The most recent review of universal and indexed universal life in Full Disclosure features 115 policies, including 33 indexed varieties. To accommodate as much information as possible we have divided the report into 2 parts–the indexed products already appeared in the Oct. 1, 2007 issue.
The latest data collection shows 14 brand new policies. This is a result of the implementation of the new 2001 CSO mortality tables by companies that chose to start from scratch rather than reprice existing policies. It is interesting to note that even though there are 14 new policies presented here, the total number (82) remains unchanged from our last update.
There are 3 excerpts in this report taken from the latest Full Disclosure UL/indexed UL edition. 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 (or age 121). A final table features retirement income from policies generally designed for maximum accumulation values. The parameters of the illustrations are included with the chart.
Current illustrations are based on a Male Age 40 with a best nonsmoker class (representing at least 15% of the contracts issued) paying a $7,500 annual premium and a $1 million 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 to indicate which are designed to generate maximum death benefits. All of the data is current for products for sale on July 1, 2007.
The guaranteed minimum premium excerpt is for long-term (age 100 or lifetime) guaranteed premium and death benefit. Whether by rider, a minimum premium level or automatically, mechanisms to include the guarantee may differ. Other guarantee variations include duration, pre-payment discounts and other nuances that help differentiate products in a crowded marketplace and serve individual customer needs (in addition to making the jobs of product wholesalers a little more exciting). If a policy is not featured in the minimum guaranteed premium chart, it does not offer a long-term secondary guarantee but may offer shorter guarantee durations as specified in the main chart featuring illustrated values.
Internal rates of return (IRRs) figures included in the main chart indicate which products are designed to be more efficient in producing cash values, death benefits, or providing an all-around solution. The IRR can be applied to cash values as well as death benefits, and we have chosen to measure both at a policy duration of 30 years. Those seeking to analyze the relationship between cash values and death benefits will find the IRR measurement a useful tool. It’s easy to see, using the provided IRRs, which policies are built to generate death benefits, which is why it would be unfair to compare them under a level death benefit only. These values are meant to be a snapshot of how individual UL plans are being illustrated on the street as a way to gauge their relative positions for our sample policyholder.
Also included at the end of the current illustration chart are the minimum level premium on a current basis to endow the policy (cash value equals death benefit at maturity) and minimum premium to carry it (cash value equals lowest cash values at maturity). With the advent of longer maturity ages we have assumed that these figures are to this age but will clarify this in future reports.
The real product differentiation is at the policy level in the features, limitations, and current and guaranteed cost structure of each. In a separate section we have included information on what each product is designed to do under Product Design Objectives. While not all of a product’s design objectives may be listed, you can see for what market many of these policies are meant. Some are built for low premiums, for example, while others are meant to generate major league cash values. Others may be aimed at the business market with accounting benefit riders or high early cash values.