Wednesday, September 30, 2009

‘The 30-Day Project’ Wraps Up

This installment of comments completes ‘The 30-Day Project,’ an effort to mark Life Insurance Awareness Month by asking average Joes and Janes three questions:

--What is the first thing that you think of when someone says the word ‘life insurance?’
--What is the best thing about life insurance?
--What is the worst thing about it?

Here are the final round of comments—30 comments for the 30 days of September. I hope you have found this interesting, helpful, or maybe, just a little different. I thought it was refreshing and informative to move away from the many industry experts and just listen to the perceptions of everyday people.

Housekeeper—The money it provided when my husband died. The security it gave me in retirement. The worst thing was making payments when I worked three jobs and had eight children to take care of. But I made the payments and now I’m glad I did.

Manager of cafĂ©—Not necessary. If you have a family it might be worth it. But, I have bills and don’t make a lot.

Lawyer—Estate planning. It can make it easier to pass on money to heirs. It can be expensive to implement but not as expensive as a large estate tax bill.

Handyman—I don’t need it. The cost is a lot but my wife still wants me to get it. (After questioning.) I have a child and another one. I’ll save and that will be there if they need it.

Retiree—Passing money on. I have a son who is struggling, so I will be able to pass some money to him. The payments were sometimes hard to meet.

Crossing guard—Protection. If anything happens to me, my family will have some protection. The cost is hard.

Maintenance worker—My family. I have children and a wife who need protection. The money could be used for other things.

Poll worker-Protection; caring enough for your family; not protecting them enough.
Social worker—Protection; knowing you are doing the right thing; being fair to all my children.

Caterer—Drain. It can provide money but I need to put my resources into my business.

Office worker—Keeps things steady if someone dies. I think it at least provides something definite when other things are up in the air after a death. It can be expensive though.

Friday, September 25, 2009

NAIC Wrap Up

National Harbor, Md.

When state insurance regulators met this here this week, they accomplished quite a bit. Namely, they adopted a number of major initiatives, advanced an item on deferred tax assets which will now be taken up by the full body of the National Association of Insurance Commissioners, discussed a proposal on residential mortgage-backed securities, market and held a hearing on rating agency responsibility for the financial crisis last year. The last item is part of the process NAIC is undertaking as it considers starting its own ratings initiative.

During the executive/plenary session held on September 23, the full body of the NAIC acted several items that were part of a proposal requested by the American Council of Life Insurers, Washington, last November. ACLI had requested a package of nine items as an emergency request. The NAIC held a public hearing at the end of January 2009 and decided that while some of the items had merit, the items did not need to be advanced on an emergency basis. Consequently, it remanded the request back to appropriate working groups for further consideration.

Among the items that were part of this package and are now fully adopted by the NAIC are:
--amendments to a model regulation permitting the recognition of preferred mortality tables for use in determining minimum reserve liabilities; These amendments allow the 2001 tables to be used prior to January 2007;
--amendments for the adoption to the Valuation of Life Insurance Policies model regulation; These amendments remove restrictions on the use of X-factors. X-factors are experience determinants that the ACLI says allows companies to more accurately reflect actual mortality experience.
--adoption of amendments to the Actuarial Opinion and Memorandum Regulation;
--amendments for adoption of actuarial guideline 1c—interpretation of the calculation of the segment length with respect to the Life Insurance Policy model regulation contingent on adoption of the preferred mortality table changes; The changes are an effort to clarify Regulation Triple-X calculations to prevent technical requirements of the calculation from diminishing the impact of the other requested items.

Another item that is part of the ACLI package is the deferred tax asset request. It has just passed out of the NAIC’s “E” Committee and will now come before Executive/Plenary. The Accounting request concerned the limit on admissible DTAs following GAAP rules for DTAs instead of statutory rules. A DTA is an offset against future taxes. The item that will go before the Executive/Plenary permits increased use of that asset and allows a 3-year carryback. It also prevents DTAs from being used for determining any regulatory triggers that involve admitted assets or statutory surplus. The provision sunsets at the end of 2010 but may be revisited by regulators.

Another financial issue that is working its way through the NAIC is an ACLI request to ease capital requirements for insurers’ holdings of residential mortgage-backed securities. Ratings applied to these “AAA”-rated securities have recently been downgraded, in many cases by several notches. Consequently, the ACLI submitted a Sept. 10 request that NAIC requirements be eased. The issue revolves around whether the rating agencies properly rated them. The ACLI is proposing that an independent third party firm model RMBS losses held by insurers. The results, according to the ACLI letter, will then be applied to a formula which will be applied to determine which of the six NAIC ratings the securities should be assigned.

The issue of the reliability of ratings from rating agencies was delved in a public hearing yesterday. During that hearing, state insurance commissioners repeatedly questioned how meticulous the ratings process of the major ratings agencies.
Representatives for the ratings agencies said that ratings should be used in conjunction with other regulatory tools and that there are various types of ratings that create a broader picture of a company’s strength.

