The National Association of Insurance Commissioners Annuity Disclosure Working Group is moving forward with efforts to tell consumers more about life and health insurance guaranty fund coverage.
The American Council of Life Insurers, Washington, opposes providing such disclosure.
Jim Mumford, chair of the working group and Iowa Insurance Division first deputy commissioner, concluded here at the spring meeting of the NAIC, San Diego, that the focus of discussion going forward should be on developing disclosure that works rather than on debating whether disclosure should be provided.
In a Jan. 21 letter to the working group, Mumford suggests drafting guidelines for more specific disclosure of guaranty fund coverage and limits while still conforming with Section 19.A of the NAIC Life and Health Insurance Guaranty Association Model Act, which prohibits persons from using the existence of guaranty associations for the purpose of sales.
“The need for additional information concerning guaranty fund coverage to policyholders when a contract is delivered…in this era when the life insurance industry is pushing for increased sales in annuities for retirement purposes, and the economic environment is volatile, is clear,” Mumford writes in the letter.
The ACLI contends that consumers should rely on the strength of an individual company rather than on the strength of guaranty association coverage.
Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, has disagreed, saying it is wrong to limit the amount of information going to consumers, as it implies that consumers are not smart enough to understand the information, and so should not have access to it.
Disclosure should be “meaningful” and educate consumers on what exactly guaranty funds are and what they do, Birnbaum says.
Mumford says the purpose of disclosure is to provide knowledge and to let the public know there is a safety net out there.
He has agreed to bring all interested parties together to discuss what disclosure methods could work.