CEJ - Center for Economic Justice

  • Birny Birnbaum (Center for Economic Justice—CEJ) said... the current structure of the illustration presents the IUL policy as an investment. 6-836

2019-1, NAIC Proceedings

  • 2019 - NAIC (LATF) - Conference Call
    • Birny Birnbaum (Center for Economic Justice—CEJ) said AG 49 was developed to address the issue of companies using unrealistic crediting rates and providing less misleading information to consumers.
      • He said despite using lower crediting rates and higher policy fees, the illustrations are producing significantly higher accumulation values.
      • He said the bonuses and indexed crediting multipliers by creating illustrations appear to be perpetual cash machines.
      • He said the idea that more disclosures will address the problem is incorrect.
      • He noted that disclosure is not an actuarial issue and that consumer testing is essential.
      • He recommended going back to the Life Insurance and Annuities (A) Committee to make them aware that the scope of the issue is broader than initially thought.
  • 2019 0407 (Typo - Says 2018) - Life Insurance and Annuities (A) Committee (6-2)
    • e. Heard Comments
      • Birny Birnbaum (Center for Economic Justice—CEJ) said the work of the various disclosure and information workstreams should be coordinated to ensure support for the overall goal of the Retirement Security Initiative, to preserve and enhance consumer assets for lifetime income and well-being. He said the disclosure and information workstreams should ensure consumers have the relevant information, at the right time, and in a format that empowers the consumer to make timely and informed decisions about the purchase and use of life insurance and annuity products. He said this is important not only for consumer protection, but also to avoid the periodic scandals in the life insurance industry regarding improper or unsuitable sales.
      • Mr. Birnbaum requested that the Committee review the timing of delivery of the policy overview document being developed by the Life Insurance Illustration Issues (A) Working Group. He said the delivery of the policy overview document and the Buyer’s Guide should occur prior to delivery of the policy. He said this is an example of getting the relevant information (i.e., tools for comparative shopping) to the consumer at the right time (i.e., prior to purchase) and in the right format (i.e., a consumer-tested, brief overview that facilitates understanding of the key features of the product and permits comparative shopping through consistency of presentation for similar products across insurers). He said the current requirement states that delivery of the policy overview and a Buyer’s Guide can be as late as delivery of the policy, which contradicts the purpose of Model #580.
      • Mr. Birnbaum also requested that the Committee direct the IUL Illustration (A) Subgroup under the Life Actuarial (A) Task Force to address immediate repair needs of Actuarial Guideline XLIX—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest (AG 49) to stop the “gaming” of AG 49 through product design intended solely for gaming illustrations; i.e., the use of multipliers and policy loan features. He asked the Committee to provide guidance to the Subgroup, because there are products being sold today with grossly misleading illustrations and bad consequences for consumers and fair competition. He said companies that do not want to game illustrations are at a competitive disadvantage to those willing to do so.
      • Mr. Birnbaum also asked the Committee to open Model #582 in order to revise the basic approach to illustrations. He said he would like for illustrations to:
        • 1) better present the value of the product as insurance;
        • 2) better educate consumers as to the risks associated with volatility of returns;
        • 3) move toward convergence with the illustration regime for annuities; and
        • 4) use consumer testing to help ensure the illustrations are effective at empowering consumers on critical issues