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July 02, 2006 at 04:00 PM
Recently there was some good news regarding life insurance sales. According to LIMRA International, new annualized premium in the first quarter of 2006 rose 15% over the same quarter in 2005 with most of the gains coming from variable universal and universal life products. LIMRA went on to state that the increase included the second double-digit growth in variable sales in five years.
What I find remarkable is that this is a time when most agree that variable insurers are feeling the pressure from indexed life products, particularly with the relentless volatility we continue to experience in equity markets. While not all products have them, I believe that the foundation of the support for variable products lies in premium guarantees (also cited in part by the LIMRA study) that take the edge off consumer unease and that may, in fact, lead to larger policy sizes.
When it comes to looking at individual variable life products (the “wrapper” around the subaccounts if you will), Full Disclosure’s approach is to examine how products are being illustrated in the field but more importantly to look at the numbers with an eye toward what each product is designed for. There are charts for current illustrated values, guaranteed minimum premiums and a scenario with maximum retirement income–an ideal use for VL.
The main illustration chart also features the maximum duration the death benefit and premium can be guaranteed along with the minimum premium the policyholder would pay to obtain that guarantee. Our survey also features 56 specifications and features for each policy, but with the exception of a Product Design Objective section, this excerpt is about the numbers.
Full Disclosure surveys variable insurers twice each year (variable survivorship products are included in a separate survey). The data in this excerpt is current as of May 1, 2006. Current illustrations are based on a Male Age 40 paying a $7,500 annual premium and a $1,000,000 policy. If our specified premium of $7,500 is too low to illustrate the policy for this age and face amount, the policies are blended with term insurance, if available. The death benefit type is level; however, a column is included with a true increasing death benefit for each policy. The class specified is best nonsmoker as long as the class represents at least 15% of the contract issued of each policy. Companies were asked to employ a 10% gross crediting rate that is then net of average fund expenses.
