LIIIWG - LIfe Insurance Illustration Issues Working Group - NAIC - Before Start
2015 - Summer
June 4, 2015 - LIAC - Life Insurance and Annuities (A) Committee - Conference Call - (6-6)
2. Adopted AG 49
Mr. Boerner discussed the Life Actuarial (A) Task Force’s work over the past few months in developing concepts and reaching a compromise in the language for Actuarial Guideline XLIX for Indexed Universal Life Illustrations (AG 49) in order to address the time-sensitive nature of the main issue—having more realistic credited rates illustrated for increasingly popular indexed universal life (IUL) products.
- He noted that the Life Actuarial (A) Task Force has formed a subgroup to be chaired by Fred Andersen (MN) to address additional IUL-specific illustration issues.
- Mr. Boerner said he anticipates the subgroup proposing revisions to AG 49 to address those issues within the next year.
- He also suggested that it may be appropriate for the Committee to consider revisions to the Life Insurance Illustrations Model Regulation (#582) to address broader illustration issues, which could be a charge given to the Life Actuarial (A) Task Force or a new Committee working group.
August 16, 2015 - (LIAC) - Life Insurance and Annuities (A) Committee - (6-2)
3. Discussed the Appointment of a New Working Group to Work on Life Illustration Issues
Commissioner McPeak explained that during the Committee’s discussions concerning the adoption of Actuarial Guideline XLIX—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest (AG 49), the Committee was asked to consider establishing a new working group that would conduct a comprehensive review of life illustrations to determine if, and in what manner, the Life Illustrations Model Regulation (#582) should be revised.
- She suggested that in order to further refine what possible issues the proposed new working group could review with respect to Model #582, and possibly outside of Model #582, the Committee should set a 30-day public comment period within which to receive information from stakeholders on their issues and concerns and what needs to be address with respect to illustrations.
Commissioner Gerhart expressed support for Commissioner McPeak’s suggestion.
Birny Birnbaum (Center for Economic Justice—CEJ) also expressed support for the suggestion.
- He said it is important that state insurance regulators determine if illustrations are accomplishing what they are intended to accomplish, how they are being used and whether consumers understand them.
- Mr. Birnbaum also suggested that illustrations should be consumer-tested.
Bonne Burns (California Health Advocates) expressed support for Mr. Birnbaum’s comments.
- She also suggested that the Committee have the proposed new working group include in its work the review of illustrations for life insurance and long-term care (LTC) insurance combination products.
- Ryan Wilson (AARP) also expressed support for Mr. Birnbaum’s comments, particularly with respect to consumer testing of illustrations.
Commissioner Ridling made a motion, seconded by Commissioner McCarty, to set a 30-day public comment period to receive comments on what needs to be addressed in Model #582 with respect to life illustrations in order to establish a working group to perform that task.
2015 - Fall
November 20, 2015 - (LIAC) - Life Insurance and Annuities (A) Committee National Harbor, Maryland - (6-3)
3. Appointed a New Working Group to Address Life Insurance Policy Illustration Issues
Commissioner McPeak reminded Committee members that, at the Summer National Meeting, the Committee set a 30-day public comment period to receive comments from stakeholders on their issues and concerns with life insurance illustrations and the Life Insurance Illustrations Model Regulation (#582). In response, she said the Committee received comments from:
- American Academy of Actuaries (Academy) - 3p
- American Council of Life Insurers (ACLI) - 2p
- California Department of Insurance - 1p
- Massachusetts Mutual Life Insurance Company (MassMutual) - 1p
- NAIC consumer representatives - 1p
- <State Farm> - 1p
Mr. Schwartzer asked if the comments included specific suggestions for revising Model #582.
- Commissioner McPeak said some of the comments discuss specific suggested revisions, while others outlined general issues that should be considered if Model #582 is opened for revision.
Mr. Schwartzer said that absent specific suggested revisions, he would urge caution in opening Model #582 for revision.
- He suggested tabling the discussion for now until the Committee receives specific suggested revisions.
- Ms. Froment expressed support for Mr. Schwartzer’s comments.
