By

Reno, Nev.

Strident opposition by many insurers and lukewarm support among regulators was reflected in a discussion of proposed Actuarial Guideline XYZ that would require minimum nonforfeiture benefits for universal life and variable universal life policies with secondary guarantees.

Regulators voted to expose another draft of the proposed guideline in a 7-3 vote during the spring meeting of the National Association of Insurance Commissioners here. Pennsylvania abstained. New York did not vote, but in previous discussions has said it opposes the guideline, citing 18 years of product development that would be disrupted if it was put into effect.

But Frank Dino, a life actuary with the Florida insurance department and developer of the guideline, said that protecting consumers was reason enough to advance the draft guideline.

Speaking of consumers, he said, “they wont complain because they dont know. We are protectors of consumers and it is our job to get consumers the value they are entitled to.” Even though the chassis of these policies is universal life, the secondary guarantees are long enough so that they are in effect comparable to traditional life insurance products, he added. Consequently, Dino said, these policyholders deserve the same nonforfeiture rights as traditional policyholders.

Several regulators agreed but were uncertain whether the guideline would be adopted in their states and whether their departments would support it.

Other regulators, including Larry Gorski, Illinois life actuary, said the idea of making it optional was satisfactory, given his belief nonforfeiture is rightfully a state issue.

Some regulators opposed the measure. John Hartnedy, a life actuary with the Arkansas department, says it seems clear the guideline will be fought at the state level and this will not further the uniformity among states that commissioners are seeking.

Several regulators questioned putting it in guideline rather than regulation form.

Indeed, that point was argued by William Fisher, a lawyer with MassMutual Financial Group, Springfield, Mass., for about 20 major companies that signed a letter on March 12, opposing the guideline. Fisher said as a regulation it would get due process.

He said consumers could be denied a chance to purchase products if companies stop selling them.

The cost was noted by Alex Zeid, representing the National Alliance of Life Companies in Rosemont, Ill. One company stated that the cost would be seven figures and would involve work such as IT and administrative changes and refiling of product, Zeid told regulators.

Only William Koenig, a life actuary representing Northwestern Mutual Life Insurance Company in Milwaukee, supported the guideline. He described it as an attempt to make sure a policyowners benefits that could not be forfeited approximated the value in the policy. “Maybe XYZ is not exactly the right answer, but zero is not the right answer either,” he said.

The discussion followed an announcement from the National Association of Independent Life Brokerage Agencies that it was opposing the draft guideline.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.