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Poll Results - Interest adjusted

By a very narrow margin (51.3% to 48.7%) voters in Breadwinners’ first poll have rejected the Interest-Adjusted Indices, voting to discontinue their use. In response to questions about its indices defeat, the NAIC’s press office would only say, “No comment, no comment.” Insiders report that many within this byzantine body of state insurance regulators believe that they can still save the defective indices from discontinuation by focusing first on killing the Federal government’s financial services reform’s consumer protection proposals. Leading marketers of whole life policies, however, are apparently contemplating more direct challenges because of concerns about the election ballot. One executive, though, who had in private previously stated that, “The unfathomable interest-adjusted indices are godsends that preserve, if not enhance, consumers’ ignorance,” was rumored to be wondering if the life industry’s years of exploitation of the American consumers might not just be coming to an end.

The Poll and the percentage of voters favoring each alternative are shown below.

Do you think the NAIC should discontinue using the flawed Interest-Adjusted Indices as life insurance policy comparison measurements? (If any background on this subject is needed, please see Archive Documents “The Life Industry’s Policy of Confusion” and an American Academy of Actuaries’ 1992 Memo.)

F) Emphatically, YES. How many more reasons and years are needed for insurance commissioners to fulfill their duty to provide appropriate life insurance policy disclosure? (39.7%)

E) Yes, I suppose. (11.6%)

In contrast, votes counted in favor of retaining (that is, not discontinuing) the inherently-defective tool were as follows:

A) Definitely Not, No, Never. Although the indices are inherently defective, and were declared such by the American Academy of Actuaries in 1992, the life insurance industry should never abandon its problematic practices. (20.2%)

C) No. Although research has shown that agents and consumers do not understand nor use the indices, their continued use gives everyone a good feeling that the taxes collected to pay for life insurance commissioners’ salaries are, and have always been, very well spent. (13.6%)

B) No. Although the indices cannot be used to compare different “types” of policies, they must remain in use because there can’t possibly be anything better; for if there were, the innovative and consumer-concerned life insurance industry would have provided it. (10.2%)

D) Maybe, but let me first check with a local agent and his lobbying organization, NAIFA, because they proclaim to serve the consumer’s best interest and I know that they are always in the forefront of good reform. (4.7% )

Fortunately, this poll was supervised by an independent election committee (IEC) co-chaired by Katherine Harris, Theresa LePore, and former Associate Justice Sandra Day O’Connor – all, as readers recall, supremely experienced election officials from the 2000 US Presidential election controversy. They point out that although the industry complains and may challenge the poll, citing the inclusion of such phrases as “the industry should never change its problematic practices,” in its alternative choices for voters, that such statements are accurate and appropriate relevant information. They also defend their recording of all the “Maybe” votes as supporters of the status quo, and assert that, despite the large online voter turnout, there were no voting irregularities. They also have generously suggested that the election could be re-run if that would make the industry and the NAIC really happy, saying “The country should never have to endure another crazy court battle like Florida 2000.”

Breadwinners’ founder, Brian Fechtel, is apparently also willing to have the election re-run, saying that he “understands why the IEC technically had to award votes for A, B, and C as in favor of keeping the interest adjusted indices, but that undeniably many of those votes were cast in jest.” He continued, “If they want to re-run the election, the defective indices will be defeated 99 to 1.” Late yesterday, though, Breadwinners’ founder released the letter below so that voters who favor discontinuation of the indices could encourage the NAIC: 1) to accept the outcome of the vote, and 2) to begin work on the much more serious problems of pervasive misrepresentations in the life insurance marketplace. Printed below is the letter which he encourages others to personalize and send as they desire. Stay tuned for more details.

Shown in brackets [ ] are suggested choices and/or matters about which a selection is required.

[Dear/Dearest] Insurance Commissioner:
As you are no doubt aware, the American Academy of Actuaries in 1992 recommended use of the inherently-defective Interest-Adjusted Indices be discontinued; voters have recently seconded this rejection. Please explain why your department: 1) continues to require the use of this flawed analytical tool, and 2) fails to adopt appropriate policy disclosure along the lines called for by Professor Joseph Belth,’s founder, Brian Fechtel, CFA, and others.

Given, however, that your department today is still requiring agents and consumers to use this defective tool, I would like you or one of your department associates to: 1) obtain [PICK-A-Number from 4 to 10, i.e. 6] policy illustrations for [amount of coverage, i.e $500,000] of coverage for an individual like me: [age] years old, and likely to receive coverage in the [best, second best, smoker, etc.] health class; and then 2) provide a written description of how I as a consumer should use the policies’ indices to inform and help make a possible purchase decision. Of the assortment of policies analyzed, please be sure that one of the policies is term, and another is a variable policy. Also, please explain how I might use the indices of the analyzed policies to compare with the indices of [pick a number from -3.21 to +2.97] on the in-force illustration I recently received on a policy I bought 10 years ago from my life insurer, an IMSA member that endlessly proclaims its support of fair economic competition and the golden rule. Isn’t my life insurer, and every other IMSA member, a wonderful company?

I also would like you to comment upon the Life Insurance Buyer’s Guide promulgated by the NAIC, and in particular to evaluate it with a grade-school letter grade (A to F). In doing so, please be sure to comment upon: 1) your Buyer’s Guide’s distinctions regarding types of life insurance, and 2) its omission of the tax advantages of cash-value policies, and the implications of such, and 3) any other contrasts with the draft of a new buyer’s guide advocated by www.Breadwinners

Please call me with any questions. Thank you for your and your department associates’ work on this inquiry. I look forward to your reply with [baited breath, anticipated amusement].

Your Forever [Admiring, Salary and Pension-Paying, Adjective of Your Choice] [Citizen, Subject, Slave],

PS If you’d like, please also share your thoughts regarding your fellow NAIC associate who 16 years ago proposed that life insurers improve illustrations by disclosing the policy’s annual rate of return as given by the formula: each year’s annual growth in cash-value divided by the annual premium paid in that one year. That’s right, that was the (pardon me for saying it, but it ought to be called what it is) Bozo formula the state regulator in charge of improving the disclosure of policies proposed at a May 1994 NAIC meeting. For details of such, see Regulators’ 1994 Hand-out posted in the Archives under Regulatory Incompetence at www.BreadwinnersInsurance .com. Please recall that the NAIC working group had promised to tackle the subject of policy disclosure after they fixed the industry’s sales practices of the 1980s and 1990s. With the NAIC these days currently revisiting the still unsolved illustration problem, it’s also obvious that you and your predecessors also failed to provide the promised and needed policy disclosure. Therefore, consequently, please be sure to tell your associates, that any who may now be inclined to offer ideas similar to that contained in their predecessor’s 1994 Handout, to leave their Bozo costumes, props, and ideas at home these days when they are supposed to be working for the American public.

PPS Oh, and if you find the “Bozo” comment objectionable, please understand that for decades you and your associates have not only failed to solve the fundamental disclosure problems in the life insurance marketplace, but you all have also failed to include any of the real critics with knowledge, experience, and solutions of the marketplace’s problems in your purported problem-solving working groups. In light of such, were not the seeds of the above admittedly-harsh, but unquestionably well-deserved rebuke regarding your organization’s Bozo-like performance sown by your predecessors’ own actions/inactions?


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Brian Fechtel, CFA, Agent


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