Automobile industry ignoring safety packages – National Consumers League

/in , , , /by

NCL Public Policy Intern Melissa Cuddington contributed to this post.

In November 22, 2004, Automotive News, the publication that covers the auto industry, ran one of my favorite editorials of all time:

“All safety related devices should become standard equipment on all vehicles. No choice. It’s not an economic decision; it’s a moral decision. When the choice becomes profit vs. lives, the decision should be simple.”

This issue is more pertinent now than ever. The National Consumers League strongly supports enhanced auto safety technologies and, like the quote above says, it’s a moral decision to make safety technologies standard equipment. Case in point: driver-assist technology, has been available for about a decade in the United States. It includes automatic breaking, lane-changing aids, and cruise control, each of which has made driving safer.

One would think that these driver-assist programs would be included in “standard safety packages,” but they are not. As such, it’s sad to read that the auto industry is doing a poor job marketing and selling these systems. According to the Wall Street Journal, salespeople are apparently not being properly trained to discuss the benefits of these safety technologies. In a recent survey done by the MIT AgeLab, only six out of 17 car sellers were able to explain the safety technologies. In fact, many car salespeople say they don’t have the knowledge or the time to explain these packages. Car sellers are not incentivized to explain these technologies because they drive up the cost of the car and take “excessive” time in the showroom. What a loss! Thirty percent of traffic accidents and fatalities could be avoided if the majority of cars had these standard safety packages, according to the Boston Consulting Group.

This lack of enthusiasm for selling the safety that exists today is ironic. Automobile manufacturers are trying to rush through Congress a bill that gives nearly carte blanche for the deployment of autonomous vehicles (AVs) with little regulation. Safety is one of the top reasons AVs are being touted by the auto industry as a means for greatly reducing auto injuries. But we are skeptical; just look how industry gives short shrift to the safety devices we have access to now!

There are notable exceptions. NCL applauds carmakers Honda Motor Co., Subaru Corporation, and Toyota Motor Corporation for their plans to include safety packages in their standard car models, such as the 2019 Subaru Ascent and the 2018 Honda Accord. These companies have also made a concerted effort to keep prices down for models featuring the safety technology. We’d like to see them and their competitors expand these features to their whole fleet.

We urge the automobile industry take a second look at the cost of these driver-assist packages that aren’t standard equipment, to train their sales force to sell these lifesaving packages, and—most importantly—to start to include these safety packages in standard car models. Consumers shouldn’t have to choose between affordability and safety. Like Automotive News said nearly 15 years ago, “All safety-related devices should become standard equipment on all vehicles.”

Vaccine-averse ‘Hotspots’: A danger to all – National Consumers League

/in , , , /by

By Melissa Cuddington, NCL public policy intern

Think that measles has been eradicated from the United States? Think again. According to a report published earlier this month by PLOS Medicine, measles is still spread by unvaccinated children and foreign visitors to the United States. This spread is seen in “hotspots,” otherwise known as areas where the risk of disease is higher because parents choose to abstain from getting their children vaccinated. Parents continue to claim non-medical exemptions for issues of philosophy, and that’s dangerous.

A recent Washington Post article shined a light on the growing problem the anti-vaccination movement is creating: 18 states still allow parents to opt their children out of school immunization requirements. These hotspots are located across the country both in urban, metropolitan locations, such as Houston, Austin, and Pittsburgh and in rural areas as well.

In many of these urban centers, too many children are being exempted from immunization requirements, making it easier for vaccine-preventable diseases to spread and infect others. The Post article notes that these urban centers have busy airports, opening up the possibility for diseases to spread to the un-vaccinated.

According to a study conducted by the Centers for Disease Control and Prevention (CDC), people who remain unvaccinated are most likely the cause of the increased occurrence of measles and other contagious diseases being spread throughout the United States. The CDC also predicts the reemergence of these diseases if parents continue to skirt vaccination requirements.

Many of these diseases from the past are easily preventable if parents get their children vaccinated at a young age. Medical research shows that if children do not receive the measles vaccination (MMR) 12 to 15 months after birth, they are at risk of exposure.

Sadly the anti-vaccination movement in the United States has been going strong. At some point, parents need to consider that the decision not to get their child vaccinated is not just personal—it’s a communal one. The choice to abstain from vaccination puts vulnerable adults and children at risk. As the research demonstrates, this decision could expose others to possibly fatal diseases, which are entirely preventable with immunization.

