Newspaper article St Louis Post-Dispatch (MO)

Redrawing Likely to Improve Insurance Policy Illustrations

Newspaper article St Louis Post-Dispatch (MO)

Redrawing Likely to Improve Insurance Policy Illustrations

Article excerpt

When you buy a life insurance policy, the agent may show you something called a policy illustration. It's a page or more of numbers, purporting to show how the policy will work over 20 to 50 years.

But these complex illustrations can easily be used to deceive. That's especially true for cash-value coverage, where you build up savings inside the policy. Your coverage may cost you much more than the numbers show.

The insurance industry is policed by state regulators, and for years most of them ignored this abuse. But in 1993, a couple of events pushed the states into action.

First, Sen. Howard Metzenbaum threatened a campaign to impose federal regulation. Then, a blitz of consumer complaints began to blot the reputations of some of the industry's major players: Metropolitan Life, John Hancock, New York Life. Finally, when the industry itself decided something ought to be done, the National Association of Insurance Commissioners (NAIC) swung into action.

Last month, an NAIC committee suggested a remedy. If adopted (and if enforced), the proposed policy-illustration rules should end the worst abuses, says life insurance consultant Glenn Daily of New York City.

In the past two years, however, Metzenbaum has retired, a states'-rights Congress has come to power and the threat of federal regulation has gone away.

Not surprisingly, that took the steam out of the NAIC's pro-consumer movement, says Kevin Hennosy, editor of an insurance regulatory newsletter, The Communique, in Kansas City.

The life insurance industry played a key role in developing the proposed policy-illustration rules. Consumer advocates, who presented the NAIC with their own ideas, were virtually ignored, says Jim Hunt of the Consumer Federation of America Insurance Group.

Originally, the consumer camp had hoped the illustrations could be designed to help you compare competing cash-value life policies. That didn't happen. Instead, the changed illustration will merely show you how a particular policy works. It's less subject to manipulation than illustrations are today. But it's still complex. You probably won't be able to understand it without the help of an insurance expert. …

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