Aetna Life Insurance v. Mitchell

303 N.W.2d 639, 101 Wis. 2d 90, 1981 Wisc. LEXIS 2718

• Court: Wisconsin Supreme Court
• Decided: March 31, 1981
• Docket: 80-518
• Status: Published

Opinions

COFFEY, J.

This is an appeal from a judgment of the circuit court for Dane county, the Hon. W. J. Jackman, Reserve Judge, presiding. The circuit court declared Wis. Adm. Code § Ins. 2.14(3) (a) and (3) (f)¹ when joined with Wis. Adm. Code § Ins. 2.14(4) (a) (effective February 1, 1980) invalid insofar as applicable to whole life policies and enjoined Susan M. Mitchell, Commissioner of Insurance, appellant, from enforcing any penalty for a violation of the said rules. This action is before this court on certification from the court of appeals.

On May 10, 1979, this case was before this court for the first time involving these provisions of the code but with an earlier effective date of January 1, 1979. These rules, promulgated by Harold R. Wilde, the then Commissioner of Insurance, directed life insurance companies to provide prospective policy purchasers with information describing the types of life insurance (term, whole life, endowment) and their respective costs in a pamphlet entitled “The Wisconsin Buyer’s Guide to Life Insurance” (Buyer’s Guide) ,² together with a form labelled the “Preliminary Policy Summary” (Policy Summary).

The Buyer’s Guide and the Policy Summary required to be delivered prior to sale emphasized the necessity of comparing the policies with the Surrender Cost Index (SCI)³ as a means of comparative shopping to aid in determining the lowest cost policy. The Surrender Cost Index numbers for the policies being considered were required to be disclosed to the consumer with the one-page Policy Summary form.

On December 15, 1978, shortly before the January 1, 1979 effective date of Commissioner Wilde’s rule, Aetna Life Insurance Company (Aetna) and others,⁴ the respondents, commenced an action pursuant to sec. 227.05 (1), Stats., seeking both a temporary and a permanent injunction enjoining the Commissioner from enforcing these same rules and a judgment declaring them invalid as unconstitutional, beyond the Commissioner’s power to establish and not in compliance with the statutory rule-making procedures.⁵ In its complaint, Aetna, et al., alleged in part that the Commissioner’s rules exceeded his authority, for the life insurance cost disclosure materials ordered to be given to prospective purchasers were incomplete — misleading in violation of sec. 628.34 (1), Stats., in that these materials did not contain sufficient information to enable the consumer to make an informed purchase decision and that they falsely represented that the least costly policy could be determined solely by a comparison of the SCI numbers of the policies under consideration. Aetna based this claim on the fact that the Buyer’s Guide and Policy Summary ordered by Commissioner Wilde repeatedly emphasized the importance of the Surrender Cost Index as follows:

Policy Summary

“To find a low-cost policy, look to the policy’s Surrender Cost Index, not its premium.

“The lower the Surrender Cost Index, the lower the policy’s cost to jmu.”

Buyer’s Guide

“The basic life insurance cost index is called the ‘Surrender Cost Index’.

“But the most important thing to know may be summarized quite simply: LOOK FOR POLICIES WITH LOW SURRENDER COST INDEX NUMBERS. THEY COST THE LEAST.

“THE MOST IMPORTANT THING TO REMEMBER WHEN USING THE SURRENDER COST INDEX IS THAT A SMALL NUMBER IS GENERALLY A BETTER BUY THAN A COMPARABLE POLICY WITH A LARGER NUMBER.” (Emphasis and capital letters in original.)

The trial court (Judge Sachtjen)⁶ denied the request for a temporary injunction and Aetna, et al., appealed. At the time of the first appeal, the appellate court reversed the circuit court but directed the trial court to enjoin enforcement of the rule pending a trial on the merits. In its decision, the appellate court concluded that the “unqualified” representations that policies with low SCI numbers “cost the least” contained in the Buyer’s Guide and Policy Summary were misleading for the court determined that “it is not always true that policies with low Surrender Cost Index numbers cost the least.” On the original appeal, this court, having considered Wilde’s petition to review the decision of the court of appeals, vacated the decision ruling that “the propositions of law addressed by the court of appeals in its opinion should not be authoritatively determined until after a hearing on the merits.” However, this court did agree with the court of appeals and continued the temporary injunction, remanding the case to the circuit court directing that court to enjoin enforcement of the rule, pending a hearing on the merits.

