• The actual-versus-expected performance for some UL policies led to class-action lawsuits that have caused a substantial amount of negative attention to be focused on cash-value life insurance in the illustration of projected values.
  • The market conduct environment has been a “black eye” for the industry and has damaged our credibility with some consumers.

--  Deanne Osgood (Milliman & Robertson)

1999 - The Next Generation Universal Life, Society of Actuaries - 30p


Mr. Schwartzer reminded the Working Group that the Life Insurance Illustration Issues (A) Working Group came out of concerns raised when the Indexed Universal Life (IUL) Illustrations (A) Subgroup under the Life Actuarial (A) Task Force was working on guidance for IUL policy Illustrations that 

  • would result in consumers being better able to understand the product performance and interest variability of IUL products.

2016/4/3, LIIIWG CC, NAIC Proceedings

  • 3. Discussed Comments from the Academy on NGEs (Non-Guaranteed Elements)
    • Illustrations, if available during the purchasing process, can be useful tools to help consumers understand a range of possible product performance outcomes.
  • Brenda Cude (University of Georgia) said the issue of NGEs is interesting, but not something the average consumer would understand. She did not think it was information that was appropriate for a short guide for first-time purchasers.

2017/11/06 -  Life Insurance Buyer’s Guide (A) Working Group Conference Call

  • particular, the impact consumer payment patterns have on the performance <Coverage Period> of the product.  

--  Assurity White Paper 

2016/5/17 - Life Insurance Illustrations Issues Working Group Conference Call 


  • The policy performance and features illustrated to the buyer have been an issue with regulators for at least a century.
  • The purpose of these illustration requirements is to ensure that both the guaranteed and nonguaranteed performance of the policy are disclosed to the buyer.  

1991-1992 -  Final Report of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries

  • ….provide illustrations based on different assumptions.
  • This would serve to demonstrate to the consumer the effect on future benefits of changes in assumptions.”


1988-2, NAIC Proceedings

THOMAS L. BAKOS: I have perhaps a more simplistic view of what's going on with respect to illustrations and their acceptability.

  • I think what's happened is that in the mid 1980s, interest rates were the highest they had been in this century, but they came down, and we all know that a universal life or a traditional participating policy's performance is very dependent on the level of interest.
  • Interest rates came down and policies issued in the 1980s did not actually perform as well as they were illustrated.
  • If you go back a little further, policies issued in 1970 or 1975 are performing better than illustrated, and no one is complaining about the inaccuracy of illustrations in that situation.
  • So it seems to me that the basic problem is that interest rates have come down, and people don't like the way their policies are performing versus how they were illustrated.
  • You can modify rules and regulations and certainly there are some abuses in illustrating life insurance products that should be corrected, but I think the only thing that will eliminate this problem altogether is if interest rates start going up again.


  • Please also tell us what documents or information you were given after you had applied for coverage, including documents or information provided at the time your policy was delivered to you. 
  • For example, were you given an illustration, ledger, or written explanation of policy performance with your policy?

1999 - LC - Spitz v Connecticut General - Amended and Restated Stipulation of Settlement

Case 2:95-cv-03566-JFW-EX Document 249-1 Filed 07/29/99 Page 39 of 160

C. Universal Life

  • From the beginning, a necessity for successful marketing of Universal Life has been the ability of the seller to illustrate the performance of a policy tailored (within policy limits) to the needs and resources of the prospective purchaser.
  • The agent and prospect have the ability to choose almost any pattern of benefits and premiums.
  • No longer is the sale limited to one of several fixed plans of insurance from a ratebook.
  • Each one is different.

1991-1992 -  Final Report of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries - 142p

This was an optional idea that we called "Illustrations As Road Maps."

  • The concept is that instead of letting the actual performance of a Universal Life policy diverge over time further and further from what was originally illustrated, you could send policyholders a notice each year on the anniversary, if the results are below what was illustrated.
  • A letter would state the need to pay an additional amount to get back to what was illustrated, because interest rates are lower. This would have two advantages.
  • First, it would keep people on track with their illustrations.
    Second, it would help people understand the workings of their universal life policy." 

-- John Keller

1991 - Illustrations - Society of Actuaries

  • If your training process for your agents is to sell at target premium, for example, and target premium carries the policy to maturity at a 7 percent rate, if you’re only crediting 6, it’s not making it there.
  • So keep an eye on how you’re training your agents to sell your products and try to avoid problems up front in the product performance before they become a premium risk problem.


2001 -  Investment Strategies to Maximize Yield, Society of Actuaries

  • Created during the early 1980’s, the original UL Life Insurance product calculated premiums based on reduced current mortality rate assumptions and historically high current interest rates.
    • This resulted in significantly lower premiums relative to Traditional Cash Value Insurance.
  • ...the original reduced UL premium was financially insufficient to pay the increasing cost of insurance associated with decreasing policy cash values, causing the polices to lapse prior to maturity.

