Timing of Disclosures / Information to Consumers

Inappropriate Timing of Message

  • Dissemination of the message at an inappropriate time also reduces effective exposure.
  • For example, the life insurance cost disclosure package adopted by the National Association of Insurance Commissioners (NAIC) suffers from a serious timing problem.
  • Purchasers receive a disclosure package containing several cost indices for comparing policies, but the information comes only after the policy is delivered, usually a week to 10 days after purchased.
  • Once the purchase decision has been made, however, "the buyer becomes psychologically committed to it and is very unlikely to read and use a disclosure package" [Kramer 1978, pp. 12-13].

1982 - AP -Using Information-Processing Principles in Public PolicymakingMichael B. Mazis and Richard Staelin

NAIC Working Groups
Information (Policy Overview) before/ at application: Birney Birnbaum, Lois Lerner Information (Policy Overview) at Delivery: ACLI

c. Life Insurance Illustration Issues (A) Working Group

  • <Ms. Stegall> explained that the Working  Group originally was working on revisions to both the Life Insurance Disclosure Model Regulation (#580) the Life Insurance Illustrations Model Regulation (#582).
  • However, under the new approach, revisions only under Model #580 required.
  • She said the policy overview document would be distributed along with the Buyer's Guide with all life insurance policies.

2018-3, NAIC Proceedings (6-4)

  • Marvin Van Cleave (Wisconsin) expressed concern that the proposed regulation did not  provide for disclosure at the point of sale.

1984-1, NAIC Proceedings

  • It had been the desire of the working group to require delivery at the time of application, but small insurance companies would have a great deal of trouble complying with that requirement due to lack of  computer resources, so the extra period is allowed by way of compromise.

1989-2, NAIC Proceedings

  • Much of the information required in the draft disclosure forms simply cannot be provided at time of application….
  • In doing so, it should also recognize the limits to the type and amount of information that agents can reasonably be expected to produce on their own at time of application.

1989-2, NAIC Proc.

5. Adopt November 21 and December 1 Minutes to Life Marketing Practices to Senior Citizens Working Group and Amendments to Life Insurance Disclosure Model Regulation and Disclosure Form

  • Superintendent Stokes concurred, stating that she has serious problems with providing the disclosure form after the consumer has made a decision to purchase the policy. She did not feel the free-look period was an acceptable substitute for giving the disclosure information at an earlier time.
  • Commissioner Lyons said the advisory committee reported that the point of sale disclosure requirement impacted the direct marketers and other insurers who do not have individual information available to them at point of sale.

1991-1A, NAIC Proceedings

Financial Review of This Policy disclosure form were adopted (Attachments Three and Four respectively).

  • Ms. Jewel asked if the early discussions of the working group had centered upon the disclosure form being provided prior to delivery of the policy.
  • Commissioner Lyons confirmed that was in the original work product of the group; however, he said the working group decided to require delivery at the earliest practical time which, until completion of the review by Mr. Swenson, appears to be at the point of issuance of the policy.
  • Commissioner Foster echoed Ms. Jewel's concern and stated that his preference for time for delivery of the disclosure form to the consumer is at point of sale.
    • He said he would support the model as currently drafted, recognizing the legitimate concern of how delivery required at point of sale would impact direct marketers.

Life Marketing Practices to Senior Citizens Working Group and Amendments to Life Insurance Disclosure Model Regulation and Disclosure

1991-1A, NAIC Proceedings

  • The second item is a review being conducted by Jim Swenson of the individual industry marketing practices to enable identification of those methodologies which would allow for delivery of the disclosure form to the consumer at the point of sale.

1991-1A, NAIC Proceedings

  • Mr. Strauss said that it was Iowa's opinion that the illustration should not be mandated.
  • Judy Faucett (Coopers & Lybrand), an NAIC consultant on the illustrations project, asked if it would suffice to deliver the illustration with the policy.
  • Commissioner Wilcox responded that in his opinion presenting the illustration at the time of delivery was acceptable, but he emphasized this was still an open question. Scott Cipinko (National Alliance of Life Companies -- NALC) agreed that a requirement to provide the illustration with policy delivery was appropriate.

1994-4, NAIC Proc.

125 Reprinted in Moss Subcommittee Hearings, supra n. 4, at 409.

  • In testimony before the Moss Subcommittee, Mr. Julius Vogel, Vice President and Chief Actuary of Prudential Insurance Company, testifying on behalf of the ACLI, readily admitted that the industry has taken inconsistent positions on the timing of disclosure in initial sales and replacements.

Mr. SHAFFER (Subcommittee counsel): My obvious question is, isn't this inconsistent with your position on timing for the model solicitation rule?
Mr. VOGEL (ACLI): Yes, it is.  (p167)


Timing of disclosure

  • The question of when during the sales process to disclose cost indexes and other policy information to customers has generated considerable controversy.
  • Obviously, if the purpose of the disclosure is to assist the consumer In making a purchase decision, the information should be provided before the decision is made.
  • A practical problem arises, however, due to the fact that an insurance agent does not know at the outset of the sales presentation what sort of policy the customer will choose.
  • The agent cannot reasonably be expected to prepare elaborate policy data disclosures in advance for all of the alternatives that could be selected.  (p49)

1978  - Life Insurance Marketing and Cost Disclosure Report - Moss

C. Timing of disclosure

Finally, the Commission was concerned about the timing of the

Under the NAIC model regulation, consumers generally received the buyer's guide and policy summary only when the policy is actually delivered, often a week to 10 days after purchase.

  • Our experience indicates that if cost disclosure is to be effective, it must take place before the purchase decision. Consumers are very unlikely to read and use a disclosure package provided after the transaction has been completed.
  • For this reason, we recommend that a buyer's guide be given at the beginning of the sales presentation and that a preliminary policy summary be given prior to the time prospective purchasers are provided an application for a policy.
  • The preliminary policy summary would contain the basic information concerning the policy, such as the policy type, premium, surrender index and the rate of return.
  • The proposed preliminary policy summary contains only those limited items of information essential to an informed purchase decision.

It would not be impractical for agents to have all of the information needed to fill out the preliminary policy summary with them during the sales presentation.

However, we concur in the NAIC's recommendation that a full policy summary be delivered with the policy.

That summary contains more detailed information concerning the cash flow elements of the policy.

  • The Commission believes that this information is important and useful to the consumer.
  • Because the information is more detailed it may not be readily available to the agent during the sales presentation, but it can easily be provided with the policy, as is currently the practice of companies which comply with the NAIC model.