Policy Performance

  • ….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

  • Chalke and Davlin point out that a policy that provides whole life  benefits assuming 10 percent interest is not a whole life plan if the guaranteed cash value is only 4 percent.
  • Such a plan is term insurance only for a period of years.

--  Thomas G. Kabele

1983 - Universal Life Valuation and NonForfeiture: A Generalized Model,  Shane A. Chalke and Michael Davlin, Society of Actuaries - 72p

  • 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

  • Phoenix was the exclusive source of information concerning the projected performance of the policy.

From <https://caselaw.findlaw.com/pa-superior-court/1101716.html>

  • The inability to evaluate policy performance in the normal course of owning the policy seems to be fundamental to any theory of informational market failure in this market.
  • The survey evidence cited above suggests that policyholders do not understand how to evaluate the dual savings/protection pay in advance life insurance contract.
  • They neither know nor realize the economic importance of cash values, dividends and the policy loan interest rate.
  • None of the usual market institutions that help buyers cope with complexity, expert "agency" or firm reputation, will work unless buyers can and, with some frequency do, evaluate the product and the services supplied by sales agents. (p293)

1985 11 - FTC - Life Insurance Products And Consumer Information - Michael P. Lynch and Robert J. Mackay - Staff Report Bureau of Economics - Federal Trade Commission - 317p

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 doing.

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 phone].

1995-1 p489

C. If the annual report does not contain an in-force illustration, and there has been a diminution of previously illustrated values, it shall contain the following notice displayed prominently:

  • IMPORTANT POLICY OWNER NOTICE: During the past year, previously illustrated values for your policy in the area of [describe which values have diminished] have diminished and may have an impact on your expectations.

D. Upon the request of the policy owner, the insurer shall furnish an updated illustration based on amounts actually paid, credited, withdrawn or charged under the policy since issue; and future illustrated items based on the insurer's present disciplined current scale or some lower scale applicable to the policy. No signature or other acknowledgment of receipt of this illustration shall be required.

Comment: The earlier draft contained a requirement to provide the updated illustration within 30 days of the request.

Comment: The working group needs to identify the items to be included in the updated illustration. Is it supposed to match the basic or the concept illustration? The insured may have changed his or her mind about the way the policy is to be handled.

Without including such things as "vanishing premiums," policy loans, etc., it is not too meaningful.

  • It would be most useful if the updated illustration was designed to fit the needs of the policy owner. The insurer won't have this information.