The data in this report is excerpted from a comprehensive database compiled annually by the editors of Full Disclosure. Twenty-seven participating (dividend-paying) contracts are featured on an illustrated basis, with 13 reporting actual results. All data is current as of Feb. 1, 2007, a period by which many insurers have declared their current dividend scales for the year. Companies that have a later dividend scale revision were asked to illustrate values based on the upcoming dividend scale.
By using these tables, one can get an idea of how policies are currently being illustrated as well as how leading plans issued by many of these insurers 10 and 20 years ago have returned value to policyholders historically.
Of the currently illustrated policies, 11 are priced using the new 2001 mortality table. This migration is important in that it allows insurers to lower annual premiums and/or increase illustrated performance relative to those utilizing the 1980 table. In a competitive environment, the ability to tout high internal rates of return on values and death benefits courtesy of the new table is extremely valuable-even against universal life. It also makes whole life more attractive from an income standpoint. As a result, future whole life excerpts from Full Disclosure will feature retirement income streams from surrender values and loans.
Illustrated values are based on a Male Age 40 paying on a $250,000 policy. The class specified is best nonsmoker as long as the class represents at least 15% of the contract issued of each policy. Illustrations are divided between all base (100% whole life coverage) and policies blended with 50% term. Blending policies in this fashion allows a lower premium outlay while retaining a responsible level of all base coverage to cushion any adverse changes in dividend scales. There is more risk to the level death benefit and premiums that are guaranteed in an all-base policy, but the upside to the consumer–and the seller–is a more affordable premium.