201x - AP - Universal Life Insurance Duration MeasuresAlonzi, Lange, Simpkins

1995-1 p481

"Mr. Higgins said he also thought it was important to add an alert that there was something different, if in fact that was the case, so that the insured would understand the importance of requesting an in-force illustration.

Commissioner Ruthardt emphasized that it was very important to get information to the policyholders on how their policy was


1995-1 P486

Drafting Note: The susceptibility of non-guaranteed benefits and values to changes in the underlying assumptions can be

demonstrated in various ways. The approach suggested here involves reducing the non-guaranteed items to a midpoint.

1995-1 p488

IMPORTANT POLICY OWNER NOTICE: You should consider requesting more detailed information about your policy to

understand how it has performed and may perform in the future. You should not consider replacement of your policy or

make changes in your coverage without requesting an updated illustration. You may request such an illustration by

calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contacting your agent at [agent's


  • One thing that has exacerbated the problem of disappointed policyowners accompanying the flow of market interest rates is that this immediately followed almost a 30-year period when, as you correctly commented, everything went up. Every company had its own version of a mountain chart.
  • Here's a policy we issued 20 years ago, here's what we originally illustrated, and here's what we actually paid. At least a generation and one half of life insurance agents, field people, even home office people and their customers grew up thinking that a mutual company would never pay dividends less than what was illustrated.
  • As that sunk in, collectively we forgot to talk about the fact that dividends weren't guaranteed. We very seldom made that point up front during the sale near the end of that period when things were about to turn around.
  • We never showed alternate illustrations at less favorable interest rates to show the potential volatility of policy performance if conditions change.



If illustrations do not adequately convey the likely performance
of the underlying contracts, various parties to the insurance transaction suffer:

  • insurers and insurance professionals who rely on illustrations in sales presentations may increase their exposure to liability, 
  • policy owners who rely on illustrated values to achieve
    financial goals may fail to reach their goals and be forced to seek other means.
  • In addition, the insurance industry risks losing the confidence of insurance professionals, financial service professionals, and consumers.
  • Thus, if illustrations do not adequately convey the likely performance of life insurance contracts, then an alternative form of disclosure may better serve the interests of consumers, insurers, insurance regulators, and insurance professionals.

--  James M. Carson, Associate Professor of Insurance and Finance, Katie Insurance School, Illinois State University
-- Mark D. Forster

1997 - JIR - An analysis of life insurance illustrations: regulatory implications of the disparity between policy yields based on illustrated versus actual surrender values - 23p

  1. Academic
  1. Actuarial
    • SOA
      • "I think you really have to make sure that people understand volatility, whether you solve for a policy blowing up or values being halved. I think you have to catch people's attention, and that is all to the good."

        --  Mr. Coleman (Prudential) Technical Resource Group (NAIC),

        1994 - PROBLEMS AND SOLUTIONS FOR PRODUCT ILLUSTRATIONS (rsa94v20n229), Society of Actuaries

  1. Government
  1. Industry
    • At the 1986 Annual Meeting of the American Council of Life Insurance ACLI. Chairman John Pearson stated: "Our products must do what we say they do. Our companies must fulfill their promises. All the words in the world­ the best government relations, the best public relations-will not be enough without performance."

      1986 - Actuarial Update - Non-Guaranteed Promises: A New Standard of Practice, by William T. Tozer - p2

    • “I <Larry R. Robinson> am on this panel principally as Chairman of the ACLI Subcommittee on Cost Comparisons. Much of our work has dealt with the issue of illustrating Nonguaranteed Elements.
      • As a backdrop, I want to quote from a January 1988 Financial Planning The article is entitled "Future Shock" by Harry Lew with the sub-heading: "What will happen when a generation of insurance buyers begins comparing unrealistic illustrations with the actual performance of their policies?


        Industry leaders would prefer not to find out."

        1988 - ACTUARIAL OPINION ON NON- GUARANTEED ELEMENTS, Society of Actuaries - 12p

  2. Law
    • Legal Cases
      • 1998 - Friedman v Manufacturer's Life
      • 2010 - Blumenthal v New York Life
      • 2018- Vogt v State Farm

        "Mrs. Vogt’s testimony reveals that the Vogts’ actual grievance with the policy performance arose from their agent’s alleged oral representation in 1999 that if they paid a $150 premium each month, their $100,000 policy would remain in force and would never lapse. (Ex. A at 17:17-20:12.)"

  1. NAIC Proceedings
    • 1994-3 NAIC - Wright / Nelson

      "Mr. Wright <Commissioner> asked what sensitivity testing would achieve that standardized illustrations did not. He said the purpose of both was to show that there could be a variable result.

      Mr. Nelson <NALU / NAIFA> said it was important to sensitize consumers to the inevitability of change."

    • 1994-3
      “Ed Coover (National Travelers Life) said the problem was explaining to consumers that the illustration was only a snapshot. He suggested using the annual review to show how circumstances change.”