Illinois Director Michael McRaith wondered whether regulators are too reliant on ratings from the major agencies and whether sufficient resources are devoted to the structure to develop these ratings. Grace Osborn of Standard & Poor’s, New York countered that there were ample resources to ensure the robustness of these ratings.

Newly appointed New York Superintendent James Wrynn asked which ratings regulators could rely on and how credibility could be restored to the process. And Connecticut Insurance Commissioner Tom Sullivan asked how regulators can be assured that a herd mentality does not exist putting pressure on analysts to upgrade or downgrade insurers.

Producer licensing and health issues were also finalized during the Executive/Plenary session. Revised Uniform Applications for producer licensing was adopted as was amendments to the long-term care insurance model act and model regulation.

The producer licensing changes proceeded even though New York maintained that renewals should include new background checks because people’s circumstances change. Additionally, New York said that there should be four additional questions included related to: bankruptcy, delinquent taxes, inappropriate use of funds and termination for misconduct.

The changes to the Long-Term Care model are based on laws that Iowa developed on the issue to address prompt-pay and recission issues.

Thursday, September 24, 2009

Standard Valuation Law Amendments Adopted By NAIC

National Harbor, Md.
Twenty eight conference calls and nine national meetings and one final feisty verbal exchange later, amendments to the Standard Valuation Law were fully adopted by the National Association of Insurance Commissioners during its fall meeting here.

The full plenary voted for the key part of principles-based reserving, a dramatic difference from the current use of formulas to establish reserves. New York and Wisconsin opposed the motion.

At the start of the discussion in the executive committee/plenary session, Connecticut Commissioner Tom Sullivan, chair of the Life & Annuities “A” Committee, explained some of the features of the changes, noting that there would be a minimum floor, that changes would be made prospectively and that policies currently in force would not be affected. He also noted that the Valuation Manual that is scheduled to be completed in December, would hold the details to implementing the new SVL.

If the SVL were a car, the Valuation Manual is a roadmap. Or more specifically, like a GPS in which the roadmap moves as the industry moves and changes.
But in a recent conference call last month, reservations were expressed by both New York and Wisconsin about implementing a new law in which many of the details are not yet developed. Wisconsin Insurance Commissioner Sean Dilweg expressed concern over implementing a new reserving system for disability insurance and long-term care insurance when work had really only been done on life insurance reserving. He also said that the SVL should include prescribed minimums and it should not be left in the Valuation Manual. And he said that Wisconsin will not adopt the SVL for long-term care products.

Larry Bruning, chief actuary in Kansas and chair of the Life and Health Actuarial Task Force, said that there is a deterministic component in the Valuation Manual right now. And, he added that that manual can be changed if there is an issue that arises. Bruning also said that if specific product details in the manual are not ready, then the current SVL would remain in place for those products.
Dilweg offered a friendly amendment to reflect these concerns, an amendment which was defeated prior to the vote on the model to adopt the amended SVL. He said that a regulatory “guardrail" is needed to establish protections.

Sullivan said that this proposal had been worked on “since the earth cooled” and that it was time to adopt it so that it could be brought to state legislatures starting in 2010. And South Carolina Director Scott Richardson said that it was a bad precedent to question the work of so many regulators that had devoted so much time to the project.

Utah Commissioner Kent Michie urged plenary members to “vote yes. This is an extraordinary vote. It is history in the making.”

After the vote, Bruning concurred telling The Bellwether that it is one of the biggest changes since a formulaic reserving system was instituted in 1858. Bruning noted that the vote is the culmination of five years of hard work. PBR will fix a “lot of weakness in the formula-based methodology,” he said. It has not measured all asset and liability risks and with a new system, the financial solvency of the insurance industry will be strengthened.

Bruning outlined the timeline for the proposal. Once the Valuation Manual is adopted, a date that is anticipated at year end, state can bring the model to legislatures. Kansas plans to introduce a bill in 2011, he added. A total of three quarters of states need to adopt the Manual for it to become operative, he added. The model will also be an accreditation standard, so states which do not adopt it, may have trouble being reaccredited, he said.

“This means that we move into the 21 Century,” noted Barbara Lautzenheiser, a life actuary with Lautzenheiser Associates, Hartford, Conn. The changes bring us up to speed with the international community, she added.

Paul Graham, chief actuary with the American Council of Life Insurers, Washington, said that “this is a first step in a very long process. It is great to have it completed but we still need to complete the manual.” And, he continued, states need to adopt the new law, a process which will take a couple of years. At that point, there will be “big benefits to the industry and consumers alike.”

