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January 24, 2022 at 11:54 AM
What You Need to Know
- An NAIC committee formed the Life Insurance Illustrations Working Group in 2016.
- The working group chair report said states should become the laboratories for disclosure standards.
- The committee disbanded the working group and put the disclosure standards effort back in the hands of the states.
The National Association of Insurance Commissioners may have set off a race by New York and other states to develop their own life insurance policy disclosure rules.
Members of the NAIC’s Life Insurance and Annuities Committee freed states to create their own disclosure rules last month, by voting at an in-person session in San Diego to kill the committee’s Life Insurance Illustrations Working Group.
What It Means for Agents
If states move forward with their own life policy disclosure efforts, financial professionals with multi-state practices and multi-state clients could have to keep track of life policy disclosure forms and rules for multiple states.
A life insurance agent who had a licenses in California, New York and Texas, and a client with homes in Dallas, Los Angeles and New York, might have to figure out which form, or forms, to give the client, and how, instead of just having to give the client one national form.
A flurry of new state-specific life disclosure forms and rules also could be burdensome for national life insurance web brokers, which often try to sell insurance in all, or nearly all, states.
The History
The NAIC is a Kansas City, Missouri-based group for state insurance regulators. It does not set major laws and regulations directly, but states often start with NAIC “models,” or sample language, when developing their own laws and regulations.
The NAIC’s Life Insurance and Annuities Committee formed the Life Insurance Illustrations Working Group in 2016, in response to requests by regulators, insurers and consumer groups for national standards for documents that could help consumers understand life insurance policies.
In recent years, working group members had focused on creating a short life policy summary as a tool consumers could use to make sense of policy performance illustrations.
The Chair Report
Richard Wicka, a Wisconsin regulator who had chaired the working group, concluded in a review of the working group’s efforts released in the summer, he had no indication that many states saw adopting a policy summary as a priority, and that, to his knowledge, no state had policy summary rules in effect.
Wicka suggested that a top-down approach to policy summary regulation seemed inappropriate, and that states should serve as the laboratories for developing any policy summary standards, according to a copy of his report included in a San Diego meeting document packet.