As a consumer advocacy organization that champions vaccinations for all who can safely be vaccinated, NCL pushes against these non-medical exemptions. It is dangerous for parents to be making decisions for their children that can have adverse effects on others. NCL encourages state and federal health officials to support laws that don’t allow personal preference to prevent children from being immunized. California’s law is a good model and would keep us all safe from totally preventable diseases.

Feeling the pressure to go paperless? – National Consumers League

/in , , , , /by

By Melissa Cuddington, NCL public policy intern

Feel forced to go digital or pay for paper bills and statements? You are not alone. Many consumers are beginning to push back against the “going paperless” trend that has become so popular among credit card and other companies that send bills to millions of consumers.

Charging for a paper bill is not a popular practice among consumers. In fact, according to a survey conduced by Toluna and Two Sides North America, 83 percent of American consumers believe that they should not be charged more as a result of opting for a paper bill. 

NCL and Consumer Action have agreed to work with “Keep Me Posted North America” (KMPNA), based out of Chicago, and yes supported by the paper industry — to raise these concerns. We happen to agree that preserving consumer choice when it comes to choosing what type of bill you receive is important. Keep Me Posted is working in the United Kingdom, Australia, and Europe. 

This specific issue is of significant importance when it comes to the work that NCL does on behalf of consumers and promoting their best interests in the marketplace. The campaign is currently working to represent more vulnerable consumers: seniors, low-income populations, the disabled, and those on Indian Reservations and in rural areas who may not have access to broadband. Charging them $3.50 or more because they choose a paper bill is just plain wrong. We believe anyone who chooses a paper bill should not have to pay for it. 

This consumer issue also has relevance to the increasing occurrence of digital fraud in the United States. According to a 2017 survey done by the Competition Bureau in Canada, digital fraud is increasing at a rapid rate. From 2011 to 2016, digital fraud increased significantly from $4.95 billion to $7.95 billion. This paperless trend is increasing the likelihood that consumers are the victims of telemarketing and Internet fraud. 

It is important that consumers, especially elders and those in low-income and rural areas have the option to receive a paper bill without incurring additional costs. For many Americans, $3.50 x 12 months is extra money they don’t have — and multiply times several bills and it really adds up. Additionally, the option of receiving a paper bill is seen as a more convenient and secure form of payment. In fact, 78 percent of people keep hard copies of important documents at home, because they believe it is the safest and most secure way to store their information (Two Sides North America, 2017). 

We believe this is a good coalition and one that will push hard to preserve consumer choice and do away with the odious practice of charging consumers who can least afford it for the convenience of a paper bill.

The role of technology in meeting consumer demands for product info – National Consumers League

/in , , , , , , , /by

Entering the grocery store, more than 40,000 products are right at your fingertips. As our Food Policy Fellow Haley Swartz has written about previously, choice overload and the “tyranny of too much” are increasingly common for consumers in grocery store aisles.

In an age when nutrition, health, and product safety are major consumer priorities, it becomes increasingly important to know what are in the items you purchase, and how they compare to the many other options on the grocery shelf.

Transparency itself is in high demand, as some have even called it the must-have ingredient for successful food companies in the modern era. Substantial consumer research data also indicates consumer demand for industry transparency, particularly in food and beverage manufacturing. The *2016 Label Insight Food Revolution Study found that 71 percent of consumers believed product transparency influences their purchasing decisions at the grocery store. A July 2017 survey found even more striking results, that 70 percent of purchases were influenced by transparency content.

A more recent survey from May 2018 found that if consumers were provided with additional information about a product, 80 percent said they would be more likely to buy it. In fact, more than two-thirds of respondents said that their interest about the information on product labels has increased over just the past two years.

Shoppers across the country are hungry for detailed information about what is in a product, why it is there, how it is produced, and what impact it has on the environment and their health. This call for more product information could be a result of the increasing complexity of food manufacturing, occurrence of allergies in the United States, and heightened awareness about the effect food has on our health.

A variety of tools aim to help anxious consumers wade through the noise to find the information they seek. But product packaging is becoming increasingly complex, enough so that some have called it a “competitive piece of real estate.” Only some of the information consumers want can be available directly in sight during grocery shopping experiences or when they are at home making out their shopping lists.

