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June 22, 2008 at 04:00 PM
The newest variable life excerpt from the Full Disclosure software series features 62 policies, including 13 new ones. Most year-to-date subaccount returns are down, which really isn’t news to most of us. What you may not know, and what our latest research reveals, is that the number of policies emphasizing long-term guaranteed premiums has soared. The timing couldn’t be better as this policy-level “flight to safety” in product design offers a whole new comfort level for producers, distributors, and consumers.
Driving the newly competitive guaranteed premiums is the adoption of the new 2001 CSO mortality table, which 17 of the policies in this excerpt now use. Age 121 maturity means a longer term (compared to age 100) to stretch mortality costs, resulting in lower cost premium guarantees for companies wishing to go this route. And they are. When we gathered data in late 2007, there were 23 policies in our long term guaranteed premium sections. This time there are 30, and we are expecting many more in the fall as companies are required to use the new table by 2009.
While very popular with traditional universal life plans, guarantees on premiums and death benefits on VL are a welcome development for producers who have built their practice around VL but are dealing with resistance as investments struggle.
Full Disclosure surveys variable insurers twice each year and tracks illustrated values and the benefits each brings to the marketplace. In addition to the contractual and qualitative data on each policy collected, we also look at how they are illustrating their products in the field (current as of May 1, 2008). There are charts presented for current illustrated values and a scenario with maximum retirement income-an ideal use for VL. There is also the aforementioned guaranteed minimum premium excerpt for long-term (age 100 or lifetime) guaranteed premium and death benefit.
Current illustrations are based on a Male Age 40 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. 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.