During the interim period of time between the first appeal and the subsequent remand to the circuit court, Susan M. Mitchell replaced Wilde as Commissioner of Insurance and conducted a hearing to review a possible modification of the challenged rules. Following this hearing, Mitchell directed a change in the effective date of these administrative code rules from January 1, 1979 to on or after February 1, 1980⁷ and further, made minor changes in the Buyer’s Guide and Policy Summary. An example of a minor change is Mitchell’s restating Wade’s earlier representations concerning the cost of policies with low SCI numbers by merely qualifying the representation with the insertion of the word “likely” as follows:

“A POLICY WITH A LOW COST SURRENDER INDEX IS LIKELY TO BE A BETTER BUY.” (Emphasis supplied.)

On November 20, 1979, shortly after Commissioner Mitchell ordered the language change in the Buyer’s Guide and the Preliminary Policy Summary,⁸ Aetna filed an amended complaint and again claimed that the amended rules were invalid for they mandate the distribution of incomplete — misleading material, contrary to sec. 628.34 (1), Stats. Specifically, Aetna termed the language change by Commissioner Mitchell as merely a “change without substance” and reiterated that the amended rules continued to require the distribution of incomplete— misleading cost disclosure information.

The basis for this allegation was that the amended Buyer’s Guide and Policy Summary required to be distributed, pursuant to the administrative code rules did not provide purchasers of whole life policies with an accurate picture of the relative cost of a particular policy because they emphasized the SCI to the practical exclusion of other life insurance cost indices. Aetna, et al., claimed that two other life insurance cost indexes, namely, the Net Payment Cost Index (NPCI)⁹ and the Equivalent Level Annual Dividend (ELAD)¹⁰ must also be disclosed in order to provide the consumer with sufficient information to make an informed purchase decision.

The case was tried to the court and the evidence dealing with the actuarial bases of the SCI, NPCI and ELAD, as well as that relating to the nature of whole life insurance policies, is not in dispute. Aetna, in support of their claim that the Buyer’s Guide and the Policy Summary are misleading unless delivery and disclosure of the NPCI is also required before sale, established that the true cost of a whole life policy is dependent upon how it is terminated,¹¹ by death or surrender for cash value. The SCI and the NPCI are both measures of the relative costs of whole life policies with the SCI assuming a policy termination by surrender for cash value¹² while the NPCI is premised upon the assumption of policy termination by death.¹³

At trial, Aetna, with the introduction of exhibits numbered 61 and 62, established that as a consequence of the assumption of policy surrender rather than termination by death, the use of the SCI alone cannot accurately predict the comparative costs of whole life policies when terminated by death, for the assumption that the cash value of the policy will be returned to the purchaser does not occur if the policy is terminated by death. Further, these exhibits demonstrate that in the event a policy is not surrendered, the NPCI is the more accurate measure when considering all of the elements of the policy’s comparative cost¹⁴ since, contrary to the SCI, the NPCI assumes the policy will be terminated by death and the cash value will not be available to reduce the cost of the policy.

These exhibits reflected the results of studies dealing with the accuracy of the SCI in predicting the less costly of two whole life policies, assuming that each policy will be terminated by death rather than surrender ten and twenty years after issue. Each exhibit established that when termination by death is assumed, and one of two policies under consideration has a lower SCI and the other has a lower NPCI, then the policy with the lower NPCI is the less costly (or the policy with the lower SCI is the more expensive) for, as noted, the NPCI is the more accurate indicator of a policy’s relative cost when it is assumed that termination will occur by death. Further, these exhibits demonstrated that as a result of their different assumptions regarding termination (death or surrender) the SCI and the NPCI often disagree as to the less costly of two policies; thus, demonstrating that the policy with the lower SCI would in fact be the more expensive policy in a substantial number of cases where termination by death occurs.

Exhibit number 61 examined the relative costs of nonparticipating policies as to other non-participating policies in over “500 competitive pair situations”.¹⁵ This study determined that the policies with the lower SCI were not the “better buy” in over 220 competitive pair situations (44%) when termination by death was assumed to occur ten years after issue and in over 125 competitive pair situations (25%) when the calculations were based on a termination date of twenty years after purchase.

Exhibit number 62 reflects the results of a study examining over 40,000 “competitive pair situations” involving both participating and non-participating policies. This study likewise concluded that the SCI alone is not an accurate and complete indicator of the better life insurance purchase in terms of return per premium dollar, as it determined that the SCI designated the “wrong” (more expensive) policy as the less costly in over 20% (more than 8,000) of the competitive pair situations when termination by death was assumed to occur at a ten or twenty year interval after issue.

