Elizabeth Cicchetti in an article “Whole Life Insurance Turns 2000” in the December 6, 2010 issue of the National Underwriter sings praise for whole life and states, “In fact, whole life insurance actually can get less expensive the longer the policyholder holds the policy because the increase in guaranteed cash values and nonguaranteed dividends often exceeds the premium after a few years.” Although a Senior Marketing Communications Specialist with Mutual Trust Life, Ms. Cicchetti clearly does not understand whole life well enough to be writing about it, much less to be a senior marketing communications specialist for a life insurer. Ms. Cicchetti’s full article is at http://www.lifeandhealthinsurancenews.com/Issues/2010/December-6-2010/Pages/Whole-Life-Insurance-Turns-2000.aspx

In some ways, this misrepresentation should not surprise anyone. The life insurance industry, after all, is built on misinformation and misrepresentations, and the regulators have never enforced the prohibitions against such. But, following the sales misconduct of the 1980s and 1990s, it is seldom that one currently sees such a blatant misrepresentation in print by a life insurer’s employee. Thank you, Ms. Cicchetti.

Contrary to Ms. Cicchetti, the annual expense of a whole life policy is not calculated by comparing the difference between the annual premium and the annual increase in cash-value. Ms. Cicchetti analysis constitutes a blatant misrepresentation. (For more information about the correct way to calculate the annual expense see page 7 of the “Policy Disclosure” article above, page 7 or examine Table 2 in the same article for an explicit example of a policy’s actual costs that proves the falsity in Ms. Cicchetti’s words.)

State insurance regulations require that information provided to consumers “shall be truthful and not misleading in fact or in implication…. and shall be sufficiently complete and clear so that it is neither misleading nor deceptive, nor has the capacity or tendency to mislead or deceive.” Misrepresenting a whole life policy’s on-going annual costs is a clear violation of this insurance regulation, although no doubt Ms. Cicchetti and Mutual Trust will try to explain their way out of this matter. Misrepresentations are an essential part the current sales practices of agents because there is nothing about whole life that justifies the excessive sales compensation that the industry and its agents have always extracted from consumers. Whole life is nothing but term insurance and a tax-advantaged side-fund. Consequently, to hide its huge sales loads agents routinely need to make misrepresentations. Despite histories of feckless enforcement, it will be interesting to see what Mutual Trust Life’s compliance department and the IL Department of Insurance will do regarding this black and white misrepresentation. Copies of this email have, of course, been sent to these parties, but feel free to forward it to your own state insurance regulator.

It will also be interesting to see what consumer organizations, plaintiff attorneys, and financial journalists do with this example of a blatant misrepresentation. While it troubles me to point out this additional fact, it must be noted that these groups, by not having provided good disclosure about policies, have allowed such misrepresentation to pervade the life insurance marketplace for generations. Fortunately, it does seem like these groups’ neglect of this pervasive problem is coming to an end, albeit slowly.

After all, Breadwinners’ Insurance has been providing the good disclosure of life insurance policies that consumers have always needed and deserved. However, until this disclosure is known about by all consumers, the multitude of misrepresentations in the life insurance marketplace will continue.

Again, Breadwinners’ Insurance is very grateful to Ms. Cicchetti and the National Underwriter Editor, Bill Coffin, for this early Christmas present and their apparently unwitting assist with Breadwinners’ Campaign to Fix the Life Insurance Industry’s inadequate disclosure and problematic sales practices.

For everyone else, there’s still time for consumer groups and financial journalists both to share-in this gift and to also provide their own gift to the Breadwinners’ Campaign to help America’s life insurance consumers.

15 Days Until 2011 – The Year in Which Good Disclosure Will Finally Come to All Life Insurance Consumers

Spread the News about Breadwinners’ Disclosure

With your help, Breadwinners’ Disclosure is changing the terribly sick life insurance industry.

Merry Christmas, Happy New Year, and Thank You, again, Ms. Cicchetti and Mr. Coffin!