels in 2021, according to Wink, Inc.
- We can also support A Committee consideration of a longer-term, multi-year effort to overhaul illustrations for all fixed life insurance products, presumably involving the re-opening of the model. We believe such an effort should address illustrations holistically across products rather than taking a piecemeal approach.
- 2022 0808-09 - LATC - Life Actuarial (A) Task Force - NAIC
- 5-34 - 5. Adopted the Report of the IUL Illustration (A) Subgroup and Re-Exposed the Potential Options for Addressing the AG 49-A Volatility-Controlled Indices Issue
- Comments
- 5-35 - Birny Birnbaum (Center for Economic Justice—CEJ) said the illustration infrastructure is flawed, and its framework needs to be revised. He said the illustration issue is a consumer disclosure issue that should be addressed by those with disclosure expertise. He asked the Task Force to petition the Life Insurance and Annuities (A) Committee to examine and re-engineer life insurance and annuity illustrations. Brian Bayerle (American Council of Life Insurers— ACLI) said the solution that the Task Force chooses should be principle-based. Several Task Force members concurred that a comprehensive approach is necessary and suggested requesting that the Committee consider opening the Life Insurance Illustrations Model Regulation (#582).
- 5-35 - 7. Discussed the Academy Framework for Developing, Evaluating, and Implementing ESGs
- 5-1252 - 2022 0718 - The Indexed Universal Life (IUL) (A) Subgroup Exposure - Attachment Twenty-Seven
- 2022 0811 - LIAC - Life Insurance and Annuities (A) Committee - NAIC - Agenda - 2p
- 4. Discuss the Life Insurance Online Guide (A) Working Group - Director Judith L. French (OH)
- 6. Discuss Enhanced Cash Value Products - Director Judith L. French
- 2022 0811 - LIAC - Life Insurance and Annuities (A) Committee - NAIC
- 5-4 - Mr. Andersen gave an update on the Indexed Universal Life (IUL) Illustration (A) Subgroup. He said there have been issues with IUL illustrations over the past eight years.
- 5-4 - Mr. Andersen said new issues have arisen, and the Task Force is considering how to address them. They are
considering whether additional modifications should be made to the actuarial guidelines to address these newer
concerns.
- He said there is an exposure period for feedback on four possible ways to address the issues that have come up, ranging from doing nothing to taking drastic action. One of the options gaining Task Force member support involves making a more immediate fix to the actuarial guidelines, but in recognition of the fact that issues are likely to continue necessitating future changes, perhaps limited, targeted revisions to the Life Insurance
Illustrations Model Regulation (#582) should be considered.
- 5-4 - Mr. Birnbaum said most stakeholders endorsed a fix to AG 49A to address the latest actions by insurers to game the guideline, but there was also broad recognition by many of the need to address illustration issues more
broadly.
- He said the fundamental problem is a flawed illustration infrastructure that drives insurers towards so called innovations after each iteration of AG 49. He said without addressing the problems with the illustration framework—projecting future returns using constant annual crediting rates, loan arbitrage, data-mined indices with made up histories, no sequence of return risk, etc.—the state insurance regulators will be coming back again
and again as insurers game each new iteration of the actuarial guideline. He said none of this even addresses the disparities between illustration guidelines between indexed annuities and indexed life insurance, despite the similarities in product features nor the disparities in illustration guidelines across life insurance products.
- 5-5 - Mr. Birnbaum said the actuaries are limited in two important ways:
- 1) they are limited by Model #582 because it was designed 30 years ago before indexed products existed, and it is woefully out of date; and
- 2) actuaries are not experts in consumer financial disclosures.
- He said illustrations are a consumer disclosure, and the technical expertise needed is not that of an actuary but of experts in consumer financial disclosure.
- He said asking the actuaries to fix problems with IUL illustrations would be like asking the Life Insurance Online Guide (A) Working Group to develop reserving requirements for indexed life insurance.
- He said he urges the Committee to establish a charge to examine and re-engineer life insurance and annuity illustrations for effective consumer disclosure and consistency of principles across similar products.
- 5-5 - 5. Discussed the Life Insurance Online Guide (A) Working Group
- Director French reminded the Committee that Ms. Kane said the Communications Division would need assistance
from subject matter experts (SMEs) to assist with these recommended revisions. She said this work is consistent with the Life Insurance Online Guide (A) Working Group’s 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.”
- Mr. Herrick said he would be happy to assist with the development of content for the website based on the chart on the Texas DOI website.
- Commissioner Schmidt also agreed to help. Director French said any other states willing
to volunteer should reach out to Jennifer Cook (NAIC).
- 2022 0813 - EX - Executive (EX) Committee and Plenary - Summer National Meeting - Attachment Two - NAIC
- 4. LATF - Life Actuarial (A) Task Force
- In particular, the Task Force is considering asking the Committee to consider limited, targeted revisions to the Life Insurance Illustrations Model Regulation (#582) to address the need for the Task Force to make continual changes to the indexed universal life illustration actuarial guideline to address product features causing aggressive illustrations.
- 6. LIOWG - Life Insurance Online Guide (A) Working Group focus on updating life insurance information on the NAIC website. State insurance regulators interested in participating in the Working Group can contact Jennifer Cook (NAIC).
- 6. Discussed Enhanced Cash Value Products