Supportable

  • What is supportable is up to the illustration actuary and involves all aspects of the product, not just the crediting rate.

--  Donna Megregian

2015 - SOA - Actuarial Guideline 49 (aka Actuarial Guideline YY), Society of Actuaries - 3p

  • 1988 - SOA - Are Current Illustrations Supportable?, Society of Actuaries - 20p
  • I endorse the idea of giving the Society of Actuaries more power to determine supportability.
    • I think the general principles outlined by Harold Phillips (August 19, 1993) are very good in this regard.
    • The percent of 80CSO cost index could be used as a practical tool for testing supportability.
    • Along with a comparison of the crediting rate to long-term market rates, you have clear ways of comparing cost and growth components.
  • The Society of Actuaries could refine definitions of what assumed mortality and interest improvements should not be illustrated.
    • If columns of projected values are not allowed with these assumed improvements, then you could still allow a description by the company of what and why improvements may occur.  (p352)

--  Chris Kite

 1994-1, NAIC Proceedings 

  • Historically, illustrated dividends were understated in sales illustrations and we were spoiled, but in recent years, that doesn't seem to be the case.
    • Our task force feels that there must be more precise definitions and stricter rules governing the definitions of supportability and current experience.
    • We took our concerns to the ASB public hearing on March 3, 1993 in Chicago.
    • We asked the ASB to review the current actuarial practices and help define and strengthen the definitions and rules regarding supportability of sales illustrations.
    • We were expressing our concern not just for the existing downward interest rate market, but for all economic cycles over a long period of time.

--  Robert Nelson (NAIFA / NALU)

1993 - SOA - Sales Illustrations - We Can't Life With Them, But We Can't Live Without Them!, Society of Actuaries - 28p

  • With regard to nonguaranteed elements at this point, the working group's position is to show somebody the guaranteed interest rate, which is guaranteed for all years.
    • You show them the first-year guaranteed interest rate, which generally is higher, and you can show them the interest rate that you would be paying in renewal years, as long as that interest rate is supportable.
  • You might ask what does it mean for it to be supportable?
    • We don't know yet.
    • There's an Academy group that's working on that.
  • Is supportable going to mean the same thing that supportable means in the life insurance model?
    • I don't know.
    • Probably something analogous to that but I don't know.
  • You can show a nonguaranteed element, that is the interest rate that we would pay today in renewal years, without showing an illustration, but if you want to show any other nonguaranteed element, then you have to show an illustration, and generally the illustration will follow the same guidelines as for the life model, only it's going to be simplified, and I hope we can find a way so that we won't end up with 15-20 page documents as we have with the life model. 

-- Tom Foley, Insurance Commission

1998 - SOA - Up-to-the-Minute News Flash on Regulatory Developments - 18p

  • These are examples of a transgression of the definition, as I've defined it.
  • The Academy committee reporting on the work about annuity illustrations lists as the first supportability objective, "Ensure that information provided by the company creates consumer expectations for nonguaranteed elements that are not unreasonable." - <WishList>
    • Now, I could have stated that better: "As does not create unreasonable expectations."
    • But better still, I'm not sure that illustrations should be creating any expectations other than that there will be something above the guarantee.
    • I don't believe an illustration should create any expectation because that will only get you in trouble, and it detracts from the understanding of what an illustration is and is not.
      • An illustration does not show what you can expect.
  • This is the corker, I think.
  • There was a recent article in Contingency called, "Was Leo Tolstoy an illustration actuary?" - <WishList>
    • It was very disappointing to me, although I liked the catchy title.
  • It speaks of an illustration as a picture of how a policy is expected to perform over the next several years.
    • It talks of a ledger predicting miraculous performance.
    • It speaks of assumptions having no relation to the real world.
  • All this in an actuarial journal. I have written to the editor.  --- I haven't heard from him yet.
    • These statements are at odds with our simple definition, and only add to the confusion abounding on the subject.

--  Hal Phillips, aka William H. Phillips - a senior life actuary with the California Department of Insurance

1998 - SOA - Current Issues in Sales Illustrations, Society of Actuaries - 26p