PBR more accurately reflects risk with low risk products benefiting and higher risk products will more have prices more accurately reflected. “It is a good day for everyone. Regulators will get to focus on true risks.”
But the Internal Revenue Service must still review PBR to ensure that the new reserving methodology does not change taxes for life insurance, he added.

Staff is still being put in place in the Treasury Department, so there could be a learning curve, according to Graham. But, he noted, the Valuation Manual is flexible enough to react to whatever Treasury decides.

Tuesday, September 22, 2009

Biden Argues That Insurers Can Win Too If Health Reform Is Made Law

National Harbor, Md.
Health care reform makes sense not only for the nation and for Americans but also for insurers, asserted Vice President Joe Biden during his address at the fall meeting of the National Association of Insurance Commissioners here.

Biden emphasized two points during his address: the work of insurance commissioners and their proximity to the concerns of citizens in their states and the impact of the current health care plight; and the possibility of change that would benefit the country and would create new business for health insurers. In fact, much of Biden’s speech focused on the absolute need for the nation to address the runaway cost of health care which he says is gradually overtaking the U.S. budget.

“You get the front-row seat not only in seeing how it works and doesn't work, but in being the first line of intercession, complaint, concern, asking for help,” Biden said of the role of insurance commissioners.

Biden emphasized, the current system is not working. He noted the disparity between premium increases and salary increases in the last decade, a respective 145% and 35% in Alaska; 121% and 43% in Florida; and at best a 37% gap between premium and wage increases in Michigan which he said is “being battered now as a consequence of this Great Recession.”

But he said that providing health care for Americans would not need to come at the expense of health insurers. “I want to get this clear. I want insurance companies to make money. I want insurance companies to be able to provide a return on their investment and their stockholders to benefit. I want them -- continue to do their job and make a profit. But I also want them held accountable.”

And how will they make a profit? Biden says that while “insurance companies may not be able to drop some of the most costly patients anymore, but when every American -- every American has health insurance, they will have up to tens of millions of new customers, probably in the order of 30 to 40 million new customers, a significant portion of whom are healthy and young and inexpensive to cover their cost. So the profits might not be as high per person they cover, but there will be a much larger pool of paying customers.”

And, he contended, America is being swallowed in health care costs: spending on Medicare and Medicaid, currently about 5% of GDP will be 15% by 2040; and in 30 years $1 out of every $3 Americans earn will be spent on health care compared with $1in $5 anticipated in 10 years.

Following the address, commissioners reacted to Biden’s remarks. Illinois Insurance Director Michael McRaith said that there is growing bipartisan consensus that something needs to be done on health care. Among the most common complaints his department sees are denied claims and rescinded policies, he added. When asked about challenges states face such as ERISA preemptions, McRaith said that “the enhanced involvement of states” is needed and ERISA reform should be explored in any form available including state pilot programs.

Jane Cline, West Virginia insurance commissioner and NAIC president-elect, said that the hope is for bipartisan legislation and Sandi Praeger, Kansas insurance commissioner and former NAIC president, said that regardless of the plan, she feels “obligated to speak out” on elements of any plan that she feels is “inherently good and fair” for the country. “I hope we don’t lose sight of the endgame,” she added.
Photo Courtesy of NAIC

NAIC Fall Meeting Takeaways—Day 1

National Harbor, Md.

Regulators decided on a direction for suitability of annuity products even as insurance commissioners tried to calm state legislators’ distress that the National Association of Insurance Commissioners is throwing state insurance regulatory authority to the wolves (read Congress.) Absolutely not, the NAIC is saying. State legislators seem skeptical and are saying ‘show us you’re still on the state team.’ The two issues surfaced during the first day of the NAIC fall meeting here.


Much of the discussion over the approach to suitability centered on whether a new model should be pursued or changes to the existing model accompanied by a guideline, as the American Council of Life Insurers, Washington, is suggesting. A number of regulators are saying that the time to consider a guideline is over and the train has left the station. The ACLI’s Kelly Ireland responded that the train had not left the station and that a discussion would still be valuable.

But, regulators registered their disagreement by making a motion to pursue a regulation and then adopting it. The motion happened quickly with a comment from Joe Musgrove of Arkansas expressing frustration that more effort is being put into form than content. And, a second motion passed the Suitability of Annuity Sales working group. The motion asks its NAIC parent, the Life and Annuities “A” Committee to give the group an extension on its deadline of up to a year. That motion also was adopted.

During the suitability discussion, several interesting points were made. California noted that the majority of complaints to the insurance department from California seniors over annuities have largely focused on surrender charges that are issued upon the death of the annuitant. There needs to be written guidelines to address this problem, according to California.

The latest version of the model released on Sept. 4 is simplified compared with a July 2 version and is patterned after FINRA Rule 2821. And, according to Wisconsin’s Kim Shaul, the penalties section has been revised because of concern that a single misstep could trigger a penalty. Rather, a pattern of abuse will now need to be established. And, with the new draft, an insurer is not required to review every sale but must have a system in place for such a review.

