Universal Life Insurance Model Regulation - Citations - (MDL-585) - NAIC - Snippets

  • This model began its development when an interested party* gave a brief description of the background and concern of the new so-called "Universal Life" products to the NAIC Life Insurance (A) Committee.  

*Jim Jackson of Transamerica / Occidental Life

1982 Proc. II 355.

Chronological Summary of Actions
1984 Proc. I 6, 31, 376, 514, 515-526 (adopted).
1988 Proc. I 9, 19-20, 494, 599-600, 627 (adopted change to footnote 3).
1989 Proc. II 13, 23, 414-415, 428-429, 431-442 (amended to include consumer disclosure requirement).
1990 Proc. I 6, 27, 438-439, 450-451, 453-463 (amended).
2000 Proc. 3rd Quarter 13, 14, 88, 116, 119-135 (amended and reprinted).

Section 2. Purpose

The Universal Life Insurance (A) Task Force

The regulation would address appropriate issues of regulatory concerns, including the following:

4. The manner in which prospective purchasers of such plans are fairly and accurately appraised of the nature of such plans and the manner in which existing policyholders under such plans are informed of the nature and status of their purchase.

5. Any other legitimate regulatory concerns affecting the fair and accurate development, marketing and distribution (including replacement) of such life insurance plans; the administration of such life insurance plans; and the reasonable assurance of the financial integrity of those companies issuing such plans.

1982 Proc. II 359-360.

Section 4. Applicability and Scope

It was noted that to the extent universal life policies differ from the traditional life insurance policies, these differences should be addressed by the model regulation.

  • To the extent the existing model regulations are applicable to universal life insurance, the task force discussed how best to refer to or adopt such other regulations in the current proposal.

1983 Proc. II 627.

Section 5. Valuation

There is considerable interest in [universal life products], and a number of new varieties of plans have recently been developed.

  • With respect to universal life, the technical actuarial group saw the exposure draft prepared by the advisory committee for the first time on June 12, 1983.
  • The provisions on reserves and cash values were largely developed from work done by an American Council of Life Insurance (ACLI) task force.
  • One matter on which the group had questions was in the calculation of maximum expense allowances to be used in  calculating cash values. The group felt it might be too high in some cases.

The ACLI task force was asked to reconsider this expense allowance and either prepare a written justification or else a proposed revision.

1983 Proc. II 615.

Section 6: Valuation

A report was made on the progress of amendments to the NAIC Universal Life Insurance Model Regulation, consisting of two items: nonforfeiture and valuation.

  • The nonforfeiture provisions of the model were discussed, and with respect to the valuation section, the task force members were referred to the California draft which was  discussed by the Actuarial Task Force concerning valuation of universal life insurance plans.

1988 Proc. II 562.

  • In the alternative it was suggested that the provision be reworded to say: "The annual report shall provide notice that the policyholder may request an illustration of current and future values and benefits."
  • The insurer would look to the illustrations regulation or the disclosure regulation to determine which scale it would use.

2000 Proc. 3rd Quarter 116.

Section 8. Disclosure Requirements

The American Council of Life Insurance (ACLI) presented a paper on cost disclosure (4p) for universal life products.

  • It recommended disclosure of the difference between cost indexes based on the guaranteed and the currently illustrated premiums, death benefits, cash surrender values and endowment amounts.
  • Further, the policy summary should include a statement on the point at which the policy will expire based on the policy guarantees and the anticipated premiums shown in summary.
  • Basically, it summarized that universal life should be treated as a life insurance plan with a nonguaranteed cost element for cost disclosure purposes.

1982 Proc. I 395


Commissioner Hager of the Universal & Other Plans (A) Task Force stated that there appeared to be disclosure problems with universal life plans and that the identification of these items should be placed on the Actuarial Task Force agenda.

  • The members present agreed that the disclosure issues extended to variable life as well as universal life.
  • The main concern was that an unsophisticated buyer purchased a policy and did not know what the coverages, benefits and limitations were.
  • It was suggested that Sections 8 and 9(f) of the Universal Life Insurance Model Regulation needed considerable expansion.

It was suggested that disclosure requirements be placed in the illustrations section of the models as well as in the contract itself.