One tool that answers this question is SmartLabel, a digital disclosure tool which makes more information than can ever fit on a label available to consumers. SmartLabel works using a smartphone to scan barcodes or QR codes on food, beverages, personal care, and household products in the grocery store. Once the barcode is scanned, a SmartLabel website page provides detailed information about a range of things: ingredients, nutritional facts, allergens, usage instructions, third-party certifications, such as Kosher, and other information such as whether a food contains genetically modified organisms (GMOs). The information can also be found by going to www.smartlabel.org on a computer while you’re at home.

As of June 2018, SmartLabel is being used on nearly 28,000 food, beverage, personal care and household products in grocery stores, with many more products on the way.

The National Consumers League food policy team applauds the grocery manufacturers and retailing industry for responding to consumer demand and working to create a way for consumers to find more transparent information about the products they are purchasing. We hope that the industry will continue to roll out similar initiatives that promote the best interests of consumers and respond to demand in the marketplace.

*Links are no longer active as the original sources have removed the content, sometimes due to federal website changes or restructurings

 

Throwing away the stigma about frozen foods – National Consumers League

/in , , , /by

By NCL intern Melissa Cuddington

Over the last decade, an influx of farmer’s markets and organic certified products has accompanied increased demand for fresh food and healthy living among American consumers. This trend is partly responsible for the stigma surrounding frozen food in the grocery store as always second-best to fresh foods.

This movement towards organic, local, and fresh products has overshadowed consumers looking for more affordable, healthy, and convenient options at mealtimes. With a significant 43 percent of millennials buying frozen foods last year, this sector of the food industry is worth looking at in depth.

According to the Centers for Disease Control and Prevention, only 10 percent of Americans consume the recommended daily amount of vegetables. This under-consumption of a crucial food group high in vitamins and minerals has given the frozen food industry a much needed boost to re-brand its products, shifting the focus to taste and nutrition.

According to a Food Dive article, increasing consumer interest in frozen foods has coincided with “quick-freeze technology” becoming more commonplace among food manufacturers and retailers. A “quick freezer” is a specialized product that decreases the amount of freezing time, while also increasing production. This new technology is more effective at “keeping nutrients and flavor in the products,” making it a more enjoyable consumer experience.

This improved technology, along with the industry responding to consumer calls for increased convenience and nutrition has led to an uptick in the frozen food market share. According to Food Dive, frozen foods are seeing an increase in sales, with category volume growth up 1 percent from the 12 weeks ending March 10 (RBC Capital Markets).

According to a recent Washington Post article, frozen food manufacturers have increasingly produced and marketed vegetables such as cauliflower and spiralized veggies, both of which are healthy, low-calorie alternatives to carb-rich, much-loved foods such as pasta and potatoes. Not to mention the fact that frozen food is more affordable and convenient when it comes to putting together a healthy meal. Cauliflower provides as a good point of comparison seeing that it has become increasingly popular among consumers at the grocery store. For example, 10 oz. of fresh, organic cauliflower from Kroger costs $3.49, compared to 12 oz. of “meal-ready,” frozen cauliflower for $1.19.  

At the heart of NCL’s food policy mission is the belief that Americans deserve a safe, nutritious, and abundant food supply. This mission includes advocating for access to healthy food at reasonable prices. The nutritious and healthy products that have been developed recently by the frozen food industry provide ample opportunity for consumers to properly nourish their families.

It is about time that American consumers do-away with the negative stigma surrounding frozen foods, seeing that many of these new products are just as healthy, nutritious and significantly more convenient than fresh food – just as millennials are increasingly demanding available frozen food products in grocery stores.

Melissa recently graduated with a Political Science & International Studies degree from Rhodes College in Memphis, Tennessee. She is interning at NCL for the summer before attending law school in the fall.

High school students shocked at waste uncovered during cafeteria food waste audits – National Consumers League

/in , , /by

“Schools are a place of learning. The cafeteria should be too!”

I’m willing to guess that if you ask almost any student their favorite school period, the resounding answer will be “lunch!” My memories of school lunch involve scarfing down a peanut butter sandwich and quickly catching up with friends before our 30 minutes were up. The cafeteria is hectic, lines are long, and many students rush through their meals in order to preserve time to socialize.  So too often, a hasty lunch period leaves trash bins overflowing with half-eaten sandwiches and other barely touched food items.

