NAIC Pushing For 2-Page Life Insurance Illustration Summary

A National Association of Insurance Commissioners’ working group is accepting comments until Aug. 31 on a proposed two-page “policy overview” summary to accompany life insurance illustrations.

Designed to “enhance consumer understanding,” the two-page summary proposal has been in the works for nearly three years. The Life Insurance Illustration Issues Working Group is making slow progress on the proposal, with a few issues remaining to work out.

Specifically, the American Academy of Actuaries is concerned that the summary could do more harm than good if it motivates consumers to ignore the full disclosure.

“While we understand the concern regarding the length of some current illustrations, the information is needed in order to present a complete document that shows how all the elements of a policy interact,” wrote Donna Megregian, chairperson of the AAA’s Life Illustrations Work Group.

The letter is the only one the working group received regarding the proposal. Still, there are enough concerns among members to keep the debate alive.

During its last meeting, a May 1 conference call, the group discussed three points in particular:

• Length of the summary. Working group chair Richard Wicka, deputy chief legal counsel for the Wisconsin Office of the Commissioner of Insurance, preached flexibility in case insurers felt they needed to go beyond two pages. Other members agreed that insurers should be encouraged to hold the summary to two pages, but it shouldn’t be a requirement.

• Order of information. The group discussed whether to require specific information in a specific order. A specific order will help consumers with comparisons, said Jodi Lerner, attorney for the California Insurance Department. Others noted that the group’s charge does not call for the development of a comparison tool.

“Showing components in isolation without understanding how they work and react together will not help consumers compare different products, may be misleading, and may inhibit better buying decisions,” Megregian wrote in the AAA letter.

• Risk class inclusion. The Working Group agreed that the policy overview should identify the risk class and include cross reference to the place in the policy or narrative summary where risk classifications are explained in more detail.

Once the comment period ends, the working group will likely hold another call to iron out the remaining issues. The full NAIC Fall Meeting is Nov. 15-18 in San Francisco.

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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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.