With regard to the allegation that the Buyer’s Guide and Policy Summary are misleading unless the purchaser is also informed of the ELAD, the record demonstrates that: (1) the dividend offering of participating policies is an illustration based on the company’s current dividend scale only and thus the dividends are not guaranteed to continue in the future at the rate illustrated;¹⁶ (2) ELAD tells prospective purchasers the extent to which illustrated dividends or non-guaranteed values enter into the calculation of the SCI and NPCI for participating policies; (3) since the current illustrated dividends are used in calculating the SCI, this index usually favors participating policies over non-participating policies, particularly in the absence of ELAD; and (4) participating and non-participating policies competing in the same marketplace can only be accurately compared with the disclosure of the ELAD as well as the SCI and NPCI. As noted, Aetna, et al., claims that the failure to require disclosure of the ELAD with the SCI for participating policies is misleading for, in the absence of the ELAD, the Buyer’s Guide and Policy Summary will fail to inform the prospective purchaser of the extent that non-guaranteed values¹⁷ are factored into the SCI for participating policies.

Given the foregoing facts relating to the relationship between the SCI, the NPCI and ELAD, the question confronting the circuit court was whether the Buyer’s Guide and Policy Summary prescribed by Commissioner Mitchell would be misleading to prospective purchasers of whole life insurance due to their failure to include the NPCI and ELAD with the SCI for the policies under consideration. The salient features of the Buyer’s Guide prescribed by Commissioner Mitchell are:¹⁸

“WISCONSIN BUYER’S GUIDE TO LIFE INSURANCE

“Office of the Commissioner of Insurance

123 West Washington Avenue

Madison, Wisconsin 53702

“1980

“This guide has been prepared by the Wisconsin Commissioner of Insurance.

“This guide does not endorse any company or policy. It is designed to help most consumers buy life insurance. However, individuals with unusual financial situations should seek professional advice.

“BUYING LIFE INSURANCE

“When you buy life insurance, you should look for the least expensive policy which meets your needs. This guide will help you:

“Decide how much life insurance you should buy.

“Choose the type of policy best for you.

“Compare the cost of similar policies issued by different companies.

“FINDING A LOW COST POLICY

“After you decide which kind of life insurance fits your needs, look for a good buy. The best way to compare similar policies is to use the cost indexes. A POLICY WITH A LOW COST SURRENDER INDEX IS LIKELY TO BE A BETTER BUY.

“What are Cost Indexes ?

“Premiums alone do not always reveal the true cost. Cost is the difference between what you pay and what you get back. Three factors affect the cost: Premiums, dividends, and cash values.

“Premiums are the most obvious factor in a policy’s cost. You should not buy a policy unless you can afford the premiums.

“If the company’s investment return, loss experience and expenses are favorable, a portion of your premium is returned as a dividend. Only participating policies pay dividends. When you consider buying a participating policy, you will receive a dividend illustration based on the company’s current dividend scale. These future dividends are not guaranteed.

“Computing the cost of whole life insurance is difficult. This is because a policyholder will receive one amount of money if the policy is surrendered for its cash value and another amount if he or she dies. Usually people who buy whole life insurance policies intend to keep them but in fact many people surrender the policies early. For this reason, you should consider cash values in determining the cost of a policy.

“The Surrender Cost Index

“This index takes into account all three factors discussed above, as well as interest. The surrender cost index compares costs as if you surrendered the policy in the future and took its cash value.

“Before anyone sells you a life insurance policy, he or she must give you surrender cost index figures at 10 and 20 years. To see how that policy ranks, you should compare those figures with ones for similar policies from other companies.

“To get the most reliable comparisons, keep the following rules in mind:

“Cost comparisons should be made only among similar policies. For example, you should avoid using the surrender cost index to compare term and whole life insurance.

“Small differences in index numbers may be offset by other policy features or differences in the quality of service.

“Other Useful Indexes

“Life Insurance Net Payment Cost Index. This index does not take cash values into account. It is useful if your main concern is the benefits to be paid at your death. As with the surrender cost index, a policy with a lower index figure is likely to be a better buy.

“The Equivalent Level Annual Dividend. This index is an average annual dividend, taking the time value of money into account.

“SHOPPING HINTS

U

“SHOP AROUND. Policies vary substantially in cost. Before you buy a policy, check the surrender cost index.

