This is the last individual variable life edition of Full Disclosure in which companies can include products utilizing the 1980 CSO mortality table. Fixed products have more quickly incorporated new pricing utilizing the 2001 table, but all products have to be compliant by the end of the year.
Some companies understandably did not wish to include their 1980 CSO products at this time, and others have not yet moved their new ones into distribution. Others are taking this opportunity to consolidate numerous products into a few with differing design objectives. As a result, we have fewer products than usual; however, Full Disclosure should have a full slate of policies, including many brand new ones, with the first variable edition released in the spring.
To be sure, this is a difficult time to be in the variable market. Now more than ever, however, there is safety in different guarantees, and richer fund selections that offer diversification and conservative choices for consumers spooked by recent events. While very popular with traditional universal life plans, guarantees on premiums and death benefits in variable life are a welcome development for producers who have built their practice around VL but are dealing with resistance as investments struggle. Variable life may be a tough sell right now but there is a good story to tell. It just doesn’t revolve around equity subaccounts this time.
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 Sept. 1, 2008). There are charts presented for current illustrated values and a scenario with maximum retirement income–an ideal use for variable life insurance. There is also a guaranteed minimum premium excerpt for long-term (age 100 or lifetime) guaranteed premium and death benefit.
Current illustrations are based on a Male Age 55 paying a $7,500 annual premium and a $250,000 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 standard 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. It may seem ridiculous in this environment to illustrate 10%, but only a substantial return will dramatize pricing differences between the policies.