ACLI Urges Quick Action On IUL Rules
May 19, 2015 by Arthur D. Postal, arthur.postal@innfeedback.com
WASHINGTON — The American Council of Life Insurers (ACLI) today urged quick action on approving new rules for illustrating index universal life (IUL) insurance.
The National Association of Insurance Commissioners’ (NAIC) Life Insurance and Annuities (A) Committee had scheduled a conference call today to approve the illustration proposal. However, the call was cancelled late Tuesday. A vote by the committee would have been the next-to-final step in the NAIC regulatory approval process.
The A Committee cancelled the conference call vote after it received two comment letters on the proposal: one from NAIC consumer representatives and another from Nationwide.
An ACLI spokesman said that IUL illustration guidelines approved by the NAIC’s Life and Actuarial Task Force (LATF) have been years in the making and enjoy broad industry support in their current form.
The spokesman said that the ACLI recommended that the A Committee adopt the LATF-approved guidelines “as expeditiously as possible,” followed by a thoughtful evaluation of potential future changes to the guideline for particular product designs.
While the ACLI was urging a quick approval of the new rules, the consumer representatives asked the A Committee to scrap the current proposal and start all over.
The consumer representatives argued that the guideline adopted April 16 by the LATF does not address what it called key failures of current illustrations. The group described those failures as understating the gross return of the index investment and overstating the net returns of the IUL investments.
Meanwhile, the Nationwide letter asked that the A Committee delay the phase-in of the rule from the current proposed Sept. 1 to Jan. 1, 2016.
Eric S. Henderson, Nationwide senior vice president, said the delay is necessary for his company to have sufficient time to understand the actuarial guideline fully, model the updated requirements accordingly, incorporate necessary changes in illustration software and educate its agents about the change.
Henderson’s letter said that because IUL is a general account product, it can be sold by all his company’s agents, insurance agents as well as agents who hold securities licenses.
Nationwide argued that the final rule adopted by the LATF April 16 “represents a significant deviation from earlier drafts.” Henderson said, “adapting to the ramifications of such changes is not as simple as turning a key to limit the maximum illustration rate.”
He contended that “minimally delaying” the guidelines’ phase-in “will allow all companies, not just Nationwide, the time needed to effectively understand the actuarial guidelines, and to process the changes to our models, training and procedures.”
Under the proposal, agents would be allowed to show potential customers a document that supported crediting rates in the 6-to-7-percent range, although so-called “guardrails” mandated by the proposal could limit actual likely yields to as low as 4.5 percent.
If approved, provisions dealing with currently payable scale methodology as well as the so-called “guardrail,” which limits the expected yield that can be illustrated for potential customers of an IUL, will go into effect Sept. 1.
Provisions detailing information on policy loans and establishing additional standards would go into effect for all new business and in-force life insurance illustrations on policies sold on or after March 1, 2016.