“COMPARE POLICIES AND COMPANIES. The company with the lowest indexes for one policy will not necessarily have the lowest indexes for others.” (Bold face type and emphasis in original.)

The Policy Summary established by Commissioner Mitchell¹⁹ requires the insurer to supply the prospective purchaser with the name and address of the issuing company, the type and name of the policy, its face amount at issue, annual premium and SCI. As to the SCI, it provides:

“10 years 20 years

“SURRENDER COST INDEX*-—

“To find a low cost policy, compare cost index figures, not just premiums. The Surrender Cost Index takes premiums, cash values, dividends (if any) and interest into consideration. A policy with a lower Surrender Cost Index is likely to be a better buy.

“Be sure you use the Surrender Cost Index to compare only similar policies. Small differences in the index are probably not significant. Large differences may mean substantial savings. See the Wisconsin Buyer’s Guide to Life Insurance for examples.

“* The Surrender Cost Index assumes that the policy is surrendered for its cash value 10 or 20 years in the future. Death prior to these surrender dates may alter the cost comparisons. Figures for participating policies are based on illustrated dividends which are not guaranteed.

“The Wisconsin Commissioner of Insurance requires an agent to complete this form when he or she takes an application.” (Emphasis in original.)

The record demonstrates that various actuarial experts disagreed concerning the issue of whether the above-quoted documents would mislead prospective purchasers of whole life policies as to their comparative costs. The Commissioner’s experts testified that the Buyer’s Guide and the Policy Summary were not misleading despite the fact that they only required the disclosure of the SCI and represented that policies with low SCI numbers are likely to be the better buy. They further stated that the inclusion of the ELAD and NPCI would only serve to confuse the consumer and therefore disclosure of only the SCI was reasonable. Three of the commissioner’s experts stated that the representation “A Policy with a low surrender cost index is likely to be a better buy,” was not misleading as the word “likely” was a sufficient qualifier in the sense that consumers reading this phrase would not rely solely on the SCI in making their purchase decisions. One of them defined “likely” as meaning “not always.”

Commissioner Mitchell, when testifying in support of her rule, reiterated the testimony of her experts and stated that the required disclosure of only the Surrender Cost Index for whole life insurance cost comparison purposes was reasonable for she believed that this index provided a simple and effective means of cost comparison not likely to confuse consumers. She further recited that the Buyer’s Guide and the Policy Summary were not misleading as they represented that a policy with a low SCI is only likely to be a better buy. However, she admitted that the SCI would not always be a perfect measure of the relative cost of whole life policies, and in particular those policies retained until death. The Commissioner also testified that although the majority of the consumers who purchase whole life policies do so with the intent to hold them until death, the decision to require a disclosure of only the Surrender Cost Index was based in part on statistics showing that most whole life purchasers, despite their initial intentions, actually surrender their policies within 20 years.

In contrast to the Commissioner and her experts, a number of actuarial and life insurance cost index experts testifying for Aetna, et al., recited that the Buyer’s Guide and the Policy Summary as prescribed by Commissioner Mitchell were misleading. These experts stated that the repeated emphasis on the SCI in the Buyer’s Guide and Policy Summary would lead average prospective purchasers to rely solely on the SCI in arriving at their purchase decisions. Thus, they concluded that the failure to require disclosure of the NPCI and ELAD is misleading because the mere reading of the SCI alone fails to provide sufficient and accurate information as to the relative cost of policies terminated by death as well as the extent to which the SCI is calculated on non-guaranteed costs (illustrated dividends) .²⁰ They cited the admitted fact that at the time of purchase most whole life purchasers intend to hold their policies until death as the basis for their opinion that the NPCI must also be disclosed for the NPCI gives the more accurate measure of the relative costs of policies terminated by death.

The circuit court entered judgment declaring Wis. Adm. Code § Ins. 2.14(3) (a) and (3) (f) and the appendices thereto (Jan., 1980) invalid insofar as applicable to whole life policies. In support of this judgment, the court agreed with Aetna that the Buyer’s Guide and the Policy Summary prescribed by Commissioner Mitchell were incomplete in that they failed to also require disclosure of the NPCI and the ELAD and made the following findings of fact and conclusions of law:

“FINDINGS OF FACT

“A substantial number of policies whose low cost is judged by the Cost Surrender Index are not the lowest in cost if not surrendered but continued to death.

“Comparison of cost of participating policies with nonparticipating policies on the basis of the Surrender Cost Index alone results in the participating policies in having substantially lower Surrender Cost Indexes than those for non-participating policies.

