1993 0525 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?

  • 1993 0525 -  GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?
    • [PDF-354p-GooglePlay, No Video]->Not on govinfo.gov - R
    • Senate - Committee on The Judiciary - Subcommittee on Antitrust, Monopolies and Business Rights
  • (p1) - Senator METZENBAUM.
    • Almost 1 year ago, I chaired a hearing in this room looking at sales practices in the life insurance industry.
    • That hearing did not make the network news and was not broadcast by C-SPAN.
    • Put bluntly, it was a pretty dull hearing.
  • David Lyons - Iowa Insurance Commissioner, On Behalf of the National Association of Insurance Commissioners
  • Mark Rakich - California Department of Insurance, on behalf of Commissioner Garamendi from California
  • Jerry Keating - John Hancock Mutual Life Insurance Co.
  • Gloria Darleen Newberry - Consumer
  • (p196) - Overwhelming numbers of Life Insurance buyers do not even understand which, if any, elements of their sales illustrations are guaranteed.
  • For instance, as we demonstrated in our hearing, an Alexander Hamilton illustration did not make it clear that there was no guaranteed death benefit after 12 years.

--  Senator Howard Metzenbaum, letter to the NAIC

  • (p4) - Senator Howard Metzenbaum:
    • So, two national organizations of agents publicly acknowledged to the NAIC the problems we uncovered in last year's hearing.
      • But they, like the companies they represent, are unwilling to face the pubic.
    • In addition, the ACLI, the national trade association for life insurance companies, refused to testify last year and refused to come today.
      • I consider their actions reprehensible and irresponsible.
    • The refusal of the companies and the agents to participate in today's hearing leads me to think they have something to hide.
    • This Senator thinks they do have something to hide. I think the life insurance industry is really not willing to stand behind its product.
    • I do not think they are that proud of what they are doing, and that is the reason they are not here today.
    • And I think it is fair to say that the people who bought cash value policies since the early 1980's have already had or are about to have rude awakenings.
      • Soon they will realize projections made when they bought their policies do not have a snowball's chance in August of coming true.
    • Today we will see what can be done about it.
  • The agent said that Universal Life policy premiums would stay the same, but I came to realize that this is not true of our policies.
  • ...what bothers me is that I am afraid that this same misleading information may be the basis of my children's and grandchildren's ... planning...

--  Statement of Gloria Darleen Newberry

1993 0525 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance? - [PDF-354p-GooglePlay, No Video]->Not on govinfo.gov 

  • David Lyons - Iowa Insurance Commissioner, On Behalf of the National Association of Insurance Commissioners
    • (p33) - Statement of David Lyons:  I also serve, as you noted, as the chairman of the NAIC's Life Insurance Committee, which has jurisdiction over several insurance consumer disclosure issues including life policy illustrations, which has been the subject of a lot of discussion this morning.
    • (p33) - Access to information is the true key.
      • The NAIC has long been working to improve the availability and quality of information consumers receive.
    • (p34) - A buyer's guide was added in 1976.
      • Thirty-two States now require that it be provided to consumers during the sale of insurance.
      • In 1983, it was upgraded to include information on universal life and other new developments in the insurance world.
      • As new products were introduced to the marketplace, new needs for consumer protection arose.
        • So in June 1989, our life insurance committee adopted disclosure statements to help consumers compare different types of interest-sensitive products.
        • The forms were then tested with consumers, and revisions were made in December 1989 based upon that consumer input.
        • These disclosure forms were then added to the NAIC universal life model  regulation.
    • (p34) - As with all areas of insurance regulation, however, our focus is not on what we did yesterday; it is on what we will do tomorrow.
    • (p34) - In addition, I hope this hearing itself sheds light, a spotlight, on the issue to encourage the States to focus greater attention on adopting the consumer protection measures which have already been developed by the NAIC.
    • (p34) - Giving consumers clear, relevant, and complete information plays an important role in any market, particularly in one as complex as insurance, and it is extra complex in the area of life insurance.
      • The NAIC has long recognized this fact, and I think our record reveals our commitment to consumer information.
  • Mark Rakich, California Department of Insurance
    • (p32) - Metzenbaum: ...here on behalf of Commissioner Garamendi from California, and I do not think there is any commissioner in the country who is trying harder to protect the policyholders of this country.
    • (p170- ) Statement of Mark Rakich

1993 0525 -  GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance? - [PDF-354p]

(p15) - Jerry Keating - I began my career with John Hancock Mutual Life Insurance Co. in 1965. 