Birny Birnbaum, an NAIC funded consumer who is executive director of the Center for Economic Justice, Austin, Texas, said that a model is preferable to a guideline and said that any model should make sure that “insurers are responsive for outcomes and not just process.”

And, Ron Panneton of the National Association of Insurance Financial Advisors, Falls Church, Va., said that if the new model is put in place with an 8 hour educational requirement, annuity operations should not be shut down until the credits are earned. “NAIFA has never opposed education.” But, he noted the disruptive nature of stopping an operation until producers earned the proper credits. Wisconsin’s Shaul said that she would consider including a “grace period.”

Kim O’Brien of the National Association of Fixed Annuities, Milwaukee, urged regulators to remove the concept of investment from the sale noting how hard NAFA had worked to focus on financial objectives rather than investments.

State Regulatory Authority

A project two years in the making, the National Insurance Supervisory Commission, is angering state insurance legislators at the National Conference of Insurance Legislators, Troy, N.Y. Legislators say that in order for state regulation to remain strong, it is necessary for all state-based groups to work together. State Rep. Brian Kennedy, D-Hopkinton, R.I., said that “We have an important role and need to be involved. We don’t want to see our authority given to some commission.”

State Rep. George Keiser, R-Bismarck, N.D., asked “What is broken? The insurance industry is solvent and regulated..”

But NAIC President and New Hampshire Commissioner Roger Sevigny noted that there is an active call for some kind of change and that “we can’t ignore it. None of us can ignore it.”

However, State Rep. Robert Damron, D-Nicholasville, Ky., said, “It concerns me when the NAIC gives them an ally and breaks the solidarity states have had. If we stay united, we don’t think that Congress will run over us.”

Illinois Director Michael McRaith explained the plan, noting that it was only a proposal and said that it helped address real issues such as working on international insurance issues and creating greater uniformity.

The Commission would receive its authority from Congress, would identify appropriate topics for uniform treatment, develop and implement any standards and only as a last resort would delegate authority to the federal government.

South Carolina Insurance Director Scott Richardson told state legislators that regulators were told “be part of it [reform] or just get out of the way” by federal lawmakers. And NAIC CEO Terri Vaughan said states need to be in Washington and tell their story, which is a good one.

Both sides say that they are committed to working together as Congress gets ready to act on reform. Toward that end State Sen. Delores Kelley, Md., suggested that future discussions also include other state groups such as the National Governors Association, Washington, and the National Conference of State Legislatures, Denver.

At the opening reception, there was no clear opinion on the issue with several attendees saying that they could understand NCOIL’s anger but others saying that NAIC was taking a more pragmatic view. One wag said that NAIC should be given some credit for keeping a secret for two years.

Sunday, September 20, 2009

The 30-Day Project Sheds Light On How People View Life Insurance

Here is the third phase of The Insurance Bellwether’s 30-Day Project. The Project is done as part of Life Insurance Awareness Month. The idea is to ask the average Joe and Jane three questions about insurance to get a sense of what people and not insurance people first think about insurance.

The three questions in the order they are asked are:
--What is the first thing that comes to mind when you think about life insurance?
--What is the best thing about life insurance?
--What is the worst thing about life insurance?

Here are the responses from the latest group of folks polled by The Bellwether.

Retiree—"I worked for one for 40 years, so I guess being employed. I received 2x my salary from work and 1x when I retired, so I guess that’s what I’m worth from that. It’s all changed. When I started your agent visited you and collected premiums or my neighbors would ask me to bring in their premiums to work. That has all been lost. Now it is all done by computer and there are so many different kinds of insurance."

Real estate broker—"It’s a waste. Nothing. The worst thing is fighting among members when a person dies. When my father died, there were arguments among my brothers and sisters."

Administrator in Public Schools—What is it? Why do I need it? I’m single and have other property.

Seminarian—Death, the protection it provides your family, the expense.

Public School Teacher—"Buying a policy from an agent who had sold one to my parents.
When I wanted to cash out of the policy 5 years later, he argued against it until I insisted and threatened to speak to his supervisor. The best thing about it is the protection that it offers. The worst part is that there should be a better way to offer protection to people than having to purchase insurance."

Hot Dog Stand Owner—“We don’t know about insurance. Our family takes care of us if we need.”

Retail Clerk—The first thing is that it reminds me of my father’s death. The best thing about it is that it can provide a useful way to meet expenses if there is a death. “The worst thing is for someone my age [20s] to pay premiums. It’s just ridiculous. It doesn’t seem to make sense.”

Administrator in a local college—The first thing is the premiums you have to pay without any benefit to you. The best thing is the protection it can offer to relatives. The worst thing is paying premiums with no benefit. “I have had many types of insurance running from term to whole life. Many people just get coverage where they work.”

