1979 0710 and 1017 - GOV (Senate) - FTC Study of Life Insurance Cost Disclosure, Senator Cannon

  • 1979 0710 and 1017 - GOV (Senate) - FTC Study of Life Insurance Cost Disclosure, Senator Howard Cannon (D-NV) - [PDF-592p--- [BonkNote] 
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    • John H. Filer, Chairman of the Board, AETNA Life & Casualty
    • 1979 0711 - FTC GOV - Testimony of Michael Pertschuk, Chairman, Federal Trade Commission - 11p 
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  • <WishList> - (p188) -1977 08 - Best's Review - Moorhead, "Doomsday Just· Ahead for Life Insurance? Not Necessarily!" 10, 12 (August, 1977). 
    • 1979 0710 and 1017 - GOV (Senate) - FTC Study of Life Insurance Cost Disclosure, Senator Cannon - [PDF-592p]
  • (p9) - Statement Of Hon. Michael Pertschuk, Chairman, (FTC) Federal Trade Commission; Accompanied By Albert H. Kramer, Director, Bureau Of Consumer Protection; And Michael Lynch, Bureau Of Economics - C. Timing of disclosure
    • Finally, the Commission was concerned about the timing of the disclosure.
    • The Commission believes that this information is important and useful to the consumer.
    • Because the information is more detailed it may not be readily available to the agent during the sales presentation, but it can easily be provided with the policy, as is currently the practice of companies which comply with the NAIC model.
      • Our experience indicates that if cost disclosure is to be effective, it must take place before the purchase decision. Consumers are very unlikely to read and use a disclosure package provided after the transaction has been completed.
      • For this reason, we recommend that a buyer's guide be given at the beginning of the sales presentation and that a preliminary policy summary be given prior to the time prospective purchasers are provided an application for a policy.
      • The preliminary policy summary would contain the basic information concerning the policy, such as the policy type, premium, surrender index and the rate of return.
      • The proposed preliminary policy summary contains only those limited items of information essential to an informed purchase decision.Under the NAIC model regulation, consumers generally received the buyer's guide and policy summary only when the policy is actually delivered, often a week to 10 days after purchase.
      • It would not be impractical for agents to have all of the information needed to fill out the preliminary policy summary with them during the sales presentation.
      • However, we concur in the NAIC's recommendation that a full policy summary be delivered with the policy.
      • That summary contains more detailed information concerning the cash flow elements of the policy.
  • (p111) - The FTC commissioned three studies, two by Professor Jacoby of Purdue University and one by Professor Formisano of the University of Wisconsin.
    • The results of these studies helped improve the FTC's recommended disclosure system.
    • They were by no means suppressed, but rather were publicly released at the earliest possible date and have been disseminated widely.
    • All the studies are, in fact, summarized in the cost-disclosure report
      • the Formisano study on pages 150-163 of the text
      • and the much more technical Jacoby studies in a 27 page appendix.
  • (p131) - For cost comparison purposes, the natural unit price for insurance is dollars of Premium per thousand dollars of death benefit per year—adjusted as appropriate and cash surrender values.
    • (ACLI) American Council of Life Insurance, on The FTC Staff's Responses to Criticisms of the Report on Life Insurance Cost Disclosure
  • (p167) - 125 Reprinted in Moss Subcommittee Hearings, supra n. 4, at 409.
    • In testimony before the Moss Subcommittee, Mr. Julius Vogel, Vice President and Chief Actuary of Prudential Insurance Company, testifying on behalf of the ACLI, readily admitted that the industry has taken inconsistent positions on the timing of disclosure in initial sales and replacements.
      • Mr. SHAFFER (Subcommittee counsel): My obvious question is, isn't this inconsistent with your position on timing for the model solicitation rule?
      • Mr. VOGEL (ACLI / Prudential): Yes, it is.