Q: Who Can Explain How Life Insurance Policies Work?

  • 2023 0321 - NAIC/Consumer Liaison Committee - 6p
    • (p3-4) - Richard Weber (Life Insurance Consumer Advocacy Center—LICAC)
    • 5. Heard a Presentation Calling Attention to the Dilemma of Current Assumption Policy Illustrations
      • Weber provided some simple graphic views of variable universal life policies and said an illustration showing a
        $5,900 annual premium with an illustrated rate of return of 10% had only an 8% probability of success of actually
        covering a policyholder until age 100.

        • Weber said consumers should buy policies based on the probability of success rather than the lowest premium. Weber said a policy with a constant illustrated rate of return of 4.4% would need an annual premium of $16,500 to reach a 99% probability of success.

Actuaries can do lots of things.  We can provide the field with a clear description of the policy and how it works.

--  Bruce E. Booker, Life of Virginia, ACLI Task Force, NAIC Advisory Group

1993 - SOA - Sales Illustrations - We Can't Life With Them, But We Can't Live Without Them!, Society of Actuaries - 20p

  • I'm here to talk to you specifically about a meeting that was held in March 2000 with the Federal Reserve at the Federal Reserve Bank in Boston.
    • As the Federal Reserve became more aware of the potential role that it might have in insurance and insurance regulation, it parceled out some of its responsibilities.
    • It gave to the Boston Bank the primary role with regard to regulation of banks and insurance.
  • That afternoon, actuaries from John Hancock came in to make a presentation on life insurance actuarial issues.
    • All of this was done in an effort to educate skilled bank regulators.

--  Robert E. Wilcox,  member of the Actuarial Standards Board, Current Former Utah Insurance Commissioner and Former Chairman of the Life Disclosure Working Group (NAIC)

2000 - SOA - Enhancing Actuarial Input at the Federal Level on Life Insurance Issues, Society of Actuaries - 20p

  • (p170) Mr. Brosnahan said: Well, the fees can cause policies to lapse. Is that a secret?
    • I mean, fees cost something. That's the point of fees. If someone puts money into their policy, there will be fees, as they know, coming out of those policies.
    • If you don't put enough premiums into your policy, over time the fees will keep decreasing the value of the policy. That's what fees do.
    • That's not a defect in the policy. That's how policies work. 
  • (p171) - The fact that we charge people fees that we have disclosed and that fees reduce the value of your policy, and if your policy keeps reducing in value, it will lapse, is not a fraud.
    • That's common sense. That's how life insurance works.

2014 0425 - LC - Walker vs Life Insurance Company of the Southwest, LSW - DOC 813 - Trial Transcript - 224p

  • Universal Life is a ratebook and more, all by itself. If you say you have Universal Life, you in fact have more of a product than you probably have in your current portfolio at the present time.

--  Thomas F. Eason

1983 - SOA - Individual Life Insurance, Society of Actuaries - 22p

  • C. Universal Life
    • From the beginning, a necessity for successful marketing of universal life has been the ability of the seller to illustrate the performance of a policy tailored (within policy limits) to the needs and resources of the prospective purchaser.
    • The agent and prospect have the ability to choose almost any pattern of benefits and premiums.
    • No longer is the sale limited to one of several fixed plans of insurance from a ratebook.  Each one is different.
    • Any system of policy illustrations will have some limitations on this flexibility. (p151)

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

  • Let's review the basic mechanics of Universal Life.
    • The first thing that has to occur is a premium payment.
      • A premium may be paid at any time and in any amount desired.
    • Whenever a premium is paid, loads are deducted from that premium.
    • The balance is added to a fund.
    • On a monthly basis, cost of insurance charges are deducted from the fund.
    • Expense charges may be deducted from the fund, especially in the early policy years, and interest is added to the fund on a monthly basis.
    • The cash value changes each month based on the net impact of the income and deduction transactions.
    • The policy does not lapse if a premium is not paid; rather, it lapses if the fund balance becomes too small to pay the next month's cost of insurance. 

--  Ben H. Mitchell, [Bonk: a consulting actuary with Tillinghast in Atlanta - Years-?]

1981 - SOA - Universal Life (RSA81V7N412), Society of Actuaries - 16p