NAIC advances greater disclosures for small-face-amount life insurance.

Following decades of intermittent debate, state regulators finally advanced an effort to establish greater disclosures to consumers of small-face-amount life insurance policies.

Having been in and out of consideration for some 25 years, the Disclosure For Small Face Amount Life Insurance Policies Model Act saw action June 12 when it was unanimously approved by the Life Insurance and Annuities Committee at the National Association of Insurance Commissioners' Summer National Meeting in Boston. The topic had topped the agenda of the committee for the previous nine months under the leadership of North Dakota Insurance Commissioner Jim Poolman.

Crafted by an appointed group of regulators, industry representatives and consumer groups, the model law represents a compromise from all who were at the table, Poolman said.

The act applies to a life insurance policy or certificate with an initial face amount of $15,000 or less, though it notes that states may use different face values.

It pertains to all group and individual life insurance policies. Among the products exempted are variable and credit life insurance and individual and group annuity contracts.

Key to the model is a provision that requires issuers to disclose prominently, on or before delivery of a policy, the length of time until the cumulative policy premiums paid may exceed the policy's face amount.

The new model law also requires insurers to disclose, on or before delivery of a policy, available alternatives in terms of the premium payment plan and product. Also included is a drafting note to states that have no "free look period" legislation in place, with language that may be adopted to allow a policyholder to cancel the policy within 10 days after delivery.