Starters - Policy Cash Flow Mechanics

First thing that I want to say is that there have been some references to Misleading Illustrations.

  • I'm certainly not aware of the Regulators have not found that Illustrations are misleading.
  • That seems to be just an allegation that is left hanging in the air, which is inaccurate. 
  • The Illustration is not misleading.

»  The policy is performing according to policy mechanics. 

-- Scott Harrison  

2019 1115, NAIC Proceedings - IULISG - IUL Illustration Subgroup - Conference Call, [Bonk]

Its fundamental "mechanics" are indistinguishable from those underlying traditional life insurance products.

  • re: Universal Life

--  Samuel H. Turner, President - The Life Insurance Company of Virginia

1982 - Journal of Insurance Medicine - 1p

Many insurance companies even have a way to get a consumer's money without the consumer ever knowing about it.

  • Most policies have a clause that allows the company, without telling the policyholder, to dip into the savings component of their life insurance policy.
  • This can happen, for instance, when a consumer stops paying on a policy because he or she believes that the policy is paid up.
  • Then, without even telling the policyholder, the company can raid the savings to pay itself more premium.

--  Senator Howard Metzenbaum (D-OH)

1992 0623 - GOV (Senate) - Consumer Disclosure of Insurance - [PDF-323p-GooglePlay, 

  • The fact that we charge people fees that we have disclosed and that fees reduce the value of your policy, and if your policy keeps reducing in value, it will lapse, is not a fraud.
    • That's common sense.
    • That's how life insurance works.  (p171) 

--  Closing Argument by Mr. Martens (Defendant Attorney - LSW)

2014 0425 – DOC 813 – Trial Transcript – Day 12 – Walker v LSW – 224p

  • These previous comments remind me of a little story. It also relates to one of the comments Judy made, that agents sometimes do not understand the policies.
  • My mother was thinking of buying an insurance policy on my father, and she asked me to speak to her agent.
  • I spoke to him, and it was a Universal Life policy being proposed. I asked about the crediting rate, and then I said, "What kind of cost-of-insurance (COl) deductions are there?"
  • He didn't understand what I was talking about.
  • I said, "Well if you think of this Universal Life policy as a box, then you pour in premiums and your interest credited, and then pull out the cost of insurance.
  • And he said, "I didn't realize that out of this account you're actually pulling out an amount every month to pay for the insurance, and that could vary between companies.
  • I'll have to talk to the company about that, because I never realized that before.

-- Alan L. Igielski

1992 - SOA - Life Insurance Sales Illustrations, Society of Actuaries - 16p