Walter Miller

  • We continue to put out these apples vs. oranges illustrations.
    • We're misleading our policyholders.
    • We are providing the ammunition to make replacements of inforce policies with new coverage that is not in the policyowner's best interest.

--  Walter Miller

1983 - SOA - Surplus Distribution and Allocation for New and Inforce Policies - 22p

  • Walter Miller, vice president of the Prudential Insurance Company of America, said: "Illustrations are not predictions.
    • But they are better than no illustration at all in explaining how policies work."

1993 1030 - NYT - Insurance; Confusion Over Policies Leads to Talk of Change, by Leonard Sloane - [link]

  • 1969 - Analysis of Actuarial Theory for Variable Life Insurance, Walter Miller - <WishList>
  • 1975 - AP (ARIA) - Variable Life Insurance Product Design, Walter Miller - 17p
  • The educational task is huge, and it's not just with the customers; it's with our agents also.
    • I would say to all of you that if you think that you don't have any customers or any agents who fail to understand what a nonguaranteed illustration really means, you're kidding yourself.   

--  Walter Miller, Prudential

1991 - SOA - Illustrations, Society of Actuaries - 20p

  • 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 - SOA - Equity for Existing Policyowners, Society of Actuaries - 24p

  •  That was one of the recommendations made by the Advisory Committee that Shane and I worked on almost ten years ago, and it joined most of our other recommendations in being trashed by the then NAIC working group.
    • So things are coming around.
    • [Bonk: Shane = Shane Chalke]

--   Walter Miller

⇒  Walter Miller, now an independent consultant, retired as the senior vice president and chief actuary of Prudential Preferred Financial Services. He is a former chairperson of the Actuarial Standards Board (ASB) and was a member of its life Committee that originally drafted the ASB's standard on illustrations. He is a member of the technical resource advisors to the NAIC's working group drafting the new model illustration regulation, and he is the former chairperson of an Advisory Committee on Life Nonforfeiture.

1995 - SOA - Current Developments Surrounding Regulations and Standards of Life and Annuity Products, Society of Actuaries - 18p

  • 1993 - The Problem With Sales Illustrations: Why it Exists and How It Should Be Addressed, by Walter N. Miller, Journal of the American Society of CLU & ChFC; Bryn Mawr Vol. 47, Iss. 3, (May 1993): 64. - <WishList>
    • THE ILLUSTRATION IS THE PRODUCT (TIITP)
    • [Excerpt] - The problem, although sometimes intense, has been evident for only a few years since external events have forced companies to make their dividends and other nonguaranteed pricing elements (e.g., interest crediting rates) less favorable. It is appealing but incorrect to blame the problem totally on companies that have adopted over-aggressive bases for their illustrations.
    • Such companies would have no reason to do this if not for the fact that many agents, clients, prospects and other advisers are afflicted with The Illustration Is The Product (TIITP) syndrome. Under this syndrome, illustrations take on a life of their own. There is little understanding that because bases for illustrations vary widely, it is virtually impossible to use illustrations alone to produce meaningful comparisons of policies sold by different companies.
    • While there is no one magical solution to the problem, some promising initiatives are under way and more can be done, mostly in the areas of massive education and better disclosure and illustration structure. Some regulators threaten to address the problem through prohibition of various practices, but this route is seldom, if ever, in the best interests of the public and, in any event, it is not likely to be effective in the long run.
    • Sales illustrations have existed for many years, and computer-prepared illustrations, tailored to the specific policy under discussion, became widely used in the seventies. While the format of some of these illustrations, such as those geared to minimum deposit approaches, did cause problems, there were relatively few problems overall until the early eighties.
    • Until then, the industry and its customers enjoyed almost 30 golden years--years when (except for an interest rate and inflationary spike at the end of the period) interest rates gradually and predictably improved, mortality rates gradually and predictably became lower, and expenses were easily held under control (or such was the perception).
    • Virtually every mutual company had its own version of what securities people call a mountain chart. Typically, it was a comparison of dividends actually paid on a policy issued 10, 20, or 30 years ago and those illustrated when the policy was originally bought. Actual dividends were always significantly higher than original illustrations. Despite the ever-present "not guaranteed" caveat, it was easy to believe that what had happened in the...
  • 1995 - SOA - Current Developments Surrounding Regulations and Standards of Life and Annuity Products, Society of Actuaries - 18p
    • James D. ATKINS: I'd like to start out by posing a question and that is, what is the impetus behind introducing this illustration regulation? Why are we doing this?
    • Robert WILCOX (NAIC - Chairman of the Life Disclosure Working Group - Utah Insurance Commissioner):  Whatever we did to illustrate those contracts when they were sold, the policyholders did not understand the contingent nature of that vanish. That's the underlying reason we got into this.
    • MR. ATKINS: You mean just because they didn't understand the vanishing premium illustration we have all this regulation being imposed?
    • MR. WILCOX: If you try to get down to the catalyst that made it turn the comer, that's probably true.
    • Walter MILLER: Perhaps that was the catalyst, but I have a somewhat different point of view as to what triggered all this.
      • In addition to the widely publicized sets of problems that had to do with the vanishing premium illustrations, much of that had to do not so much with the illustration, but how the illustration was explained, if at all. I mean that's a somewhat different animal.
      • There are many industry people, however, who feel that for better or worse, there is a perception among many regulators that too many companies are being too aggressive in the bases underlying their illustrations and we need to do something about that.
        • I think there are several new model regulations that your group is developing and there's obviously some proposed actuarial standard of practice that addressed this point.
    • MR. WILCOX: I think you're right, Walter, in a significant respect.
      • The fact is that a minority would be inclined to make those overly aggressive assumptions and produce unsupportable illustrations, but every time one company would take that stand and use assumptions for the illustration that don't make sense, there's another company that competes with them and feels compelled to play in the same ball park and then another company that competes with them.
      • In the absence of regulation on those who would be most aggressive, the problem grows, but your point is well taken.
    • MR. ATKINS: Does anybody think the market could take care of these excesses on its own?
    • MR. MILLER: It demonstratively hasn't.
      • I published an article in a CLU journal several years ago where I wrote about what I call "The Illustration Is The Product," a syndrome that unfortunately pervades our industry. To agents, potential customers, their advisors, and some regulators, the illustration is the product. If this illustration looks better than that illustration, then this policy is a better policy than that policy and that means this company is better than that company.
  • 1995 - SOA - Practical Illustrations and Nonforfeiture Values, Society of Actuaries - 14p
    • KEVIN A. MARTI: What I'm thinking about in particular is, Universal Life companies, back in the early 1980s, were illustrating interest rates that we all knew were not realistic long term.
  • 1986-1, NAIC Proceedings - Yield Index Advisory Committee -
    • We wanted to take this opportunity to note and discuss some of the more important "real world" items which must be considered.
    • ....did some work based on then current garden variety whole life policies.
    • .................
    • When this approach was developed, the overwhelming majority of individual life insurance plans in the market were fixed premium, guaranteed cost or traditional participating designs (whole life, limited payment life, endowment, etc.).
    • Neither universal life nor any of the other proliferation of product types we see today were on the horizon then.
    • Rearend loads and variants thereof didn't exist, nor did indeterminate premium or other non-guaranteed pricing approaches.
    • We don't think that this type of approach, depending on comparisons of a particular statistical measure vs. "test limits" determined by studies of"normal" plans and pricing patterns in the industry, is practical now and looking ahead.
    • For these reasons, we hope that the Life Insurance Cost Disclosure Task Force will accept our non action on this portion of our charge and agree with our belief that further work along these lines would not be productive.