“The Commissioner expects that participating and nonparticipating policies will be cost compared on the basis of the Surrender Cost Index alone, although such policies differ in the presence or absence of dividends and the Surrender Cost Index of non-participating policies are guaranteed and that of participating policies is not.

“It is misleading to the prospective purchaser to compare participating and non-participating policies using only the Surrender Cost Index.

“The assertion in the Preliminary Policy Survey [sic] and the Buyer’s Guide that a low surrender cost index is likely to be the better buy is not accompanied by any index which can be compared to show those cases where the Low Surrender Cost Index may not be a less expensive policy if it is not surrendered. It is therefore misleading.

ÍÍ

“Since the Surrender Cost Index in the case of participating policies is made low by the use of illustrated dividends in the calculation, the failure to disclose the Equivalent Level Annual Dividend does not permit the purchaser to determine what part of the Surrender Cost Index is based on illustrated premiums [sic], the amount of which is not guaranteed and is misleading.

“The majority of policies of a similar kind can be judged as to cost by the Surrender Cost Index, but a substantial number can not, especially when the intent is to keep the policy until death. In such cases the Net Payment Cost Index is of value to such persons. It is also a valuable comparison tool to either confirm the Low Surrender Cost Index or if it does not point in the same direction, to provoke inquiry of the purchaser into the reason for the difference. The failure to include it in the Preliminary Policy Summary is misleading.

“The Surrender Cost Index and the Net Payment Cost Index of non-participating policies are guaranteed figures, since no dividends are included in the calculations. But the Surrender Cost Index and Net . Payment Cost Index of participating policies are not so guaranteed. Neither the Preliminary Policy Summary or the Buyer’s Guide make this clear so that a customer may be misled, even though it is stated that dividends are not guaranteed.

“Because the Preliminary Policy Summary and Buyer’s Guide have the mark of the Commissioner on them the information contained has the endorsement of the State as complete and correct, although they are incomplete and misleading because of the absence of vital information needed by a substantial number of persons to make an intelligent choice.”

“CONCLUSIONS OF LAW:

“1. The rule, INS. 2.14(3) (a) [sic] as amended by the amendment promugated [sic] to take effect February 1, 1980, insofar as it directs the use of the ‘Preliminary Policy Summary, Whole Life’ and ‘Wisconsin Buyer’s Guide to Life Insurance’ as therein set forth as ‘Appendix 1’ and ‘Appendix 3’ are invalid and void as applied to whole life policies and being in excess of the powers of the Commissioner of Insurance because the same contain misleading information, including information misleading because of incompleteness, contrary to Sec. 628.34, Wis. Stats, and compels insurance agents to disseminate such information.”

Commissioner Mitchell appealed from the judgment of the circuit court and the case is before this court on certification from the court of appeals.

Issue

Did the trial court err in declaring that the Commissioner of Insurance exceeded her rule-making power in requiring insurance companies to disseminate misleading cost disclosure information as to whole life policies because of incompleteness, contrary to sec. 628.34(1), Stats ?

At the outset, it must be noted that this case does not involve a challenge to the Commissioner’s authority to promulgate a rule requiring insurance companies to disseminate life insurance cost disclosure information. Aetna admits that the Commissioner has such authority. In fact, the record demonstrates that Aetna and the insurance industry as a whole support a complete and accurate cost disclosure requirement. However, Aetna objects to the accuracy and completeness of the information required to be disclosed in the Commissioner’s Buyer’s Guide and Policy Summary effective February 1, 1980.

The Commissioner attacks the trial court’s ruling on two bases: (1) the trial court did not apply the correct standard of review in a proceeding challenging administrative rules under sec. 227.05(4), Stats; (2) the circuit court’s findings and conclusions are not supported by the record.

I. Standard of Review

According to the Commissioner, the trial court’s review of the rule must be limited to a determination of whether the rule is a reasonable means of effecting the purposes of the Insurance Code found in sec. 601.01(3), Stats. (1977). She bases her argument on the premise that administrative rule-making is of its nature quasi-legislative rather than adjudicatory. Thus, in the absence of claims that she has no authority to promulgate cost disclosure rules, and that the rules were not established in compliance with ch. 227, the Commissioner contends that the standard of judicial review is the same as that for legislative acts, namely, the test of reasonableness. Accordingly, the Commissioner claims that the trial court’s use of sec. 628.34(1), Stats., concerning unfair and misleading marketing practices in the insurance business as the standard of review was inappropriate as it required the court to look beyond the reasonableness of the rules and into their factual underpinnings. We disagree, as the legislature in sec. 628.34(1) (a), Stats., has prohibited insurance companies and their agents and employees from making false or misleading representations with regard to insurance contracts, including the dissemination of information that is misleading because of incompleteness:

