REPORT OF NONFORFEITURE IMPROVEMENT WORK GROUP
Section VII The Road Ahead - Next Steps and Deliverables This report presents the WG’s development of a broad-based plan for nonforfeiture reform. It represents only the beginning of a lengthy process involving the formulation of a revised nonforfeiture law and a newly conceived Nonforfeiture Manual as well as attendant ASOPs and practice notes. Laws and/or regulations covering disclosure and suitability will need review and revision. But even before that process can begin, the WG needs critical input on the plan. The process for nonforfeiture reform cannot commence unless the proposed approach is clear and acceptable to all parties involved – regulators, industry, and consumer groups. To that end, the WG seeks input on the following items addressed in this report (in no particular order): A.
Is the GPNM an appropriate approach to establishing nonforfeiture mandates and RPNA values? o o
B.
The issue of whether cash surrender values should be mandated in life and annuity products when some threshold level of RPNA is present (Section VI) o o o
C.
o
Should the relationship between RPNA values and cash surrender values, if available, be mandated and disclosed in the policy? If the RPNA/cash surrender value relationship is not actuarially equivalent, how should the relationship be linked?
The appropriate approach to regulating the nonforfeiture basis (NFB) elements (Section V) o o o o
E.
Impact on product design and potential for reduced costs Relationship to nonforfeiture values Impact of secondary market activities
The relationship between RPNA values and cash surrender values, if available o
D.
Validity of the criteria established in the WG’s proposed framework for reform as a basis for reform Effectiveness of GPNM in satisfying the criteria set forth in the WG’s proposed framework for reform
Interaction of regulatory mandates and company flexibility Consumer protection issues Disclosure issues: to consumers and regulators Confidentiality issues
The appropriate approach to handling RPNAs that are below a threshold level (Section V)
American Academy of Actuaries
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