With regard to the proposal “to address any broader issues with life illustrations,” ACLI believes that there should be a thorough analysis and evaluation process that is used to identify the underlying issues and drive the solutions, which may or may not include opening Model #582.
2022 1103 - AAA to NAIC (IULSG) - Re: Exposure for AG49-A Quick Fix Proposals (October 13, 2022), American Academy of Actuaries - 3p
2022 1115 - NAIC - LIAC - LIFE INSURANCE AND ANNUITIES (A) COMMITTEE - 15p
Fred Andersen, [MN - IULSG Chair] - gave an update on the Indexed Universal Life (IUL) Illustration (A) Subgroup. He said there have been issues with IUL illustrations over the past eight years.
Birny Birnbaum [CEJ] - said without addressing the problems with the illustration framework—projecting future returns using constant annual crediting rates, loan arbitrage, data-mined indices with made-up histories, no sequence of return risk, etc.—the state insurance regulators will be coming back again and again as insurers game each new iteration of the actuarial guideline. He said none of this even addresses the disparities between guidelines for indexed annuity illustrations and indexed life insurance illustrations, despite the similarities in product features.
Birny Birnbaum (CEJ) - said the actuaries are limited in two important ways:
1) they are limited by Model #582 because it was designed 30 years ago before indexed products existed, and it is woefully out of date; and
2) actuaries are not experts in consumer financial disclosures. He said illustrations are a consumer disclosure, and the technical expertise needed is not that of an actuary but of experts in consumer financial disclosure. He said asking the actuaries to fix problems with IUL illustrations would be like asking the Life Insurance Online Guide (A) Working Group to develop reserving requirements for indexed life insurance.
He said he urges the Committee to establish a charge to examine and re-engineer life insurance and annuity illustrations for effective consumer disclosure and consistency of principles across similar products.
2022 1118 - ACLI to NAIC (IULSG) - Re: Model Reg 582 Ideas - 2p
ACLI wishes to work with LATF and the Subgroup to develop solutions to appropriately address the regulatory concerns around IUL illustrations and to foster appropriate consumer understanding of these products.
However, it is not a simple task to determine which subsections of the Model to consider opening without a clear understanding on what concern(s) the changes are trying to solve.
Ensure illustrations:
demonstrate both the benefits and risks of product features to promote consumer understanding;
are product-neutral, so that any changes to the Model create a level playing field between products;
are adaptable to new product development to ensure that consumers are provided innovative products that adapt to current market environments.
ACLI hopes that with a greater understanding of regulator concerns, we would be better situated to provide feedback towards solutions to those concerns.
2022 1122 - AAA to NAIC (IULSG) - Re: IUL Subgroup Exposure for Model Reg 582 Ideas (October 13, 2022) - 2p
2022 1122 - Seven Companies to NAIC (IULSG) - Re: October 13 IUL Subgroup Exposure for Model Reg 582 Ideas - 2p
Allianz Life
John Hancock
Lincoln National
National Life Group
Nationwide
Pacific Life
Sammons Financial Companies
2022 1122 - Coalition of Concerned Insurance Professionals to NAIC (IULSG) - 8p
2022 1122 - Transamerica to NAIC (IULSG) - Re.: Model Reg 582 Ideas - 1p
2022 1209 - InvestmentNews - Insurer: Add full in-force life insurance illustration to regulation remix, by John Hilton - [link]