What's Happening?
The National Association of Insurance Commissioners (NAIC) task force has recommended requiring 10 years of historical data for index illustrations, defying industry lobbyists who preferred a five-year history. This recommendation aims to address illustration irregularities
uncovered in indexed life illustrations from 13 companies. The changes to Actuarial Guideline 49-A, which limits the maximum illustrated rate insurers can use in policy projections, will now proceed to the Life Insurance and Annuities Committee for approval and then to the NAIC Executive and Plenary Committee for a vote.
Why It's Important?
The NAIC task force's recommendation for a 10-year data history is significant for the insurance industry, as it seeks to standardize index illustrations and prevent unrealistic growth assumptions. This move could enhance consumer protection by ensuring more accurate and reliable policy projections. The decision reflects ongoing efforts to address chronic issues with indexed universal life illustrations, which have been criticized for showing unrealistic returns and potentially misleading consumers.
What's Next?
The recommendation will undergo further approval processes within the NAIC, potentially leading to changes in industry practices regarding index illustrations. Insurers may need to adjust their illustration strategies to comply with the new guidelines, impacting how they market and sell indexed life products. Stakeholders, including consumer advocates and industry professionals, will be watching closely as the recommendation progresses through the approval stages.