Food waste in American schools is a major problem. Studies have found that U.S. schools waste a total of about $1.2 billion annually. There are many theories as to why schools produce so much food waste, but in order to really identify the root causes, we have to get our hands dirty. And who better to dig into a messy issue than energetic high school students?

In the spring of 2017, students participating in LifeSmarts, NCL’s signature consumer literacy program, were given the unique challenge of conducting a food waste audit in their school cafeterias. Throughout the 2016–2017 academic year, LifeSmarts students studied the impacts of food waste that infiltrate almost every aspect of consumers’ lives. Students learned about the humanitarian and environmental impact of food waste. Having this background knowledge helped the students contextualize the auditing challenge within the discourse of the national and global food waste problem.

The terms of the challenge required students to conduct one audit in their cafeteria during one lunch period. Students worked with their peers to separate waste into five separate bins: unopened food, organic waste, liquid waste, recycling, and landfill waste. Students recorded the weight of each bin and answered a series of data-related and critical thinking questions, which gave them an opportunity to connect their real-life results with the national and global impacts of food waste.

Students’ reactions were diverse, and their suggestions inform insightful structural and policy solutions for preventing and reducing food waste in schools and communities.

One student shared:

“Before the food audit, we predicted that the amount of food wasted would peak at around 70 percent of the total weight of food received, however when we combined the total weight of food thrown away and the unserved cafeteria food we were astonished to find that the true amount of food wasted was around 85 percent.“

Some students went an extra step to try to understand why food was being thrown out:

“Additionally, we were interested in evaluating the variety, amount, and nutrition within the available choices and determine how healthy students are eating at our school. This data will be shared with the food distributer for our high school as well as the School Committee.”

Students were also confronted with limitations from their school board:

“Unopened food cannot be shared, saved, or removed from the school per BOE directives.”

“Prepared cafeteria foods that were untouched had to be disposed of as food waste.”

As students became aware of the issue, they presented next steps for increasing efforts to reduce waste:

“Our LifeSmarts Team could encourage the administration to make a student lunch advisory board to review the lunches and see which meals students are reluctant to consume.”

One of the most striking findings from the audit challenge is the combined metrics of waste generated.

Instead of throwing away unopened food, it could have been recovered or donated. The potential for food rescue is detailed in the table below. Amounts were calculated using Food Rescue’s conversion tool.

Items rescued 2,444
Meals rescued 488
Pounds of CO2e rescued (the amount of carbon dioxide which would have the equivalent global warming impact) 305.5

The feedback from students who completed this challenge demonstrates the value in conducting food waste audits. Many students expressed interest in conducting more audits to dig deeper into the issue. Others were energized to move forward with engaging community members and school administrators to experiment with new solutions.

In the 2017–2018 academic year, LifeSmarts students will build on the momentum from the first audit challenge and test strategies for reducing waste in their cafeterias. Students will be encouraged to run longer audits, implement solutions, and conduct a second series of audits to measure their success. By collaborating with school administrators, food service workers, and community partners, students will navigate our complex food system, providing opportunities for solution-making from the ground up.

High school students shocked at waste uncovered during cafeteria food waste audits

/in , , , , /by

I’m willing to guess that if you ask almost any student their favorite school period, the resounding answer will be “lunch!” My memories of school lunch involve scarfing down a peanut butter sandwich and quickly catching up with friends before our 30 minutes were up.

Read more

The failure of the AHCA is a victory for the American people – National Consumers League

/in , , /by

j_johnson92.jpgSpotlight on Health Care Series, Part 2: As America’s health care system is facing uncertainty, NCL staff is exploring the topic in a new weekly blog series.

Ding dong, the bill is dead! Democrats, health advocates, patients, and consumers across the country are rejoicing after the GOP’s first attempt to repeal and replace major pieces of the Affordable Care Act (ACA) crashed and burned. Republicans ultimately could not coalesce around House Speaker Paul Ryan’s (R-WI) American Health Care Act (AHCA) and, in a stunning turn of events, the bill was pulled from the House floor without a vote last Friday.While inability to build a solid block of support for the AHCA in Congress became painfully obvious over time, the American people made their disdain of the bill apparent from the start. In the weeks following its introduction, citizens from every corner of the nation fervently expressed their disgust with the attack being waged on their health care. By the time the would-be vote was to have taken place, the AHCA had a meager 17 percent public approval rating, according to a Quinnipiac poll. Though dismal, this figure is hardly surprising, as the bill did nothing to improve access to care or quality of coverage for a clear majority of Americans – and, in many cases, the bill would have left many worse off than before the ACA.

