Joseph Belth, Ph.D., is nationally recognized as being one of the foremost authorities on the life insurance industry. For over 40 years, he has been advocating policy disclosure and changes in sales practices on behalf of the consumer. He is Professor Emeritus of Insurance in the Kelley School of Business at Indiana University (Bloomington), editor of The Insurance Forum, author of Life Insurance: A Consumer’s Handbook, and winner of numerous awards over the years for his publications. Today, Breadwinners’ Insurance would like to pay tribute to him by sharing with all of you a few of his wise words. As indicated below, these quotes are largely taken from Professor Belth’s Insurance Forum (IF) articles over the years; as the life insurance industry has never addressed its fundamental problems arising from inadequate policy disclosure, these words represent his thinking to this day.

“The life insurance market is characterized not only by an absence of reliable price information, but also by the presence of deceptive price information. In my opinion, Mr. Chairman, the deceptive sales practices found in the life insurance industry constitute a national scandal.” First in February 1973 testimony before Subcommittee on Antitrust and Monopoly of the US Senate Committee on the Judiciary, repeated in IF many times over the years, i.e., IF 8/94 issue.

“There is a saying that nature abhors a vacuum. In many areas, including prices and rates of return, the absence of disclosure is an invitation for various types of deceptive information to rush into the vacuum. ….. [Consumers] are victimized by a variety of deceptive methods for portraying the price of the protection component and the rate of return on the savings component in life insurance.” IF 5/04 issue

“The solution to the problem of deceptive practices in the life insurance industry lies in disclosure, not in paternalistic regulation…..Three broad categories of disclosure are needed. First, life insurance companies should be required to disclose to regulators and the public how policy values are determined….Second, life insurance companies should be required to send an annual report to each policyowner including information about the price per $1000 of protection in the past year and the rate or return on the savings component. ….Third, life insurance companies and agents should be required to provide a prospectus at the point of sale, and the use of sales illustrations should be discontinued….The prospectus should explain all material risks associated with the proposed policy.” IF 8/94 issue

“Efforts to eradicate deceptive practices would be viewed as troublemaking behavior. Also, the practices are so widely used and so deeply embedded in the life insurance industry that many actuaries who try to do something would be treated as troublemakers.” IF 8/94 issue

“In the late 1970s, the staff of the Federal Trade Commission concluded, after careful study, that rate of return disclosure was needed. The companies did not just stifle the staff report; they mounted a successful effort to enact federal legislation barring the Commission from investigating life insurance without a request from Congress.” IF 5/04 issue

“One company executive told me that companies could not survive disclosure of yearly prices. I disagree. I think companies would prosper if price disclosure were routine. However, if he is right and I am wrong, and if companies cannot survive price disclosure, they should leave the business. Companies that can survive only by concealing the price of their product do not deserve to survive.” IF 5/04 issue

Professor Belth in November 1970 asked the chairman of the committee on professional conduct of the Society of Actuaries, “Is it the professional responsibility of the actuary to take positive action to eradicate deceptive practices, or is it the professional responsibility of the actuary merely to refrain from endorsing deceptive practices?” Belth continued, saying “In May 1971, the chairman of the committee wrote me that, after discussion ‘at length,’ the committee was unable to answer the question. After the shock wore off, I asked a friend who was a member of the committee to tell me what [had] happened. …. [Here is] the gist of his explanation: If the committee concluded it is the professional responsibility of the actuary merely to refrain from endorsing deceptive practices, the Society would become the laughingstock of professional organizations. On the other hand, if the committee concluded it is the professional responsibility of the actuary to take positive action to eradicate deceptive practices, the Society would condemn many members to being fired by their companies.” IF 8/94 issue

“Developments during the past 40+ years suggest that rigorous disclosure requirements will never be mandated by the state insurance departments. Industry opposition to such requirements is too strong. Nor do recent developments at the federal level offer any hope for consumers.” First stated in 1984 before a House subcommittee testimony at which time Professor Belth said 20 years; in IF 5/04issue reiterated comment, saying “past 40 years” and during our discussions this past year has reiterated these words, hence this landmark quote now reads “40+ years.”

“Some of those deceptive methods are used by advocates of cash-value insurance, and some of those deceptive methods are used by advocates of term insurance…..[Until appropriate disclosure] consumers will continue to be victimized by deceptive practices…..The time has come for the life insurance industry to confront deceptive sales practices and the risks being imposed on consumers.” IF 8/94

“Some life insurance companies construct their cash-value policies so that the agent can choose the amount of the commission….The companies should not have created such a conflict of interest for their agents.” IF 1/05 issue

“I have learned that companies do not merely fail to disclosure vital information. They often take strong action to prevent the disclosure of vital information. That is why I describe the life insurance industry as built on secrecy. Today I will provide examples of efforts by companies – and state insurance regulators – to prevent disclosure of vital information…..Yearly prices are so revealing that the companies took extraordinary action to prevent disclosure of the information. For example, in the early 1980s a committee of state insurance regulators concluded, after a careful study, that price disclosure was needed. The companies did not just stifle the committee report; the individuals primarily responsible for the preparation of the report lost their jobs. There were other heavy-handed actions, including unsuccessful attempts to have me fired by Indiana University.” IF 5/04issue

A Brief Personal Thought

In the early 1990s, after I had submitted my policy disclosure approach to Northwestern and was experiencing their actuaries’ attempts to kill it, I learned of Professor Belth’s pioneering and steadfast work over the then prior 25+ years, and sent him my approach. His letters greatly encouraged me, and started our long friendship. Throughout the life insurance industry’s sales practices scandals of the 1990s, I was fortunate to have enjoyed many hearty conversations with Professor Belth. His generous sharing of his industry knowledge and professorial manner, with both its didactic and humorous overtones, made for fascinating stories. I tried to learn all I could from him. While there are issues upon which – like any two people – we disagree, I without reservation recommend the entire 400+ month issues of The Insurance Forum as mandatory reading for every life insurance executive, director, and regulator. Moreover, for everyone, Professor Belth’s pioneering work is not only a fascinating study of modern American business and regulatory history, and not only has it made it easier for all others who champion the same and similar causes, but it can also be of great inspiration to all because of Professor Belth’s noble dedication.