We'll Keep You Posted

The fall meeting of the National Association of Insurance Commissioners promises to be one of the more interesting ones in recent memory with the announcement late yesterday that Vice President Joseph Biden will address commissioners and attendees in a special session on Tuesday, Sept. 22.

The Insurance Bellwether will keep you posted on Biden's comments, health care discussions, new developments on principles-based reserving, suitability, annuities and a hearing on rating agencies. Stay tuned.

Wednesday, September 16, 2009

Rebuilding A Battered Retirement Income Plan After The Economic Storm

For many, rough economic times are knocking retirement income plans askew, leaving those approaching or in retirement with the task of repairing and rebuilding lost wealth, according to insurance and financial planning experts.

So, where should a market battered consumer start? The first rule is simply to know yourself, according to Mark Singer, a certified financial planner based in Lynn, Mass. “Know where you are, who you are and what you need,” he advises. By that, Singer says you need to know how much you will need on a monthly basis in retirement. Some do not know when they have attained their goal and are like bicyclists who just keep pedaling and pedaling, he explains. Singer works with clients to achieve that goal, using both expertise and investment platform tools from companies like Curian Capital, Denver, Colo.

The reason that this is important, Singer continues, is that once you have attained your goal, you can adjust your retirement income portfolio so that it holds investments that have less risk. This is possible because you no longer need the extra risk that comes with extra return.

Once a client understands what is really important to them and what is really needed for income, Singer says that he adds another 15-20% as a margin of error because “no one captures all the line items.” For instance, he says, a client might be looking at a gross figure rather than a net total amount of what is needed. Income taxes must be figured in as well as discretionary items such as a trip to Italy or making home improvements.

Singer also advises taking smaller monthly amounts of retirement income when you start retirement so that more of your portfolio can continue to grow.

Drew Denning, vice president-retirement services division, Principal Financial Group, Des Moines, Iowa, also strongly advises not taking too much of retirement income out of a portfolio at the start of retirement. But in order for retirees to understand this, he says that education is needed. A recent poll showed that 64% of respondents thought that an 8% or higher withdrawal rate was sustainable when the actual figure is 4-5%, Denning notes. And, he says that whatever the target withdrawal rate, you need 20-25 times that in your portfolio. So, for instance, if a retiree wanted to withdraw $1,000 annually, $20,000-$25,000 would be needed, Denning continues.

Denning says that “most are very unaware of what their financial situation actually is.” There was a gap of what retirees think they need and what they actually have that has only grown bigger with the recent financial turmoil, he adds. For example, most are not even aware of what health care costs and even if Medicare is used, there might still be $10,000-$15,000 in co-pays and premiums paid each year, Denning explains.

A solid understanding of one’s position is needed before one can even think about what financial products will help achieve a retirement goal, he continues. And many products such as certificates of deposit and immediate fixed annuities, while valuable products, are not paying good rates of interest right now, he notes.
One of the concerns with immediate annuities is that if the purchaser dies soon after the purchase, payments will cease and the family will never recover what was invested in the annuity, Denning says. But, he notes, only 7% are sold without the rider for an installment refund. Of course, he adds, that rider comes at a cost, reducing monthly payments by 5-8%.

In the high net worth market, traditionally, the major concern has been about protecting lifestyle, according to Walter Zultowski, senior vice president of research and concept development with Phoenix Companies, Hartford, Conn. But increasingly there is a shift to concerns about running out of money, he adds. That concern has grown since many retirement assets have taken a hit and been diminished, Zultowski continues.

And, interestingly enough, he notes, people do have a sense of how long they will live. People who have been asked about their life expectancies have had “uncanny ability to estimate their life expectancies to within a few years of actuarial projections.”

One of the things that happened following past recessions, Zultowski says, is that there is more product innovation to meet lessons learned. This time will be no different, he continues citing his company’s new universal life product that pays out on the death of the first spouse as an example of what is starting to surface in the market. There will also be more of a merger of elements of the insurance and investment world in future products, Zultowski predicts.

But, he continues, there is no substitute for a return to basics including maximizing a 401(k) plan when possible and periodically reviewing and rebalancing investments within that plan. Zultowski also notes, rebuilding lost wealth not happen overnight.

This article first appeared on

Monday, September 14, 2009

Enough Talk. Let’s Act On Health Care.

Much of the recent attention on health care reform has focused on Town Hall meetings, reaction to the anger reported during some of those meetings and President Obama’s address to a joint session of Congress last week.

But I think that President Obama’s remarks to a group of nurses on Sept. 10, the day following his address, really cut to the point. “…we have talked this issue to death, year after year, decade after decade. And the time for talk is winding down. The time for bickering has passed.”

