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Life Regulators Back Away From New Illustration Fight

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What You Need to Know

  • The NAIC's Life Insurance and Annuities Committee is discontinuing the Retirement Security Working Group.
  • The committee is looking for ways to reduce disparities in minorities' level of access to life insurance and annuities.
  • The committee talked about the idea of asking about COVID-19 vaccinations in life insurance applications.

Members of the Life Insurance and Annuities Committee — an arm of the National Association of Insurance Commissioners — appear to be cool to the idea of forming a Life and Annuity Illustration Reengineering Working Group.

The committee talked about the illustration working group proposal Monday, during an online session that was part of the NAIC’s spring national meeting.

An illustration is “a presentation or depiction provided to prospective or new policy owners that shows how the policy should perform under specific circumstances set out in the illustration,” according to the NAIC.

Birny Birnbum, the executive director of the Center for Economic Justice, has argued that there are inexplicable differences between the illustration rules for indexed life insurance products and indexed annuity products, even though the products tend to accumulate value in similar ways.

Birnbaum also argued that the current rules encourage life insurers to game the system, and to design investment indexes in such a way that the illustrations can minimize the impact of down markets.

Doug Ommen, the Iowa insurance commissioner, said there is too little consensus among regulators on illustration issues for a working group to have much chance of producing useful results.

“There has to be sufficient commissioner and regulator support for the project,” Ommen said.

He agrees with Birnbaum on some points, and said that Iowa is starting to implement an NAIC annuity index illustration rules update, but he noted that only four states have adopted the annuity illustration rules update.

COVID-19 and Life Insurance

Regulators at the life and annuity session also talked about the impact of COVID-19 on the life insurance purchasing and underwriting process.

Elizabeth Kelleher Dwyer, the Rhode Island insurance commissioner, and Karen Schutter, the executive director of the Interstate Insurance Product Regulation Commission (IIPRC), talked about what the IIPRC is seeing and doing in that area.

The IIPRC oversees life insurance application and other forms for 46 states.

Schutter said states decide what insurance company underwriters can do with the information on the application forms.

Life insurers cannot ask applicants to diagnose themselves, or to answer open-ended questions about what could be symptoms of COVID-19, Schutter said.

Life insurance policies already in force cannot contain coverage exclusions for specific medical conditions, such as COVID-19, Schutter said.

She reported that some life insurers want to ask about whether applicants have been vaccinated against COVID-19.

The IIPRC decided against allowing vaccine-related questions on compact-approved forms, in part because of the current limited level of consumer access to the vaccine, Schutter said.

Spring Cleaning

The Life and Annuity Committee also:

  • Agreed to dissolve the Retirement Security Working Group, as it has completed its charge on gathering information about retirement security.
  • Agreed to wind down the Annuity Suitability Working Group, after it completes some remaining tasks.
  • Talked about efforts to work with the NAIC Executive Committee’s Special Committee on Race and Insurance, and its own Accelerated Underwriting Working Group, to study disparities in minorities’ access to life and annuity products.

The Parent

The NAIC as a whole will celebrate its 150th anniversary in May. It unveiled a new logo Monday, and it released its 2020 annual report Monday.

The Kansas City, Missouri-based nonprofit organization is reporting a $17 million increase in net assets for 2020 on $117 million in revenue, compared with an $18 million increase in net assets on $113 million in revenue for 2019.

Here’s how the COVID-19 pandemic affected some of the NAIC’s revenue and expense items:

  • Meeting Revenue: Fell to $720,784, from $2.5 million.
  • Securities Valuation Services Revenue: Increased to $31 million, from $29 million.
  • Administrative Services Revenue and Licensing Fee Revenue: Increased to $21 million, from $20 million.
  • Travel Costs: Fell to $610,771, from $5 million.
  • Grant and Zone Expenses: Fell to $167,799, from $1.5 million.

(Image: NAIC)


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