PrivClientSG
Guru
- 325
Well, May 1 has come and gone. Maybe people are oblivious, maybe they don't know, don't care, who knows. If you don't think AG 49-B, which took effect on May 1, has any bearing on UL, IUL, etc. -- then stop reading. You'll just be wasting your time.
On May 1, NAIC's AG 49-B took effect and requires changes and certain guidelines in illustrations for universal-type products. Yes, it specifies IUL illustration rates, but it can affect universal policies in general. A couple of highlights seemed to trigger some strong concerns, vis a vis, moving forward, index accounts/rates can no longer be illustrated above the benchmark index. That's a very good thing! In addition, the maximum illustrated rate must include bonuses. Another very good thing! Instead of 6% with a 1% bonus, which you illustrate as 7% -- now you have to back-out the bonus, illustrate at 5%, include the 1% bonus, and now you are illustrating at 6%. Good, good, good! There's also a limit to the maximum you can illustrate on the respective IUL index/portfolio, relative to what it's earning and what you can illustrate!
Personally, I view AG 49-B merely as a temporary step, a temporary, work-in-progress step toward a more permanent solution. NAIC, in my humble option, must, absolutely must, revisit and readdress the entire regulation on illustrations.
More important, get your inforce ledgers. Don't figure out "how to make them look good" or "better" -- run them to see how sound they are under different scenarios, how the UL-chasis holds up and behaves under different scenarios, etc.
Good luck everyone!
On May 1, NAIC's AG 49-B took effect and requires changes and certain guidelines in illustrations for universal-type products. Yes, it specifies IUL illustration rates, but it can affect universal policies in general. A couple of highlights seemed to trigger some strong concerns, vis a vis, moving forward, index accounts/rates can no longer be illustrated above the benchmark index. That's a very good thing! In addition, the maximum illustrated rate must include bonuses. Another very good thing! Instead of 6% with a 1% bonus, which you illustrate as 7% -- now you have to back-out the bonus, illustrate at 5%, include the 1% bonus, and now you are illustrating at 6%. Good, good, good! There's also a limit to the maximum you can illustrate on the respective IUL index/portfolio, relative to what it's earning and what you can illustrate!
Personally, I view AG 49-B merely as a temporary step, a temporary, work-in-progress step toward a more permanent solution. NAIC, in my humble option, must, absolutely must, revisit and readdress the entire regulation on illustrations.
More important, get your inforce ledgers. Don't figure out "how to make them look good" or "better" -- run them to see how sound they are under different scenarios, how the UL-chasis holds up and behaves under different scenarios, etc.
Good luck everyone!