Regulators Press On With Nonforfeiture Guideline For UL
Work on an actuarial guideline that would require nonforfeiture values for products with secondary guarantees will continue despite a resounding call by insurers to end the project and a tepid response from regulators.
Proposed Guideline XYZ, which would require nonforfeiture values for universal life products with long guarantees, was debated during the winter meeting of the National Association of Insurance Commissioners here.
The debate centered on when a guarantee in effect makes a UL product comparable to a whole life policy.
Frank Dino, a life actuary in Florida and the lead regulator in the effort to develop the guideline, said that if a policy is offering long guarantees, extending up to 50 years, then it should be treated like a whole life policy and nonforfeiture values should be required.
Industry begged to differ, and did so in a letter signed by 21 major life insurance companies and the National Alliance of Life Companies in Rosemont, Ill.
During the discussion, regulators were told that there is “significant industry opposition” to the proposed guideline and that there is a “firm opinion that XYZ is not necessary and the end result of XYZ is anti-consumer.”
The proposed guideline would require companies offering UL and VUL products with secondary guarantees to calculate alternative sets of cash values related specifically to the secondary guarantee.
The proposed guideline establishes a UL cash value that is the greater of the cash value mandated by the UL regulation or the XYZ cash value.
The letter also noted that secondary guarantees are approved in virtually all states and are policy provisions that protect customers. It adds that explaining the XYZ cash value to a customer will be “extremely complicated.”