Universal life and variable universal life contracts with secondary guarantees could soon have new actuarial requirements for determining nonforfeiture values if work on an actuarial guideline continues at its present pace.
Actuarial Guideline XYZ will get a further airing and could be voted on during the fall meeting of the National Association of Insurance Commissioners next month and fully adopted in December.
This guideline applies only to secondary guarantees that extend for more than 20 years or extend beyond age 70 of the insured. In the case of more than one insured, the guideline applies if the guarantee extends beyond age 70 of the younger insured.
Frank Dino, a life actuary with the Florida insurance department, emphasized the need for the guideline, explaining that if there are 30-, 40- and 50-year guarantees, it is more like a fixed policy and should therefore have a nonforfeiture guarantee.
If a company is making an interest rate guarantee, then it is a fixed benefit whether it is in a fixed or variable life contract, Dino adds.
William Schreiner, a life actuary with the American Council of Life Insurers in Washington, says it was always the intention of a group of industry interested parties to include VUL products in the guideline. “Intellectually, it makes sense to include these products,” he says.
However, he adds, there is a practical issue of tracking values of VUL’s investment baskets. It will be different than tracking the values of UL policies, Schreiner says.