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?
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    • 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
  • 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 con- sumers 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 lifeand 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 werethen tested with consumers, and revisions were made in December 1989 based upon that consumer input.
        • These disclosure forms werethen 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, onthe issue to encourage the States to focus greater attention onadopting the consumer protection measures which have alreadybeen developed by the NAIC.
    • (p34) - Giving consumers clear, relevant, and complete information playsan important role in any market, particularly in one as complex asinsurance, and it is extra complex in the area of life insurance. TheNAIC has long recognized this fact, and I think our record revealsour commitment to consumer information.
    • (p35-38) - Prepared Statement of David J. Lyons on Behalf of the National Association of Insurance Commissioners
      • Mr. Chairman, empowering consumers with clear, relevant, and complete infor-mation about purchase decisions can play an important role in any market.
        • This is particularly true with respect to a complex product like insurance.
      • The NAIC has long recognized this fact, and our record reveals our commitment to assuring thedisclosure of such information to consumers in a broad array of situations.
  • Mark Rakich, California Department of Insurance
    • (p32) - Metzenbaum: ...here on behalf of CommissionerGaramendi 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?

  • 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 protectyour 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?
  • Senator Thurmond. Yes, you do.
  • 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.