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August 17, 2005 at 08:00 PM
Major universal life companies remain committed to minimum premium long-term death benefit guarantees even as regulators are struggling with the question of adequate reserving levels for these products.
You may recall that the last time we analyzed minimum long-term guarantee premiums, average minimum premium levels dropped about 3%. New data suggests this pricing trend has reversed slightly even though more companies are adopting the new 2001 CSO mortality table resulting in lower illustrated mortality costs. By any measure, even though minimum premiums have started to rise, they are still a bargain at many companies.
We expect long-term guaranteed minimum premium prices to firm up even further now that reserving changes for long-term guarantees have evolved and now are being considered within the National Association of Insurance Commissioners. Companies already are looking to balance policy risk in a number of ways such as tightening underwriting and making guarantee durations more flexible. It also will be interesting to see where and how far pricing changes go as more companies implement the new mortality table. Eight products in the latest release of Full Disclosure utilize the new table, up from four in January.
A trend we have observed is that Equity Indexed UL products are receiving a lot more attention than they have for the last five years or so. Some companies, such as AmerUs and Conseco, have made EIUL a cornerstone of their marketing efforts, but there are products in the pipeline at companies that have never had one. Full Disclosure features information on their mechanics and how their assumed illustration rates are calculated, but the illustration excerpts are contained in this report for your review. Some of the numbers look like anomalies compared to straight universal life, but this is, in fact, how they are being illustrated on the street.
There are three excerpts in this report taken from the latest Full Disclosure edition featuring 87 UL policies for sale on July 1, 2005. The largest chart includes illustrated values on a current basis and is accompanied by one featuring select minimum premiums necessary to guarantee the premium and death benefit to age 100 or for life. A third chart features a retirement income scenario to show maximum income from policies with a high equal premium.
