Risky no-lapse guarantees for variable life insurance products are a “disturbing cloud” on the horizon of the life insurance industry, according to the head of New York Life Insurance Company.[@@]
“About 65% of no-lapse guarantee products have done well,” Sy Sternberg, chairman and chief executive officer of New York Life, said during this week’s LIMRA International annual meeting in New York. “But the other 35% have blown up. If you’re going to use the word ?guarantee,’ you’d better do better than 65%.”
[New York Life does offer a number of products with a no-lapse option. No-lapse guarantees, often available as a rider to variable universal life policies, keep the policy from lapsing as a result of poor investment performance, as long as the holder keeps up premium payments.]
Sternberg said too many policies carry guarantees that carriers may ultimately find difficult to back up.
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“In the insurance industry, it takes 10 to 15 years to see the results of a bad decision,” he said. “It scares me and concerns me to see so many guarantees out there.”
Sternberg pledged his company always would price and underwrite guaranteed products responsibly.
“We will be there to keep our promises,” he vowed.