“Misrepresentation, (a) Conduct forbidden. No person who is or should be licensed under this code, no employe or agent of any such person, no person whose primary interest is as a competitor of a person licensed under this code, and no person on behalf of any of the foregoing persons may make or cause to be made any communication relating to an insurance contract, the insurance business, any insurer or any intermediary which contains false or misleading information, including information misleading because of incompleteness.” (Emphasis supplied.)

Thus, the commissioner’s rules in requiring whole life insurance companies and their agents to distribute the current “editions” of the Buyer’s Guide and the Policy Summary are clearly unreasonable if they require such parties to violate the law. The question of whether the Buyer’s Guide and the Policy Summary are misleading is a question of fact. Thus, we must look to the record to determine if the trial court’s findings are supported therein.

II. Trial Court’s Findings

As to the rules applicable to the review of a circuit court’s finding of fact, we refer to Klein-Dickert Oshkosh, Inc. v. Frontier Mortgage Corp., 93 Wis.2d 660, 663, 287 N.W.2d 742 (1980), where this court stated:

“We believe it is well-established that findings of the trial court will not be upset on appeal unless they are clearly erroneous and against the great weight and clear preponderance of the evidence. The evidence supporting the findings of the trial court need not constitute the great weight or clear preponderance of the evidence and reversal is not dictated if there is evidence to support a contrary finding. If there is to be a reversal on appeal, the evidence to support such a result must itself constitute the great weight and clear preponderance of the evidence. Furthermore, when the trial judge acts as the finder of fact, he is the ultimate and final arbiter of the credibility of witnesses. When more than one inference can be drawn from the credible evidence, the reviewing court must accept the inference drawn by the trier of fact. Bank of Sun Prairie v. Opstein, 86 Wis.2d 669, 676, 273 N.W.2d 279 (1979), and cases cited therein.”

The trial court found that a substantial number of whole life policies determined to be the lowest in cost under the SCI alone are not the least expensive if terminated by death rather than surrender. Aetna’s exhibits numbers 61 and 62 established that a substantial number of consumers who rely solely on the SCI in making their purchase decision are likely to buy a relatively more expensive policy if they continue premium payments until death. Thus, the assertion in the Buyer’s Guide and the Policy Summary that a policy with a lower SCI is likely to be a better buy, in the absence of an explanation as to when this representation may not be accurate, fails to adequately inform the purchaser and is therefore misleading.

The trial court also found that participating and nonparticipating policies when compared on the basis of the SCI alone as set forth in the Buyer’s Guide and Policy Summary will favor participating policies over nonparticipating policies as the Surrender Cost Index for participating policies is reduced with the inclusion of illustrated dividends in its (SCI) calculation. The court further found that Commissioner Mitchell’s Buyer’s Guide and Policy Summary fail to inform the purchaser the extent to which a participating policy’s SCI is based on illustrated dividends. These findings are not disputed. Thus, the Commissioner’s Policy Summary and Buyer’s Guide repeatedly emphasize the use of the SCI for cost comparison purposes, but fail to disclose the extent to which the SCI for participating policies is reduced by dividends that the consumer is not assured of receiving. The record demonstrates that the disclosure of the extent to which the SCI for participating policies is determined by nonguaranteed dividends is precisely what the ELAD accomplishes. Therefore, a true and accurate comparison of participating and nonparticipating policies as to illustrated dividends can only be made with the disclosure of the ELAD; hence, the presentation of the SCI without a contemporaneous revelation of the ELAD is misleading.

The circuit court further found that the SCI does not accurately measure the relative cost of a whole life policy when it is ultimately terminated by death and therefore the NPCI is of particular value to consumers who, at the time of purchase, intend to keep their policies in force until death. Commissioner Mitchell admitted that most whole life insurance purchasers buy this type of insurance with the intent to keep it in force until they die. She also conceded that the SCI would not always be a perfect measure of the relative cost of whole life policies, particularly if they were terminated by death. Despite knowledge of these facts, the Commissioner, based on the distorted reasoning that she must be primarily concerned with what people actually do with their policies rather than what they intend to do, decided to order disclosure of only one index, the SCI, because most consumers surrender their policies before the twentieth year anniversary date.

