UL Secondary Guarantees Might Be Going Away

[JRoot]

I was speaking with a life manager at my GA this morning and he mentioned a few life insurance companies will be getting rid of their secondary guarantees on their Universal Life products. He mentioned AXA may discontinue their no lapse products in '09 due to reserve issues and many other companies may be following.

He explained a life insurance company, by law, must keep a level of reserves to guarantee these "secondary guarantees". A lot of life companies just can't keep these reserves right now.

Just giving a heads up to everyone.

 

[Delta76]

Interesting. I've also heard that the secondary guarantees are have caused a mispricing on life insurance also. With UL policies with little to no cash value to 1035 to another contract, the persistency has been higher than expected to the carriers as the policy holders aren't lapsing them.

 

[bobson]

I was speaking with a life manager at my GA this morning and he mentioned a few life insurance companies will be getting rid of their secondary guarantees on their Universal Life products. He mentioned AXA may discontinue their no lapse products in '09 due to reserve issues and many other companies may be following.

He explained a life insurance company, by law, must keep a level of reserves to guarantee these "secondary guarantees". A lot of life companies just can't keep these reserves right now.

Just giving a heads up to everyone.

I wouldn't doubt it. It makes me wonder what kind of idiots they have running some of these insurance companies. Universal life is an abomination of the word "insurance". Why would companies want to jump on the investment bandwagon? We've seen the stock market fail us in the past, how could company presidents be so blind they never would think it would happen again?

Insurance companies created guarenteed products over a hundred and fifty years ago. Leave it to Wall Street to try to fix it!

 

[bluemarlin08]

Universal life is an abomination of the word "insurance".

Why do you think that? Some might argue that WL is the same.
Don't you think different product fit different situations? I can think of situations where UL is the best fit and where WL is the best fit.

 

[dgoldenz]

Hmmm.....interesting.

 

[bobson]

Universal life is an abomination of the word "insurance".

Why do you think that? Some might argue that WL is the same.
Don't you think different product fit different situations? I can think of situations where UL is the best fit and where WL is the best fit.

Well you are right. All of 'life insurance' is an abomination of the word insurance. Every other type of policy is designed to pay if something bad happens. Only life insurance is designed to pay when the inevitable happens.

I guess I should have said UL is an abomination of the term 'life insurance'.

I can't think of a good fit for UL ever... well, except for the insurance companies.

 

[bluemarlin08]

If one is looking for a guaranteed premium, for a guaranteed death benefit, at the least cost seems that the UL with secondary guarantees tops the list.

 

[bobson]

If one is looking for a guaranteed premium, for a guaranteed death benefit, at the least cost seems that the UL with secondary guarantees tops the list.

I'm hearing rumblings that some companies will discontinue offering these products, hecne the title of this thread. So yes maybe today GUL has a place in a portfolio, but UL seems to me to be an abomination without purpose.

UL constantly needs to be monitored, at the very least annually. New illustrations run each year. The cost for servicing these policies for an agent makes certain over the long haul they will be unprofitable for everyone but the insurance company. If you were a great agent and sold 100 UL's a year after ten years you would have 1000 on the books. There is no way you could make any money servicing these policies each year in my opinion. The amount of time you would spend helping your policy holders would mean you couldn't sell new policies.

 

[bluemarlin08]

I service several hundred UL policies, some dating back to the late 80's. Getting in force illustrations takes very little time, and it has never really been a problem, in fact I often get additional business and referrals from these reviews. In addition, I have never had one of my UL's implode.
WL blended policies need monitoring as much as UL's, frankly, I have seen more problems with the blended WL's than UL's.
I am not interested in getting into who is right or wrong, as you have commented in other posts no one is going to change their views. Some say WL has its place, I really can't see any situation where I would recommend, but am open to ideas, sold lots of WL in early 80's, mostly for estate liquidity. I now use GUL for what I use to use WL.
Regarding GUL and the rumors of its possible demise, this rumor has been circulated from the inception of the product, mostly coming from the large mutuals.

 

[Drewrilla]

Wow, several over-reactions as I am reading these replies. AXA is temporarily eliminating their guarantees effective immediately due to their doubts of investing in the current market. I can almost guarantee you that they will again be participating in this type of product when the market rebounds. I also doubt that many other carriers will be following suit. Are the products "universally" underpriced (pardon the pun), absolutely. Will they ever be this inexpensive again, probably not. More the reason to push UL plans now with solid companies since they will all likely be raising the pricing on these plans in the near future.

Nearly every carrier we work with (about 15 respectively) is not in jeopardy of having insufficient reserve requirements. Any analyst can tell you that. The chances of a major life insurance carrier going insolvent before another carrier purchases the book is little to none. Everyone just needs to calm down while we sit through this financial storm.

As far as UL ruining insurance, that sounds like an old WL captive agent that can't compete with low premiums and guarantees or change the methods of how he makes sales. UL is the perfect vehicle for many (not all) estate planning solutions where cash value is of absolute zero importance.

Stay on top of the AM Best and Comdex rating changes to ensure you are showing a stable carrier and things will be back to normal in no time. Happy selling and Happy New Year!