Section 8. Disclosure Requirements

The American Council of Life Insurance (ACLI) presented a paper on cost disclosure (4p) for universal life products.

• It recommended disclosure of the difference between cost indexes based on the guaranteed and the currently illustrated premiums, death benefits, cash surrender values and endowment amounts.
• Further, the policy summary should include a statement on the point at which the policy will expire based on the policy guarantees and the anticipated premiums shown in summary.
• Basically, it summarized that universal life should be treated as a life insurance plan with a nonguaranteed cost element for cost disclosure purposes.

1982 Proc. I 395

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Commissioner Hager of the Universal & Other Plans (A) Task Force stated that there appeared to be disclosure problems with universal life plans and that the identification of these items should be placed on the Actuarial Task Force agenda.

• The members present agreed that the disclosure issues extended to variable life as well as universal life.
• The main concern was that an unsophisticated buyer purchased a policy and did not know what the coverages, benefits and limitations were.
• It was suggested that Sections 8 and 9(f) of the Universal Life Insurance Model Regulation needed considerable expansion.

It was suggested that disclosure requirements be placed in the illustrations section of the models as well as in the contract itself.

• Some of the items identified which should be disclosed:
  • (1) what is guaranteed versus what is not;
  • (2) adequate disclosure of the fact that a premium quoted will not support the contract for the whole life if the policy is a universal life policy;
  • (3) disclosure of the guaranteed surrender values on a flexible premium policy.

1988 Proc. II 566

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The Product Development (A) Task Force established a working group on identifying consumer disclosure issues to be chaired by Iowa and to include the states of California, Texas and Massachusetts.

• The disclosure issue would be coordinated with the Life Cost Disclosure Task Force.

1988 Proc. II 563

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The Consumer Disclosure Issues Working Group conducted a survey of the states to determine if regulatory problems existed with these products.

• The working group’s aim was to make these disclosures statements easier to understand and to get them into the hands of consumers early enough in the purchase process to aid in making a meaningful comparison.

The working group recommended that disclosures should be delivered at the time of application or no later than 15 days thereafter.

• If disclosure statements were not provided until the time of policy delivery, consumers would receive an additional five-day free-look period.
• The working group agreed to test-market these disclosure forms for readability.

1989 Proc. II 428

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An amendment to Section 8 of the model regulation was adopted by the Consumer Disclosure Issues Working Group
recommending changes to the NAIC Life Insurance Disclosure Model Regulation and the Universal Life Insurance Model Regulations, as well as the Supplemental Transmittal document, and was adopted by the parent committee and the Executive committee as recommended.

• This amendment added Appendix A – Disclosure Form to the model regulation.

1989 Proc. II 13, 23, 414, 429, 441-442

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The Consumer Disclosure Issues (A) Working Group approved the Policy Information For Applicant – Universal Life Policy for inclusion in Appendix A of the Model Regulation, which was adopted by the Product Development Task Force, and was adopted by the parent committee and the Executive committee as recommended.

1990 Proc. I 6, 27, 438, 450-451, 453-463

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The Life Disclosure Working Group adopted a revised Generally Recognized Expense Table (GRET), which was required by the Life Insurance Illustrations Model Regulation.

• The recommended effective date for the new GRET is Jan. 1, 2001.
• In addition, the working group adopted revisions to the Universal Life Insurance Model Regulation.
• This was the last of four models that the A Committee was charged to revise to be more compatible with the Life Insurance Illustrations Model Regulation.
• When the Optional Form of the Life Insurance Disclosure Model Regulation with Yield Index was adopted, the
  group recommended that each time the disclosure regulation was amended the alternative with the yield index should also be amended.
• When the disclosure regulation was amended, all references to indices were deleted.
• The working group clarified its intent with regard to the alternative with the yield index by voting to recommend its deletion from the list of official NAIC models laws.

2000 Proc. 3rd Quarter 88

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The model regulation was amended to eliminate the disclosure provisions of Section 8 and Appendix 10, and instead refer to the Life Insurance Illustrations Model Regulation.

2000 Proc. 3rd Quarter 13, 14, 88, 116, 119-135