AG 49 Targets Fantasy Returns in IUL Illustrations, Policy Loans
April 28, 2016 by Cyril Tuohy
You can’t spell “illustration” without “illusion”.
The National Associate of Insurance Commissions (NAIC) ushered in a new era in illustration of indexed universal life (IUL) products last month when Actuarial Guidelines (AG) 49 went into effects.
AG 49’s latest provisions focus on policy loans and illustration disclosures used to map out the future growth of cash values and death benefits. Some observers say the changes will install some long overdue corrections in what the described as questionable behavior.
“Actuarial Guideline 49 means nothing to the agent presenting realistic proposals to their indexed life prospects” said Sheryl J. Moore, president and CEO of Moore Market Intelligence, the publisher of Wink’s Sales & Market Report. “However, to agents that are trying to pitch indexed life as a way to ‘make money off your life insurance,’ it has an impact. Gone are the days of illustration 10 percent returns and 4 percent loans, which results in a positive arbitrage of 6 percent. Now, you are froced to undersell and over-deliver.”
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For a longer-term perspective, annual indexed life premiums reached $1.56 billion in the fourth quarter of 2014, a 15 percent increase over the year-ago quarter, according to Wink’s Sales & Market Report.
Third-quarter year-to-date 2015 indexed life sales were already at $1.31 billion, and 2015 is expected to be a record year for indexed life sales, according to Moore of Moore Market Intelligence.
In 2004, annual index life premiums registered only $139 million in the fourth quarter, according to Wink.
