• It is clearly time for action.
  • I admit to being dismayed by the disarray in the market, as a result of "illustration games.
• "When my kids go outside to play games, I let them do so with the expectation that no one will get hurt.
  • With some of the illustration games being played today, my expectation is exactly the opposite.
  • I say that for two reasons, one of which is historical, and one of which is practical.
• On the buyer's side, there are two major sorts of harm that can befall the unwitting participants of illustration games. Neither is trivial.
  • 1. Bad buying decisions are more likely to occur. Bad buying decisions are inevitable whenever illustrations are not on a comparable basis. The existence of illustration games exacerbates the problem.
  • 2. The misdirection of an illustration game can leave the buyer in a position from which he simply cannot recover.
• One of our competitors likes to talk about an illustration where a big premium increase at an advanced age is downplayed by saying, "Don't worry, you'll probably be dead by then."
  • He calls it the pay-or-die illustration.
  • How can we expect an 80-year-old individual, who has been paying the level premiums illustrated for years but still finds himself out of cash and insurance, to replace what he thought was a permanent benefit?
• The life insurance industry will also suffer because of illustration games. It suffered once before when unsound illustrations were prevalent -- 100 years ago during the tontine wars. That is my historical reason for saying that both buyers and the industry will be hurt by unsound illustration practices.
• Let me go back in time now, and try to retrace our steps from the tontine days to the present.

--  William C. Koenig, Northwestern Mutual

1991 - SOA - Disclosure Systems: Can an Ideal Method be Found?, Society of Actuaries - 22p