In the interview, Dinallo addressed issues currently concerning the insurance industry, including that the insurance industry should now focus on adjusting the balance between term life insurance and annuity sales. Accordingly, Dinallo discussed the importance of establishing appropriate guarantees with respect to annuity sales in the industry.
With respect to annuity sales, Dinallo recognizes that when a consumer purchases an annuity, he or she is entering into a sophisticated and difficult transaction which, in turn, should prompt regulators to become equally as sophisticated. While no specific solutions were recommended for potential problems, Dinallo did describe a situation in which short-term relief could be granted; if the asset class that the insurance companies are holding is experiencing liquidity impairment, as opposed to true value impairment, then relief may be granted.
With respect to the NAIC’s veto of various capital and surplus proposals from the American Council of Life Insurers of Washington (“ACLI”), Dinallo stated that he didn’t think the passage of the ACLI proposals was a good idea and that for an insurance carrier to receive relief by way of capital or surplus, the carrier would have to demonstrate that it does not have the ability to raise capital or to slow sales. Dinallo suggested that insurance carriers should look to sale reductions or changes in prices and benefits as alternatives before requesting capital relief.
Dinallo also acknowledged that the continuing challenge for the insurance industry is the market’s overall slowing down as insurance carriers typically base their success on a certain amount of volatility in the market. Likewise, the report included Dinallo’s suggestion to require a higher reserve for new customers as well as to manage customers’ expectations by setting forth slightly less rich guarantees on the annuities.