Full Disclosure covers universal life insurance products twice per year and features both fixed and indexed policies. This excerpt’s charts, covering indexed universal life policies, will be featured in National Underwriter online at www.lifeandhealthinsurancenews.com. Charts include one of the illustration scenarios featured in Full Disclosure; an extract featuring long term guaranteed minimum premiums (for those that offer them), and a listing of each product’s policy design objectives. This newest excerpt features values and features for indexed policies only. Traditional universal life was covered in an earlier issue. All data is current as of July 1, 2010.
One of the challenges in evaluating indexed universal life products is determining how the individual pricing components affect policyholder values. An illustration can help, but different features, caps and participation rates affect the amount of gain that the policy experiences due to gains in the underlying index. There are potentially complex combinations of these that can make two illustrations under scrutiny as different as night and day. Products are also priced at sometimes dramatically different premium funding levels as well as optimal indexing and crediting method combinations. Adding to the confusion are differing “lookback” methods that apply historical performance of an index to formulate a current crediting rate that an illustration utilizes to develop nonguaranteed projections.
For these, and other reasons, benchmarking indexed products to get some idea of their competitive position in the marketplace, is tricky, especially when examining only slivers of data. We believe that without some level of standardization, albeit one that may penalize products designed for either end of a bell curve of performance, you are left with data anarchy that is less useful for comparative purposes. We recommend using these illustrations, in conjunction with a wide range of information pertaining to the policy itself (we refer to them as Specifications in Full Disclosure) to get the best results.