Twice a year the editors of Full Disclosure compile the life insurance industrys largest survivorship life insurance product database. Our research includes complete policy specifications and features, current and guaranteed costs and expenses, and a wide sampling of illustrations.

The excerpts in this report feature illustrated values for whole, universal, and variable life survivorship products from the leading companies in the market. And while these charts are only slices of data, they will give you an idea of how these products illustrate in the market. We have also included the strengths and market positioning of these products as an antidote to the hypothetical nature of illustrated values.

When it comes to survivorship life, the biggest questions on every mind are where does the market go from here in light of restructuring of the estate tax law last year, and how are companies coping with this change? According to a study by LIMRA, annualized survivorship premium volume was down 40% in third quarter 2001 compared to the quarter a year earlier, and 24% for the year.

Based on what we are hearing, however, sales have recovered somewhat after the initial market reaction to the estate tax news.

Two things have happened. First, competent advisors are pointing out that the ultimate status of the estate tax is in doubt. People are being made to realize this was a convoluted compromise if there ever was one. Secondly, and just as well, companies are starting to give policyholders greater latitude in releasing ownership without penalties should things change in future.

And while sales have stabilized, so too will the market share remix between variable and fixed products that has accompanied the free fall in equity values that people are acknowledging is not endless. In fact, the seesaw between products (always made interesting due to the cutthroat competition in the market) is spawning new variations on products. Particularly regarding the kind of guarantees and security that can be had out to age 100or much further!

In our Full Disclosure excerpts, we apply the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations 30 years dependent on age combination. The IRR of cash values rises over time, as the IRR for the death benefits falls.

A careful analysis of the IRR measurements indicates which policies are designed (in an illustration at least) to build current cash values, guaranteed cash values, or death benefits. You will notice at the end of each chart (SVL & SUL), there are columns showing how the policy would have performed under an increasing death benefit option. The cash value of an increasing death benefit policy, while not listed, would be lower because of the added costs of insurance.

The whole life policies have naturally rising death benefits due to the paid-up additions dividend option.

This report features abstracts of 89 universal, whole and variable life policies and is excerpted from Full Disclosure Survivorship Life Volume II edition. We have been compiling this data since 1998 and this is a record number of policies. All data is current as of Oct. 1, 2001.

We do not charge companies to be in Full Disclosure, and strive to be fair through consistency maintained between all types in age combinations of insureds, product specifications, measurements of values and death benefits at various points.

Flat premium amounts are the same between UL and VL illustrations, and the VL illustrations are based on an assumed 10% rate of return net of average fund expenses. Be aware that not all companies use the same averaging method. Some use a regular arithmetic average and others weigh the average according to assets allocated to the various investment options available under each policy. This is only one factor of many that determine how an eventual illustration of values turns out.

With variable products, in particular, where the investment experiences vary from client to client, the tangible product differentiation is at the policy level in the features, limitations, and current and guaranteed cost structure of each.

For an accurate comparison we recommend a survivorship life policy analysis approach based on illustrations, current and guaranteed (contractual) costs, features (and their costs), as well as knowledge of what each product was designed to do. While it may be designed with strengths at higher or lower ages or face amounts, a policy may be intended for a purpose/market as remote from illustrations as you can imagine. For example, it may have broad underwriting classes so more policies are issued preferred, or it may be oriented to high guaranteed values or low premium outlays. Certain companies specialize in “uninsurable” lives, or some other aspect not readily available.

A comprehensive approach, such as that used in Full Disclosure, can lead you to the true nature and architecture of the contract.


Reproduced from National Underwriter Life & Health/Financial Services Edition, January 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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