NAIC Regulators Refuse to Go Forward with Life Illustrated Rework – InsuranceNewsNet

The state insurance task force has not given the opportunity to approve the reinstatement of the overall life insurance example model law, and future efforts remain in limbo.

The Life Insurance Actuarial Task Force met last week at the Fall Meeting of the National Association of Insurance Commissioners. At the two-day meeting, a NAIC spokesperson said the panel refused to release the illustrated model of life insurance to the Parent A Committee or to another group with illustrated expertise.

In response, consumer advocate Bernie Birnbaum issued a letter to the NAIC asking them to remove the illustration issue from the LATF.

“Despite our best efforts, the LATF has never failed, never failed, failed at least three times,” Birnbaum writes. “The failure of the LATF was largely the result of its attempt to work within the Life Illustrated Model regulatory framework, which, despite being developed and adopted prior to the introduction of indexed products, underperformed insurers’ investment results. It’s not a product that reflects, it’s a product that references the outcome of the market.”

Developing the Illustrated Rule of Life was an arduous process that took years, until the NAIC adopted it in 1995. change.

This subgroup operates under the direction of LATF.

Decisions on how to proceed with the Life Illustrated Model Act will be returned to a subgroup that closed last month’s comment period on “concepts” to improve the model. A subgroup received his five comments.

“Quick fix” adoption

The subgroup passed a “quick fix” to Actuarial Guideline 49-A.

Actuarial Guideline 49 was adopted in 2015 to address indexed universal life insurance products created after the original illustrated model was adopted. The insurance company quickly got around this by offering his IUL product with multipliers and bonuses.

This led to AG 49-A in 2020 after this LATF directive. But regulators and consumer advocates say the abuse continues.

Birnbaum says the LATF should not have chosen to tweak the regulations when the problem first arose. To do so, he pointed out, would only push the problem into the future and make it a much bigger problem.

“For other investments, consumers are told that past performance is no guarantee of future performance and that backtesting is prohibited. AG49 not only allows such backtesting but also , requires backtesting,” Birnbaum wrote. It continues to inspire us to develop more complex and opaque product designs just to play games, creating unrealistic illustrated cumulative values.”

Additionally, regulators apply changes to actuarial guidelines only to new products. This creates a “strange situation where consumers who used discredited illustrations to sell insurance continue to get updated illustrations using the same discredited methodology,” said Birnbaum. writing.

The subgroup currently has no scheduled meetings.

Senior editor at InsuranceNewsNet, John Hilton has covered business and other topics in daily journalism for over 20 years.May reach John [email protected]Follow him on Twitter @INNJohnH.

© InsuranceNewsNet.com Inc. All rights reserved 2022. all rights reserved. No part of this article may be reproduced without the express written consent of InsuranceNewsNet.com.