1985 - FTC - Report - Life Insurance Products and Consumer Information

  • 1985 11 - FTC - Report - Life Insurance Products And Consumer Information, by Michael P. Lynch and Robert J. Mackay, Staff Report Bureau of Economics, Federal Trade Commission  ---  [BonkNote]  ---  [PDF-317p] 
  • (p36) - See, for example, the statement of John Filer, then president of the Aetna Life Insurance Company, that a whole life policy is not partially insurance and partially savings. It is wholly insurance."
    • Hearings on FTC Life Insurance Cost Disclosure Report (1979).
  • (p36) - Also see the American Council on Life Insurance response to the FTC staff's use of the term 'savings through life insurance' in Ibid 133-134, and the distinction made therein between savings in a macroeconomic sense and the benefits contained in a whole life policy
  • (p96) - Survey evidence has consistently shown that most people do not shop at all for life insurance; they deal with only one agent. See Chapter IX.
  • (p198) - Commissions are usually a large (35-85%) percentage of the '"target" or "Minimum Allowable Premium (MAP), but are much smaller on premium dollars generated in excess of the target premium. 
  • (p281) - 1983 Evidence Concerning the Adequacy of Information
    • We have analyzed samples of:
      • annual renewable term policies (Chapter IV),
      • traditional whole life policies (Chapter V) and the
      • newly introduced universal life policies (Chapter VI)
  • (p293) - The inability to evaluate policy performance in the normal course of owning the policy seems to be fundamental to any theory of informational market failure in this market.
    • The survey evidence cited above suggests that policyholders do not understand how to evaluate the dual savings/protection pay in advance life insurance contract.
    • They neither know nor realize the economic importance of cash values, dividends and the policy loan interest rate. 
    • None of the usual market institutions that help buyers cope with complexity, expert "agency" 'or firm reputation, will work unless buyers can and, with some frequency do, evaluate the product and the services supplied by sales agents.