Starters - Performance

  • 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 0403, NAIC Proceedings - Life Insurance Illustrations Working Group (LIIIWG) Conference Call, NAIC Proceedings

  • "II. REGULATORY REQUIREMENTS FOR LIFE INSURANCE ILLUSTRATIONS
    • 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.  (p143)

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

  • Appendix II - Illustration Examples
  • The actual versus expected performance for some Universal Life 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. 

-- Deanne Osgood

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

  • 2016-2, 0517- NAIC Proceedings - LIIIWG, Life Insurance Illustrations Working Group
    • .....in particular, the impact consumer payment patterns have on the performance of the product.  
    • Richard Wicka (Chair) said the paper advocates for:
      • 1) additional information to be provided to consumers regarding how the timing of their payments impacts the product; and
      • 2) follow-up information to be provided to consumers at the time their payments go off-track so that consumers are aware of the impact to their policies.
        • [Bonk: "impact to their policies" ≈ Coverage Period]
      • 2016 - Assurity Resources - Consumer Issues Associated with Guaranteed Universal Life Policies - NAIC, LIIIWG, Life Insurance Illustrations Working Group - 11p
  • 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

  • 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.)

2018 - LC - Vogt v State Farm

  • 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.
    • ... 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 / NAIC - An Analysis of Life Insurance Illustrations: Regulatory Implications of the Disparity between Policy Yields Based on Illustrated Versus Actual Surrender Values, by James M. Carson and Mark D. Forster - 23p