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June 14, 2005 at 08:00 PM
A high-level group of insurance regulators has approved a compromise on the sale of small life insurance policies but put off resolving a dispute about life insurance guarantee reserves.[@@]
The group, the Life Insurance and Annuities A Committee of the National Association of Insurance Commissioners, Kansas City, Mo., decided here at the NAIC’s summer meeting to add several amendments to the NAIC’s Small Face Amount Life Insurance Policies model act.
Critics of small face value policies, or policies with death benefits of less than $15,000, have complained for years that some holders of the small policies end up paying premiums that exceed the value of the death benefits.
Regulators came up with a consensus here at the summer meeting by coming up with changes that emphasize disclosure to the contract holder.
“Did everyone get what they wanted out of the situation?” asked Walter Bell, Alabama’s insurance commissioner. “No.”
But the resulting compromise is a good product, Bell said.
NAIC members must approve the proposed amendments to the small face value policy model at a “plenary,” or gathering of all NAIC members, before the amendments can take effect.
Individual states must adopt the changes to the model before the changes can affect regulation of sales and administration of small value policies.
In related news, the NAIC’s A Committee decided to pause on another contentious issue, Actuarial Guideline 38, which addresses reserving for universal life products with secondary guarantees. The A Committee received a draft model adopted by the Life and Health Actuarial Task Force. The A Committee plans to hear more discussion about the draft at a public hearing.
