<Bonk:  I wonder if the members of the Current / Recent NAIC Working Groups have different perceptions / "mental maps" of Life Insurance Products / System.  --- Translation:   Often, I don't think you guys are talking about the same things.

  • If the Working Group members, including Industry and Interested Parties, have different perceptions then is it possible / probable that Agents, Consumers and others do as well?>

Also, because most people presume that if you pay your premium continuously, your policy will remain in effect, quite a few people had a hard time understanding how or why the policy would terminate in policy year 31.

This was simply foreign to their way of thinking.

1990-1A - NAIC Proceedings - NAIC / LIMRA Focus Group - Universal Life Disclosure Form Test Market Results - 10p

  • <Bonk:  Could "Product Performance" also be interpreted as "Plan of Insurance" or "Coverage Period" "Duration of Coverage"?
    • Guaranteed, Mid-point or Current">

"...how all products are explained to consumers."  <Bonk:  This Focus is on Universal Life>

2016/4/3 - NAIC Life Insurance Illustrations Issues Working Group Conference Call

During the IUL Illustrations (A) Subgroup’s discussions, interested parties expressed a need to take a broader look at how all products are explained to consumers.

<Bonk:  Do Working Group members have different perceptions / "mental maps" of what a "Universal Life Insurance" policy is?" Do Others?>

  • Cash Value, Permanent, Whole Life, Dynamic
  • Cash Value - Life Insurance Buyer's Guide - Since 1996
  • Permanent -
  • Whole Life
    • Comment [BJC2]: Permanent insurance is a term used only by the industry – not by consumer educators.

      We would prefer – Life insurance comes in two basic types: Term and whole life (also referred to as permanent insurance)

      No Date. Assuming approximately 11/15/2017

      <Bonk:  I'm assuming Professor Cude is categorizing Universal Life Insurance Policies as "Whole Life."

  • Dynamic
    • "...completely Dynamic services and policy opportunities for their customers to purchase and to elect a variety of options."
      2019/11/09- LIIIWG CC - Michael Lovendusky, ACLI

    • "Dynamic Products" are products with premiums and benefits <Plan of Insurance> that can fluctuate from month to month, depending on the premiums the policyholder pays, the withdrawals the policyholder makes, the investment returns credited to the policy, and the mortality and expense charges deducted from the policy.

      Some common names for dynamic products include universal life....

      2000, - Life Insurance Products and Finance, page 288D.B. Atkinson and J.W. Dallas

C. Universal Life

  • The agent and prospect have the ability to choose almost any pattern of benefits <Plan of Insurance> and premiums.
  • No longer is the sale limited to one of several fixed plans of insurance from a ratebook.
  • Each one is different.
  • page 151

1991-1992 -  Final Report of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries - 142p

It should be noted that the suggested design can provide any conceivable pattern of premium payment and coverage <Coverage Period> and thus can replace all other products <Plans of Insurance>.

Hence, the Universal Life Insurance Policy.

-- James C. H. Anderson

1975 - The Universal Life Insurance Policy, Society of Actuaries

-JESSE M. SCHWARTZ: Why are people so reluctant to call Total Life <Universal Life> permanent insurance?

-Mr. MARGOLIN: Universal Life type products are, I suppose, permanent. It is a semantic question whether they are permanent life or not, but clearly they are not the traditional cash value products as we have known ...


Legal Case - 2010 - Maloof v John Hancock - Alabama Supreme Court Opinion - 39p

  • After receiving these notices, John contacted Glasgow <Agent>... to inquire why his policies would be terminating, even though he had timely paid the premiums on the policies for approximately 18 years.
  • "The gravamen of their complaint was that Glasgow had  misrepresented to them ....that the policies would provide
    benefits that would be available to pay any estate taxes due
    upon John's death ... in fact, based upon the projected insurance <Plan of Insurance> and interest rates at the time of sale, those policies would likely lapse when John was approximately 78 years old <Plan of Insurance - x-Year Term> unless the Maloofs at some point substantially increased the amount of the premiums they paid."
  • However, the Maloofs could not have reasonably relied on the alleged misrepresentations concerning the availability <Plan of Insurance> of benefits from those policies to pay estate taxes due upon John's death in light of the clear language of the insurance policies. <Reasonable Person / Duty to Read>
  • The undisputed facts indicate that Glasgow did in fact procure two universal life-insurance policies for the Maloofs and that, had the Maloofs continued to pay sufficient premiums on those policies, they would have remained in effect <Plan of Insurance> and the benefits <Death Benefit $> of those policies would have been available for any purpose after John died.

