Regulators tackle troubling illustration practices
April 2, 2025 by John Hilton
State insurance regulators say some life insurers are “undermining” efforts to bring illustrations in line with reality.
The Life and Annuity Illustration Subgroup aims to stop the latest illustration abuses with changes to Actuarial Guideline 49-A. Subgroup members discussed the problems March 22 during the opening day of the National Association of Insurance Commissioners’ spring meeting.
The illustration abuses were uncovered after an informal multi-state review group was formed and selected 10 companies to review in 2024, explained Ben Slutsker, director of life actuarial valuation at the Minnesota Department of Commerce.
Wink’s Moore on the Market: According to John Hilton at InsuranceNewsNet, The Life and Annuity Illustration Subgroup of the National Association of Insurance Commissioners (NAIC) plans to begin meetings on…illustration issue(s) in the coming weeks.
Why?
In short, hybrid indices.
(Think proprietary indices, multi-asset indices, engineered indices, etc.)
What is in this proposal?
An interesting amendment-
“For any Index Account where an index or indices have existed for fewer than 25 years, the historical period shall be limited to the length of its existence, or the date of inception of the index.”
I knew this was going to happen, but it has taken years to get here.
“With no history to draw from to support illustrations, insurers created ‘backtested’ hypothetical performance from proprietary index components. But critics say this results in misleading illustrations untethered from reality.”
No more backtesting.
(Does anyone else feel like this is a do-over for IUL? Remember when carriers used a period of historical performance on indexed life, to determine their illustrated rate? That was just before AG-49 took effect in 2015.)
Now, can we please get some attention to the matter of indexed annuity illustrations? -sjm