This testimony of the Commissioner demonstrates why the failure to include the NPCI in her Buyer’s Guide and Policy Summary renders them incomplete and misleading. She has admitted that the majority of people who purchase whole life insurance do so with the intent to hold their policies until death, yet, in spite of her admission that the SCI “would not always be a perfect measure” for policies held until death, she repeatedly encouraged in her cost disclosure materials the singular use of the SCI. The point to be considered is that it is the consumer’s intent at the time of purchase and not whether the policy is surrendered or terminated by death that should determine what information must be disclosed in order to enable them to make an intelligent and informed purchase decision. Since most consumers are interested at the time of purchase in buying death protection, the NPCI dealing with the relative costs of policies terminated by death is required to be disclosed, together with the SCI, in order to accurately and completely inform them of their policy's relative cost and thus we hold that the disclosure of only the SCI and the failure to disclose the NPCI is misleading.

In summary, given that the SCI does not accurately predict the least costly policy under all circumstances, that the ELAD discloses a material fact that the SCI alone fails to present, namely, the extent to which illustrated dividends are reflected in the SCI, and that the NPCI is the more accurate measure of the relative cost of whole life policies terminated by death and is therefore a valuable guide to purchasers who intend to hold their policies until death, the record supports and indeed compels the trial court’s finding that the Buyer’s Guide and the Policy Summary are misleading in failing to inform the consumer when the SCI is likely to be inaccurate and in failing to include the NPCI and the ELAD.

Commissioner Mitchell has argued throughout these proceedings that the court should defer to the judgment of the agency in determining what cost disclosure materials should be required to be disseminated to consumers prior to sale. This argument amounts to the claim that statements and materials required to be distributed by the Commissioner, even if false or misleading, can never be challenged and, if accepted, would negate the legislative intent of sec. 628.34(1) (a), Stats. We reject this assertion for the reason that the legislature made a policy determination in sec. 628.34(1) (a), Stats., stating that life insurance contract information must not be misleading due to incompleteness when disseminated. In the context of this case, sec. 628.34(1) (a), Stats., requires disclosure of the materials that are necessary to provide consumers with a complete picture as to the relative costs, namely, the SCI (cost at surrender), the NPCI (cost at death) and the ELAD (illustrated dividends). Further, this statute requires a complete disclosure at the time the consumer is making the purchase decision. The Commissioner is never at liberty to substitute her judgment when the legislature has spoken in unambiguous terms with respect to full disclosure (“. . . including information misleading because of incompleteness.” Ibid.), and thus, the court need not defer to her judgment as to what information is material and therefore required by the legislature under sec. 628.34(1) (a), Stats., unless she demonstrates reasonable grounds for that judgment. In view of our determination that the record supports the trial court’s findings that Commissioner Mitchell’s Buyer’s Guide and Policy Summary are misleading due to incompleteness, we hold that the Commissioner has not demonstrated a reasonable ground for her judgment. Thus, we further hold that any rule requiring dissemination of cost disclosure information that is misleading due to incompleteness is beyond the scope of a commissioner’s rule-making power in that it mandates a violation of sec. 628.34(1) (a), Stats.

By the Court. — The judgment of the circuit court is affirmed.

1 Wis. Adm. Code § Ins. 2.14(3) (a) and (3) (f) creates appendixes 1 and 3 to Wis. Adm. Code § Ins. 2.14 which set forth the mandatory life insurance cost disclosure information that is the subject of this suit, namely, the “Preliminary Policy Summary, Whole Life,” and “The Wisconsin Buyer’s Guide to Life Insurance.” Id. at 39 and 41 through 42-3. See also: pp. 6-8 infra.

2 Wis. Adm. Code § Ins. 2.14(4) (a), effective January 1, 1979, provided:

“(4) Disclosure requirements, (a) The insurer shall provide, to all prospective purchasers of any policy subject to this rule, a copy of the current edition of the Wisconsin Buyer’s Guide to Life Insurance and a properly filled out Preliminary Policy Summary prior to accepting the applicant’s initial premium or premium deposit, except that insurers which do not market policies through an intermediary may provide the Preliminary Policy Summary and Wisconsin’s Buyer’s Guide to Life Insurance at the point of policy delivery, so long as they:

“Guarantee to the policyholder a 30-day right to return the policy for a full refund of premium, and

“Alert the prospective policyholder, in advertisements or direct mail solicitations, of his or her right to obtain a copy of the Wisconsin Buyer’s Guide to Life Insurance and a Preliminary Policy Summary prior to sale.”