  • ...which allegedly deceptive sales practices used by Manulife between 1982 and 1993 were challenged; Glasgow <Agent>  subsequently joined in that motion.

    Maloof v. John Hancock Life Ins. Co.
    60 So. 3d 263 - Ala: Supreme Court, 2010 - Google Scholar

Vogt v State Farm 2017-Mrs-Vogt-Depo-Not-Whole Life-as-they expected

Recommendation 5:

  • If appropriate, the paragraph might add something like:
  • "The amount of premium you have elected to pay, $300 per year, is however insufficient to keep the policy in force to age 95 at the guaranteed minimum interest rate of 4%; the policy would terminate at age 66.
    • <Plan of Insurance>
      • x-Year Term on a Guaranteed Basis
      • x-Year Term on a Current Basis>
  • To be sure that the policy continues to age 95, even at the minimum interest rate of 4%, you would have to pay  $644.30 per year <Guaranteed Maturity Premium> for the entire life of the policy." <Plan of Insurance - ???? - See Legal Case Faye v Aetna>
  • (page 466) 

1990-1A - NAIC Proceedings - NAIC / LIMRA Focus Group - Universal Life Disclosure Form Test Market Results - 10p

<Bonk:  Compare and Contrast versions of the NAIC Life Insurance Buyer's Guide>

  • 1984 - NAIC Life Insurance Buyer's Guide <written primarily by the ACLI>
    • 1984 NAIC Life Insurance Buyer's Guide version - Universal Life under "Combinations and Variations"/ "Special Plans"
      • Other policies <Universal Life> may have special features which allow flexibility as to premiums and coverage Some let you choose the death benefit you want and the premium amount you can pay.  The kind of insurance and coverage period are determined by these choices. 

Defining the principal elements of a policy as amount of insurance,
gross premium, and plan of insurance, an original issue involves election of any two of the elements and calculation of the third.

Each change after issue involves a change elected for one element, either a change or continuation for a second element, and calculation of the third element.

  • 1996-Current  Life Insurance Buyer's Guide
    • (1996 written primarily by regulators and Consumer Representatives - Including Brenda Cude and Chris Kite)
    • Current NAIC Life Insurance Buyer's Guide, also "Cash Value" in versions after 1996.
      • In a universal life policy, you can choose a flexible premium payment pattern as long as you pay enough to keep your policy in force.

How do you think about Universal Life?  How do you think Consumers/ Agents think about it?

Choice A

Choice B

Choice C

2016/4/3, LIIIWG CC, NAIC Proceedings

Mr. Schwartzer reminded the Working Group that the Life Insurance Illustration Issues (A) Working Group came out of concerns raised when the Indexed Universal Life (IUL) Illustrations (A) Subgroup under the Life Actuarial (A) Task Force was working on guidance for IUL policy Illustrations that would result in consumers being better able to understand the product performance <Plan of Insurance> and interest variability of IUL products.

2016/5/17 - Life Insurance Illustrations Issues Working Group Conference Call - Assurity White Paper 

.....in particular, the impact consumer payment patterns have on the performance <Plan of Insurance> of the product.  

Mr. Wicka said the paper advocates for: 1) additional information to be provided to consumers regarding how the timing of their payments impacts the product; <Plan of Insurance> and 2) follow-up information to be provided to consumers at the time their payments go off-track so that consumers are aware of the impact to their policies <Plan of Insurance>

2017/11/6 - LIBGWG - NAIC Conference Call - American Academy of Actuaries

"Because NGEs <Non-Guaranteed Elements> are likely to change, the ongoing performance <Plan of Insurance> of products with NGEs should be reviewed periodically after purchase to assess the impact <Plan of Insurance> of any NGE changes and consider actions that policyholders may wish to take (e.g., adjust premium payments or death benefits)."

The purpose of these illustration requirements is to ensure that both the guaranteed and nonguaranteed performance <"Plan of Insurance">  of the policy are disclosed to the buyer.