And, if the time for bickering has not passed, then it is time for the nation to come to a decision. Do we really have the will and the desire to pass health care legislation? If we do, then let’s do it. If we don’t let’s accept the fact that dissension, fear or pure selfishness are too strong to fight in this country and let the matter go. The truth is maybe we have become too selfish a nation to really care what happens to those who are underinsured or not insured. If that turns out to be the case, then it is an ominous omen for where the country is heading. But, at least the nation can come to terms with that fact and move onto other issues.

Fortunately, I don’t believe that we as a nation are at that point. I think there is momentum to get the job done. But in order to tap into that momentum and will to look after all Americans, I think it is necessary to go back to our nation’s source.

As I watched President Obama’s health care address before Congress, I imagined what the 56 signers of the Declaration of Independence would have thought if they were watching the address. More specifically, I would have liked to have watched the address with the four signers who were physicians: Lyman Hall of Georgia; Josiah Bartlett and Matthew Thornton of New Hampshire; and Benjamin Rush of Philadelphia.

No doubt they would have been proud and amazed that their Declaration had resulted in the creation of the body of lawmakers on the television screen. Perhaps, they would have been a little dismayed at the lack of respect shown the President. There is a way to disagree. They respectfully but strongly did so in the Declaration when they spelled out why they were disenchanted with King George III. Saying that the President is lying is not only wrong but a sign of bad breeding. And, in a very real way it points to the deep, dangerous and intensifying partisan divisions not only on the health care issue but in the nation as a whole.

By the same token, I wonder if it was wise to chastise insurers during the President’s speech. Sure, they’ve done bad things in the past and possibly in the present and everyone likes a bad guy. But it is a little too easy to pick one scapegoat when a lot of different constituencies contributed to the current health care crisis. If coverage was wrongfully denied to people who died as a result of those denials or delays in coverage, then those companies should be tried both in the criminal and civil courts by states’ attorneys general. And, if they are found guilty, then they should not only be condemned. CEOs should be given jail time and court judgments should be imposed. And the courts should step in and establish plans to make sure that the culprits can’t do it again.

But alienating a key constituency in the health care debate will not advance the issue. America’s Health Insurance Plans, Washington, released a statement in which it states that “We agree the status quo is not sustainable” and noted that “We proposed health insurance reform to guarantee coverage to all Americans, eliminate pre-existing condition exclusions and rescissions, and no longer base premiums on a person’s health status or gender. To keep coverage as affordable as possible, these reforms must be paired with an effective coverage requirement to get everyone into the health care system.”

AHIP notes that it does not support a “government-run plan” but asserts that “the nation cannot afford to let this historic opportunity pass us by.”

The Founding Fathers would have been dismayed by the fact that it was necessary for the President to spell out why health care reform that covers everyone and prevents people from falling into the abyss of poverty is needed.

After all, they did help craft a document that says it is “self-evident” that “all men are created equal,” noting that “life” is one of the “unalienable rights.”

The President clarified the many unintentional and unfortunately deliberate attempts to misconstrue his plan. In that respect, it was a strong statesman-like speech that laid out the facts of his plan. He would like to see a public option available only for those who wanted it and you can keep the health insurance you want. And, granny, rest easy. No medical tribunal is going to put you down.

The message was clear and the outline of the plan well-defined. Where it was a little weak was on details. The President says that the plan will not put us in greater debt because there are ways to save in the current system. But, there doesn’t seem to be specifics on the savings.

Is that a death knell for the plan? I don’t think so. Did the four physician signers of the Declaration of Independence; Hall, Bartlett, Thornton and Rush have specifics on how the new government would develop and ultimately work? They might have had concepts but I doubt they had specifics. The Declaration itself is a very general document.

What they did have was a gut feeling that what they were signing onto was right and just. What they did have was the courage of their convictions and the willingness to take a leap of faith. I saw the same willingness in that speech.

I was heartened by the fact that the President still wants a public option. I think it can only help and not hurt. I was also heartened by the fact that he says he will listen to any serious proposal. The Republican response from Rep. Charles Boustany, R-La., a medical doctor, about making health insurance available across state lines, certainly is worthy of discussion although it may hurt the public option. But maybe it would be a reasonable way to ensure that Americans in areas where health insurance is not available could have affordable coverage.

Whatever the ultimate solution is, the overhaul is needed now. The situation is becoming too dire for too many Americans and we have too many other serious issues to delay this any longer.

With Congress back in session, it is time for its members to roll up their sleeves, keep the partisan politics to a minimum and remember the leap of faith that the 56 signers of the Declaration of Independence took when they signed a statement that left their future very uncertain.

And, as healers as well as Founding Fathers, the four physicians in that original group would have been as interested in healing the divisions in our country as they would be in providing health care for all.

Sunday, September 13, 2009

The 30-Day Project Continues As Part of Life Insurance Awareness Month

Last week, the Insurance Bellwether launched the 30-day project as part of Life Insurance Awareness Month. The goal is to ask 30 average Joes and Janes three questions:

--What is the first thing that comes to mind when you think of life insurance?
--What is the best thing about life insurance?
--What is the worst thing that comes to mind when you think about life insurance?

