Life Insurers Raising Rates on Some Older UL Policies

Brian Anderson

Executive Editor
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I’ve been hearing about this as a trend recently – first in Bottom Line a couple of weeks ago and again today.

From a CBS News story:
The Consumer Federation of America (CFA) on Monday warned insurance regulators that life insurers are quietly hiking rates on some universal life policies, possibly to compensate for losses from falling interest rates.

The Washington, D.C., consumer watchdog and advocacy group said that AXA Equitable, Transamerica and VOYA Financial (VOYA) had notified their agents about the premium hikes, but hadn't put out any public announcements.


From Bottom Line contributor Tony Steuer, CLU:
Insurers typically do not raise the premiums throughout the life of the policy, and the cash value of the account typically increases. But because investment returns for the insurers have been falling short, the fine print allows them to increase fees, which reduces the cash value—in effect draining the account. That could mean that policies—which typically are written to expire when the policyholder reaches an age somewhere between 87 and 121—will terminate 10 or more years early if policyholders do not pay more in premiums.

Any agents receiving these notices from Voya, AXA or Trans, and if you did, would you proactively contact impacted clients?

Are life insurers raising rates on universal policies? - CBS News

Your Life Insurance May Be Terminated | Bottom Line Personal
 
Compression of yields is forcing their hand. They don't really have any other options. It's actually happening in some whole life policies, too, where the policy has a term blend or PUAR. It's not as bad there, however.

My own policy saw the term rider costs bump about $0.20-$0.30. Now, I can convert that term to permanent at any time and erase the liability, so it's not a big deal.

The increase in rates seems to be modest at this point. If yields don't improve, expect another round of repricing. Not good when the FED is considering negative interest rates.

This is why those ULs are always best when the premium is scheduled well over target.
 
Compression of yields is forcing their hand. They don't really have any other options. It's actually happening in some whole life policies, too, where the policy has a term blend or PUAR. It's not as bad there, however.

My own policy saw the term rider costs bump about $0.20-$0.30. Now, I can convert that term to permanent at any time and erase the liability, so it's not a big deal.

The increase in rates seems to be modest at this point. If yields don't improve, expect another round of repricing. Not good when the FED is considering negative interest rates.

This is why those ULs are always best when the premium is scheduled well over target.

Glad I don't have to be concerned about it.. Haven't written good old fashioned traditional WL and fixed premium term for years.. :1smile:

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The CBS report included this statement: "a Princeton University study which showed that mortality rates climbed half a percent each year among white middle-aged Americans between 1999 and 2013." First I have heard of a mortality rate increase.. I thought it was supposed to be decreasing.. :err:

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Correction.. That should be Haven't written anything but good old fashioned traditional WL and fixed premium term for years.. :1smile:
 
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Why do life insurance companies raise premiums on older, non-guaranteed products?

Because they can.

It's not IF the premiums go up, it's when.

After 35 years in this business, I've seen it with many companies and many types of products.
 
Why do life insurance companies raise premiums on older, non-guaranteed products?

Because they can.

It's not IF the premiums go up, it's when.

After 35 years in this business, I've seen it with many companies and many types of products.


Such a baseless statement. Unsupported by facts like always. Although I'm sure you'll come up with some outdated partial copy of a report you'll find somewhere, misinterpret, and paste a link here as your "proof."
 
Conseco did this a few years ago. I had 3 UL's that were affected on the books. There was a class action lawsuit and the company reinstated their benefit. The last policyholder died about a year ago and the claim was paid in full. I am sure glad the benefits were reinstated because otherwise my reputation would have been tarnished.
 
Glad I don't have to be concerned about it.. Haven't written good old fashioned traditional WL and fixed premium term for years.. :1smile:

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The CBS report included this statement: "a Princeton University study which showed that mortality rates climbed half a percent each year among white middle-aged Americans between 1999 and 2013." First I have heard of a mortality rate increase.. I thought it was supposed to be decreasing.. :err:

Obesity and opioid drugs, big contributors. There have been some reports in news media.
 
And now, Transamerica Life Insurance Co. is being sued for raising the cost of insurance on some of its UL contracts...
From the article linked below:

Plaintiffs in the Transamerica suit — Gordon and Mary Feller, and George and Margaret Zacharia, holders of Transamerica adjustable universal life policies — allege “Transamerica's sudden and unilateral increase in the premiums required to keep these policies in force constitutes a breach of its express and implied obligations under the policies,” as well as a violation of California state law.

These cost increases began in August 2015, and relate to universal life insurance contracts sold in the late 1980s and early 1990s, many of which guaranteed an interest rate of no less than 5.5% annually, according to the complaint, filed Feb. 28.

Plaintiffs allege Transamerica raised monthly charges by 38%, “falsely stating” the firm's increases were permissible under specific terms of the policies, when they were actually “to subsidize its cost of meeting its interest guarantee, to recoup past losses on the policies and on its investment portfolio, and to make the policies more profitable by inducing policy terminations by those policyholders who could not afford the increase,” the complaint says.


Transamerica sued for cost increases on universal life insurance contracts

And another piece about the suit...

https://www.linkedin.com/pulse/transamerica-hit-class-action-law-suit-over-cost-increase-smith
 
This about insurance contract language and it is more interesting for lawyers than us. Most of the times, these things get settled as not to create a precedent. Insurance company can argue the contract language, lawyers can argue the contract language is wrong, misleading and try to throw out the whole contract out. At the end of the day, while life insurance companies can raise coi on UL policies, this does not mean they can raise them as much as they legally can. If they did that, people would lapse their policies, cancel the existing premium payments and the insurance company would be stuck with the fixed costs it has already paid. Because life policies have many fixed costs to the life insurance company a higher or lower lapse rate than what they projected would effect their business model. They can't raise COI too much that could rock their lifeline.
 
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