2020/7/24 - NAIC Life Insurance Illustrations Working Group Conference Call - ACLI - Pat Reeder

-Idea of the Informed Consumer

3 Broad Recommendations:
#3) Have a larger discussion about the disclosure and buying process... backed with data driven studies to understand when consumers need what information in the buying process.  Consider the information available at each point in time.

 It is probably true that most of the information needed is already in illustrations but doesn't get to the consumer because of their limited attention span or because of how the information is presented.

Though it is usually not stated so simply, in the area of llustrations, format not content is the key to improving disclosure.


1993 - Sales Illustrations - We Can't Life with Them, But We Can't Life Without Them!, Society of Actuaries


Senator BRYAN. Is the concept of a disclosure offensive to you, assuming that you could get a disclosure that is not so highly technical as to be actually meaningless ? But I mean , is the concept of full disclosure at the point of sale, assuming that you could get something that is more understandable than the complexities might permit it to be? You can be so complex that nobody is going to read it, and those that do --

Mr. SUTTON <Pacific Life / ACLI>:

  • My personal opinion is that I would not have any problem with a kind of disclosure that could be communicated simply, but was based on extensive analysis by someone capable of
    making the appropriate analysis.
  • I would not like a simplistic disclosure that could cause great dislocation because it did not recognize all of the factors in what is, in fact, a very complicated business. (p280)

1991 - GOV - Insurance Company Solvency


1988 Letter from Ted Becker Pertaining to Disclosure Statements for Universal Life

Plans - Texas State Board of Insurance


SAMPLE DISCLOSURE STATEMENT, Specifications - For All Disclosure

Statements, Draft: 12-11-88

.... I agree that failure to disclose not only misrepresents but also sows the seeds of destruction. 

--  ALLEN D. BOOTH, FSA, is a consultant in the Milwaukee office of Towers, Perrin, Forster and Crosby. 

1982 - UNIVERSAL LIFE UPDATE, (rsa82v8n34) - Society of Actuaries - 26p

Commission Disclosure

MS. KHACHADOUR: The moment you talk about disclosing one portion of that premium, you're going to have to start disclosing the rest of that premium and the allocation of every penny in that dollar. It's not fair to identify Just the agent's compensation, and have him confess publicly to getting 100% of the first year premium. We agreed earlier that the buyer just looks at the overall price.

MISS LAUTZENHEISER: The consumerists I have heard talk, seem to be more concerned about the compensation to the agent than they have been about other specific costs within the policy.


"I. Objectives of the New (A) Committee

"a. Simple disclosure form for universal type life products, as well as other simplified cost disclosure methods."

1982-2, NAIC Proceedings

An actuary <Bart Munson (William M. Mercer Inc.)> cautioned that life insurance disclosure issues have been the subject of ongoing debate since the 1970s, and addressing the problems could be an extremely challenging and time-consuming effort.

1993 Proc. IB 788-789

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2011
Proceeding Citations
All references are to the Proceedings of the NAIC

"Commissioner Hager of the Universal & Other Plans (A) Task Force stated that there appeared to be disclosure problems with universal life plans and that the identification of these items should be placed on the Actuarial Task Force agenda."

"The main concern was that an unsophisticated buyer purchased a policy and did not know what the coverages, benefits and limitations were."

"Some of the items identified which should be disclosed: (1) what is guaranteed versus what is not; (2) adequate disclosure of the fact that a premium quoted will not support the contract for the whole life if the policy is a universal life policy; (3) disclosure of the guaranteed surrender values on a flexible premium policy"

1988-2 NAIC Proceedings, p566.

Pg 820

“In the state of Maryland, a recently enacted disclosure regulation has two special features.”

“First, there must appear a statement in the disclosure form which warns that any oral statement of the agent should be considered in the purchase decision, but only if it is reduced to writing and given to the applicant.”

--Bill Snell

1977 Cost Disclosure, Society of Actuaries

The findings and conclusions, and this Is the part that created the explosion, were that there is a shortfall of information, particularly with respect to ordinary life and that consumer experience does suggest that the consumer Is not able to adequately determine the suitability of the product, the quality of the product, or the cost of the product.

As a consequence, consumers are sustaining losses, and this would be a definite Indication of a market failure.

1979 Society of Actuaries “Cost Disclosure” (RSA79V5N45)

  • One of the key things about interest rates that cannot be overemphasized is that there must be complete disclosure.
  • The company cannot purport to pay 14 percent interest on cash values when it pays only the guaranteed rate on the first $I,000.
  • This issue has received some exposure, but companies that pay less than the current rate on some minimum amount must disclose that fact.

    1982 - UNIVERSAL LIFE UPDATE, (rsa82v8n34) - Society of Actuaries - 26p


Plaintiffs wrongly accuse the court of speculating about agent disclosures.


What the court concluded was that the non-uniform sales process inherently defeats Plaintiffs’ class-wide omission theory. ER791 49:11-50:3. The trial record supports that conclusion, and is dispositive. See Kaldenbach v. Mutual of Omaha Life Ins., 178 Cal. App. 4th 830, 847-848 (2009)