The Life Insurance and Annuities Committee granted two time extensions today to allow state regulators to finish work on a pair of key disclosure issues.
Holding its summer meeting via Zoom call, the committee granted extensions to these two working groups:
- The Annuity Disclosure Working Group for its work to increase the time indexes must be in existence to be used in annuity illustrations from 10 to 15 years. Regulators are concerned that consumers are being misled by unrealistic indexed annuity illustrations.
- The Life Insurance Illustration Working Group for its work to develop policy summary disclosures across the various life insurance products.
The annuity disclosure group met for many calls to settle on the 15-year number. It represents a compromise between hardliners pushing for a 20-year requirement and those who wanted 10 years. But the group has a couple more issues to iron out, said Mike Yanacheak, Iowa actuarial administrator.
In particular, the working group needs to decide whether it wants to "make a recommendation to the A Committee related to whether there is a need for product approval standards for proprietary indices and whether there needs to be standards surrounding the relationship between the hedging provider and the index provider," he said.
The index illustration issue rose in importance as many insurers developed their own proprietary indices in recent years to respond to the popularity of indexed annuities with cautious clients. These indices rely on other indexes to create a hypothetical historical record of return.
Since the illustrations are ultimately relying on a mismash of indices, regulators say a longer historical record is needed to account for the full economic cycle. The past 10 years featured nothing but strong bull market returns, regulators noted.
The group should be ready to make a final recommendation to the A Committee by the next national meeting, Yanacheak said.
Life Insurance Disclosure
The life insurance group is working on policy summary disclosure documents to be delivered with the Life Insurance Buyer's Guide. Decisions remain to be made on the timing of delivery, said Richard Wicka, chief legal counsel for the Wisconsin Office of the Commissioner of Insurance.
The group is busy reviewing sample policy overview options for term life, Wicka said. One sample shows what the document would look like pre-underwriting, and one shows what it would look like after underwriting to show the differences. Comments are due on those samples by Oct. 28, Wicka said.
Once decisions are made on a term life policy overview, the group will move on the universal life and whole life, he added.
“We are making good progress and would like to request an extension so we can finish our work," Wicka said.
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]. Follow him on Twitter @INNJohnH.
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