Bruce Ferguson (ACLI) said more than 40 states have adopted Model #582. He noted that, in its comment letter, the ACLI suggests enhancing simplicity and transparency of the narrative summary in Model #582 to reflect the significant changes in the marketplace since Model #582 was adopted 20 years ago, including the demographics of consumers who buy life insurance, the product designs developed to meet the changing needs of consumers and the technology consumers use to obtain information about life insurance products.
Laura Hanson (Academy) explained the Academy’s comments, noting that the Academy also suggests that the Committee consider revising the Life Insurance Buyer’s Guide, which was developed in 1995 at the same time Model #582 was adopted.
She noted that it is woefully out-of-date and should be updated to reflect current life insurance products and features.
Commissioner Gerhart noted that some of the comments appear to merit some review of Model #582.
Director Ramge agreed and made a motion, seconded by Commissioner Gerhart, that the Committee establish a new working group with a 2016 Proposed Charge to explore how the narrative summary required by Section 7B of Model #582 and the policy summary required by Section 5A(2) of the Life Insurance Disclosure Model Regulation (#580) can be enhanced to promote consumer readability and understandability of these life insurance policy summaries, including how they are designed, formatted and accessed by consumers.
The new working group should present a report to the Committee, with preliminary recommendations on enhancements to the narrative and policy summaries due by the 2016 Summer National Meeting.
Birny Birnbaum (Center for Economic Justice—CEJ) said that although Model #582 may be uniformly adopted by the states, that does not mean it translates into uniform illustrations provided to consumers.
- He said one reason for this is that Model #582 is out-of-date and does not reflect new product designs.
- It also does not reflect consumers’ use of technology to access information.
- Mr. Birnbaum also reminded the Committee of the illustration issues that resulted in the development of Actuarial Guideline XLIX—The Application of the Life Insurance Illustrations Model Regulation to Policies with Index- Based Interest (AG 49) and broader issues with illustrations. He also expressed support for the Committee revising the Life Insurance Buyer’s Guide.
Mr. Regalbuto expressed support for opening Model #582 to look at issues related to AG 49.
Mr. Robleto asked if appointing a new working group to look at the narrative summary provision in Model #582 and the policy summary provision in Model #580 addressed the Committee’s commitment to level the playing field among insurers.
Commissioner McPeak said addressing that issue is still in progress. The motion passed, with New York dissenting.
2016 - Spring
3. Discussed a Proposed Amendment to the Charge for the Life Insurance Illustration Issues (A) Working Group
Currently, the Life Insurance Illustration Issues (A) Working Group has a charge to:
- Explore how the narrative summary required by Section 7B of the Life Insurance Illustrations Model Regulation (#582) and the policy summary under the Life Insurance Disclosure Model Regulation (#580) can be enhanced to promote consumer readability and understandability of life insurance policy summaries, including how they are designed, formatted and accessed by consumers.
Commissioner Gerhart explained that the American Academy of Actuaries (Academy) wrote a letter suggesting expansion of the Working Group’s charge to include a review of the Life Insurance Buyer’s Guide (Buyer’s Guide).
He said the American Council of Life Insurers (ACLI) followed up with a letter stating that it did not oppose the addition, but pointed out that the Committee itself already has an existing charge to revise the Buyer’s Guide, and the addition of this task to the Working Group might slow down its ability to accomplish the current charge.
Birny Birnbaum (Center for Economic Justice—CEJ) expressed support for updating the Buyer’s Guide generally, but said the charges contemplated for the Working Group serve a different purpose.
- He explained that the Buyer’s Guide is an educational document and the revisions contemplated in the charge to the Working Group focus on plan-specific information.
Mr. Regalbuto said New York is releasing Insurance Regulation 74 focusing on universal life illustration issues and updated its buyer’s guide with respect to universal life.
Brenda Cude said the Buyer’s Guide needs a total overhaul, not just a revision.
- She explained that the products in the marketplace have radically changed since the time the Buyer’s Guide was first written.
The Committee agreed that because there is an existing charge to revise the Buyer’s Guide and the focus of the Buyer’s Guide is different from focus of the Working Group’s charge, the charge should remain as written.