In-Force Illustrations

4/15/15
Letter to LATF

Lessing, Brian [mailto:Brian.
Lessing
@axa.us.com]

However, we believe that all sections of the guideline should apply to all inforce life insurance illustrations after some effective date, regardless of when the policies were sold, since if the new limitations on the illustrated crediting rate are appropriate for new business, similar reasoning implies that they should also be appropriate for all inforce policies.

I'd like to take that one step further.

  • What I noticed was there is a requirement for in-force illustrations, and people may have thought they bought one thing and whenever you have to give them an in-force illustration with a current disciplined scale, they're going to realize they bought something else.
  • I think many companies will have serious problems with policyholder retention.

--  MARK J. GREENE 

1995 - ILLUSTRATIONS AND NONFORFEITURE VALUES, Society of Actuaries - 14p

  • The Larry Gorski Amendment that was adopted says in-force illustrations cannot be less favorable than sales illustrations or the actuary would have to disclose that; the idea is that buyers would be able to find out that a company was utilizing a bait-and-switch strategy in its illustrations.

1996 - Update on Life Insurance Illustrations, Society of Actuaries - 24p

There should be a lot more focus on the need for in-force illustrations.

  • The policies that we sell today have so many moving parts and require frequent monitoring on an ongoing basis to make sure that the program is remaining viable, that enough premium is going into these policies to sustain them, and that the death benefits or cash values are structured the way that the policyholder expects them to build.
  • So, I think there's going to be a lot more focus on in-force illustrations in the future."

--  JUDY FAUCETT

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

  • Finally, we need to provide the agent the capability to do in-force Illustrations.
  • That way we can keep policyholders up to date, we can provide fair comparison when the policyholder is trying to decide whether to buy a new policy, and enable the agent to provide follow-up service to clients.
  • This is an expensive service as we've all seen with in-force illustrations, but it is necessary if you want happy customers.

-- BRUCE E. BOOKER

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

In my mind, the problem occurs not at the time of illustration, but in our deficiencies in reillustrating the products in the annual report.

  • Many times it appears that the insured is attempting to buy something and his question is "What can I pay for eight years that will pay up a certain level of death benefit?"
  • I think two things happen even if, for example, he does get an annual report of a universal life plan and his question isn't answered.
  • "How much more does my premium have to be to achieve my original results?"
  • We've taken some steps to try and eradicate that by using comments and various codes on our master file.
  • We reillustrate every year and we invite the insured to send us a letter saying, "This illustration doesn't meet my needs. I wanted to know this bit of information," so they can take proper steps to recognize the change in interest rate environment.
  • Much of our "reappearing" vanishing premium problem could have been eradicated by an early warning system that says, "The interest rate environment has changed. You need to increase your premium by 20% to achieve your original goal."

--  CHRISTOPHER H. HAUSE

1995 - CURRENT DEVELOPMENTS SURROUNDING REGULATIONS AND STANDARDS OF LIFE AND ANNUITY PRODUCTS, Society of Actuaries - 18p