{"id":17544,"date":"2019-11-15T16:42:02","date_gmt":"2019-11-15T21:42:02","guid":{"rendered":"https:\/\/insurancenewsnet.com\/?post_type=innarticle&p=4853841"},"modified":"2019-11-15T16:42:02","modified_gmt":"2019-11-15T21:42:02","slug":"naic-panel-splits-on-requiring-new-illustration-rules-for-old-policies","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/11\/15\/naic-panel-splits-on-requiring-new-illustration-rules-for-old-policies\/","title":{"rendered":"NAIC Panel Splits On Requiring New Illustration Rules For Old Policies"},"content":{"rendered":"
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A significant split opened up this week on applying tightened indexed universal life insurance illustration rules to in-force policies.<\/p>\n

A National Association of Insurance Commissioners’ subgroup is still working through the details, but has a mandate to clamp down on multipliers and bonuses that critics say enable insurers to get around Actuarial Guideline 49, approved in 2015.<\/p>\n

Whether it’s fair to apply the final changes to in-force illustrations produced much disagreement during an IUL Illustration Subgroup conference call this week.<\/p>\n

In late October, the Life Actuarial Task Force voted to add language tightening AG 49, leaving the details to the subgroup. The key wording is this: multipliers or other enhancements should not illustrate better than non-multiplier designs.<\/em><\/p>\n

‘Create More Confusion’<\/strong><\/p>\n

Some say different illustrations on the same product will only confuse consumers.<\/p>\n

Vincent Tsang of the Illinois Department of Insurance said clients would be confused if their agents came back with a new illustration on a policy they already bought.<\/p>\n

Birny Birnbaum, executive director of the Center for Economic Justice, said the issue has already been decided by NAIC precedent, which requires application to in-force policies.<\/p>\n

\u201cThe whole purpose of these changes is to stop what people feel are misleading illustrations,” Birnbaum said. “So under what scenario would you say \u2018Well, you\u2019ve got a misleading illustration to begin with, but we don\u2019t want to confuse you, so we\u2019re going to let the company continue to provide a misleading illustration on an ongoing basis\u2019?”<\/p>\n

In-force illustrations are more than just a sales tool, said Sheryl Moore of Moore Market Intelligence.<\/p>\n

“It\u2019s not just a tool that\u2019s used for replacement of policies; this is not just about a sales presentation,” she said. “And it\u2019s really not much about how does this product work. It\u2019s about managing the expectations of an interest-sensitive life insurance policy, and properly servicing the contract. This is a very, very important tool for managing policies that have already been sold. So knowing how to properly fund that policy is very, very important and that decision [on in-force illustrations] lies in all of your hands.\u201d<\/p>\n

The disagreement extended to insurers, with Securian and Global Atlantic submitting comments in favor of extending new illustration rules to in-force policies. The trade associations were uniformly opposed to the idea.<\/p>\n

Attorney Scott R. Harrison, who represents Lincoln Financial Group, Pacific Life and Sammons Financial Group, said clients deserve an “apples to apples comparison” when assessing how in-force policies are performing. He also pushed back against the idea of misleading illustrations.<\/p>\n

“I\u2019m certainly not aware of anything regulators have found on illustrations that are misleading,” he said. “That seems to be just an allegation that is just hanging in the air.”<\/p>\n

Nationwide offered a potential “middle ground” sought by some regulators: a “one-year phase-in” for in-force policies.<\/p>\n

The subgroup concluded a 45-minute discussion on the topic by agreeing with Chairman Fred Anderson’s plan to delay a vote on the in-force decision until the NAIC Fall Meeting in Austin Dec. 7-10.<\/p>\n

Second Issue<\/strong><\/p>\n

After LATF handed down its mandate to clamp down on multipliers and bonuses, several insurers pointed out that changes were not that simple.<\/p>\n

The proposed language “appears to allow for the continued illustration of certain benefits related to charged-for indexed features, including multipliers,” and for benefits related to buy-up indexed accounts, reads a letter from Harrison.<\/p>\n

Regulators debated with industry representatives proposed tweaks to the formulas set out by AG 49 for IUL illustrations. Several ideas were discussed as options to produce a fairer illustrated scale for IUL products.<\/p>\n

Regulators concluded with a series of topics that they will accept comment on until Nov. 25. The four topics are:<\/p>\n

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  1. Section 3.C., to address a potential concern that product enhancements with charges could be interpreted as a benchmark.<\/em>
    2. Section 4.E., to ensure relevance and consistency with Section 5 in light of changes to Section 5 and to ensure the coordination with Sections 4A and 4B to produce a clear and appropriate calculation.<\/em>
    3. Section 5B (new part of Section 5), to ensure:<\/em>
    a. Inappropriate double counting of credits or charges is avoided;<\/em>
    b. Clarity is added, including defining the new term \u201cnet\u201d in 5B(A); and<\/em>
    c. Cap buy-ups are appropriately addressed.<\/em>
    Supplemental math examples may be provided to add clarity.<\/em>
    4. Section 6B to ensure the 100 basis point loan limits is applied as intended.<\/em><\/li>\n<\/ol>\n

    Comments may be sent to Pat Allison at [email protected]<\/a> by close of business Nov. 25.<\/p>\n

    InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]<\/span><\/a>. Follow him on Twitter @INNJohnH.<\/em><\/span><\/p>\n

    \u00a9 Entire contents copyright 2019 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.<\/strong><\/span><\/p>\n<\/p><\/div>\n<\/div>\n<\/div><\/div>\n

    Read the original article at insurancenewsnet.com <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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