  • From 1982 to June 12, 1990, I was the staff manager in the Sioux City, LA, office.
  • My job during this period was to office train and field train new and veteran agents.

(p15) - Mr. Keating: I am still employed by the John Hancock ... I would like to know exactly, what guarantees do I have from this committee that I will not be harassed?

  • (p15) - Senator Metzenbaum. We cannot guarantee any position.
    • But I would guess that my colleague here from South Carolina and this Senator and I think every member of this Senate would be so outraged at John Hancock if they took any action against you for testifying before a Senate committee that they would find our wrath unlimited and that we would take every step possible to protect your position.
    • I think the Senator from South Carolina, with whom I disagree on some issues, but I think he would agree that no witness ought to ever be penalized for appearing before a Senate committee.
      • And this gentleman is asking whether or not—what guarantee does he have that he will not be terminated from his employment just by reason of his appearing here. Do I reflect the Senator's view as well?
  • (p15) - Senator Thurmond. Yes, you do.
  • (p15) - Senator Metzenbaum. Thank you. Mr. Keating, please proceed,

(p16) - Mr. Keating: I began my career with John Hancock Mutual Life Insurance Co.in 1965. 

  • From 1982 to June 12, 1990, I was the staff manager in the Sioux City, LA, office.
  • During the first years of my employment, everything that I heard from the John Hancock home office turned out to be true, correct, just like we were told.

Sometime in the early 1980's, we began selling a product called variable life insurance.

  • Every day we received information on the home office computer with glowing account facts on how much these accounts were earning—25, 30, and 35 percent interest.
  • This information was shown to new prospects to get them to buy variable life insurance.
  • Also, these contracts required no premiums after 5 years.
  • We sold these variable life policies by the hundreds.
  • In fact, our Sioux City office was one of the leaders in the company.

(p17) - Several times the other people in our office and I went to meetings where we were told nothing about the risks involved in buying this product, just how much the insured would make.

  • I personally wrote two VLI contracts on Ivan Ammar in Randolf, NE.
    • He is the minister at the Lutheran Church there.
      • He bought these policies for his retirement.
    • The computer sheets showing the amount of his retirement benefits were fantastic.
    • He paid for years, but had to drop his policies when he found out he would have to continue paying premiums after retirement.
  • ...another. Jeanette Keating, my wife, another. Holly Keating, my daughter, another. Jerry Eike, my son-in-law, another. Terry Eike, my daughter, another. Larry Eike, Jerry's brother, another.

(p18) - The training we received was sales training only.

  • The home office people who came to the Sioux City, lA, office said: Don't try to become a Ph.D. in variable life insurance; just learn enough to sell it and go.
  • This is what they told the whole office, and this was how I trained any new men that I hired:
    • Just sell it; do not worry about it.
  • Just before I got sick in 1990, the company seemed to change.
    • They started telling us about the risks.

This statement is only the tip of the problem.

  • There are hundred and hundreds more.
  • And, Senator Metzenbaum, I would like to tell you, sir, if you do not get the Government to do something about this, you haven't seen nothing yet. 

What nobody seems to want to tell people is that no one knows exactly how long it will take to build up enough cash value to pay the remaining premiums.

  • They do not know, so they guess.
  • And as long as they are making up facts, they make them sound real good.

Companies say: After 5 years, there will be enough in your cash value for you to stop paying premiums forever, or your money will earn at 10 percent, or your premium will never be more than $7.00
per thousand dollars of insurance.

  • And very quietly, maybe hidden in a footnote or in a gobbledygook phrase, they say: Well, we are really only guessing.
  • They never say: We do not have any idea how much you will eventually have to pay for policyholder.  (p3)

-- Senator Howard Metzenbaum

1993 0525 -  GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance? - [PDF-354p-GooglePlay, No Video] - [BonkNote]