1991-1992 -  Final Report of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries - 142p

"The actual-versus-expected performance <Plan of Insurance> for some UL policies led to class-action lawsuits that have caused a substantial amount of negative attention to be focused on cash-value life insurance in the illustration of projected values <Plan of Insurance>

1997The Next Generation Universal Life, Society of Actuaries

A life insurance policy illustration is a mathematical calculation of benefits <Product Performance / Plan of Insurance> and values over time under specific, simplified, and generally static assumptions. (p141)


Section I

Finally, almost nobody understood the difference between a flexible premium and fixed premium policy.

As indicated previously, this confusion was enhanced by the fact that the charts showed a level premium which they interpreted as being a fixed premium.

1990-1A NAIC Proceedings - NAIC LIMRA Focus Group - Universal Life Disclosure Form Results - 10p

Universal Life

Unlike adjustable life, where a current plan <Plan of Insurance> is defined, but is subject to change, a universal life policy at any time has only a "minimum" <Plan of Insurance> and a "maximum' <Plan of Insurance>...

The adoption in 1983 of the Model Regulation for Universal Life provided recognition that these policies could be configured as whole life policies <Plan of Insurance>.

1989-1 (p662), NAIC Proceedings

Video: Exam MLC Problem 297 "Learning Objective "Universal Life." Question: Calculate the Level Annual Premium that results in an account value of 0 at the end of the 20th year." - UW- Madison / SOA - <Bonk -Goal: use a Universal Life policy to design a 20-year term policy.>

<Bonk:  Could "Product Performance" also be interpreted as the <Plan of Insurance> or "Coverage Period" "Duration of Coverage"?  Guaranteed, Mid-point or Current

"Plan of Insurance" examples: 5-year term, 20-year term, Traditional Whole Life Plan,

  • Could the "Product Performance" or "Plan of Insurance" be tracked through in-force illustrations or Annual Reports?
  • This would work if Agents and Consumers knew there was such a thing as "Performance" / "Plan of Insurance" and looked at it.
  • What percent of Consumers know about "Performance" / "Plan of Insurance?"
  • What percent of Agents know about "Performance" / "Plan of Insurance?"
  • What percent of Regulators know about "Performance" / "Plan of Insurance?"

We have mentioned several times that the function of the account value is to determine future benefits <Plan of Insurance>.


<Bonk:  What percent of Universal Life Insurance Buyer's would you guess think they bought  a Fixed Premium Ordinary Whole Life Insurance Policy instead of a Flexible Premium Universal Life Policy? 1-24%, 25-49%, 50-74% or 75-100%?

  • What percent of Universal Life Insurance Buyer's are paying the __________ Premium and what, if anything, can be assumed about "Plan of Insurance" / "Product Performance," "Length of the Coverage Period" based on Guaranteed vs Current Assumptions? :
    • Guaranteed Maturity Premium,  ____% Paying,   _____ Guaranteed Plan, ______ Current Plan 
    • Guideline Level Premium,  ____% Paying,   _____ Guaranteed Plan, ______ Current Plan 
    • Target Premium,  ____% Paying,   _____ Guaranteed Plan, ______ Current Plan 
    • Minimum Premium,  ____% Paying,   _____ Guaranteed Plan, ______ Current Plan 

The guaranteed maturity premium for flexible premium universal life insurance policies shall be that level gross premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid, which will mature the policy <Plan of Insurance> on the latest maturity date, if any, permitted under the policy (otherwise at the highest age in the valuation mortality table), for an amount which is in accordance with the policy structure. (page 3)

Most companies encourage a premium level which will provide lifetime insurance protection. (Page 5)

Universal Life Model Regulation (MDL-585)

  • In our Universal Life products, we need to find that critical point, or what is as important, what is the best level of premium relative to the target premium.
    • You don't want all target premiums.
    • In fact, the lower the premium is, the closer to the minimum premium, the happier we are.
    • How do we communicate that to our agency people?

      --  RICHARD SCHWARTZ, (responsible for the product marketing function for the agency distribution systems for the Sun Life Group of America)


Legal Case


The complaint set forth a litany of alleged facts misrepresented or concealed from policyholders, including,..... (d) Farmers encouraged setting the premium for FFUL policies no higher than a "target" rate, by its commission structure; however, policies would lapse when only the target premium was paid;

 Plaintiffs also noted that Farmers's computerized rate-setting program would inform agents of the minimum and target premiums, thus suggesting that the premium be set between these two numbers, and no higher.