Thirty days, thirty viewpoints. Here is the second round of answers for the man and woman on the street.

Campaign worker—Expensive, “giving something to your family”, losing a person.
Hair Colorist—Death; Financial Protection; expense.
Architect—Family; comfort; the way insurance is sold—“scare tactics, talking down to [prospects], and manipulation.”
Bicyclist—Death; the protection it can give to a family, not so much people my age [mid-20s] but people my parents’ age; the expense
Bell Captain at The Standard Hotel—Money; the protection it provides to a family; “The expense is unbelievable. If you have are alive you have too much, but if you die, then you can’t have enough of it.”
Data Programmer—Monthly payments; The “Feeling that you've done the right thing by your dependents;” Monthly payments.
Editor-Literary Journal--Burial insurance; 1-Life insurance is one means of planning for the future--one's own and one's beneficiary(ies). Some policies I think can eventually be used like savings accounts--i.e., help the policy holder. I consider people who take life insurance policies stable and forward looking. 3-I'm not sure many people actually need it. Having savings--money in the bank--or solid investments (whatever those are today) might be a better way to go for most people. For example, my annuity earns great interest and will be available for my own use down the road and what's left over will go to my beneficiaries. Most life insurance policies earn little to no interest. I know for example my boss is dead set against life insurance policies--thinks they are a waste of money.
Housewife—growing older and becoming more mature and responsible; protecting your family; the process of having to go through blood tests and other requirements that slow down the process of getting more insurance.

Friday, September 11, 2009

We Honor You, We Miss You

Eight years ago today, the unspeakable happened. A perfect day with not a cloud in the sky was darkened by hate. For those lost on September 11, we honor you and miss you.

For those in our own insurance community who lost their lives, we honor you.

Wednesday, September 9, 2009

New SVL Moves Closer To Reality

Revisions to the Standard Valuation Law, or SVL in shorthand for those who have been following the issue for the last several years, moved closer to reality earlier this afternoon. The model progressed when members of the Life Insurance and Annuities “A” Committee of the National Association of Insurance Commissioners, Kansas City, Mo., passed it in an 11-1 vote. New York abstained.

The vote gives the model the two-thirds committee majority it needs under NAIC rules to be considered for full adoption as a model law rather than simply NAIC guidance.

The new SVL and an accompanying Valuation Manual are considered lynchpins to a movement that would allow more flexibility for product reserves. The Valuation Manual is the roadmap of practical, specific guidance that makes the SVL work. Flexibility is considered important because regulators said that they were continually called upon to develop new models to reflect either changing products or skirting around existing reserving requirements. The new SVL version would take a more holistic approach, looking at all the risks of an insurer and the products it sold rather than strictly using formulas to determine reserves.

The conference call discussion included reservations expressed both by the American Council of Life Insurers, Washington, as well as state insurance commissioners, but for different reasons.

John Bruins, a life actuary with the ACLI raised the first issue of making sure that the proposed law would ensure uniformity both at adoption and during its implementation. Different requirements in different states would result in companies having to run multiple actuarial scenarios, an “expensive and very time consuming process,” he explained.

But regulators including New York life actuary Bill Carmello and Connecticut Insurance Commissioner Tom Sullivan said that commissioners should be able to challenge any assumption made by a company when preparing reserving scenarios. Sullivan pointed out similar commissioner discretion in the Accounting Practices and Procedures Manual which he called “tried, true and tested.”

The discussion then addressed prescribing assumptions in the Valuation Manual if there is no company data available to create assumptions in the actuarial testing process or if the assumptions are outside company control such as estimating future interest rates. The ACLI’s Bruins asked if that would draw in other unknowns such as the choice of premium mode consumers make.

Larry Bruning, chair of the NAIC’s Life & Health Actuarial Task Force, and a Kansas life actuary, said that any “hole” could be filled by the Valuation Manual. Paul Graham, chief actuary with the ACLI, said that the Valuation Manual might ultimately catch up with a brand new product but until that point, companies would be left without guidance.

Donna Claire, who is spearheading the whole effort for the American Academy of Actuaries, Washington, said that while the Academy had some concern, it wholeheartedly supports the SVL proposal and believes that the Valuation Manual could be used to address this issue.

However, Wisconsin Insurance Commissioner Sean Dilweg expressed concern over passing a model law when the content which would be in the Valuation Manual was not yet developed. Adam Hamm, North Dakota insurance commissioner moved that the model be advanced with the condition that the Valuation Manual must be passed by the end of 2009.

