1978 12 - GOV (House - Report) - Life Insurance Marketing and Cost Disclosure Report: Together with Dissenting Views, John Moss (D-CA)

  • (p1) - SUMMARY
    • The principal purpose of this report is to evaluate the state regulation of life insurance marketing and cost disclosure.
    • The report results from a Subcommittee inquiry commenced during the Spring of 1978 and is based on the record developed during Subcommittee hearings held on August 7, 14, and 15, 1978.
    • The Subcommittee's interest in the marketing and regulation of life insurance arose for several reasons.
  • (p16) - Finally, we recommend that the NAIC, the FTC, or both, study how to encourage (a) the development of professional insurance consultants who would provide advice to consumers for a set fee, and
  • (p58) - One answer is that agents should charge a fee for their counsel, thus receiving compensation for their efforts whether or not a policy is sold. This approach, of course, is reflected in our "fee-for-advice" recommendation. Practically speaking, however, insurance advisors will be able to serve only those consumers who are out to "buy" insurance.
    • Consumers who must be "sold" insurance, that is, who buy only after being contacted and affirmatively encouraged by an agent, probably cannot be effectively served except by a commission-funded sales force.249 We observe that such consumers will likely value an agent's service, and are likely to place their business with a company that their agent serves,250 rather than with a company that has lower costs but no agents at all.251  In our view, the demise of the agency system is simply not a likely consequence of cost disclosure.
  • (p66) - Statement James Collins (R-TX) - Much misunderstanding of cash value life insurance has been caused when people have overlooked the true function of cash value in the life insurance policy and have insisted on comparing it to "investments" and "savings", whereas in fact cash values is primarily an incident of the reserve required by law to support the promise to pay at a later time, having its origin in the excess premiums charged in the early years of the contract to keep the premium level over the life of the policy.