Deal Reached On Proposed IUL Illustrations - INN

[Tahoe Ray]

You missed what I meant. I wanted to show maximum returns up to the current caps (about 14%) for 3 years, then 0% for 2 years... and alternate that throughout the life of the policy.

As far as I know, NO IUL carrier illustration system allows their illustrations to show anything above an 8-9% return in any given year.

I know Midland and NA will allow the alternating returns... but still up to a certain limit on that rate of return.

If IUL was properly sold and positioned by the majority of agents, I doubt this would be a problem. However, with all the misrepresentations on what the product is and does... it won't ever happen.

I have said it before....just make it like VA illustrations (and some IA carriers)...best, worst, and current...10, 15, and 20 year rolling.

 

[scagnt83]

You missed what I meant. I wanted to show maximum returns up to the current caps (about 14%) for 3 years, then 0% for 2 years... and alternate that throughout the life of the policy.

I gotcha. No, you cant do that.

 

[BNTRS]

I think the MetLife coalition will come to rue they day they decided to instigate this issue. The newly established maximums are still much higher than we assume when we design and propose indexed universal life insurance, and IUL has certainly compared very favorably against whole life insurance at our much lower assumed interest rates.

Now without an argument that the product only looks better because it is not bound by the same restrictions whole life insurance is, the whole life only salespeople have lost considerable leverage.

 

[meclimit]

I think the MetLife coalition will come to rue they day they decided to instigate this issue. The newly established maximums are still much higher than we assume when we design and propose indexed universal life insurance, and IUL has certainly compared very favorably against whole life insurance at our much lower assumed interest rates.

Now without an argument that the product only looks better because it is not bound by the same restrictions whole life insurance is, the whole life only salespeople have lost considerable leverage.

You probably should get your facts straight about who instigated the issue. The issue was "instigated" when the NAIC asked for comments to a proposed illustration actuarial guideline for IUL. At the same time, some states were becoming more vocal about pushing life insurance suitability guidelines due to complaints about IUL "retirement plan" sales. It turns out, most of the suitability type concerns rested with how these policies were illustrated -- earn 9% on the cash value and borrow at 5% -- money does grow on trees! Everyone should have one!

People were depending on this for their retirement and an illustration that could never possibly come true. Do you think that the mutuals who are in this for the long-haul really wanted to risk having a major scandal 10-15 years from now when scores of people find out they can't retire on their life insurance policies? Its more than just about competition -- the reputation of the industry was at stake.

 

[DHK]

You probably should get your facts straight about who instigated the issue. The issue was "instigated" when the NAIC asked for comments to a proposed illustration actuarial guideline for IUL. At the same time, some states were becoming more vocal about pushing life insurance suitability guidelines due to complaints about IUL "retirement plan" sales. It turns out, most of the suitability type concerns rested with how these policies were illustrated -- earn 9% on the cash value and borrow at 5% -- money does grow on trees! Everyone should have one!

People were depending on this for their retirement and an illustration that could never possibly come true. Do you think that the mutuals who are in this for the long-haul really wanted to risk having a major scandal 10-15 years from now when scores of people find out they can't retire on their life insurance policies? Its more than just about competition -- the reputation of the industry was at stake.

And the IUL companies are NOT "in this for the long-haul"?

Look, the appeal of IUL is that you can sell an "investment-look-alike" without a securities license... so it's bound to attract attention from people who have little to no clue about how it really works. And the perception is that companies will profit from agent ignorance... as long as they are selling the product.

However, illustrations are such that you can 'set your own rate'. You can't do that with mutual funds, except in a 'straight-line' calculation on your HP-12c. With mutual funds, you can create an illustration and "back-test" what would've happened if you invest and leave the money alone.

IUL is a unique asset that needs a different kind of illustration standard. If it were me, I'd propose doing a "maximum 3-year returns to the current cap, then 0% for two years" and alternate that sequence of returns throughout the life of the policy. IUL captures upside volatility (subject to a cap) and no downside volatility.

If a policyholder should happen to borrow money from the policy, then in the 0% down year, you may be paying interest to restore your policy values for that year.

IUL is just another financial tool... and it is best used and sold by agents who truly understand it's power... and the misleading power is to easy to mislead others by the "gain 9% per year, borrow at 5%" pitch.

 

[scagnt83]

You probably should get your facts straight about who instigated the issue. The issue was "instigated" when the NAIC asked for comments to a proposed illustration actuarial guideline for IUL. At the same time, some states were becoming more vocal about pushing life insurance suitability guidelines due to complaints about IUL "retirement plan" sales. It turns out, most of the suitability type concerns rested with how these policies were illustrated -- earn 9% on the cash value and borrow at 5% -- money does grow on trees! Everyone should have one!

People were depending on this for their retirement and an illustration that could never possibly come true. Do you think that the mutuals who are in this for the long-haul really wanted to risk having a major scandal 10-15 years from now when scores of people find out they can't retire on their life insurance policies? Its more than just about competition -- the reputation of the industry was at stake.

The NAIC are the ones who got us in this mess in the first place. Many carriers use the current (dating back to around 09ish) IUL illustration recommendations of using a 20 year or 30 year historical lookback rate. Before that often the default was around 7%.

I do support changes to the current recommendations, but they have created one of the most convoluted and least transparent ways of doing it. A simple discounted rate (with a cap) based on a 20 or 30 year lookback... or even a discount of a composite of the 10/20/30 year historicals would be much better for all involved.

And the big mutuals who do not sell IUL are loving the convolutedness of the proposed regulations. The less transparency there is the better their competing products look.

 

[BNTRS]

You probably should get your facts straight about who instigated the issue. The issue was "instigated" when the NAIC asked for comments to a proposed illustration actuarial guideline for IUL. At the same time, some states were becoming more vocal about pushing life insurance suitability guidelines due to complaints about IUL "retirement plan" sales. It turns out, most of the suitability type concerns rested with how these policies were illustrated -- earn 9% on the cash value and borrow at 5% -- money does grow on trees! Everyone should have one!

People were depending on this for their retirement and an illustration that could never possibly come true. Do you think that the mutuals who are in this for the long-haul really wanted to risk having a major scandal 10-15 years from now when scores of people find out they can't retire on their life insurance policies? Its more than just about competition -- the reputation of the industry was at stake.

Oh stop the sensationalism.

The NAIC always asks for comments on proposed model regulations, that's what they do. MetLife et. al. put forth some serious effort to alter illustration parameters. My only point is that these new rules may be more problematic to companies that focus on whole life insurance as their sales forces often use a lazy argument against IUL that suggests it only looks better because no one is stopping them from making lofty assumptions.

We both know how ridiculous your claim is concerning who is in this for the long haul and who is not.