Regulators Mull Moving Up Delivery Of Life Insurance Buyer’s Guide

By John Hilton

Industry proponents lost one argument and forced a delay in another decision during a conference call Tuesday as regulators debate which disclosures will be required to accompany life insurance sales.

A National Association of Insurance Commissioners' working group has accelerated efforts to complete its long-delayed “policy overview” summary to accompany life insurance sales.

The two main issues taken up by the Life Insurance Illustration Issues working group were:

Whether to combine the policy overview with the Guaranteed Premium and Benefit Patterns Summary for non-illustrated products. Industry trade groups and insurers supported this move, but regulators voted it down 4-2.
Whether to change the delivery date of the Life Insurance Buyer's Guide. The working group deferred this discussion.

A Significant Change

Changing the delivery date of the buyer's guide would be a significant change to industry practices, acknowledged working group chairman Richard Wicka, deputy chief legal counsel for the Wisconsin Office of the Commissioner of Insurance.

During a previous conference call, the group agreed to require distribution of a policy overview in tandem with the buyer's guide on all life insurance policies. That opened the door for the Center for Economic Justice to question the overall timing.

"The purpose of the policy summary is to assist the consumer as she/he shops for insurance – the same purpose of the Buyer’s Guide," CEJ said in a comment letter. "It is illogical to provide these documents only after the consumer has purchased the product.

"While it may have been reasonable at one point in time to permit delivery of the Buyer’s Guide after purchase due to logistical constraints, that is surely no longer the case and this provision is profoundly anti-consumer and must change."

That raised the ire of Michael Lovendusky, vice president and associate general counsel for the American Council of Life Insurers.

“The idea that the working group would contemplate changing the delivery date of the buyer's guide ... undercuts the possibility of succeeding in the charge it was given," he said.

In a previous call, Wicka agreed that changing the delivery date of the buyer's guide was beyond the working group's scope. He changed his opinion this week, saying the group's charge "affects the buyer's guide because currently the model calls for delivery of these things together."

Still, changing the buyer's guide delivery date "would be a pretty big sea change for companies to come into compliance with," Wicka added. "I don’t want to do something sort of off-handed without studying it."

The group will return to this debate in a future call.

'Compare' Does Not Appear

ACLI provided language to combine the policy overview with the Guaranteed Premium and Benefit Patterns Summary for non-illustrated products.

The policy overview was going to be a cover page to the summary, but the working group has moved away from that plan. Combining the two disclosures will be confusing and make it difficult for consumers to compare life insurance products, said Birny Birnbaum, CEJ executive director.

Again that raised the ire of Lovendusky.

“It was never the intent of the charge to require the creation of a template by which policies can be compared to one another," he said. "The word 'compare' does not appear in the charge to the working group.

"I mean I would think it would be common sense that it would be better for a consumer to receive information in a single document rather than have multiple pieces of paper placed in front of them and having to figure out how they relate to one another.”

Regulators representing California, Iowa, Nebraska and Tennessee voted against the ACLI language, while Missouri and Texas voted in favor of combining the disclosures.

The NAIC Summer Meeting is being held this weekend in New York City, although the Life Insurance Illustration Issues working group is not scheduled to meet. The policy overview changes should be completed by the end of the year, Wicka said.

“I do plan to have more regular and aggressive calls to see if we can get through this after the national meeting in New York,” he 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 john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.