The AHCA touted several policy changes that would have undoubtedly wreaked havoc on our health care system. Paramount was the spending cap (read: MASSIVE CUT) on Medicaid, the defunding of Planned Parenthood, an exponential premium increase for older Americans, a cost shift from the federal government to states and their citizens, and a general rationing and reduction of care to cover massive tax cuts for the wealthy. Arguably, one of the bill’s most odious aspects was the elimination of the essential health benefits – a measure put on the table in a last-ditch effort to get the unyielding, far-right, so-called “Freedom Caucus” block of the House on board. The essential health benefits are 10 services the ACA requires all plans to cover, including maternity and newborn care, ambulatory services, preventive and wellness services, and substance use treatment that can address issues such as the opioid epidemic ravaging communities across the country. Women of child-bearing age would have experienced significantly higher health care costs due to the elimination of maternity care and contraception from the standard benefits package – and they would either have considerably higher premiums than their male counterparts or be forced to pay for their maternity care or contraceptive methods out-of-pocket.

In addition, the AHCA would have effectively gutted consumer health protections, particularly for patients with pre-existing conditions, by eliminating out-of-pocket caps and reinstating lifetime coverage limits. In the long run, adequate care would be far beyond the reach of many Americans who would be left with bare-bones coverage and a higher cost burden. What is worse, by 2026, 24 million Americans would lose their coverage altogether. Americans heard that message loud and clear and they didn’t like what they heard.

While we can breathe a sigh of relief that the ACA is still the law of the land, NCL is among the many groups that agree that the ACA needs some tweaks to make it work better for all Americans. Now more than ever, a bipartisan approach to bringing affordable care and coverage to ALL Americans is not only desired, but essential. Rather than trying to undermine the ACA, Republicans and Democrats should embrace this opportunity to work together to come up with solutions that address the current insufficiencies in health care and make our system one that works for everyone.

The defeat of the AHCA is a big victory for the American people. The persistence and hard work of everyday Americans who spoke up, who called their members of Congress, who attended rallies, wrote to their local papers, and used social media ultimately made the difference. The National Consumers League, which since our inception in 1899 has spoken up for consumers and supported health insurance for all Americans, is proud to have stood alongside our colleagues in the consumer and public health communities in this battle to defend our care and oppose policies that would send us backward. We will continue to fight to protect the ACA, preserve consumer health protections, and argue that it is good for the economy and good for America’s future if all of us have access to health care coverage.

The Affordable Care Act is not harming the job market – National Consumers League

/in , , /by

karinb.jpgDespite dire predictions to the contrary by Obamacare opponents, three recent studies have found that the Affordable Care Act (ACA) hasn’t hurt the labor market. Critics claimed massive numbers of workers would be moved from full-time to part-time jobs to avoid the cost of the employer mandate on health insurance. Critics also warned that people might choose to work less because they could either get health insurance on the exchanges or qualify under expanded Medicaid coverage.None of those scenarios is playing out. There’s no significant increase in part-time jobs, nor significant shifts in employment patterns in states with expanded Medicaid programs. The Agency for Healthcare Research and Quality data shows no increase in the likelihood of working part-time after the employer coverage mandate went into effect in 2015. On Medicaid expansion, while one of the studies published in Health Affairs found that people were about 0.6 percentage points more likely to leave a job in the states that expanded Medicaid eligibility to 138 percent of the Federal Poverty Level, the difference is not statistically significant. Not only that, but we now have Obamacare firmly in place and the economy is booming.

Throughout NCL’s history, our leaders have called for universal health insurance, and we, and many other supporters are vindicated by these findings. Turns out providing health insurance for all may be good for the economy and can even help create jobs. The President noted in his State of the Union on Tuesday: “It’s about filling the gaps in employer based care so that when you lose a job, or you go back to school, or you strike out and launch that new business, you’ll still have coverage. Nearly 18 million people have gained coverage so far, and in the process health care inflation has slowed, our businesses have created jobs every single month since it became law.”

