It’s the Hottest Thing in Life Insurance. Are Buyers Aware of the Risks?
January 8, 2020 by Leslie Scism
Sales of a life-insurance policy tied to the longest bull market in U.S. history are soaring. Regulators worry that buyers are unprepared for a crash.
Indexed universal life is one of the insurance industry’s hottest products. It accounted for a quarter of all individual life sales as measured by premium for the first nine months of 2019, according to research firm Limra, up from 20% in 2014. Before the decadelong stock market boom, these policies were just 4% of sales in 2008.
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This isn’t the first time regulators have looked to tighten rules for these hot-selling policies. In 2015 the National Association of Insurance Commissioners limited the annual interest rate that can be used in a projection of how the policy will perform over time. Policies tied to the change of the S&P 500 index are currently limited to an “illustrated rate” that averages 5.92% under a formula adopted by the organization, according to market research firm Wink Inc. in Des Moines, Iowa.