Dilweg also was concerned that the proposal encompasses health, disability income and annuities as well as life insurance products. He said that it was important that the new model law have “guardrails” and expressed reservations that reserving floors were only for life insurance products. But Kansas’ Bruning explained that if the model is limited to life insurance products then it would require a change in law each time another product such as fixed annuities was added. And, in response to other regulators such as New York’s Carmello, Bruning said that the proposed model law would leave in place existing state reserving laws for products until new guidelines are put in the Valuation Manual, so there would be guidance for these products.

Wisconsin’s Dilweg said he would raise the issue of including health, long term care and disability insurance in the model at a later point in the process.

Friday, September 4, 2009

September Hath 30 Days and Life Insurance Awareness—the 30-Day Project Kicks Off

Life Insurance Awareness Month kicked off earlier this week with a message from Gov. Frank Keating, president and CEO of the American Council of Life Insurers, Washington. Keating noted that “These are difficult times. Families have seen their hopes and dreams shattered during the past year as the economy faltered and unemployment soared. Understandably, many Americans are more focused on getting through the next week than on long-term financial planning.”

But, he added, “Life insurance is the cornerstone of any financial plan. It provides financial security at the moment of greatest need. Life insurance is certainly no substitute for the loss of a breadwinner, but it can help a family withstand the financial pressure.”

The Insurance Bellwether thought it would be interesting to find out what the average guy and gal think about life insurance. Toward that end The Bellwether will kick off its 30-day project to get their gut reactions.

The Bellwether asked average people three questions in the following order:
-What is the first thing that comes to mind when they think of life insurance?
-What is the best feature of life insurance?
-What is the worst feature?

Here are six responses from the first round of interviews. Some answered the three questions while others took a stream of consciousness approach. The goal is to have several more rounds of interviews with a total of 30 or one per day.

1-Retail Clerk-Staples—Money; Money; and a person you love dying in order for you to get it.
2+3-Bake Shop—Counter person—Forensic Science and shows in which the victim is killed for insurance money; the ability to put kids through college if a parent dies; didn’t really discuss a negative.
--Counter person—“I wonder how many people think about it. I wonder if my dad has insurance. He was a life insurance salesperson a long time ago. It can provide protection.”
4-Editor in the Advertising industry—I don’t think about it.
5-Postal Mailwoman—“I don’t see anything bad about life insurance. No one is guaranteed tomorrow. I know people don’t want to pay that monthly bill but you pay other bills like rent and food. I’ve seen people who don’t have it and they’re putting money in the ground [when a love one dies.] Or there is not enough insurance to cover the expense. There’s nothing bad about it.”
6-Nurse—“I don’t really have life insurance. I get some through work and it doesn’t cost me anything. I receive 1x my salary. The good thing is that there are no health exam requirements. I don’t have kids and it is enough to bury me and leave my partner something.”

Tuesday, September 1, 2009

NAIC Says Self Assessment Shows Insurance Regulators Observe International Principles

The National Association of Insurance Commissioners, Kansas City, Mo., has completed a self-assessment to evaluate “the extent to which U.S. insurance regulatory practices “observe” international principles established by the International Association of Insurance Supervisors, Basel, Switzerland.

The self-assessment demonstrates the “many ways insurance regulation in the U.S. is absolutely consistent with international standards,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner.

The self-assessment was undertaken along with self-assessments undertaken by other U.S. financial regulators under the Financial Sector Assessment Program, which is coordinated principally by the U.S. Treasury Department. The NAIC says that “conducted worldwide, the FSAP is a joint project of the World Bank and the International Monetary Fund (IMF).” The exercise “further highlights the importance of our extensive contributions to the development of international standards at the IAIS,” said Dr. Therese (Terri) M. Vaughan, Chief Executive Officer of the NAIC.”

The self assessment is based on the following insurance core principles issued by the IAIS in October 2003:

ICP 1 Conditions for effective insurance supervision
ICP 2 Supervisory objectives
ICP 3 Supervisory authority
ICP 4 Supervisory process
ICP 5 Supervisory cooperation and information sharing
ICP 6 Licensing
ICP 7 Suitability of persons
ICP 8 Changes in control and portfolio transfers
ICP 9 Corporate governance
ICP 10 Internal control
ICP 11 Market analysis
ICP 12 Reporting to supervisors and off-site monitoring
ICP 13 On-site inspection
ICP 14 Preventive and corrective measures
ICP 15 Enforcement or sanctions
ICP 16 Winding-up & exit from the market
ICP 17 Group-wide supervision
ICP 18 Risk assessment and management
ICP 19 Insurance activity
ICP 20 Liabilities
ICP 21 Investments
ICP 22 Derivatives and similar commitments
ICP 23 Capital adequacy and solvency
ICP 24 Intermediaries
ICP 25 Consumer protection
ICP 26 Information, disclosure & transparency towards the market
ICP 27 Fraud
ICP 28 Anti-money laundering/ Combating the Financing of Terrorism.