3 The SCI is described in the State Life Insurance Fund Brochure as follows:

“This index [SCI] is calculated using premiums, dividends, the cash value for the duration of the index and an after-tax interest rate. These cost values are based on the assumption that the insured will live for the duration of the index [10 or 20 years] and then surrender the policy and that dividends will be paid according to the current dividend scale. The value is based on $1000 of insurance.”

4 The parties to this appeal are Aetna and 13 other life insurance companies as well as 7 life insurance agents and 2 associations of life insurance underwriters.

5 We neither address the constitutional nor statutory rule-making procedure challenges as we resolve this case on the basis of the allegations in support of the claim that the rules are beyond the Commissioner’s power to establish.

6 The case was originally assigned to Judge Sachtjen. The record does not disclose why the case was transferred to Reserve Judge Jackman after remand.

7 See: Wis. Adm. Code § Ins. 2.14(6) (Jan., 1980).

8 As noted in n. 1, supra at 92, Wis. Adm. Code § Ins. 2.14(8) (a) and (f) (Jan., 1980) provide that the current “editions” of the Buyer’s Guide and the Preliminary Policy Summary required to be distributed under Wis. Adm. Code § Ins. 2.14(4) (a) are set forth in appendices 1 and 3 to the rule. These appendices contain the challenged representations.

9 The Net Payment Cost Index is also described in the State Life Insurance Fund Brochure as follows:

“The payments index [NPCI] is calculated in the same manner as the comparable Life Insurance Surrender Cost Index except that the cash surrender value and any terminal dividend are not used. This index is useful if the main concern is the benefits which are to be paid at death and if the level of cash values is of secondary importance. It helps to compare costs at some future time, such as 10 or 20 years, if the policyholder continues paying premiums on the policy and does not take the cash surrender value.”

10 The Equivalent Level Annual Dividend is defined in the Buyer’s Guide prescribed by Commissioner Mitchell as “. . . an average annual dividend, taking the time value of money into account.” Wis. Adm. Code § Ins. 2.14 at p. 42 — 2 of appendix. It is used to determine the impact of illustrated dividends or non-guaranteed values on the SCI or NPCI. Ibid. ELAD reveals which policy has the greater non-guaranteed dividend.

11 See: Wis. Adm. Code § Ins. 2.14 (Jan., 1980) at p. 42-1 of Appendix.

12 See: n. 3 supra, at p. 93.

13 See: Wis. Adm. Code § Ins. 2.14 (Jan., 1980) at p. 42-1 of Appendix.

14 The elements of the cost of protection when the policy is terminated by death are premiums and dividends.

15 A “competitive pair situation” refers to a comparison of the costs of separate policies in a competitive situation.

16 Wis. Adm. Code § Ins. 2.14 (Jan., 1980) at p. 42-1 of Appendix.

17 The nonguaranteed values referred to here are “illustrated dividends.”

18 Wis. Adm. Code § Ins. 2.14(8) (a) (Jan., 1980) provides for the Buyer’s Guide as follows:

“(a) Wisconsin Buyer’s Guide to Life Insurance. The Wisconsin Buyer’s Guide to Life Insurance is a document which contains, and is limited to, the language within the current edition of the ‘The Wisconsin Buyer’s Guide to Life Insurance’ put out by the insurance commissioner of the state of Wisconsin. This pamphlet shall be reviewed periodically for accuracy and appropriateness. Appendix 3 to this rule contains the current edition of ‘The Wisconsin Buyer’s Guide to Life Insurance.’ ”

19 Wis. Adm. Code § Ins. 2.14(3) (f) provides that the Preliminary Policy Summary required to be distributed to consumers is set forth in appendix 1 to the rule:

“(f) Preliminary Policy Summary. For the purposes of this rule, Preliminary Policy Summary means a document provided to the buyer of a life insurance policy prior to sale which contains necessary consumer cost disclosure information, in substantially the same format for all companies, as specified by the commissioner. Appendix 1 to this rule contains a Preliminary Policy Summary form for Whole Life and Endowment Policies. . . . Insurers may, upon request, incorporate Preliminary Policy Summary forms (if they are to be filled out by intermediaries) into copies of the Wisconsin Buyer’s Guide to Life Insurance which they reprint.”

20 “Illustrated dividends” are an estimation of the annual dividends that the purchaser will receive, and are not guaranteed to continue in the future at the present “illustrated” rate.