Plaintiffs' argument regarding the underfunding of the FUL policies was more direct. As Farmers set the premiums on these policies, it was solely within Farmers's control to establish initial premiums high enough to accrue sufficient interest so that the policies would be on track to last until maturity <Plan of Insurance>.  Farmers set the premiums based on a presumed 11.5 percent interest rate, which plaintiffs argued was unrealistically high, and would result in the policies lapsing <Plan of Insurance>.

... most products have a target premium of some sort for each policy that could be and often is used as a future premium assumption.

2016 - A Practical Approach to an Enhanced Premium Persistency Assumption,  Ying Zhao and Nick Komissarov, Society of Actuaries


Legal Case

Example:   vogt-v-state-farm/

Planned Premium: $1,800 per year

Guideline Level Premium: $4,379 per year

< Bonk?:  Planned Premium $1,800 per year

Guaranteed Plan _______  x-Year Term

Current Plan       ________ x-year Term

To be sure that the policy continues to age ___, even at the minimum interest rate of 4%, you would have to pay  $_____per year <Guaranteed Maturity Premium> for the entire life of the policy."

<Bonk???:   Does the Guideline Level Premium equal the Guaranteed Maturity Premium?  How is that determined?  How would anybody know??>

In short, Petitioner <ACLI> states, the
guideline annual premium equals the
annual premium necessary to keep the
policy ·in force for the life of the insured <Plan of Insurance>.

1983, Federal Register, Vol.48 No. 231.  November 30, 54043

I’ll talk about the complications.

  • The typical policy that runs into this issue is a policy with a 3% interest guarantee where the guideline level premium requires a 4% interest guarantee.
  • Therefore, under the policy guarantees, and by paying the guideline level premium year by year, the policy will expire at age 68 without value. It’ll be term to 68.
  • Your guideline level premium is less than the premium that would be theoretically required to mature the policy at age 100 or 95.
  • Therein lies the problem.

    1999Valuation Actuary Symposium - Session 44, Edward L. Robbins, Society of Actuaries

The revised Illustration, based upon Mr. Vogt’s substandard classification, indicated the policy would lapse at guaranteed rates during policy year 3 <Plan of Insurance - 3-year Term>, when Mr. Vogt was 57 years old, and at non-guaranteed rates during policy year 14 <Plan of Insurance - 14- year Term>, when Mr. Vogt was 68 years old. (ECF No. 114-3 at 5.)

2000/10/5 - Annual Report - Continued planned payments of $150.00 each month will provide coverage until:

  • November 5, 2005, based on guaranteed rates - <Plan of Insurance - 5-year Term> 
  • July 5, 2013, based on current rates - <Plan of Insurance - 14-year Term>

2004/10/5 - Annual Report - Continued planned payments of $150.00 each month will provide coverage until:

  • June 5, 2009, based on guaranteed rates - <Plan of Insurance - 5-year Term>
  • October 5, 2014, based on current rates - <Plan of Insurance - 10-year Term>

2012/10/8 - Annual Report - If continued planned payments of $150 .00 each month, your policy will provide coverage until:

  • October 5, 2013, when the Insured's age Is 67, based on guaranteed rates - <Plan of Insurance - 1-year Term>
  • July 5, 2014, when the lnsured's age Is 68, based on current rates - <Plan of Insurance - 2-year Term>
  • Mrs. Vogt’s testimony reveals that the Vogts’ actual grievance with the policy performance <Plan of Insurance> arose from their agent’s alleged oral representation in 1999 that if they paid a $150 premium each month, their $100,000 policy would remain in force and would never lapse. (Ex. A at 17:17-20:12.)
  • No such representation appears in the policy, and the policy itself and the illustration Mr. Vogt signed contradicts any such expectation.3
  • If such an oral representation was actually made by the agent – now deceased – it was unique to the Vogts.

    Case 2:16-cv-04170-NKL Document 186 Filed 01/19/18 Page 1 of 5

Vogt v State Farm 2017-Mrs-Vogt-Depo-Illustrations-Performance
2017 Vogt End of Coverage Graph Annual Report