ROP Prices Going Up and Guideline CCC

[Mark]

I've been trying to read and study about this Actuarial Guideline CCC (officially, Actuarial Guideline 45) that will be in full force by Jan 1st 2010.

I already see a lot of companies either planning to pull their ROP product or raise the price by 30% to 50% on ROP.

I have read that the price increase is going to give a better rate of return to the client and he will be able to get his money back sooner. But of course they have to pay more for all of this extra stuff.


Can any of you tell me what you know about this new rule/guideline and why they are making us do this?

 

[JMO Fan]

Here's the regulator's problem: ABC sells Joe 10-year ROP. If Joe terminates after 9 years, he gets nothing. But the ROP is the result of 10 years accumulation, so why shouldn't Joe get 9 years' worth?

AG45 (CCC) is one interpretation of what's "fair" for Joe before 10 years.

 

[GreenSky]

Assurity has just sent an email that they are continuing their ROP at the same premium but will only apply to the base policy and waiver, not to riders such as CI, etc.

I'm fine with that and glad to see them continuing this benefit.

Rick

 

[Robert Barney]

Just a heads up.

Based on what I have seen so far, the impact of the new regulation is that the majority of companies will continue to sell ROP products, but at higher, and in some cases, much higher prices.

Of course I don't see that affecting sales very much. I think most people who buy ROP don't really understand rates of return or how to evaluate whether ROP is a good deal or not. They're just delighted to think that they are getting their money back and their insurance for free.

And if the price goes up, many agents will say it doesn't matter, it just means the clients get more money at the end.

 

[JMO Fan]

This appears to be another case of government rules backfiring. The intent of CCC was to kill ROP. I was not in favor, but it's hard to stop a speeding train.

 

[bhoward]

Here's the regulator's problem: ABC sells Joe 10-year ROP. If Joe terminates after 9 years, he gets nothing. But the ROP is the result of 10 years accumulation, so why shouldn't Joe get 9 years' worth?

AG45 (CCC) is one interpretation of what's "fair" for Joe before 10 years.

What carriers do that? I see where after 4-5 years some money starts coming back, but usually if you are a year or two away, you get at least 95% of your money back or better. It's basically a vested schedule like a 401k product with the employer match...

 

[JMO Fan]

What carriers do that? I see where after 4-5 years some money starts coming back, but usually if you are a year or two away, you get at least 95% of your money back or better. It's basically a vested schedule like a 401k product with the employer match...

Before CCC, it was often much less than 95%.

 

[Robert Barney]

This appears to be another case of government rules backfiring. The intent of CCC was to kill ROP. I was not in favor, but it's hard to stop a speeding train.

Precisely why would government want to "kill" ROP?

If it is a product people WANT to buy, why shouldn't they be able to? It isn't drugs and it wasn't stolen.

 

[JMO Fan]

Precisely why would government want to "kill" ROP?

If it is a product people WANT to buy, why shouldn't they be able to? It isn't drugs and it wasn't stolen.

I didn't want to kill ROP. But I'll try to explain "their" logic - ROP is not life insurance. It's a gimmick.

Actuarially, I know it's a gimmick. You simply charge extra for the ROP. But this is government substituting its wisdom for that of consumers.

 

[GreenSky]

Precisely why would government want to "kill" ROP?

If it is a product people WANT to buy, why shouldn't they be able to? It isn't drugs and it wasn't stolen.

Consumer Protection.

Let's fix something that is easy to understand and not broken.

Rick