According to the Department of Health and Human Services, there has been “unprecedented demand” for Marketplace coverage with more than 11.3 million people signed up for coverage through January 2, 2016. Open Enrollment ends on January 31.

Sadly, the Affordable Care Act continues to come under attack by the Republican-led Congress. On January 6, yet again, the House of Representatives passed a bill to repeal the ACA. The Senate had passed the same bill last month. Noting the harm the bill “would cause to the health and financial security of millions of Americans,” President Obama vetoed it. The House will vote to override the veto on January 26, but is expected to fall far short of the 2/3 vote necessary for a veto override.

While the fight over the ACA continues, this news should take the wind out of the sails of hardened Obamacare opponents. In the meantime, the National Consumers League will continue to work with its allies in the advocacy arena to preserve this landmark piece of legislation that–at last–ensures essential health coverage for millions of people. This is truly President Obama’s crowning achievement and one that NCL had been working for since our founding in 1899.

Guest Blog: Fixing the Life Insurance Marketplace – National Consumers League

/in , /by

b.fetchel.jpgA version of this guest post was originally published in the National Underwriter. The views reflected here are not necessarily those of the NCL.

“The life insurance market is characterized not only by an absence of reliable price information, but also by the presence of deceptive price information…the deceptive sales practices found in the life insurance industry constitute a national scandal.” So testified Professor Joseph Belth, an expert on the life insurance industry, before Congress in 1973. Can this statement, from more than 40 years ago, still be as true today?  And is it possible for such deplorable industry practices to be occurring without being in the spotlight of public attention?

The short answers are yes. To this day the life insurance industry too often relies on inadequate product disclosure, misinformation, and fraudulent practices, thereby costing consumers billions of dollars annually. Industry executives have for years acknowledged that no one would buy many of their companies’ products if they were appropriately informed.

The free market economic system is built upon informed buyers making educated decisions. Yet so many life insurance industry chieftains who regularly sing the praise of our economic system fail to acknowledge that their businesses haven’t satisfied the system’s prerequisites or played by its rules.

Empirical proof of the life insurance market’s dysfunction is readily apparent by examining the very products life insurers and their agents sell. While a select few cash-value life insurance policies can provide excellent competitive value, perhaps 95% of such policies sold provide value no informed consumer would accept. This marketplace’s dearth of information also afflicts tens of millions of policyholders at annual renewal; if properly informed, millions of them currently could readily obtain much better value. Consumers of the industry’s other main products, annuities and long term care insurance, also face enormous disclosure-related problems.

The root of the age-old problem is the inadequate disclosure of information surrounding cash-value policies, such as whole life policies, where the annual cost is not the annual premium. Professor Belth and I have both long recommended disclosure about a policy’s annual costs and rate of return on its cash-values.  

The attached table of an actual insurance policy’s historical performance (see below) shows how this information on a policy’s annual costs and rates of return on its cash-values can be presented on a year-by-year basis and summarized over the duration with average or aggregate measures. Similar cost and rate information can be calculated on any and all prospective new and in-force policies via online consumer-friendly analytical tools. Understanding policies from this framework, and with solid knowledge of the differences between illustrated future values and actual future performance, enables consumers to assess the competitiveness of a policy’s costs and rates. For example, a healthy 40 year-old male can  compare his policy’s costs with benchmarks that are available in the marketplace and its rates of return with suitable alternative investments. 

A cash-value life insurance policy’s unique intrinsic economic advantages arise from its Congressionally-granted tax privileges, not its highly touted permanence; after all, a term policy can be converted or exchanged into a policy providing lifelong, permanent coverage. These tax privileges, which are given directly to policyholders, however, are not a basis for which insurers can charge consumers; no one pays thousands of dollars to set-up an individual retirement account (IRA). Consequently, when selling such cash-value policies as whole life agents routinely make assorted misrepresentations. Agents often misleadingly state: 1) that a whole life policyholder pays for a lifetime of costs upfront, and that doing such and owning his/her coverage is better than endlessly renting it; 2) that buying a whole life policy at a younger age locks in a lower level cost for life; and 3) that the annual costs of a whole life policy can actually decline as the insured ages because these policies can pay dividends. These three common agent statements, and myriad variations of such, are deceptive.

