1990-1A NAIC Proceedings - NAIC LIMRA - Universal Life Disclosure Form Test Market Results - 10p
1984 - SOA - NAIC Update, Society of Actuaries - 24p
1984 - SOA - NAIC Update, Society of Actuaries - 24p
-- Tony Spano, ACLI:
I'm now going to talk about cost disclosure, which is one of the subjects that I have been following closely at the ACLI.
The new regulation was the result of a broad effort involving the NAIC, the ACLI, and the American Academy of Actuaries.
The major purpose of the revision was to update the regulation and the accompanying Buyer's Guide to accommodate today's marketplace.
In addition, the new regulation provides for additional disclosure designed to help both the consumer and the regulator.
However, while the revision involved some extensive changes, the fundamental structure of the disclosure system provided by the previous regulation was retained. Let's now turn to the principal changes that were made.
New Features. The following are the significant new features of the revised model regulation:
1. A requirement for furnishing interest-adjusted indexes on both guaranteed and illustrated bases. This replaces the requirement in the previous regulation for showing the interest-adjusted indexes on an illustrated basis accompanied by the equivalent level annual dividend. The change reflects the great variety of nonguaranteed factors that are now incorporated in life insurance products.
2. A Special Plans section to accommodate the unique features of policies such an enhanced ordinary life (under which dividends are applied to maintain a level death benefit), universal life, multitrack policies, and revertible term.
3. A provision for disclosure of dividend practices to both new and existing policyholders. The company must disclose whether it is on a portfolio basis or an investment year basis and must also tell the policyholder if dividends are not based on accepted actuarial principles. The Academy has defined accepted actuarial principles for mutual companies and is now in the process of doing so for stock companies.
4. A provision for disclosure to regulators and policyholders of unusual patterns of premiums and benefits. The regulation includes a mechanism to test for premiums and benefits which follow an unusual pattern. This is in response to some charges that have been made that companies manipulate cash values and dividends so as to come up with deceptively good-looking cost indexes at ten years and twenty years,
5. A provision enabling policyholders to request additional information relating to future premiums, benefits, and other items affecting policy costs.
6. Changes in disclosure requirements to accommodate (i) adjustable policy loan interest rates and (ii) procedures under which policy dividends or excess interest credits reflect the extent of loan activity on a policy-by-policy basis ("direct recognition").
7. A new Buyer's Guide, with changes designed to take account of recent product developments and to enhance the Guide's readability and usefulness.
The Future. - Now let me say a few words about where we go next.
For this year, I would not expect much action by the states on the revised model regulation.
The ACLI supports the new regulation and has written to the state insurance commissioners urging that they adopt it.
However, it takes time to digest any new regulation, particularly one as extensive as this.
Also,1984 has been a very busy year for both the regulators and the industry.
Baldwin-United, guaranty fund laws, unisex legislation, federal income taxes, bank deregulation--these and other issues have overshadowed cost disclosure on the priority list.
But there are forces at work, some just starting to stir, that may cause some real movement on the new regulation in 1985.
The increasing popularity and variety of new life insurance products are serving to make the old model regulation, particularly the old Buyer's Guide, appear more and more obsolete.
In Washington, the Federal Trade Commission (FTC) and now also the House Judiciary Committee are studying the adequacy and quality of consumer information on life insurance.
`The FTC is committed to presenting a report on the subject by January 1, 1985, and Congressional interest in the subject may very well continue for an extensive period.
It is very possible that these forces, especially if accompanied by an easing of some of the other regulatory and industry concerns, will soon spark action on the new regulation in the state capitals.