The excerpts in this report focus on 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 the Full Disclosure database, they will give you an idea of how these products perform on a prospective basis.

An additional component in the latest edition of Full Disclosure is low-cost long-term guarantees of premiums and death benefits in flexible premium policies. A portion of our findings is included here as a table for leading universal life policies providing a minimum annual premium to age 100 or beyond with little or no cash value at maturity.

The new chart (see page 46) is based on two standard nontobacco insureds at various age combinations. Typically, we survey companies on a diverse range of combinations to get an idea what end of the market the policy is positioned, usually with an older male. This time, we turned one of the equations around and featured an older female to see what would happen. The results correlate closely for the most part, but for some companies (Phoenix and General American, for example) the results are surprisingly different between the older male comparisons and quite similar when the female is older. The female age 70/male age 65 premium is almost identical, while nearly $2,000 separates the male age 70, female age 70. As usual when comparing policies, nothing can be assumed.

In addition to the guaranteed premium chart, three others cover current illustrated values for variable, universal, and whole survivorship life. These illustrated values are based on current interest or dividend crediting, expenses, and in the case of variable designs a predetermined crediting rate. Full Disclosure applies the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations of 30 years dependent on age combination. The IRR of cash values rise 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 the SVL and SUL charts that 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.

In these charts we strove to maintain consistency between the types in age combinations of insureds, product specifications, measurements of values and death benefits at various points. Standardized annual premiums are the same between universal and variable life illustrations, and the VL illustrations are based on a 10% gross rate of return with average subaccount expenses “netted out” of the projected values.

When reviewing illustrated values of variable policies, keep in mind that not all companies employ the same averaging method to calculate the fund expenses used in the illustration. It can be based on a regular arithmetic average or a weighted average, and some systems offer a choice. Under weighting, the average is tilted toward larger subaccounts with usually lower expenses thus reducing the average expense charge and benefiting the final illustrated values of the policy. This is only one factor of many including policy expenses and fees and cost of insurance affecting a policys illustrated performance.

Full Disclosure software includes complete policy specifications and features, current and guaranteed costs and expenses, and a wide sampling of illustrations. The edition of Full Disclosure that includes the information in these excerpts was released in July. Policy data is current as of May 1, 2004. The Full Disclosure approach is to cover all aspects of the policy that translate value to the policyholder. We champion the fact that policies are designed to accomplish certain objectives. And while these illustrated values are helpful, a comprehensive analysis is the only reasonable way to draw comparisons. A policy may shine at issue ages, face amounts, issue classes, etc. not covered in these excerpts.


Reproduced from National Underwriter Edition, September 9, 2004. Copyright 2004 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.