Cash Value

  • Gary Sanders (National Association of Insurance and Financial Advisors—NAIFA) agreed that use of the term “cash value” was confusing.

2017 0217 - NAIC - LIBG WG Conference Call

  • A cash value is therefore by definition a savings account whether we choose to call it that or not. 

--   Alan Richards, EF Hutton

1980 - SOA - The Future of Permanent Life Insurance, Society of Actuaries - 28p

  • Account Value
  • Benefit-Generating Account
  • Reserve
  • SIV-Self Insurance Value
  • Robert H. Dreyer: Over the past few decades, cash values in life insurance policies have become so routine that many people have lost sight of their original purpose.
    • Instead of being viewed in the context of a policyholder's equity in case of lapse, they are being treated as policy benefits which may be an integral part of the sales presentation.
  • RALPH E. EDWARDS: I do not think that the consumer "advocate" will look at the cash value except cursorily.
    • He will try to analyze the premium. For example, he may see a $20.00 premium in the tenth policy year as splitting into $1.74 for claims, $14.75 to increase the cash value, $2.61 for the dividend, and the remainder of 90 cents for expenses.
      • This arithmetic may appear to be correct, but, if it is mathematically correct, this product should be freely available to all comers in the marketplace.
      • To the contrary, it is not; this $20.00 price is indivisibly linked to the requirement that the nine previous premiums must have been paid.
      • Thus, buried somewhere in the prior premiums was a charge for guaranteeing the right to keep the policy in force at the same premium rate. Since the eleventh-year premium has a similar status, the tenth-year premium must have in itself a similar charge. This cost will surely be overlooked by the consumer "advocate," even as I believe we have disregarded it in determining prices by the interest-adjusted method.

1972 - SOA - Transactions, Society of Actuaries - 360p

  • This creature called universal life has evolved from a combination of term insurance and a flexible premium annuity to a range of differing products with various design features.
    • Common to any of these variations is the fact that future cash values cannot be determined completely at issue.
    • Cash values (and other benefits) are produced by a formula that is specified in advance. Some of the various elements used in the formula, however, can be adjusted after issue by the insurer. 
    • We have mentioned several times that the function of the account value is to determine future benefits. 

1983 - SOA - Universal Life Valuation and Nonforfeiture: A Generalized Model, by Shane A. Chalke and Michael F. Davlin, Society of Actuaries - 72p

  • There are those who would say that while cash value life insurance may not be dead, it is at least sick, if not dying, and I think that's a disservice to the people of this country.

--  Robert E. Wilcox, Insurance Commissioner for the State of Utah, and Chairman of the Life Disclosure Working Group (NAIC)

1996 - SOA - A New Look at U.S. Nonforfeiture Regulation - 16p

  • We must understand that we no longer have any reasonable basis for making any assumptions whatever about the range within which interest rates will fluctuate.
    • Financing the squeeze by issuing commercial paper is just about the most dangerous thing a life company can do.

--  Ernest J. Moorhead (Jack) - EJM

1981 01 - SOA - Financial Hazards of the Cash Value Life Insurance Business, by EJM The Actuary, Society of Actuaries - 2p

  • The primary purpose of the policy's Cash Value is to fund the Cost of Insurance.

1999 - Dearborn Continuing Education - Suitability

  • According to the Illustration, "[c]ash value accumulation is important because it is used to pay insurance costs and other charges (monthly deductions) necessary to keep the policy in force and because it can also be withdrawn to help meet a policyowner's other financial needs. . . ." Id

2008 - Legal Case - Blumenthal v New York Life - Plaintiff's Response To Defendant's Motion For Summary Judgment And Brief In Support - Case 5:08-cv-00456-F - Document 85 - Filed 06/01/10 - Page 10 of 37

Blumenthal v New York Life - Cash Value What else is it supposed to be
  • Despite the fact that there are cash values in the thirty‐year term contract, from a consumer's viewpoint it has no savings element.
  • All of the premium is required to provide the thirty years of protection.
  • The savings element in the thirty‐year endowment is the difference in the premiums of the two contracts. (p26)

--  Paul Overberg

1973 - SOA - Price Disclosure and Cost Comparison, Society of Actuaries - 186p

  • Cash value policies differ from term insurance in three important ways.
    • First, the premiums for a cash value policy are initially much higher than for term insurance for the same amount of insurance protection.
    • Second, unlike the premiums for term insurance, cash value premiums do not go up with age, but remain the same throughout the payment period.
    • Third, these insurance policies develop cash values which increase each year.  (p3)

--  David Fix, Lead Attorney, Insurance Matters, Bureau of Consumer Protection, FTC

1979 1011/1022 - GOV (House) - Small Business Problems with Insurance - Part 1 - 1979 1011/22  - [PDF-337-GooglePlay]

  • So often in the past eight or ten years, the purpose of a cash value has been to give an agent another first-year commission.

-- W. Keith Sloan

1995 - SOA - Practical Illustrations and Nonforfeiture Values, Society of Actuaries - 14p

  • Cash values, which are the residual amounts of prefunding reserves returned to policyholders if the contracts are terminated, are secondary benefits.

--  TRG  -  Technical Resource Group, Industry, ACLI

1, NAIC Proceedings

  • And, despite the stellar performance of variable funds, in reality policyholders often allocate a large percentage of their premium to the fixed account.

--  Anne M. Katcher, Equitable

1992 - SOA - Product Management, Society of Actuaries - 28p

  • 1981 01 - SOA - Financial Hazards of the Cash Value Life Insurance Business, by EJM - Ernest J. Moorhead (Jack) - The Actuary, Society of Actuaries - 2p
  • 1989 - SOA - Cash Value Structures of the Future, Society of Actuaries - 16p
  • 2004 - AP - Universal Life Insurance - Aspects of the Cash Value Development, Martin Birkenheier - 146p

Government Hearings

1978 - GOV - Life Insurance Marketing and Cost Disclosure Report - Moss - 106p 

  • 1983 0510, 0511 and 0728 - GOV (House) - Tax Treatment of Life Insurance, Pete Stark (D-CA)  ---  [BonkNote]
    • p314 - Statement of Thomas Gregg, NALU, National Association of Life Underwriters (cka NAIFA)