SB-Clarify

P1 ->SIV->P2

or

P1->P2->SIV

  • What is Universal Life?
  • Who wanted Universal Life?
  • Life Insurance as an Investment

20. Aetna does not dispute that Mr. Pflugfelder described the Policies as "permanent insurance." He did so correctly, as Plaintiffs concede.
21. Aetna does not dispute this paragraph, but adds that Plaintiffs never asked what the term "permanent insurance" means.

DEFENDANT AETNA LIFE INSURANCE AND ANNUITY COMPANY'S RESPONSE TO PLAINTIFFS' SEPARATE STATEMENT OF ADDITIONAL UNDISPUTED MATERIAL FACTS - Document 65 - Filed 06/02/03 Page 6 of 32

Guaranty Funds

  1.  .... guaranty fund associations often carry out a monitoring role to help prevent insolvencies and keep assessments to a minimum.  -- Roy Woodall (p92) -
    1. 1991 0613 - GOV - Insurance Competitive Pricing Act of 1991
  2. < No they don't> - 199x - GOV - Eden Safarty (NOLGHA)

Universal Life Insurance Demand

  • Arnold <Dicke> suggested that universal life stemmed from the desire of many consumers to have a product that unbundles the insurance and investment elements.
  • At New York Life, we get a lot of communications from policyowners but we cannot remember one single request for a product that unbundles the insurance and investment elements.
  • I would like to ask how many people here have received requests for such unbundling from the public. (No hands were raised.)

--  WALTER MILLER

1981 - EQUITY FOR EXISTING POLICYOWNERS, Society of Actuaries

P1->P2->SIV

  • The first type includes whole life, universal life, and endowment insurance policies.
  • A portion of the premiums on these policies pays for life insurance coverage, and the remainder adds to the cash surrender value of the policy.  (p6)

1994/04 - The Economic Impact of a Solvency Crisis in the Insurance Industry - CONGRESSIONAL BUDGET OFFICE 

What is Universal Life?

  • Universal life insurance: Combines features of term life insurance and whole life insurance policies by offering death benefits at lower, flexible premiums with a cash value.
  • Under a universal life insurance policy, the death benefit, cash value and premiums can be altered if a policyholder’s circumstances change, and the policyholder can use the interest from the cash value to help pay the premiums.

NCSL

Role of SIV

  • Many insurance companies even have a way to get a consumer's money without the consumer ever knowing about it.
  • Most policies have a clause that allows the company, without telling the policyholder, to dip into the savings component of their life insurance policy.
  • This can happen, for instance, when a consumer stops paying on a policy because he or she believes that the policy is paid up.
  • Then, without even telling the  policyholder, the company can raid the savings to pay itself more premium.

--  Senator Metzenbaum  (p3)

1992 - GOV - Consumer Disclosure of Insurance

The role of the policy value, or account value, with its monthly algorithm and mortality, interest and expense guarantees, is part of the cost  structure of the product.

  • In a traditional product the inner workings are hidden.
  • With this product <Universal Life>, the mechanic is "unbundled" and open.
  • But events that are now observable may be misinterpreted.

--  Douglas Doll <Actuary>

1988-2, NAIC Proceedings

Who Wanted Universal Life?

These products <Universal Life, etc> arose from a significant rise in interest rates in the early 1980’s and a wave of consumer demand for
products better meeting their needs. (p37)

2020/08 - IMF - UNITED STATES FINANCIAL SECTOR ASSESSMENT PROGRAM TECHNICAL NOTE—INSURANCE SUPERVISION AND
REGULATION - IMF Country Report No. 20/244

WALTER MILLER: Arnold <Dicke> suggested that universal life stemmed from the desire of many consumers to have a product that unbundles the insurance and investment elements.

 

At New York Life, we get a lot of communications from policyowners but we cannot remember one single request for a product that unbundles the insurance and investment elements.

I would like to ask how many people here have received requests for such unbundling from the public. (No hands were raised.)

 

1981 - EQUITY FOR EXISTING POLICYOWNERS, Society of Actuaries

Sharing Information / Working Together/ Passing the Buck

  • 1980s NAIC - UL/ Illustrations in Market Conduct... then went to LIAC... Doug Ommen (LIAC - Chair) back to Market Conduct.... LIBGWG/OLIBGWG and LIIIWG ...

 

6. Agreed to Discuss Universal Life Policies

Kim O'Brien (Americans for Asset Protection-AAP) said:

  • there is a growing problem with universal life insurance policies that is hitting the elderly particularly hard.
  • Due to the low interest rate environment, policies purchased 10 and 20 years ago require additional premiums to stay in force, and the premium hikes are particularly difficult for the elderly to pay.

Commissioner Ommen said:

  • he would put the issue on the agenda for a future meeting.
  •  the issue might be one for the Market Regulation and Consumer Affairs (D) Committee, as well.

2018-3, NAIC Proc. (LIAC)

  • Commissioner Ario said that since complaints are a part of market analysis, guidance needs to be provided by the D Committee with regard to which Working Group will work on this issue.

    2009-3, NAIC Proceedings

  • Life Insurance as an Investment
  • It might surprise you to know that about 15 percent of retirement savings in America are in cash-value life insurance—that is something that is not often shown in reports. (p31)

--  John W. Mangan, Vice President, State Relations, American Council of Life Insurers (ACLI) 

2019 0405 - Nevada - MINUTES OF THE MEETING OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS - Eightieth Session - 51p

In its June 7, 1994 Consent Order #94-102, the NJDBI :

  • cited N.J.S.A. 17B:30-3 and N.J.A.C. 11:2-23.4
  • and subsequently fined MetLife $965,555 for MetLife’s practice of misrepresenting life insurance to be retirement or savings plans, particularly in advertisements sent to nurses and other professionals.   (p27)

1998 1231 - Market Conduct Report - REPORT of the METROPOLITAN LIFE INSURANCE COMPANIES  - 44p

The Groves <policyholders> cannot establish that they justifiably relied on Foster's <Agent> alleged failure to disclose the primary purpose of the policy.

The policy is labeled "Adjustable Life Policy" on the cover page and clearly states, "

The purpose of your policy is to provide a death benefit." (See Ex. A at 4.)

It does not mention "retirement'' or "college funding" or suggest in any way that it was designed for these other needs. <p27>

1997 - Legal Case - Grove v Principal - BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS TIIE CLASS ACTION COMPLAINT - CASE NO. 4-97-CV-70224 (Iowa) - 115p