Deciphering Cash Value Life Insurance Illustrations

Katt, Peter
October 1997
Journal of Financial Planning;Oct97, Vol. 10 Issue 5, p32
Academic Journal
The article focuses on the cash value life insurance illustration abuse and the attempts being made by the National Association of Insurance Commissioners (NAIC) to curb the problem through the implementation of regulations. Cash value life insurance Illustrations are critical to the life insurance planning process because they serve as roadmaps for consumers considering the purchase of life insurance. However, life insurance policy pricing is inherently complicated, making it easy for life insurance companies to manipulate illustrations in ways that give them an apparent advantage over other companies, yet leave policy buyers vulnerable to exaggerated claims that may not materialize. The author's tentative conclusion is that the NAIC's attempt to eliminate illustration abuses is producing under whelming results. First, the regulations appear to be inadequate for protecting unsuspecting consumers from the potential losses they may incur with lapse-supported pricing. Second, the regulations apparently can be interpreted to allow companies to continue the game of illustration liar's poker by making unsupported exaggerated policy values promises.


Related Articles

  • Disclosure Is Focus Of Small Face Amount Issue. Connolly, Jim // National Underwriter / Life & Health Financial Services;9/3/2001, Vol. 105 Issue 36, p49 

    Addresses the issues to be discussed at a meeting of the National Association of Insurance Commissioners in September 2001. Focus of the meeting on the Small Face Amount Life Insurance Policies Model Act; Provisions under the draft model; How the disclosure document can provide help for...

  • BYPASS. Hintze, John // Asset Securitization Report;Aug2013, Vol. 13 Issue 8, p8 

    The article discusses the asset-backed vehicle of life insurance companies to free up capital to return to the securitization market. The move was to fund excessive reserve requirements for term life policies and universal life policies, and transfer insurer risk. However, principle-based...

  • Preserving Reserves. MORTON, HEATHER // State Legislatures;Apr2014, Vol. 40 Issue 4, p26 

    The article discusses the modernization of how reserve requirements are calculated undertaken by the National Association of Insurance Commissioners. Topics discussed include the adoption of a method to calculate life insurance policy reserves in 2009 based on certain principles, the tiered,...

  • Draft model on illustrations raises concern. Crosson, Cynthia // National Underwriter / Life & Health Financial Services;12/13/93, Vol. 97 Issue 50, p1 

    Forecasts public reactions towards the National Association of Insurance Commissioners' (NAIC) draft of a model law on life insurance policy illustrations. General opinion among the National Association of Independent Life Brokerage Agencies; American Council of Life Insurance; Established...

  • Alternative to Triple-X faces 38 questions. Connolly, Jim // National Underwriter / Life & Health Financial Services;8/31/98, Vol. 102 Issue 35, p1 

    Notes the efforts of American life insurance industry representatives to create an alternative for the Valuation of Life Insurance Policies Model or Triple-X regulation. Limitations of the Triple-X which the National Association of Insurance Commissioners (NAIC) adopted in March 1995; Proposals...

  • NAIC takes aim at illustration abuses. Crosson, Cynthia // National Underwriter / Life & Health Financial Services;9/20/93, Vol. 97 Issue 38, p1 

    Reports on the recommendation made by the National Association of Insurance Commissioners to prohibit the use of life insurance policy illustrations making projections into the future. Inappropriate use of illustrations; Suggested alternatives; Comments from The National Association of Life...

  • ACLI Draft Of Legislation to Establish Optional Federal Chartering For Life Insurers; Released For Commentary; NAIC Expresses Its Opposition.  // Insurance Advocate;4/21/2001, Vol. 112 Issue 16, p3 

    Focuses on a legislative proposal to establish optional federal chartering for life insurance companies, issued by the American Council of Life Insurers. Support of property and casualty insurers' trade associations on the proposal; Contents of the proposal; Opposition of the National...

  • Spinning Wheels. Piontek, Steve // National Underwriter / Life & Health Financial Services;5/7/2007, Vol. 111 Issue 18, p4 

    The author reflects on the process of creating model acts and regulations at the National Association of Insurance Commissioners (NAIC). He argues that although NAIC adopts to any number of model acts, it is the state legislatures who have to pass them. An overview of the debate brought by the...

  • NAIC Likely To Adopt Triple-X Revise In '99. Connolly, Jim // National Underwriter / Life & Health Financial Services;12/14/98, Vol. 102 Issue 50, p1 

    Reports on the possible adoption of the Valuation of Life Insurance Policies model regulation by the National Association of Insurance Commissioners (NAIC) in the United States. Creation of reserving requirements for life insurance products and for term insurance; Issues being discussed by...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics