Non-Guaranteed Cost Element - ACLI

  • A couple of ACLI groups have also been studying various aspects of universal life insurance.
    • The Council's Subcommittee on Cost Comparisons has proposed that cost disclosure requirements for universal life plans be generally similar to those for traditional life insuranceplans as provided by the NAIC Model Life Insurance Solicitation Regulation.
    • In addition, the Subcommittee is recommending disclosure for universal life plans in accordance with the "non-guaranteed cost element" concept endorsed by the Council as a modification to the model regulation.
      • The only special requirement recommended for universal life plans is that the Policy Summary indicate when the plan will terminate based on guaranteed assumptions.
      • No post-sale disclosure requirements were deemed appropriate at this time.

--  Leonard E. Odell, ACLI

1981 - SOA - Universal Life (RSA81V7N412), Moderator: Samuel H. Turner, Society of Actuaries - 16p 

  • Since universal life insurance was then being marketed only on a very limited basis, the council task force's proposals did not address this product.
    • The council has now developed a recommendation for universal life insurance, which we would like to present for your consideration.
  • The essence of the proposal is that universal life insurance be treated for cost disclosure purposes as a life insurance plan with a nonguaranteed cost element.
  • Thus, the policy summary would show for the prescribed policy years the anticipated premiums and, both on the guaranteed and currently illustrated bases, the death benefits, cash surrender values, and endowment amounts, if any.
    • The life insurance cost indexes would be calculated on the currently illustrated basis, using the anticipated premiums, and would be required to be shown along with corresponding nonguaranteed elements.
  • ⇒  An additional item of information that is recommended to be required in the policy summary is the point at which the policy will expire based on the policy guarantees and the anticipated premiums shown in the summary.

1981 1215 - Report - ACLI to NAIC - Paper on Cost Disclosure for Universal Life, by the Special Task Force of the ACLI Cost Disclosure Subcommittee  to NAIC Task Force on Life Insurance Cost Disclosure - 4p

1982-1, NAIC Proceedings (p399)