  • Some of the items identified which should be disclosed:
    • (1) what is guaranteed versus what is not;
    • (2) adequate disclosure of the fact that a premium quoted will not support the contract for the whole life if the policy is a universal life policy;
    • (3) disclosure of the guaranteed surrender values on a flexible premium policy.

1988 Proc. II 566


The Product Development (A) Task Force established a working group on identifying consumer disclosure issues to be chaired by Iowa and to include the states of California, Texas and Massachusetts.

1988 Proc. II 563


The Consumer Disclosure Issues Working Group conducted a survey of the states to determine if regulatory problems existed with these products.

  • The working group’s aim was to make these disclosures statements easier to understand and to get them into the hands of consumers early enough in the purchase process to aid in making a meaningful comparison.

The working group recommended that disclosures should be delivered at the time of application or no later than 15 days thereafter.

  • If disclosure statements were not provided until the time of policy delivery, consumers would receive an additional five-day free-look period.
  • The working group agreed to test-market these disclosure forms for readability.

1989 Proc. II 428


An amendment to Section 8 of the model regulation was adopted by the Consumer Disclosure Issues Working Group
recommending changes to the NAIC Life Insurance Disclosure Model Regulation and the Universal Life Insurance Model Regulations, as well as the Supplemental Transmittal document, and was adopted by the parent committee and the Executive committee as recommended.

  • This amendment added Appendix A – Disclosure Form to the model regulation.

1989 Proc. II 13, 23, 414, 429, 441-442


The Consumer Disclosure Issues (A) Working Group approved the Policy Information For Applicant – Universal Life Policy for inclusion in Appendix A of the Model Regulation, which was adopted by the Product Development Task Force, and was adopted by the parent committee and the Executive committee as recommended.

1990 Proc. I 6, 27, 438, 450-451, 453-463


The Life Disclosure Working Group adopted a revised Generally Recognized Expense Table (GRET), which was required by the Life Insurance Illustrations Model Regulation.

  • The recommended effective date for the new GRET is Jan. 1, 2001.
  • In addition, the working group adopted revisions to the Universal Life Insurance Model Regulation.
  • This was the last of four models that the A Committee was charged to revise to be more compatible with the Life Insurance Illustrations Model Regulation.
  • When the Optional Form of the Life Insurance Disclosure Model Regulation with Yield Index was adopted, the
    group recommended that each time the disclosure regulation was amended the alternative with the yield index should also be amended.
  • When the disclosure regulation was amended, all references to indices were deleted.
  • The working group clarified its intent with regard to the alternative with the yield index by voting to recommend its deletion from the list of official NAIC models laws.

2000 Proc. 3rd Quarter 88


The model regulation was amended to eliminate the disclosure provisions of Section 8 and Appendix 10, and instead refer to the Life Insurance Illustrations Model Regulation.

2000 Proc. 3rd Quarter 13, 14, 88, 116, 119-135

Section 10. Interest-Indexed Universal Life Insurance Policies

  • The proposed draft of “Interest-Indexed Universal Life Insurance Policy” text was submitted by Transamerica Occidental Life on behalf of the Interest-Indexed Plans Subgroup.
  • The goal of the subgroup might best be to list filing requirements for insurance departments in the regulation itself and give the rationale for and use of filings in extensive drafting comments.

1983 Proc. II 628


The Life and Actuarial Task Force recommended deletion of the Interest-Indexed Project 4D, which was adopted by the Universal and Other Plans (A) Task Force.

1988 Proc. II 562-563

E. Other

  • At Mr. Becker's request, Mr. Daniel F. Case reported on the status of the ACLI activity.
    • The ACLI had formed an actuarial working group which was aiming to develop suggestions for the technical subcommittee to assist it in developing model valuation and nonforfeiture regulations.
    • The group had already met three times, and had a two-day meeting scheduled for later in June.
  • Mr. Case outlined the general approach which the working group was taking and mentioned some of the problems to be resolved.
  • Nonforfeiture values would involve a retrospective accumulation of adjusted premiums which would be related to premiums paid and actual expense charges.
  • The working party was still working on a method to express the extra first year allowance <Expense Allowance>.
  • There were also outstanding questions regarding the interest rate and the valuation standards.
  • Mr. Case said that the group had been making good progress and that he would report further at the October 1981 meeting.

Mr. Becker said that it was very important that this matter be completed as soon as possible.

1982-1 Proc, p361