Task Force Exposes Preferred Mortality Guidance Draft

Regulators expressed concerns about products designed to avoid nonforfeiture benefit requirements, the current inflexibility of nonforfeiture laws, and the need for clearly disclosed values upon forfeiture.

During a recent LHATF discussion, Andrew Ware, a representative for Northwestern Mutual Life Insurance Company, Milwaukee, argued that policyholders will turn to third parties to get economic value out of policies unless they can use nonforfeiture benefits to get insurers to help them realize the value.

Another Northwestern Mutual executive, William Koenig, has argued that the relatively small size of nonforfeiture benefits has contributed to the development of investor-owned life insurance and stranger-owned life insurance.

Connecticut regulator Allen Elstein asked Ware whether whole life with a premium of $30 per $1,000 and a universal life contract with premium of $20 per $1,000 should have comparable cash values or whether the product with lower premiums should have a lower cash value.

Ware says 2 contracts with the same death benefits could have different cash values, but he says it is important to recognize that one of the contracts should not have a cash value greater 0 while the other has no cash value.