Illustrated Promises: Unmet Expectations - INN Article

[unlimitedsigh]

I'm not sure if this has already been posted or not (INN's July issue), but it was fresh of Sheryl Moore's newsletter this morning.

Illustrated Promises: Unmet Expectations (Sheryl's newsletter is obviously a very good source of ins news, or I-anything articles, and she's a contributing author for INN)

Direct link: ISSUU - July 2013 by InsuranceNewsNet


The article does a very good job of mathematically exposing the dangers of ONLY running 8, 8.5, even 9% crediting interest in illustrations.

It also goes into a bit of the history of IULs in general, the illustrations, legislation, and the inherent limitations to IUL illustration software to begin with.

It details the Monte Carlo approach and why either a lower crediting rate or a higher premium outlay may be required to make the policy perform through market fluctuations/bear seasons (and the COI drag in decumulating years) . It's actually intriguing to watch the the account value grow and then fall off without dramatic cash input from the owner.

 

[Tahoe Ray]

I'm not sure if this has already been posted or not (INN's July issue), but it was fresh of Sheryl Moore's newsletter this morning.

Illustrated Promises: Unmet Expectations (Sheryl's newsletter is obviously a very good source of ins news, or I-anything articles, and she's a contributing author for INN)

Direct link: ISSUU - July 2013 by InsuranceNewsNet


The article does a very good job of mathematically exposing the dangers of ONLY running 8, 8.5, even 9% crediting interest in illustrations.

It also goes into a bit of the history of IULs in general, the illustrations, legislation, and the inherent limitations to IUL illustration software to begin with.

It details the Monte Carlo approach and why either a lower crediting rate or a higher premium outlay may be required to make the policy perform through market fluctuations/bear seasons (and the COI drag in decumulating years) . It's actually intriguing to watch the the account value grow and then fall off without dramatic cash input from the owner.

More of an agent defect than a product defect, no?

 

[unlimitedsigh]

I implied a product defect?

 

[Tahoe Ray]

Not at all.

It just seems that most of the failures that the author highlights are due to poor case design, and not the products themselves.

The comment was for the purpose of discussion, not directed at you.

 

[unlimitedsigh]

Apologies.

And, I agree with what you are saying. Poor case design in the 80's particularly, but there may be another round of over-illustrated/over-promising policies (and lawsuits?) cooking.

 

[scagnt83]

More of an agent defect than a product defect, no?

Life Insurance problems are rarely the products fault.
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I did not read the article. But there has been a discussion on producers web about IUL and the potential for lawsuits. And of course Sheryl joined in the mix.

Obviously agents should not run these at 8%+. I run mine at 6%-7% depending on the situation.
But their reasoning for the lawsuits are a bit extreme. And in Sheryl's constant effort to save agents from themselves, she makes a few assumptions about the product that imo are just not true.

 

[marcolifeproducer]

good article. not a big fan of IUL personally...

 

[lementex]

I've never run an illustration past 6%. Usually I use 5.5% or even as low as 5%, and explain to the client that I am leaning on the conservative side of things. Typically these products perform pretty well even at 5-6% so I don't know why agents run them at 8-9%, its crazy

 

[scagnt83]

I've never run an illustration past 6%. Usually I use 5.5% or even as low as 5%, and explain to the client that I am leaning on the conservative side of things. Typically these products perform pretty well even at 5-6% so I don't know why agents run them at 8-9%, its crazy

An IUL/UL at 5% will usually produce more income than a WL policy at 6%.

 

[BNTRS]

I haven't yet read the article, but we should note that Richard Weber has been commissioned by Guardian in the past to produce research on the use of whole life insurance as an asset as well as speak to its superiority over other products.

In fact, it's his work that drives their web site www.lifeinsuranceasanassetclass.com

Not saying that's a problem, but he tends to have a definite slant.