Questions For NAIC

Questions Submitted to the NAIC to Help Facilitate Their 8 Month and
Counting Review of Two Deceptive Life Insurance Advertisements
By: R. Brian Fechtel, CFA & Agent, Breadwinners’ Insurance, May 2012

In September 2011 when I wrote articles identifying deceptive life insurance advertisements and
marketing practices by New York Life and Northwestern (Articles are in the archives and brief Executive
Summaries document my charges.), I sent copies to the 2011 NAIC’s President Susan Voss and the
NAIC’s Executive Director, Eric Nordman. My accompanying email began, “New York
Life andNorthwestern have recently run blatantly deceptive advertisements for their life insurance
products. Ads that are so deceptive, it is shocking.” I mentioned that these ads were run in leading
nationally distributed publications (i.e., The Wall Street Journal, Kiplingers’ Personal Finance,
Newsweek). I continued, stating the obviousfact (but one seemingly necessary to motivate life
insurance regulators who for decades have had a proclivity to avoid any effective marketplace
surveillance or enforcement actions by offering any excuse imaginable, regardless of how inconceivable
and unrealistic their excuse might be)-that life insurance agents routinely use and cite their insurers’
advertising in their individual sales presentations-to convey my concern that these advertisements and
practices should concern all of the 50 states’ insurance commissioners.

On October 6th, the 2011 NAIC President Susan Voss replied, “I'm having staff [her staff in Iowa
where she’s the Commissioner] review the complaint as well [I had, in response to one of her prior
emailed questions, informed her that New York’s and Wisconsin’s insurance departments had also
received copies of my articles.]I'll coordinate with NAIC and let you know what we find.”

In mid-January, having not heard from the NAIC, I followed-up with NAIC executive, Mr.
Nordman, writing, “It was good to speak with you earlier this morning, Eric. I appreciate your pledge to
bring th[ese]matter[s]…to the appropriate individuals within the NAIC so that all state regulators with
responsibility for market regulation and enforcement can evaluate such [access this matter] and render
their individual and/or collective opinions, and….[essentially take appropriate action].”

Now almost another four months later, and still without any word from the NAIC, I sent Mr.
Nordman, the new 2012 NAIC President Kevin McCarty, and the NAIC’s CEO Professor Teresa Vaughan a
letter [see Letter to NAIC in May 2012] with the following list of questions to facilitate their and their
investigators’thinking these matters. I mentioned that nearly every state has an insurance law or
regulation similar to New York State’s Insurance Regulation 219.4 which reads: “Advertisements shall be
truthful and not misleading in fact or in implication. The format and content of an advertisement of a life
insurance policy or annuity contract shall be sufficiently complete and clear so that it is neither
misleading nor deceptive, nor has the capacity or tendency to mislead or deceive. [emphasis added]”
The test is whether or not the advertisement’simpact upon an ordinary consumer, one without any
specialized insurance knowledge, is misleading, deceptive, or has the capacity or tendency to mislead or
deceive. I also mentioned that these advertisements with their material inaccuracies cannot be excused
as puffery – permissible boastful advertising such as my barber’s promise: “We Can Make You [me, little
old me] Look Like the Sexiest Man Alive.” No,they can’t; and yet because their claim is recognizable on
its face as being unrealistic, it is therefore legally permitted as puffery.

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Responses From NAIC

Selected Correspondence with NAIC Executives Subsequent to my May 2012 Letter to Them

From: Brian to NAIC’s Executive Director Eric Nordman on Monday June 18, 2012
Hi, Eric:
Hope you had a nice Father's Day weekend.
Just wanting to check-in regarding the timetable that you and your NAIC associates anticipate needing to fully respond to my May 25th letter with its questions.
Could you please let me know, as I've been asked by a few individuals and organizations I copied on the letter, the likely timetable for the NAIC to respond my letter and its concerns? Thanks.
Regards,

From: Eric Nordman to me Monday June 18, 2012
Brian:
As I am sure you realize; the NAIC does not have any direct regulatory authority. Tim Mullen and I have reached out to several state insurance regulators. We could not find one willing to take the lead on your issue at this time.
We are planning to include some of the material you have provided and some we obtained from your website as part of a study of the life insurance industry we are undertaking.
I will be in touch on this project for your input.

Eric
[Note 1: Regarding this project, the NAIC’s sister organization, the Center for Insurance Policy Research (CIPR) held a special conference in October 2012 on a variety of industry issues including policy disclosure matters.]
[Note 2: In line with Mr. Nordman’s statement that “We could not find one [state insurance regulator] willing to take the lead on your issue at this time,” the record shows that the 2012 NAIC President, the FL Commissioner of Insurance, Kevin McCarty never responded to my phone calls or emails following-up on my May 25, 2012 letter.]

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