Regulations prohibit such misrepresentations, but they have never been enforced. These and other misrepresentations are all designed to distort a cash value policy’s fundamental difference. For agents, the essential difference between whole life and term insurance is the quantum difference in the sales commissions – up to 5-9 times larger on whole life policies than on term policies. No one familiar with the paramount role that compensation incentives tied to the origination of subprime mortgages and the repackaging of such default-inevitable, toxic securities played in creating the Great Recession can doubt the perniciousness of the life insurance industry’s age-old problematic sales practices.

A successful consumer-agent relationship can only be built on trust, so predicating it upon inadequate disclosure is inherently counter-productive to all. While inadequate disclosure appears to be in the insurers’ and agents’ interest, it actually has made consumers so leery of agents that the age-old distribution process is so terribly inefficient and ineffective. Americans’ under-insurance – having woefully less life insurance than needed or appropriate – reaches new records every year. Some insurers’ policy lapse rates raise fundamental questions regarding the products’ suitability that regulators have never examined. And, the facts that the typical life insurance agent sells less than one policy per week and that four out of five new sales recruits fail out of the business within a few years are further proof of this industry’s failed business approaches.

Given the nature of the problem, improved disclosure and publicity of such have always been known to be two indispensable parts of the inevitable solution. Contrary to general opinion, however, there is no need to wait to for this industry’s state regulators to act and mandate disclosure. The necessary disclosures, after all, are not proprietary or esoteric. As is shown in the table, life insurance policies, like an automobiles’ horsepower or MPG, can be disclosed, not only by the manufacturer, but by anyone with the necessary expertise and this information is now available online.

Without publicity though, this public good of disclosure remains undiscovered. Reform of the life insurance industry has always merely been a battle of wills. Reformers have had to confront industry, an uninterested or uninformed media, regulators not understanding their jobs or unwilling or unable to do them, and/or reformers’ own doubts about ever succeeding. Financial markets can be fixed when appropriate policy disclosure for consumers is heralded and becomes pervasive.

When will this information be publicly disseminated, so that everyone knows about it and can use it, thereby initiating the long-overdue repair of the life insurance marketplace? This disclosure-driven transformation will produce the myriad and well-documented benefits of genuine economic competition: consumers will obtain better value; insurers will improve the efficiency of their production processes; and agents will act and be seen as trustworthy professionals. Clearly, the sooner this time comes, the sooner Americans can start saving billions of dollars per year, the better for everyone.

 

Actual Historical Performance of a Whole Life Policy
$250,000 issued 20+ Years ago (in 1989) to a 45 Year Old Male, Best Health
*Annual Premium $5815 Paid All Years
** Notes below provide additional information

Age During Year

Insurance Death Benefit

Cash-Value

Total Annual Costs

Annual Dividend Rate

45

            251,425

  408

            5,444

10.00%

46

            253,954

 5,134

            1,556

10.00%

47

            256,890

10,188

            1,624

9.25%

48

            260,927

 15,823

            1,520

9.25%

49

            265,684

21,955

            1,403

8.50%

50

            271,380

28,709

            1,310

8.50%

51

            278,019

36,119

            1,235

8.50%

52

            285,871

44,344

            1,064

8.50%

53

            295,056

53,487

            998

8.80%

54

            305,332

63,521

            919

8.80%

55

            316,703

74,519

            844

8.80%

56

            328,867

86,417

            907

8.80%

57

            341,858

99,309

            787

8.60%

58

            354,658

112,782

            889

8.20%

59

            366,807

126,628

            1,022

7.70%

60

            378,831

141,112

            1,176

7.50%

61

            391,554

156,699

            1,160

7.50%

62

            404,738

173,322

            1,284

7.50%

63

            418,387

191,040

            1,425

7.50%

64

            429,215

207,946

            1,601

6.50%

 

 

 

Avg. Rate:

8.43%

 

**Insurance Death Benefit shows the amount the policyholder’s beneficiary would receive after his death
Cash-Value is the cash amount the insurer gives to the policyholder if he cancels his contract
Total Annual Costs show the amount expensed from policy premiums (and policy cash values if and when necessary) to pay for sales, claim, administrative, capital charges and any other miscellaneous costs, such as premium taxes.
Annual Dividend Rate is the rate earned by policyholder, net of investment management costs, on policy cash values, that is, values after costs.        

For More Information see this Table 2 of Policy Disclosure article.