You Lose Your Guarantee.

A company can avoid the reserve and price increases which Triple-X requires by simply removing the guarantee in its policy. Therefore, if a company wants to continue selling 20 year level term policies at today's very competitive prices, it can do so by simply removing the price guarantee (warranty) which it currently gives you. If it removes the warranty, the Triple-X regulation does not apply and the company can continue to sell at today's prices.

I have asked the nation's 50 Insurance Commissioners to explain this very simple but enormous contradiction. If life companies are selling 10, 15, 20 and 30 year term policies too cheap, then why would you allow them to continue doing that after Triple-X?

As I have explained to Insurance Commissioners, almost all life insurance companies have designed their current crop of level term products to quickly comply with Triple-X by having the initial premium guarantee removed or reduced. Future policies will still be available at today's prices, it's just that you the consumer will lose your price warranty.

Virtually all insurance regulators have refused to respond to the contradiction that I have drawn to their attention. The few who have responded seem very unconcerned by your loss of this important price warranty, a warranty/guarantee which most of today's companies give you. Incidentally, companies unwilling to give that guarantee have a hard time explaining why. Most multi-company agents, such as those who purchase and use the Compulife term comparison program, recommend that consumers buy fully guaranteed level term policies.

Some regulators have suggested that life companies will be required to disclose the non-guarantee product to consumers; but what does that mean? Will state regulators require life companies to tell you that they are lying to you? Once again, the argument is that these level term policies are too cheap, that companies will go out of business. If the solution is to permit companies to sell the very same policies without a price warranty, where the company can come back later and surprise you with a price hike, isn't the government really letting life companies lie to you about their true intentions?

Why Would Regulators Do This?

The life insurance industry is not regulated by the federal government, it is regulated by each state. Most states have an Insurance Commissioner in charge of that regulation. Most Insurance Commissioners are appointed by each state's governor.

Where do governors go to find individuals knowledgeable about the insurance industry? Many appoint people who have worked in the insurance industry. While that can be asset, it's also a big liability. Most Insurance Commissioner appointments are relatively short, only for a few years. Because of this, Insurance Commissioners know that they will eventually be looking for work elsewhere. Who would hire a former Insurance Commissioner? That's right, the same insurance companies that they are now regulating will provide the best opportunities for future employment. Therefore, no forward thinking Insurance Commissioner, considering his or her self-interest and future employment with the insurance industry, wants to do anything to upset that insurance industry.

This conflict of interest is further complicated by the National Association of Insurance Commissioners. The NAIC is an association whose members are the nation's individual Insurance Commissioners. Elected state senators and representatives are not part of the NAIC.

The NAIC is in the business, among other things, of crafting legislation that they want all states to adopt. The idea of these NAIC "model regulations" is to maintain uniformity between each individual state's insurance laws. The NAIC would argue that this helps smaller states with fewer resources, to take advantage of the efforts of larger states with greater resources. It also makes it easier for companies to do business from state to state if laws are all the same.

The problem is that the NAIC has become much too powerful. It is finding more and more ways to force states to adopt its model regulations whether those states want those regulations or not. The problem with all this is the question of political accountability.

The NAIC is an organization attempting to act in a nationwide lawmaking manner, without ANY accountability to federally elected politicians. Worse, the people that the NAIC is accountable to are largely appointed, not elected, state officials. Given that those appointed officials have such close ties to the insurance companies, it is easy to see why they have difficulty acting independently, in order to protect the people that they were appointed to protect: you the consumer.

The Proof Is In the Pudding.

The allegations I have just made are serious; very serious. However, what other conclusion can someone draw when one considers an NAIC model regulation like Triple-X?

There is nothing in the Triple-X regulation which benefits you the consumer. Supporters of the regulation argue that there is, that you will be protected against life insurance company failures because the regulation will require life companies to maintain higher reserves.

But that's a fairy tale because most life insurance companies will respond to Triple-X by selling non-guaranteed level term policies, policies at the same premiums as today. If premiums don't go up, how is it that the life insurance industry will end up being financially stronger? That's impossible.

But won't knowledgeable and informed consumers buy the guaranteed premium policies? No they won't. Those saying that you have that option are failing to tell you just how much more money those guarantees will cost you.

For example, a 50 year old male non-smoker, in very good health (preferred plus), can buy $250,000 of 20 year term for as little as $525. Today, without Triple-X, that's the price of a fully guaranteed policy available in most states except New York. After Triple-X, the same premium will still be available but not guaranteed for 20 years.

By contrast, a consumer in New York state, where a form of Triple-X has already been adopted, would have to pay $752.50 for a similar product with the same 20 year guarantee.

It is my view that most people will not pay an extra $227.50 per year (an extra 43%) for the guarantee. This is particularly true when most companies will be arguing that they have no intention of raising the prices on these cheaper, non-guaranteed policies.

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